Read ar2007.pdf text version

Pure Opportunity.

2 O O 7 A N N U A L R E P O R T

Contents

1 PuriCore At-A-Glance 2 Chairman & CEO Review 4 Food Retail 6 Endoscopy 8 Foodservice & Hospitality 9 Wound Management 10 CFO Report 11 Board of Directors 13 Directors' Report 16 & Social Responsibilities 20 Corporate Governance Statement 24 Directors' Remuneration Report 28 in the Preparation of

Directors' Responsibilities Financial Statements Independent Auditor's Report to Corporate

Challenge

Infectious disease and pandemic threats are a major global problem. From avian flu and norovirus to deadly MRSA, the spread of infectious pathogens is a growing concern for healthcare providers, governments, companies, and consumers. In 2007, the World Health Organisation reported that new infectious diseases have grown at an unprecedented level. One or more new infectious diseases are identified each year, and there have been more than 1,100 epidemics in the last five years. Traditionally, the spread of infectious pathogens has been controlled by the use of chemistries that often are known respiratory or skin irritants or even cytotoxic. They typically require special handling equipment and disposal procedures. Increasingly, government regulations control the proper use and disposal of these chemicals; and companies, hospitals, and the workforce at large are wary of their regular use. To control the spread of infectious pathogens, many seek green solutions that are safe to both humans and the environment. At the same time, the increased--and sometimes improper and unnecessary--use of antibiotics has led to antibioticresistant superbugs. Hospitals and schools around the globe have raised their diligence against the superbug staph infection, MRSA, as they face unprecedented infections. In 2007 the US Centers for Disease Control reported that MRSA infections are twice as common as previously stated. Increasingly, healthcare providers and governments are seeking new infectious control technologies that do not contribute to antibiotic resistance. These global issues have converged, allowing PuriCore to offer solutions to a broad range of markets that safely and naturally control the spread of infectious disease in the same way that the human body does.

30 the Members of PuriCore plc

32 Consolidated Income Statement 33 Recognised Income and Expense 34 Recognised Income and Expense 35 Consolidated Balance Sheet 37 Company Balance Sheet 38 Consolidated Cash Flow Statement 39 Company Cash Flow Statement 40 Accounting Policies 46 Notes to the Financial Statements 76 Notice of Annual General Meeting 80 Directors and Advisers 81 Financial Calendar

Company Statement of Consolidated Statement of

Market Drivers

Increasing Regulatory & Consumer Demand for Safe, Green Solutions Increasing Spread of Infectious Pathogens Decreasing Effectiveness of Antibiotics

Safe, Natural, Effective Solutions to Control the Spread of Infectious Disease

Solution

Technology

KIllS PATHOGENS

Nature's Antimicrobial Solution To fight infection, the human body produces a highly effective antimicrobial solution--hypochlorous acid. Hypochlorous acid reacts readily with a variety of microbial sub-cellular components, interferes with metabolic processes, and kills individual bacterium exposed within milliseconds, all without contributing to antibiotic resistance. Hypochlorous acid is proven to be safe, environmentally friendly, and fast acting against a broad range of infectious pathogens, including MRSA, M.tuberculosis, Legionella, E.coli, HIV, poliovirus, Helicobacter pylori, norovirus, Salmonella, and H5N1 avian influenza virus. How PuriCore's Systems Work PuriCore's Systems electrochemically generate hypochlorous acid solutions on-site and on-demand for a range of concentrations to meet the needs of each application. Requiring only common salt, water, and electricity, these systems are reliable, safe, effective, and user-friendly. The Solution produced is at near neutral pH (between 5 and 7), optimizing its biocidal efficacy, yet remaining completely safe to humans and the environment.

Effective Against: Bacteria Acinetobacter baumannii Escherichia coli (0157) Enterococcus species (VRE) Helicobacter pylori Legionella pneumophila Mycobacterium avium-intracellulare Mycobacterium bovis (TB) Mycobacterium chelonae Mycobacterium smegmatis Mycobacterium terrae Mycobacterium tuberculosis (TB) Mycobacterium xenopi Pseudomonas aeruginosa Staphylococcus aureus (MRSA) Salmonella cholerasuis Bacterial Endospores Bacillus cereus Bacillus subtilis Clostridium difficile Clostridium sporogenes Viruses Adenovirus type 4 Bacteriophage MS2 H5N1 avian influenza Hepatitis A & B (HAV) Herpes virus type 1 HIV-1 Human influenza Human norovirus (Norwalk) MS2 virus Murine norovirus Orthopoxvirus Poliovirus type 1 Poliovirus type 2 Fungi Aspergillus niger Candida albicans Trichophyton mentagrophytes

Mimicking the Human Body

+

WATER SAlT

PHAGOCyTOSIS

Salmonella

Norovirus

HyPOCHlOROUS ACID

KIllS PATHOGENS

E.coli

MRSA

STERIlOx SySTEM

Opportunity

PuriCore Applications

pital Remediation H os ted Reprocessor oma s Aut

ki Ind ng H us 2O tr Co m me ial rc ia

teria-Free Rinse Wat Ba c er D h Level isinfection Hig

ce ive I Act nd tion da ara oo ep af Pr Se ral d Flo oo ng sti Mi ping is Cr

F

l

Dri n

wound therapy

vashe

Ha rd-S urface Disinfection

Fogging Remediation

W at e Ro r Lin es ot Ca Or n al al Rin se

NB: Darker areas in the Sterilox Endoscopy, Sterilox Food Safety, and Sterilox Dental applications represent current focus.

nt ga nt Irri me l ide ia Debr ob icr Antim ing l He a

Core Markets

Food Retail: Sterilox Food Safety Solutions keep produce, seafood, ice, and floral products fresher, longer and address the problem of cross-contamination in retail supermarkets. Endoscopy: Sterilox Endoscopy Solutions disinfect endoscopes and other minimally invasive medical equipment safely, quickly, and effectively.

Emerging Markets

Foodservice: Sterilox Food Safety Solutions are used in restaurants and other foodservice operations to improve the safety and freshness of foods prepared and served to customers. Hospitality & Institutional: Sterilox Solutions protect against and control the spread of infectious pathogens in hotels, resorts, cruise ships, and schools. Wound Management: Vashe Wound Therapy is an FDA-cleared medical device using a novel, noninvasive, easy-to-use wound management process for acute and chronic wounds. Dental: Sterilox Dental Solutions control contamination in dental unit water lines and on hard surfaces, reducing infection risk. Additionally, Aquatine EC is an endodontic cleanser for root canal disinfecting and cleansing. Water Safety: PuriCore's water safety solutions quickly and effectively destroy microorganisms and pathogens that can contaminate water supplies.

Results

2007 Highlights

Financial Results

Revenue: up 17.5% to $18.6 million

(2006: $15.9 million)

Regulatory Approvals

FDA 510(k) clearance received for

the Sterilox endoscopy System FDa Food Contact notification granted for Sterilox Solution

Recurring revenue: 79% of sales Food Safety sales up 21% to $7.9 million

(2006: $6.5 million)

Published Research

effectiveness of Aquatine EC for Root Canal Disinfecting and Cleansing effectiveness of Sterilox Solution against Major outbreak Pathogens: norovirus, MRSA, Acinetobacter, and human influenza

endoscopy sales up 15% to $10.3 million

(2006: $8.9 million)

Operational Results

7 new uS retail supermarket customers, bringing the total to more than 20 (including 2 of the top-10)

uK endoscopy portfolio expanded PuriCore systems used in 33% of uK nHS hospitals with endoscopy departments More than 2,500 wound therapy patients treated: clinicians report no adverse or side effects

Safety and Efficacy of vashe

Wound therapy System

Patents and Awards

2 new uS patents granted (now 34 in total with 32 more pending in global IP estate)

new uS patents for Wound therapy Method and PuriCore technology Sterilox named Product of the Year by Foodservice Consultants Society International

total Revenue ($ millions)

CAGR 2005-2007 20.5% 15.9 12.8

ReCuRRIng Revenue BY BuSIneSS*

($ millions)

18.6 CAGR 2005-2007 75.5% 14,643,667 214,921

endoscopy Food Safety other

9,301,812 116,271 4,295,945 4,756,722

6,919,636

7,509,110 4,424,364 05 06 07 332,357 05 4,889,596 06 07

*At constant fx of 1.9973. Recurring revenue includes contracted lease revenue, service revenue, and spare parts and supplies.

PuriCore 2007 Annual Report

1

Our Core Vision

to be a global leader in advancing human health through the control of infectious pathogens.

PuriCore Investment Thesis

Critical need for safe, effective, natural solutions to control the spread of infectious pathogens. Scientifically proven. Intellectually protected. Significant share and leadership already in core markets. leveragable platform technology and competencies. Strong revenue and margin growth in predictable model.

Our Core Purpose

to generate life science solutions for a safer, healthier world.

Chairman & CEO Review

PuriCore's unique green technology is deliverable across multiple markets and geographies and provides shareholders with "Pure opportunity." this opportunity arises from our core developed technology that we believe can deliver widespread global impact on infectious disease. Sterilox Systems generate hypochlorous acid, an incredibly safe, yet powerful and effective, natural antimicrobial that mimics the same biochemistry deployed by the human immune system to fight off infectious pathogens. this proprietary antimicrobial technology is scientifically proven and approved for use in multiple market applications. Sterilox Systems are technically sophisticated to ensure consistent quality production of hypochlorous acid. Yet they are extremely easy for operators to use and require only common salt and water, offering a natural, `green' solution to address multiple significant markets, geographies, and applications. With our Sterilox Systems, our customers can generate on-site and on-demand a robust, natural antimicrobial solution tailored specifically to the volumes and concentrations required for their needs. this strong scientific foundation is further fortified by our core businesses in food safety and medical device disinfection as well as by the significant potential in size and scope of our new opportunities in biosafety, therapeutic wound management, and water safety. We aim to deliver on this broad portfolio of opportunity and thereby provide significant long-term value to our shareholders.

2007 Business Report

In 2007, we focused on building core strength in our first two businesses, namely uS Food Safety and uK endoscopy, ending the year with revenues of $18.6 million, a 17.5% increase over 2006. 2007 proved to be a challenging year with adoption rates slower than initially expected, particularly in our uS Food Safety business. the delay of a major contract in 2007 led us to restrain our business plans for product development and new market entries. However, we won new contracts with seven uS retail supermarket chains, bringing our total supermarket customers to more than 20. additionally, we have identified the potential to install an extra 5,000 Sterilox Systems within our current customer base, and we are in discussions with customers to install a further 11,000 additional Systems. By year-end and into early 2008 having signed the major contract, we have re-established our momentum, and today our confidence in our opportunity is stronger than at any time previously.

Sterilox Food Safety System Used by two of the top-five US supermarket retailers to keep produce safer, fresher, longer.

Sterilox Dental System A tabletop system used in dental practices and procedures to prevent and control the spread of infectious pathogens.

Sterilox Endoscopy Systems Used by more than a quarter of all NHS hospitals to safely, effectively, and quickly disinfect endoscopes between patient procedures.

Core businesses In 2007, we further penetrated our two primary markets. In the uS Food Safety business in the retail market, we concentrated on the largest retail chains that differentiate themselves to consumers based on quality and reputation. With more than 20 leading retail supermarket chains (including two of the 10 largest) using Sterilox Food Safety Systems in 2007, we garnered approximately 6% market share of our retail targets totalling approximately 1,600 stores. Revenues for the uS Sterilox Food Safety business grew 21%, with approximately 185 Sterilox System installations last year. In 2007, we anticipated adoption by several large retailers early in the year but agreements were not finalized until later and into January 2008, with a significant award of an $11 million contract to install Sterilox Food Safety Systems in half of the stores for one of the largest uS food retailers. this order, from the second top-five uS retailer to adopt our technology, combined with a robust pipeline of other leading retail chains, is expected to fuel significant organic growth in this business in 2008. In our second core market, the uK Sterilox endoscopy business, revenues grew 15% in 2007 (7% on a constant currency basis), fuelled largely by the expanded product portfolio of our new aeR distribution partnerships, despite the continued challenging nHS environment. We estimate that we now have garnered approximately a third of the market for hospital endoscope disinfection units with our endoscopy product portfolio. New strategic markets and geographies We have long identified the next markets that we would enter once our core businesses were stable. Capitalizing on our success in the uS Food Retail market, we expanded our business development initiatives in the Foodservice, Hospitality, and Institutional markets. We began to identify distribution channels for our initial efforts in those markets in which we have a presence, leveraging our early adopters in several of the major casino resort properties in las vegas. In healthcare, we continued to explore and invest in therapeutic applications for our core technology with very encouraging results. We are impressed with clinician and patient response to date, and we have initiated early discussions with potential partners for vashe Wound therapy. PuriCore also markets its antimicrobial solutions to Dental practices targeting biofilm remediation and clinically oriented applications and research for root canal procedures and oral rinses.

We also took steps to open new geographies for our core markets. In the uS, we prepared for the commercialisation of our Sterilox endoscopy Systems. We received a 510(k) clearance from the uS FDa to reprocess endoscopes in 2007. We are now identifying target accounts and expect to establish pilot sites in the third quarter of 2008. Similarly, we initiated very early discussions with leading food retailers in the uK to explore the opportunity for the Sterilox Food Safety business.

Outlook

With a strong current order book and anticipated order flow in both our core markets, we foresee significant top-line organic growth in 2008 that will enable us to achieve additional leverage of our operations and further expand into new markets. operationally, we anticipate strong sales growth and improving margins thereby leveraging operating expenses and significantly reducing our cash burn rate. Our 2008 key strategies are to: · xtendleadershipinourcoremarkets:USFoodRetail E and uK endoscopy · ocusonrevenuegrowth,marginimprovement,and F leverage of operational costs · aunchintonewstrategicmarkets:USEndoscopy L and uS Foodservice and Hospitality · MaintainsteadygrowthinourDentalfranchise · urtherdevelopbusinessplansandexplorepartnerships F in Wound Management and Water Safety

Summary

throughout our organisation, we continue to strive for excellence in the execution of our business processes to create a profitable, world-class company. We remain enormously proud of our safe, green, effective technology and equally proud of PuriCore as a company and as a team. Whilst the development of our business was slower than we anticipated in 2007, we are now poised for significant growth in 2008 and the commercialisation of a portfolio of applications with our core platform technology to deliver our Pure opportunity. We look forward to executing on our 2008 strategies and delivering excellent returns for our shareholders.

Christopher P.J. Wightman

Chairman 29 april 2008

Gregory T. Bosch

Chief executive officer

"We adopted Sterilox to protect the health of our staff 10 years ago, and it continues to be the safest chemistry of choice today."

Sterilox SAFER AER Used by NHS hospitals to automatically reprocess and disinfect multiple endoscopes simultaneously. lindsay Cund, endoscopy unit Manager Alexandra Hospital Acute Hospital NHS Trust

"Sterilox has made a major difference with regard to the on-shelf appearance and shelf-life of produce, plus it has enhanced food safety. It's a home run." Brian gannon, Director of Produce

Big Y Supermarkets

PuriCore 2007 Annual Report

2|3

Food Retail

2007 highlights More than 20 uS supermarket chains (2 of top-10)

use Sterilox Systems By year end, several top-10 uS supermarket chains in late-stage negotiations 21% revenue growth Sterilox Food Safety Solution listed for food contact by uS FDa

2008 objectives Successfully execute installation schedule for top-five

supermarket chain rollout Focus on increasing marketshare in top-tier national and regional supermarket chains Continue to expand the use of Sterilox Solutions throughout areas of potential cross-contamination in supermarkets

New developments another top-five uS retailer adopts Sterilox

Challenge

the retail supermarket industry faces two challenges regarding perishable products: food safety and freshness. Supermarkets are the last link in the food supply chain. Retailers must control and protect against cross contamination of harmful pathogens in their fresh products before they reach customers to maintain consumer confidence. Similarly, the fresher the produce, the greater the customer loyalty and the smaller the loss of inventory from aging products.

Opportunity

PuriCore has focused its Food Safety efforts initially in the uS retail grocery sector. of the approximately 34,000 uS supermarkets, PuriCore focuses on the 27,000 larger retail stores that can support one or more Sterilox Systems. this represents a potential placement of 30,000 Systems--a $450 million potential market.

Results

In 2007, the uS retail supermarket industry continued to be very receptive to the value of the Sterilox Food Safety System. However, PuriCore installed fewer new systems than expected because of a large contract delay. of the 185 Sterilox Food Safety Systems installed in 2007, 163 were installed under lease agreements. as of year end, the Company had a total installed base of approximately 1,600 systems in this segment, 88% of which are under multi-year (typically three-year) lease agreements. early adopters of the Sterilox Food Safety System quickly recognised the economics: using Sterilox Systems significantly reduces the amount of fresh produce lost due to spoilage. However, some retailers have found it challenging to quantify properly the economics of their inventory shrink. Consequently, we developed new customized models that better measure the savings of produce and labour when implementing a Sterilox System. additionally, we see increasingly more customers emphasise the value of intangibles including food safety, brand protection, "greenness," and customer satisfaction through the use of Sterilox Systems.

Solution

the Sterilox Food Safety System provides critical safety assurance for supermarket chains in several areas of the retail store. Fresh Produce Retailers use the Sterilox Solution in the crisping (rinsing and rehydrating) process for fresh produce and to dose into the produce-misting systems. these uses eliminate pathogens and cross-contamination, enhance the fresh appeal of the produce, improve the shelf life and home life, and significantly reduce the labour required to clean display cases. Seafood and Ice Sterilox Solution can be used to remove potential pathogens from fresh fish and shellfish, eliminating seafood ammonia odour and enhancing shelf life. the Sterilox Solution is dosed into ice machines and used frozen as active Ice sanitising ice for safe, sanitary seafooddisplay use. Floral When used to replace traditional floral food, the Sterilox Solution prevents the microbial growth that commonly occurs, keeping flowers fresh and significantly reducing the time necessary to clean flower containers.

2008 Outlook

By year end, this business model proved effective with leading retailers in very late-stage sales negotiations. In January we announced the award of an $11 million contract with another top-five retailer. this order represents approximately half of this retailer's uS store network. We anticipate further orders to complete the chain-wide implementation throughout north america in 2009.

"I was skeptical when the Sterilox System was installed that it would work. We followed the program and found our produce looks great and holds up very well. our wet rack produce never looked so good! I am impressed and wished that Sterilox was around 10 years ago. . . it's a product that works as advertised."

Produce Manager Store #3517, Southern California

PuriCore 2007 Annual Report

4|5

Endoscopy

2007 highlights Sterilox endoscopy products used in 33% of

uK nHS hospitals with endoscopy departments Integrated distributed products to provide broader product portfolio 15% revenue growth

2008 objectives Position as a full-service endoscopy solution provider

Continue to grow uK customer marketshare expand into uS market

Challenge

Flexible endoscopes, commonly used in medical procedures such as colonoscopies, are large, delicate, complex, and expensive instruments that cannot be steam-sterilised between clinical procedures. Strict regulations govern the cleaning processes to ensure adequate safety and quality controls to prevent pathogen transmission and to protect patients. the cleaning process must be quick and efficient to enable multiple endoscope uses throughout the day.

Opportunity

the market for disinfectants and aeRs is expected to exceed annually $150 million in europe and $250 million in the uS by 2009. the size of the aeR market is growing more than 9% a year, driven by the increasing demand for preventive colorectal screening and the emerging standards in favour of safer and more effective disinfection solutions. In the uK, PuriCore targets the 440 hospitals with endoscopy units in nHS hospitals. alternatives to Sterilox Solution include gluteraldehyde (withdrawn from the uK by the primary manufacturer five years ago and now restricted) and other oxidative agents, including chlorine dioxide. the Sterilox Solution remains the only disinfectant technology that is safe for healthcare workers and the environment. In the uS, PuriCore will target the 5,000 hospital endoscopy units and 4,000 independent ambulatory care facilities. Currently, gluteraldehyde dominates the market but safer alternatives are being sought.

Solution

Sterilox endoscopy Systems provide a safe and natural liquid biocide--hypochlorous acid--that is effective for room-temperature high-level disinfection of endoscopes in automated endoscope reprocessors (aeRs). the Sterilox Solution is: · afe: completely S non-toxic and is of no risk to healthcare professionals or the environment · ffective: the Sterilox E Solution eliminates a broad spectrum-- including endospores, mycobacteria, antibiotic-resistant strains of bacteria, fungi, and viruses · ast acting: requires F only five to ten minutes of contact time

Results

Despite continued budgetary challenges in the nHS, the uK and International Sterilox endoscopy business experienced 15% revenue growth in 2007 (7% at constant currency) with significant contribution from the new aeR distribution partnerships. PuriCore's strategy to grow its recurring revenue base is yielding positive results: recurring revenue for 2007 in our uK endoscopy business increased 61% over 2006.

Sterilox endoscopy Systems are safe, effective, and efficient compared with traditional toxic disinfectant alternatives.

2008 Outlook

In 2008, PuriCore's endoscopy focus will continue to be primarily in the uK and uS markets. In the uK, we will endeavor to expand our recurring revenue through the sales of service agreements, consumables, and rental contracts. We expect to be cashflow positive in our uK endoscopy business in 2008. In the uS, we continue to prepare for the commercialisation of our Sterilox endoscopy Systems with a uS FDa 510(k) clearance now in hand. We expect to establish pilot sites in the third quarter of 2008.

"Sterilox endoscopy has provided an excellent service to the trust. they were involved in the design layout of the scope cleaning rooms and their input was extremely beneficial to the trust to achieve compliance. In addition we have found them extremely responsive to our needs, and their continuing customer care is excellent."

tracy Burrell, assistant Director of Facilities Blackpool, Fylde, & Wyre Hospitals NHS Trust

PuriCore 2007 Annual Report

6|7

2007 highlights named vice president of Foodservice

and Hospitality Received Product of Year award from Foodservice Consultants Society International Published research shows effectiveness of Sterilox Solution against major outbreak pathogens: norovirus, MRSA, Acinetobacter, and human influenza

2008 objective Identify and close market leaders

for early adoption

Foodservice and Hospitality

Challenge

the Foodservice, Hospitality, and Institutional industries must ensure that their facilities are safe and free of harmful infectious pathogens, including E.coli, MRSA, norovirus, avian influenza, tuberculosis, and HIv, for their guests and employees. this requires critical focus on the safety of food served to guests as well as on the decontamination of hard surfaces in guestrooms, lobbies, elevators, restroom facilities, and public areas. Most alternative disinfection solutions require mixing, dilution, personal protective equipment, or special disposal procedures. Many hotels, restaurants, and schools are beginning to seek a simpler, greener alternative.

Opportunity

a 2007 survey of foodservice operators cited food safety as the number-one technology investment. the Foodservice and Hospitality markets include restaurant chains, hotels, casinos, and resort facilities, representing a $1 billion uS market.

Results

Ramp up for these markets began in the second half of 2007 when PuriCore named a new vice president of Foodservice and Hospitality and began to evaluate sales and distribution channels. In the Hospitality market (with 12,000 hotel, resort, and casino locations in the uS alone) PuriCore is focused initially on casino resorts, large restaurant, hotel, and resort chains. Results of independent research studies showing the effectiveness of Sterilox Solution in these types of environments against major outbreak pathogens--including norovirus, MRSA, Acinetobacter, and human influenza-- were published in the Journal of Applied and Environmental Microbiology and presented at two conferences in 2007. a prominent trade organisation, Foodservice Consultants Society International, named the Sterilox Food Safety System Product of the Year. PuriCore received two additional awards for foodservice safety leadership and innovation already in 2008: one from the national Restaurant association and the second from the internationally recognised standards organisation nSF International. We anticipate first revenue in foodservice and hospitality in the second half of 2008.

Solution

PuriCore offers two products for these markets. · heSteriloxFoodSafetySystem,thesameSterilox T System commonly used by leading retail supermarkets, provides the same level of food safety protection to professional kitchens. the Sterilox Solution significantly reduces the risk of contamination by pathogens on fresh foods and food preparation surfaces that could lead to health and safety challenges. · heSteriloxBioSafetySystemhelpsprotectagainstand T control the spread of infectious pathogens by routinely disinfecting public high-touch areas. additionally, these Systems are used to fog public spaces including guest rooms to prevent or remediate viral outbreaks--such as norovirus--without disrupting business operations.

2007 highlights More than 2,500 patients successfully treated

with vashe Wound therapy uS patent for wound therapy method Research shows safety and efficacy of vashe Wound therapy

2008 objectives evaluate partnership opportunities

Complete further clinical research Develop business plan including commercialisation, regulatory, and reimbursement strategies

Wound Management

Challenge

as the population ages and life styles change, the incidence of chronic and acute wounds increases and places a heavy burden on patients and healthcare providers. this growth is fueled in part by the 9% annual growth rate of diabetes (currently 7% of the uS population). approximately 15% of diabetics suffer from foot ulcers at some point.

Opportunity

In 2004, chronic and acute wound care represented $9 billion in global product sales, of which $3 billion was used to treat skin ulcers, $1.5 billion for burns, and $4.2 billion for surgical and trauma wounds.

Results

PuriCore continues to explore and invest in therapeutic applications of its core technology with encouraging results. In 2007, PuriCore received a uS patent on its methods that employ hypochlorous acid at neutral or near-neutral pH to enhance the healing process for wounds. During the year, physicians at 13 uS clinical sites used vashe Wound therapy successfully to treat more than 2,500 patients with chronic and acute wounds with no report of adverse effects. the clinicians reported positive results and efficacy of vashe Wound therapy for the treatment of patients with a variety of challenging wounds including chronic venous ulcers and non-healing surgical wounds as well as patients with necrotising soft tissue infections. these and other positive clinical results were presented at several national wound management conferences in 2007. at year end, PuriCore initiated a formal clinical programme to demonstrate the efficacy of vashe Wound therapy in burn applications. additionally, we have initiated early discussions with potential partners. In 2008, clinical research on vashe Wound therapy will continue. We will further develop our business plan and focus on commercialisation, regulatory, reimbursement, and partnership strategies.

Solution

PuriCore recognised the ability of the body's own infection fighter--hypochlorous acid--to offer significant therapeutic value to the growing need for the treatment of chronic and acute wounds. Research shows that hypochlorous acid eliminates pathogens, reduces odour, and eliminates pain--all without any tissue damage. PuriCore's patented wound care technology, vashe Wound therapy, is a novel, noninvasive, easy-to-use wound management process that has been shown to be complementary to existing treatment methods. vashe Wound therapy is an FDa-cleared medical device used for moistening, irrigating, cleaning, and debriding acute and chronic wounds including stage I through Iv pressure ulcers, stasis ulcers, diabetic ulcers, post-surgical wounds, first and second degree burns, abrasions, and minor irritations of the skin. Recent research demonstrates that vashe Wound therapy provides a safe and effective alternative to cytotoxic antimicrobial and antiseptic products currently used to treat infected wounds and surgical sites and is an important element in the overall clinical process of effective wound management.

wound therapy

PuriCore 2007 Annual Report 8|9

vashe

Recurring revenue three-year growth: 75.5% Total revenue three-year growth: 20.5% Recurring revenue: 79% of sales

general and administrative expenses in 2007 totalled $14.1 million compared with $11.6 million in 2006, an increase of 22.3%. the increase was largely the result of the additional costs associated with operating as a public company for the full year 2007 (only six months as a publicly traded company in 2006). these costs comprised the additional overhead of legal, accounting, and other professional fees, offset by lower non-cash stock compensation expense (2007: $0.8 million vs. 2006: $2.4 million) related to the issuance of share options to employees and directors of the group (as determined under IFRS 2).

Balance Sheet and Cash Flow

as at 31 December 2007, PuriCore had cash equivalents (including restricted cash) of $18.9 million (compared with $43.0 million as of 31 December 2006), a decrease of $24.1 million. During the year, there were two major uses of cash: debt repayment and operating expenses. approximately $5.5 million (net) was used for the repayment of debt associated with secured borrowing arrangements that the Company entered into to further the strategy of growing our base of rented Sterilox Systems installed on operating lease agreements. as at 31 December 2007, outstanding debt related to these agreements totalled $9.2 million (including $4.5 million drawn on a line of credit) ($14.8 million at 31 December 2006). In 2007, cash outflow from operating activities totalled $14.1 million (compared with $12.3 million in the year ended 31 December 2006). the Company also used $2.0 million of cash to build inventory, which increased to $5.7 million at 31 December 2007 from $3.7 million at 31 December 2006. the increase was largely the result of strategic decisions to increase inventories in anticipation of uS Food Retail orders and, although these didn't occur until early 2008, the recently announced $11 million order will utilise these inventories. With increased demand for the Company's products and the generation of rapidly growing recurring revenues, the Directors consider there is now clear evidence that PuriCore's business model is being successfully implemented. accordingly, the Directors are confident that the necessary funding can be put in place to fulfill the Company's growth plans and secure its sustainable profitability, whether through debt, equity, or a mixture of both.

CFO Report

Income Statement

Results for the year ended 31 December 2007 showed continued top-line revenue growth. Sales of $18.6 million (2006: $15.9 million) were 17.5% higher than in 2006 (13% on a constant currency basis). this was slightly below the guidance of sales of $19.1 million given in our February trading update due to the Q1 2008 return of an order of third-party distributed products supplied in 2007. Recurring revenues, which are generated from the rental agreements, service contracts, and the sale of consumables, accounted for 79% of total revenue for 2007, reflecting a 57% increase in recurring revenue over 2006. Whilst 2007 was a challenging year for PuriCore, primarily due to unexpected contract delays, the group's results validate our recurring revenue business model. Cost of sales for 2007 was $15.7 million (2006: $12.9 million), resulting in a gross profit margin for the year of 15.8% (2006: 18.4%). the lower profit margin in 2007 resulted from higher sales of distributed products in our uK endoscopy business that are not as profitable as our proprietary endoscopy systems, as well as by the costs of having spare capacity among our field-based personnel. the strong revenue growth that we expect in 2008 will take advantage of this spare capacity, and we expect significant margin improvement throughout the year. Investment in research and development in 2007 increased to $2.4 million (2006: $2.1 million), a 13.4% increase. the rate of growth of investment slowed in 2007 (2006 increase in R&D from 2005 was 29%) whilst the group balanced its continued investment in engineering, clinical development, chemistry, and microbiology with a focus on improving cash flow. Sales and marketing expenses in 2007 totalled $8.0 million compared with $7.3 million in 2006, an increase of 9.3%. the increase was driven by additional investment in sales and marketing in the uS Food Safety business offset by fewer personnel and therefore lower costs in the uK endoscopy business.

Keith A. Goldan

Chief Financial officer 29 april 2008

Board of Directors

LeFT TO RIGHT: Back Row: timothy Bruce anderson; James Walsh, PhD; Michael Dimitrios Sapountzoglou; Joseph William Birkett; alan Suggett, BSc, PhD, C Chem, FRSC Front Row: Bishop Julius allen; Keith alan goldan, CPa; Christopher Paul James Wightman; gregory todd Bosch

Bishop Julius Allen2

Non-Executive Director Mr allen, 60, joined PuriCore in March 2003 as a non-executive Director and was appointed acting Chief operating officer in october 2003 until november 2004. Mr allen is currently the vice President of Customer Supply Chain for Sorrento lactalis uSa, the uS division of lactalis group, a multinational dairy and cheese group. He was President and Coo of triad Foods group, Inc., the leading private label delicatessen meat company in the uS. He previously held senior management positions at Schlotzsky's Deli, a publicly-listed international franchise restaurant chain; Safeway Inc; HeB Supermarkets; tom thumb Supermarkets; and other food retail groups. Mr allen has a BBa with a concentration in economics and Finance from the university of texas.

Joseph William Birkett1,3

Senior Independent Director Mr Birkett, 60, joined PuriCore in 1999 as an Independent non-executive Director. on 31 January 2008, Mr Birkett was appointed Senior Independent Director. Mr Birkett is an independent consultant and investor. His career was in finance and global investment banking before forming and running two independent venture capital firms in the 1980s and 1990s. He is currently Chairman of Chelford group plc, an aIM-listed supply chain software company. Following a BSc in economics from Sheffield university, he qualified as an FCa with touche Ross (now Deloitte & touche llP).

Gregory Todd Bosch3

Timothy Bruce Anderson1

Independent Non-Executive Director Mr anderson, 61, joined PuriCore in September 2006 as an Independent non-executive Director. He held various executive management positions from 1972 to 2002 at Baxter International (nYSe: BaX), a leading uS medical technology company, including Senior vice President of Strategy and Business Development; President, Biotech group; and group vice President and Chairman, Baxter europe. Mr anderson is also currently a Director of Cerus Corporation (naSDaQ: CeRS) and lake Forest Hospital.

Chief Executive Officer Mr Bosch, 45, joined PuriCore in november 2004 as Chief executive officer. Prior to joining PuriCore, Mr Bosch held a variety of management and leadership positions with Baxter International during his 19-year tenure. Most recently, he was vice President and general Manager of Baxter's BioSurgery division, which experienced growth from $40 million in 1998 to more than $220 million in 2004 under his leadership. Mr. Bosch had international assignments in austria and Switzerland and he was a board member of Baxter ag, a company with more than 2,500 employees. Mr Bosch received his Ba from Duke university and his MBa from DePaul university.

PuriCore 2007 Annual Report

10 | 11

Board of Directors Continued

Chief Financial Officer Mr goldan, 37, joined PuriCore in october 2004 as the Chief Financial officer, bringing more than 14 years of experience in business planning and financial management in the life science industry. Previously, Mr goldan was vice President and CFo of Biosyn, Inc., a privately held biotechnology company that was successfully acquired by a publicly traded pharmaceutical company in 2004. He also has worked with viroPharma Incorporated; Century Capital associates, a consulting firm specialising in capital strategy for healthcare clients; and the Healthcare & life Sciences Practice of KPMg llP. Mr goldan received a Ba in Business Management (Finance), cum laude, from the Robert H. Smith School of Business at the university of Maryland and holds an MBa from the Wharton School of Business. Non-Executive Director Mr Sapountzoglou, 47, joined PuriCore in 1999 as a non-executive Director. Mr Sapountzoglou brings more than 20 years of investment and finance experience and is currently the Finance Director for Metrostar Management Corp., the shipping arm of the angelopoulos group, and serves as the corporate finance and investment adviser for the group's other global investment activities. Prior to this, he was a co-founder of gamma Research, a financial advisory firm focusing on european and eastern european markets. He was also the Investment Manager for Star Maritime S.a., a private company based in Monte Carlo and part of the livanos Shipping group, where he managed and oversaw the group's proprietary investment portfolios. Independent Non-Executive Director Dr Suggett, 64, joined PuriCore in September 2006 as an Independent non-executive Director. He has more than 20 years of experience in technical and business roles in the medical devices field. He brings strong experience in strategic and governance leadership, most recently related to orthopaedics, minimally-invasive surgery, and wound management. He was group Director of technology at Smith & nephew plc. Previously he held senior positions with Smith & nephew, Scottish & newcastle Breweries, and unilever Research. Dr Suggett is also a non-executive Director of Intercytex group plc (aIM: ICX), Chairman of the Scientific advisory Board of Photopharmica limited, Chairman of the Healthcare technologies Knowledge

Keith Alan Goldan, CPA

transfer network, a Fellow of the Royal Society of Chemistry, an Honorary Fellow of the Royal College of Physicians, a visiting Professor at the university of York, Chairman of the Healthcare technologies Knowledge transfer network, a Fellow of the Royal Society of Chemistry, an Honorary Fellow of the Royal College of Physicians, and a visiting Professor at the university of York.

James Walsh, PhD2

Michael Dimitrios Sapountzoglou2,3

Independent Non-Executive Director Dr Walsh, 49, joined PuriCore in September 2006 as an Independent non-executive Director. He has 20 years of general management experience in the healthcare industry with particular experience in diagnostics. He is a non-executive Director with trinity Biotech Plc (naSDaQ: tRIB) and a member of the advisory Board for Kernel Capital. He is also Ceo of Stokes Bio ltd., an Irish-based microfluidics company working in the area of molecular diagnostics. Dr Walsh also holds non-executive Director positions with a number of early-stage companies in the life science areas. Previously Dr Walsh was Managing Director of Cambridge Diagnostics ltd., a wholly owned subsidiary of Inverness Medical Innovations Inc (aMeX: IMa). Dr Walsh is a graduate of the national university of Ireland and holds a Doctorate in Inorganic Chemistry and Post Doctorate qualifications in Immunochemistry. Non-Executive Chairman Mr Wightman, 49, joined PuriCore in 1998 as a non-executive Director and was appointed non-executive Chairman of the Board of Directors in august 2002. Mr Wightman is Chairman or Director of a number of other private uK companies. He previously spent 14 years in the investment banking industry with goldman Sachs, Bankers trust, natWest, and nationsBank. He read law at nottingham university before joining arthur andersen & Co., where he qualified with the Institute of Chartered accountants.

1. a member of the PuriCore audit Committee. 2. a member of the PuriCore Remuneration Committee. 3. a member of the PuriCore nomination Committee.

Christopher Paul James Wightman3

Alan Suggett, BSc, PhD, C Chem, FRSC 1

Directors' Report

PRINCIPAL ACTIVITIES

The principal activity of PuriCore plc and its subsidiaries (collectively, the "Group") is developing and commercialising proprietary products that safely, effectively, and naturally kill pathogens and are designed to limit the spread of infectious disease. The Group's technology mimics the human body's production of the natural antimicrobial hypochlorous acid, which is highly effective in killing bacteria, viruses, and fungal spores. The Group's technology provides a potential solution in a broad range of markets that depend upon controlling contamination, including food safety in food retail and foodservice, medical device and dental equipment disinfection for endoscopy and dentistry, hospitality, and wound management, among others.

RISKS RELATING TO THE GROUP'S BUSINESS

The Group is reliant on its core technology and development. The Group is reliant on its core technology platform and is subject to competition from competitors who might have existing products in development or commercially available that are more advanced and/or less expensive. The Group manages and endeavours to mitigate these concerns through its hiring of employees and advisers who assist with product development, quality, engineering, business strategy, filing of patents, and management and protection of intellectual property. The Group's products are subject to US, European, and other legislative and regulatory requirements. If the Group or its third-party manufacturers fail to satisfy legislative and regulatory requirements, this could result in the imposition of sanctions on the Group, including fines, injunctions, civil penalties, import bans, delays, suspension or withdrawal of approvals, license revocation, seizures or recall of products, operating restrictions, and criminal prosecutions, any of which could materially harm the Group's product development and commercialisation efforts. The Group manages and endeavours to mitigate against these risks through effective management and staffing of appropriate quality, regulatory, and engineering personnel who confer with appropriate professional advisers on an ongoing basis. The Group is dependent on a limited number of sub-contract manufacturers to produce certain components within its products. Although the Group expects that its products will be manufactured, assembled, and tested as is currently done for the foreseeable future, there is no guarantee that its sub-contractors will continue to devote adequate resources to the production of the Group's devices or deliver sufficient quantities of finished devices on a timely basis or at an acceptable cost or to enable the Group to maintain sufficient inventory to meet customer demand. The Group manages and endeavours to mitigate these concerns by maintaining effective and positive communication and relationships with its existing sub-contract manufacturers and regularly considers dual sourcing and potential switching to alternate sub-contract manufacturers. Furthermore, the Group continues to strengthen its operations regarding supply chain, order management, and quality control and to assess potential related risks.

REVIEW OF BUSINESS

A review of the business for the 12-month period ended 31 December 2007 is included within the Chairman and the CEO Review on page 2.

RESULTS

The Group's trading loss for the year ended 31 December 2007, after taxation, was $21.3 million. The financial results are shown in the Consolidated Income Statement on page 32.

DIVIDENDS

The Directors do not recommend the payment of a dividend.

RISKS AND UNCERTAINTIES

Risk management is seen as an important element of internal control and is used to mitigate the Group's exposure to such risks. Further information on internal controls is contained within our Corporate Governance Statement on page 20. The risks included here are not exhaustive. The Group operates in a competitive and rapidly changing environment. New risks emerge periodically and it is not possible to predict all such risk factors for the Group's business or the extent to which any factor or combination of factors might cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

PuriCore 2007 Annual Report

12 | 13

Directors' Report

Continued

RISKS RELATING TO THE GROUP'S FINANCIAL POSITION

Failure to use each Sterilox System for its full budgeted lifespan could cause the Group to incur losses. The Group depreciates each rented System over a life of three to five years. If a System becomes incapable of operating to the required standard before the expiry of its accounted lifespan and it is not possible to or it is prohibitively expensive to remedy the problem, the Group could be required to write off the remaining net book value of the System and install a new or refurbished System in its place. The Group manages and endeavours to mitigate this concern by continuously monitoring the performance of existing Systems as well as focusing on the quality of both the manufacture and design of its Systems. The Group relies on third-party vendor financing to fund part of the capital costs of its equipment. If the Group loses the benefit of its third-party finance relationships, it might not be able to source alternative financing on similar terms. Furthermore, if the Group chooses to fund the capital costs of its equipment itself, it would result in considerable levels of cash out-flow, which might in turn have a material adverse effect on the Group's business, financial condition, and results of operations. The Group manages and endeavours to mitigate this concern by continuously evaluating alternate financial arrangements and business partners and engages in discussions and networking with other financial providers and advisers. The Group is reliant on a small number of significant customers. The Group is reliant on a small number of significant customers for its product sales in some of its business areas. Failure to deliver products to such customers or termination by any of these customers of their agreements with the Group could have a material adverse affect on the Group's results or operations or financial condition. The Group manages and endeavours to mitigate this concern by investing in sales and marketing as well as installing machines on a trial basis with an expanded network of sales prospects. Further, the Systems installed on a rental basis require full payment of the remaining rental payments should the customer wish to terminate the contract early.

RISKS RELATING TO INTELLECTUAL PROPERTY AND LITIGATION

The Group might be unable to protect adequately its intellectual property, proprietary information, and know-how or be subject to third-party infringement actions. The Group is the owner of intellectual property rights, including patents, trademarks, designs, copyright, trade secrets, unpatented proprietary technology, processes, know-how, and other confidential information. Whilst it might apply from time to time to register additional patents, trademarks, designs, and copyright and take reasonable steps to protect its proprietary information, there can be no assurance that any of its intellectual property rights will not be successfully challenged or that third parties will not misappropriate such secrets and information. The Group relies to a great extent on its patents and know-how and whilst no validity challenges have previously been made there is no guarantee that they will not be made in the future. Any misappropriation, or challenge or failure to obtain a license could have a material adverse effect on the Group's business, financial condition, and results of operations and might require it to engage in litigation. The Group manages and endeavours to mitigate these risks by implementing appropriate, ongoing legal and managerial oversight of the intellectual property portfolio, by utilising confidentiality agreements with customers, suppliers, and employees and by working with advisers.

RISKS RELATING TO FUNDING

The Group might be unable to raise sufficient future funding to meet the cash requirements of the business. The Group is in a number of ongoing discussions with potential partners to raise additional funding. Further details are included in the basis of preparation note to the financial statements.

DIRECTORS

The Directors of PuriCore plc: Bishop Julius Allen (appointed 16 May 2006) Independent Non-Executive Director Joseph William Birkett (appointed 21 April 2006) Senior Independent Non-Executive Director Gregory Todd Bosch (appointed 21 April 2006) Chief Executive Officer Keith Alan Goldan (appointed 21 April 2006) Chief Financial Officer Michael Dimitrios Sapountzoglou (appointed 21 April 2006) Non-Executive Director Christopher Paul James Wightman (appointed 21 April 2006) Chairman/Non-Executive Director

Timothy Bruce Anderson (appointed 12 September 2006) Independent Non-Executive Director James Walsh (appointed 12 September 2006) Independent Non-Executive Director Alan Suggett (appointed 12 September 2006) Independent Non-Executive Director Details of Directors' Interests can be found on page 27, within the Directors' Remuneration Report. In accordance with the Group's Articles of Association, at the forthcoming Annual General Meeting a resolution will be proposed for the re-appointment, by shareholders, of three Directors, Mr Allen, Dr Suggett, and Mr Walsh. Brief biographical information of all current Directors can be found on pages 11 to 12.

SUBSTANTIAL SHAREHOLDINGS

As at 31 March 2008, excluding Directors' holdings, these are the fund managers we understand to hold over 3% of the Group's Issued Share Capital ("ISC"): Fund Manager Sustainable Asset Management* Invesco Perpetual** Newton Investment Management Oracle Management Limited BlackRock Management Limited***

* Includes the holding of JB MP SAM Sustainable Water Fund (8,501,035 shares; 5.56%) ** Includes the holding of Perpetual Income & Growth Investment Trust plc (7,291,986 shares; 4.77%) *** Holding on behalf of the MLIIF UK Fund

No of shares 12,966,802 9,891,929 8,622,573 5,544,584 4,819,745

% of ISC 8.48% 6.47% 5.64% 3.63% 3.15%

In addition, we understand the following owners to hold more than 3% of the ISC as at the same date: Owner Woolwich International Holdings Gacita Limited Kanton Services Limited Deutsche Bank AG Mr Stewart Newton*

* Holds via two registered shareholdings each below 3% threshold

No of shares 15,954,983 12,688,986 10,521,739 7,640,044 5,929,038

% of ISC 10.44% 8.30% 6.88% 5.00% 3.88%

SHARE CAPITAL

The share capital of PuriCore plc comprises ordinary shares of 1p each; each share carries one vote per share and is entitled to dividends at the discretion of the Directors. The authorised and issued share capital of PuriCore plc, together with the movements in PuriCore plc's issued share capital during the year, are shown in note 25.

PuriCore 2007 Annual Report

14 | 15

Directors' Report

Continued

TAKEOVER DIRECTIVE

Section 992 of the Companies Act 2006, which implements the EU Takeovers Directive, requires PuriCore plc to disclose certain information. These requirements are dealt with elsewhere in the Annual Report, however the following additional disclosures are required: The Company's Articles of Association ("Articles") give power to the Board to appoint Directors, but require Directors to submit themselves for election at the first Annual General Meeting following their appointment and for one third of the Board to retire by rotation at each Annual General Meeting. The Articles may be amended by special resolution of the shareholders. The Board of Directors is responsible for the management of the business of PuriCore plc and may exercise all the powers of PuriCore plc subject to the provisions of the relevant statutes, the PuriCore plc Memorandum of Association, and the Articles. The Articles contain specific provisions and restrictions regarding PuriCore plc's power to borrow money. Powers relating to the issuing and buying back of shares are also included in the Articles. The authority to issue shares is renewed by shareholders each year at the Annual General Meeting.

that competitors want to emulate, that communities recognise as a contributor, and that investors value. PuriCore's Core Values are the foundation of its corporate and social responsibilities. Quality We focus on quality as a means of meeting and exceeding the needs of our customers. As a result, we are able to outperform the competition and earn customer loyalty, providing them with value and service beyond their expectations. Suppliers seek us out as a trusted, reliable partner. Our continual innovation, spirit of integration, and high standards improve quality throughout every aspect of our organisation. Respect and Integrity We demand of ourselves the highest level of integrity and professionalism in our dealings with each other, customers, suppliers, and other business partners. We respect the contribution that each member of our team makes to our success. To be an effective team at all levels in the organisation, we establish an environment of trust. We carry ourselves with the pride that comes from respecting ourselves and others. Teamwork We recognise that we are stronger and more effective as a team than as individuals. We support an open, communicative culture in which individuals are encouraged to offer suggestions for improvement. We recognise that diversity is a source of strength and listen to differing viewpoints so we can constructively solve problems. Fostering strong teamwork allows an opportunity for each individual's suggestions to be heard, empowering our employees and encouraging necessary risk-taking. Accountability We are accountable to our customers, employees, communities, and stakeholders. Personal accountability is expected and determines the strength of PuriCore through positive contributions by individuals. We celebrate and recognise individual contributions. At the same time, we are not afraid to acknowledge, correct, and learn from our mistakes. Individual commitment and performance allow us to pay attention to the details that will ensure quality throughout each aspect of our organisation. Passion and Pride What we do makes a difference. We are passionate about the contribution PuriCore makes to the life science community. We convey our enthusiasm and passion for PuriCore in all our communications and professional interactions. Taking pride in our work allows us to constantly strive to develop and improve.

CORPORATE AND SOCIAL RESPONSIBILITIES

PuriCore Core Purpose, Commitment, and Values The foundation of PuriCore's Corporate Social Responsibility is intrinsically tied to its Core Purpose and Core Values. Throughout our organisation and in our business dealings, we are driven by our Core Purpose: to generate life science solutions for a safer, healthier world. To achieve this Purpose, PuriCore develops solutions that advance human health through the control of infectious pathogens--including major public health threats--without harm to people or to the environment. Our technology and solutions are used in a broad range of applications that depend upon controlling contamination including food safety, medical device disinfection, wound management, and biosafety. The driving force behind PuriCore and the achievement of our Core Purpose is our people and how we conduct our business. We are committed to creating a culture that values individual and collective energy, spirit, leadership, and innovation. To realize our Core Purpose and to facilitate such a culture, we have developed the PuriCore Commitment and Core Values. The PuriCore Commitment is a promise to our customers, employees, communities, and stakeholders that we will strive to make a positive contribution to the world whilst delivering exceptional business results. Together, we will build a company that customers and suppliers respect as a strategic partner, that employees are proud to work for,

Employment PuriCore's Core Values are the foundation of its human capital force and organisational culture. Each PuriCore employee makes a commitment to adhere to the Core Values statement, which is one component upon which performance is measured. In addition, each employee receives and acknowledges compliance with PuriCore's Code of Conduct. PuriCore's human capital strategy is detailed in the Employee Practices section on Page 18. Health and Safety PuriCore is committed to providing a safe and healthy work environment for all team members. Formal, written Health and Safety Policies are communicated to all employees. These policies are robust and continuously improved to complement PuriCore's business as it develops. In these policies, PuriCore has committed to operate each PuriCore facility in accordance with applicable legal and regulatory guidelines. PuriCore also recognises, promotes, and reinforces the responsibility of employees, consultants, and visitors to work safely and follow procedures. Environment PuriCore's Core Purpose is to contribute to a safer, healthier world. First and foremost, PuriCore pursues this commitment with its products and technology that control the spread of infection pathogens. This is done in a safe and natural way: all PuriCore products and solutions are safe to people and to the environment. Throughout its business activities, PuriCore is committed to the basic tenants of conservation: reduce, reuse, recycle. As part of PuriCore's conservation and recycling programme, all employees, consultants, and visitors are asked to: · Recycle paper, glass, and tins throughout all facilities · Use recycled paper in copiers and printers throughout all facilities · Print the company's Annual Report and other business and marketing materials on recycled paper stock · Switch off all electric items when they are not needed · Recycle used office equipment · Minimize packaging and waste · Eliminate the consumption of bottled water at its facilities Communities PuriCore supports its local communities by maintaining sound business practices and acting as a good corporate citizen and a valued employer. PuriCore is a responsible member of its local business communities, an active participant in policy development to safely control the

spread of infectious pathogens, and an active member of business organisations that advance human health. Additionally, PuriCore encourages all team members to actively participate in and support charitable causes of their choice. Business Practices PuriCore is committed to providing innovative life sciences solutions that control the spread of infectious pathogens benefiting a variety of healthcare and commercial markets. Our solutions not only directly protect our customers and their employees but also protect their own customers at the consumer level and thus their brand value and stakeholder loyalty. PuriCore will continue to invest in research and development for new markets and applications of its pathogen-control technology and solutions. PuriCore is committed to providing its shareholders, directors, employees, consultants, clients, suppliers, and the public with timely and accurate information. We strive to maintain the highest levels of integrity in our company records, business communication practices, and scientific information. We are dedicated to honesty and fairness in all aspects of our business and expect the same from those with whom we do business. We also focus on preventing and correcting problems and have dedicated quality control teams. We have a formal system for analysis, correction, and feedback regarding problems that can be prevented or corrected. PuriCore and its employees are expected to comply with the laws of all jurisdictions in which they operate and with applicable international and national industry codes of practice. PuriCore complies with the applicable US, UK, and European Union securities laws, antitrust, and state laws relating to duties owed by corporate directors and officers. We comply with all applicable government regulations and standards, including those issued by the FDA, EPA, ISO, UL, NSF, FCC, and EC Marking. Accounting records and supporting documents are designed to accurately describe and reflect the business transactions and conform to IFRS and US GAAP. Human Rights PuriCore does not use any form of forced, compulsory, or child labour. PuriCore supports the Universal Declaration of Human Rights of the United Nations and respects human rights, the dignity and privacy of the individual, the right of employees to freedom of association, freedom of expression, and the right to be heard.

PuriCore 2007 Annual Report

16 | 17

Directors' Report

Continued

EMPLOYEE PRACTICES

PuriCore's human capital strategy and programmes are designed to support a positive organisational culture guided by our Core Values and to drive the achievement of our business objectives. The strategy focuses on four key areas: organisational planning, recruitment and equal opportunity, reward and recognition, and communication. Organisational Planning As an expanding organisation, one of our key priorities is to establish an infrastructure to enable growth considering both short- and long-term goals. We continually evaluate the resources that are most vital to grow our core markets whilst identifying additional expertise needed to support new market opportunities. We annually assess talent across the business to understand better our organisational strengths and knowledge gaps. Further, we look at ways to gain synergies and share successful practices across our global workforce. We also review the structure of the organisation and reporting relationships to maximize the effectiveness of our work structure and the way we deliver services to our customers. Recruitment The Group is committed to the principle of equal opportunity in employment and to ensuring that candidates for employment are hired and employees are advanced based on capabilities and demonstrated results. We employ a rigorous evaluation process for applicants, including consideration of demonstrated prior results, related company experience, extent to which they embody PuriCore's Core Values, and their passion for life sciences. We seek, where practical, to identify a diverse pool of applicants for new positions. We customize our on-boarding process based on the role the new team member will play in the organisation and provide them access to resources and other team members to help them make an informed and smooth transition to their new position and to the Group. Full and fair consideration is given to applications for employment made by disabled persons having regard to their particular aptitudes and abilities. Appropriate training is arranged for disabled persons, including retraining for alternative work for employees who become disabled to promote their career development within the organisation.

Reward and Recognition Through a variety of feedback and reward mechanisms, we are developing a performance-driven culture. We appreciate that a reward and recognition system with focused goals and the identifiable ability to impact those goals will attract, retain, and motivate our employees. We use a combination of approaches, based on the circumstance, to reward performance, including cash compensation (base pay and incentive), equity, development assignments, and individual recognition. Our performance feedback processes provide formal mid-year and year-end assessment of performance based on established goals. In setting goals, we have a cascading approach in which senior managers share their business goals with their direct report team who then share them with their direct reports and so on. In this way we ensure uniformity of priorities and objectives. Communication The Group recognises the value of communication in fostering teamwork, promoting employee morale, and managing the business. The Group's policy is to discuss with employees the status of the business and strategies for the future as well as other matters likely to affect employees' interests. Information is provided to achieve a common awareness on the part of all employees of the regular and frequent financial and economic factors affecting the Group's performance and to share how they can contribute to the Group's success. We strive for a culture of open communication, free exchange of ideas, and innovation through thought and dialogue. We regularly and actively engage our team members through timely communication of company news and information in a variety of formats. Our internal communication strategy includes frequent written employee updates, periodic employee meetings, newsletters, and lunchtime sessions that educate employees on various aspects of our technology, business, markets, and customers. We solicit and encourage feedback from all team members and actively engage dialogue across all management levels. We maintain a policy of accessibility of senior management to all staff. In 2007, we conducted an employee opinion survey to identify employee attitudes, engagement, and opportunities for improvement. The results were carefully reviewed and implementation of many improvements is underway.

GOING CONCERN

After making suitable enquiries, the Directors believe that the Group has adequate resources to continue to adopt the going concern basis in preparing the financial statements. This matter is more fully described in the basis of preparation note to the financial statements.

On 14 April 2008 the Group repaid the $4.5 million balance on the line of credit facility with Brown Brothers Harriman. The Sterilox Solution was approved for Organic Food production, processing, and handling by the Organic Materials Review Institute, as announced on 28 April 2008.

POLICY ON PAYMENT OF CREDITORS

It is Group policy to agree and clearly communicate the terms of payment as part of the commercial arrangement negotiated with suppliers and then to pay according to those terms based on the timely receipt of an accurate invoice. The Group and its UK based businesses follow the CBI Prompt Payers Code. A copy of the code can be obtained from the CBI at Centre Point, 103 New Oxford Street, London, WC1A 1DU. Group trade creditor days based on creditors at 31 December 2007 were 29 days.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Group will be held at 9:00 am BST on Thursday 26 June 2008 at the Group's UK offices located at Wolseley House, Dyson Way, Staffordshire Technology Park, Beaconside, Stafford ST18 0GA, United Kingdom. The Notice of Annual General Meeting is set out on pages 76 to 79.

SPECIAL BUSINESS

Details of special business at the Annual General Meeting are disclosed in the notice of the Annual General Meeting.

POST BALANCE SHEET EVENTS

The Group was awarded a contract worth approximately $11 million in 2008 to install its Sterilox Food Safety Systems in roughly half of the retail locations of one of the largest supermarkets in the US. The contract was announced on 11 January 2008. In compliance with the Combined Code, Joseph William Birkett was appointed Senior Independent Director of the Group on 31 January 2008. The Group signed an agreement to acquire nine issued US patents related to electrolyzed water equipment and processes from ECT, with the intent to expand its operations in commercial and industrial water treatment. The Group also signed separate agreements to hire two senior ECT scientists who bring many years of collective experience in electrolysed water technology. These agreements were announced 20 February 2008 and are subject to the approval of the United States Bankruptcy Court for the Eastern District of Missouri. The Group granted options over Ordinary Shares in the Company to the Directors and PDMRs under the terms of the PuriCore plc Executive Omnibus Incentive Plan. The grant was announced 21 February 2008. The total number of options over Ordinary Shares in the Company issued to Directors, PDMRs, and employees was 3,696,000. Refer to note 22 of the financial statements for additional information on share-based payments.

AUDIT INFORMATION

The Directors have confirmed, as far as they are aware, that there is no relevant audit information of which the auditors are unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor.

AUDITORS

A resolution to reappoint KPMG Audit Plc, Chartered Accountants, as auditors will be put to the members at the Annual General Meeting. PuriCore also engaged the services of KPMG for tax compliance and consulting in the UK. By order of the Board Mr Christopher Wightman Chairman 58 Davies Street London W1K 5JF 29 April 2008

PuriCore 2007 Annual Report

18 | 19

Corporate Governance Statement

PRINCIPLES OF CORPORATE GOVERNANCE

The Group is firmly committed to business integrity, high ethical values, and professionalism in its activities and operations. As an essential part of this commitment, the Board endorses the highest standards of corporate governance and is accountable to the Group's shareholders. The role of the Board is to provide entrepreneurial leadership of the Group within a framework of prudent and effective controls, which enables risk to be assessed and managed. The Board sets the Group's strategic aims, ensures that the necessary financial and human resources are in place for the Group to meet its objectives and reviews management performance. The Board sets the Group's values and standards and ensures that its obligations to its shareholders and others are understood and met.

· Is willing to stand up to defend one's own beliefs and viewpoints in order to support the ultimate good of the organisation · Has a good understanding of the organisation's businesses and affairs enabling proper evaluation of the information and responses provided by management The Board considers the issue of independence on an annual basis. The Board reviewed the independence of Non-Executive Directors and Mr. Birkett in 2007 and concluded that each of them continues to demonstrate the characteristics it considers to be essential indicators of independence. Although the Board's structure was not compliant with the Combined Code (A.3.3) during 2007, following the appointment of Mr Birkett as the Senior Independent Director, it is now compliant. Director biographies appear on pages 11 and 12. All Directors are subject to re-election at least once every three years. The Board is responsible to shareholders for the proper management of the Group. A statement of Directors' responsibilities in respect of the accounts is set out on pages 28 and 29. The differing roles of Executive Directors and Non-Executive Directors are clearly delineated, with both having fiduciary duties towards PuriCore plc. The Executive Directors are responsible for the operation of the business, whilst the Non-Executive Directors bring third-party, objective judgement to bear on Board decisions by constructively challenging management and ensuring that the strategies proposed by the Executive Directors are fully considered. To enable the Board to discharge its duties, all Directors have full and timely access to all relevant information and there is a procedure for all Directors, in furtherance of their duties, to take independent professional advice, if necessary, at the expense of the Group. All Board members have access to advice of the Company Secretary. PuriCore's products do not have the potential for industrial pollution. PuriCore's main products are based on electrochemical technologies that produce hypochlorous acid solutions, which are considered safe for humans and the environment. We work to ensure all our offices minimise any potential environmental impact, and we are committed to working with our suppliers to help understand and reduce their environmental impact. Mr Goldan is the Director responsible for PuriCore ensuring compliance with its environmental policy. Further information on PuriCore's environmental policies are provided on page 17 or at www.puricore.com.

STATEMENT BY THE DIRECTORS ON COMPLIANCE WITH THE PROVISIONS OF THE COMBINED CODE

From 1 January 2007 through 31 December 2007, the Group has complied with the code of best practice set out in Section 1 of the Combined Code (issued in 2006 by the Financial Reporting Council), save where detailed below, and as detailed in the Remuneration Committee report on pages 24 to 27.

BOARD STRUCTURE

The Group is currently led and controlled by a Board comprising nine Directors (the Chairman, the Senior Independent Director, appointed in January 2008, two Executive Directors, and five Non-Executive Directors). Mr Birkett and four of the Non-Executive Directors, Mr Anderson, Mr Allen, Dr Suggett, and Dr Walsh are considered by the Board to be independent of management and free of any business or other relationship that could materially interfere with the exercise of their independent judgement. The Senior Independent Director and the four Non-Executive Directors hold share options in the Group; however, the Board does not consider this to bias their independence. The Board has also concluded the following behaviours are essential for the Board to consider a Director to be independent and assesses the Senior Independent Director and each Non-Executive Director against these criteria: · Provides objective challenge to management · Is prepared to challenge others' assumptions, beliefs, or viewpoints as necessary for the good of the organisation · Questions intelligently, debates constructively, challenges rigorously, and decides dispassionately

PuriCore maintains a strong and ongoing commitment to Quality, one of its five Core Values. PuriCore endeavours to provide safe and effective products and services that meet or exceed its customers' expectations. Specifically, PuriCore is committed to continuous improvement and innovation, meeting or exceeding quality and regulatory requirements and maintaining individual and collective accountability for realizing the goals of the Quality Policy. PuriCore's Quality System is maintained through periodic evaluations and updates to meet the changing needs of our customers, employees, products, industry standards,

and other stakeholders. Quality objectives are derived from PuriCore's annual planning process and documented in a Quality Plan. Quarterly Quality Management Reviews evaluate the suitability, adequacy, and effectiveness of the Quality System; identify opportunities for improvement of the Quality System, processes, and products; assure compliance with corporate policies and government regulations; and identify resource needs. The results of these reviews are documented. Mr Bosch is the Director responsible for PuriCore ensuring compliance with its Quality Policy.

The Board has a formal schedule of matters reserved to it and usually meets bi-monthly, with eight Board meetings occurring in and from 1 January 2007 through 31 December 2007. The chart below summarises the attendance of Directors at the full Board meetings and Committee members at the respective Committee meetings: Full Board Nomination Committee Remuneration Committee Audit Committee

Director Mr Allen (Independent Non-Executive) Mr Birkett (Senior Independent Non-Executive) Mr Bosch (Executive) Mr Sapountzoglou (Non-Executive) Mr Wightman (Non-Executive) Mr Goldan (Executive) Dr Suggett (Independent Non-Executive) Dr Walsh (Independent Non-Executive) Mr Anderson (Independent Non-Executive)

Eligible Eligible Eligible Eligible to attend Attended to attend Attended to attend Attended to attend Attended 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 7 2 2 2 2 1 2 1 2 5 5 5 3 5 5 6 2* 6 6 2 6

* Since his appointment to the Committee on 31 May 2007.

The Board is responsible for overall Group strategy, approval of major capital expenditure projects, and consideration of significant financing matters. The roles of the Chairman, Senior Independent Director, and the Chief Executive Officer are separate. The Chairman, Mr Wightman, is responsible for ensuring the efficient and effective working of the Board and leads the Board in the determination of its strategy and the achievement of its objectives. Mr Wightman is currently the Chairman of the Equinox Group of Companies and is also Chairman or Director of a number of other UK companies, including ASI Solutions plc and Clickstream Technologies plc. The

Senior Independent Director, Mr Birkett, is responsible for assisting the Chairman with meeting process, evaluations and agenda as needed, presiding at meetings of the Non-Executive Directors at least once per year, and meeting with shareholders and understanding issues and concerns. The Chief Executive Officer, Mr Bosch, is responsible for implementing strategy of the Group and ensuring the effectiveness of executive functions. The Board does not allow any full-time Executive Director to take on more than one non-executive directorship or chairmanship in a FTSE 100 company.

PuriCore 2007 Annual Report

20 | 21

Corporate Governance Statement

Continued

COMMITTEES

The following Committees, which have written terms of reference (available on the Group's website at www.puricore.com or on request from the Company Secretary), deal with specific aspects of the Group's affairs. · The Nomination Committee comprises Mr Wightman (chairman), Mr Bosch, Mr Birkett, and Mr Sapountzoglou. Mr Birkett is the only independent member of the Nomination Committee. The structure of the Nomination Committee does not meet the requirements of the Combined Code (A.4.1) as it should comprise a majority of Independent Non-Executive Directors. The Committee held two meetings in the period 1 January through 31 December 2007. The Committee is responsible for proposing candidates for appointment to the Board, having regard to the balance and structure of the Board. In appropriate cases, recruitment consultants are used to assist the process. The Nomination Committee terms of reference are available on the Group website. Attendance at the Nomination Committee meeting is shown on page 21. · The Remuneration Committee comprises Mr Sapountzoglou (chairman), Mr Allen, and Dr Walsh. Dr Walsh and Mr Allen are Independent Non-Executive Directors. The Remuneration Committee has not complied with the Combined Code (B.2.1) as the Remuneration Committee should comprise entirely Independent Non-Executive Directors. The Remuneration Committee also utilises outside resources and experts as appropriate. The Committee is responsible for making recommendations to the Board on the Group's framework of Executive remuneration and its cost. The Committee held five meetings during 2007. The Committee determines the contract terms, remuneration, and other benefits for each of the Executive Directors, including performance related cash and equity bonus schemes, pension rights, and compensation. The Board itself determines the remuneration of the Non-Executive Directors. The Directors' remuneration report is set out on pages 24 to 27. The Remuneration Committee terms of reference are available on the Group website. Attendance at the Remuneration Committee meetings is shown on page 21. · The Audit Committee comprises Mr Birkett (chairman), Mr Anderson, and Mr Suggett, who joined the Committee on 31 May 2007. Mr. Birkett qualified with Deloitte and Touche as an auditor early in his career and has also served as chairman of the Audit Committee of an AIM listed company; Mr. Anderson has served on the Audit committees of two additional publicly held companies. The Audit Committee held six meetings during 2007. From 1 January to 30 May 2007, there were only two members of the Audit Committee as is

permitted due to the Company qualifying as a "smaller company" by virtue of being below the FTSE 350 during that time period. The Audit Committee received reports from the Group's external auditors (KPMG Audit Plc) and reviewed the half-yearly and annual accounts presented to the Board, focusing in particular on accounting policies and areas of management, judgement, and estimation. The Audit Committee is responsible for monitoring the controls that are in force to ensure the integrity of the information reported to the shareholders. The Audit Committee terms of reference are available on the Group website. The Committee acts as a forum for discussion of internal control issues, including review of the enterprise risk management programme and contributes to the Board's review of the effectiveness of the Group's internal control and risk management systems and processes. It advises the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work and discusses the nature and scope of the audit with the external auditors. The Committee advises the Board on the need for an internal audit function. The Committee has concluded that an internal audit function is not appropriate at this time, given the current scale and structure of its operations. The Committee is responsible for overseeing the performance, as well as the independence and objectivity of the auditor, which it does by requiring reports from the auditor, a requirement to pre-approve fees for non-audit work, and by ensuring that fees for non-audit work remain lower than those for audit work. All Audit Committee meetings held during 2007 were attended, by invitation, by the Chairman, Chief Executive Officer, Chief Financial Officer, Company Secretary, and Director of Finance and Corporate Controller. Attendance at the Audit Committee meetings is shown on page 21.

PERFORMANCE EVALUATION

The performance of individual Directors, both Executive and Non-Executive, was evaluated by the Chairman. In the case of the Chief Financial Officer, the Chairman's evaluation was made in conjunction with the Chief Executive Officer. The Senior Independent Director led and conducted the evaluation of the Chairman. In addition, the board undertook a formal annual evaluation of its performance and that of its committees. As a result of these reviews, the Board confirms that each of the Directors who are proposed for re-election at the Annual General Meeting continues to demonstrate the necessary commitment and to be a fully effective member of the Board.

INTERNAL CONTROL

In accordance with the Turnbull guidance, the Directors confirm that there is an ongoing process for identifying, evaluating, and managing the significant risks facing the Group and its subsidiaries. This process was in place during the period from 1 January 2007 to 31 December 2007 and up to the date of approval of the annual report and accounts. The Directors are responsible for the Group's system of internal control and reviewing its effectiveness. The Group's system of internal control is designed to provide the Directors with reasonable assurance that the Group's assets are safeguarded, that transactions are authorised and properly recorded, and that material errors and irregularities are either prevented or would be detected within a timely period. However, no system of internal control can eliminate the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss. The Directors confirm that the Board has acknowledged that it is responsible for the Group's system of internal control and has reviewed the effectiveness of the Group's system of financial and non-financial controls during 2007, including operational and compliance controls, risk management, and the Group's high-level internal control arrangements. The key elements of the internal control system in operation are: · The Board meets regularly with a formal schedule of matters reserved to it for decision and has put in place an organisational structure with clear lines of responsibility defined and with appropriate delegation of authority. The Board receives periodic reports from all Committees. · Management is responsible for the identification and evaluation of significant risks and for the design, implementation, and monitoring of appropriate internal controls, including financial systems, computer environments, business operations, and compliance. Management regularly reports to the Board on the key risks inherent in the business and on the way in which these risks are managed. · There are established procedures for planning, approval, and monitoring of capital expenditure and information systems for monitoring the Group's financial performance against approved budgets and forecasts. During 2007, the Audit Committee has reviewed the effectiveness of the system of internal control as described above. There are no significant issues disclosed in the report and financial statements for the period ended 31 December 2007 and up to the date of approval of the report and financial statements that have required the Board to deal with any related material internal control issues.

RELATIONS WITH SHAREHOLDERS

The Group values its dialogue with both institutional and private investors. Effective two-way communication with fund managers, institutional investors, and analysts is actively pursued and this encompasses issues such as performance, policy, and strategy. The annual report contains a full business review and a description of existing and candidate products. An interim business review is provided with the half-year report sent to all shareholders. With these documents and the Group's press releases, the Board seeks to present a balance and understandable assessment of the Group's position and prospects. The Group's website at www.puricore.com also provided extensive information about the Group. PuriCore maintains regular contact with institutional shareholders through an extensive programme of one-to-one visits and briefings. Additionally, Executive Directors give presentations on the results to institutional investors, analysts, and the media in the UK and US. Copies of major presentations are also linked on the Company's website. Private investors are encouraged to participate in the Annual General Meeting at which the Chairman and Chief Executive Officer will present a review of the results and comments on current business activity. The Chairmen of the Audit, Remuneration, and Nomination Committees will be available at the Annual General Meeting to answer any shareholder questions. Contact with major shareholders is principally maintained by the Chief Executive Officer and Chief Financial Officer, who ensure that their views are communicated to the Board as a whole. The Chairman also discusses governance and other matters directly with major shareholders. The Board believes that appropriate steps have been taken during the year to ensure that the members of the Board, and in particular the NonExecutive Directors, develop an understanding of the issues and concerns of major shareholders about the company. The Board is provided regularly with brokers' reports and feedback from shareholder meetings. The Board believes that these methods are a practical and efficient way both to keep the Chairman in touch with major shareholder opinion on governance and strategy and for the Senior Independent Director to learn the views of major shareholders and to develop a balanced understanding of their issues and concerns. The Senior Independent Director is available to attend meetings with major shareholders if requested. This year's Annual General Meeting will be held on 26 June 2008. The notice of the Annual General Meeting can be found on pages 76 to 79.

PuriCore 2007 Annual Report

22 | 23

Directors' Remuneration Report

REMUNERATION COMMITTEE

The Group has established a Remuneration Committee, chaired by Mr Sapountzoglou, as further summarized on page 22. In determining the Directors' remuneration for the year, the Committee undertook a comprehensive review of remuneration practices by similar companies with the assistance of the Group HR Director.

NON-EXECUTIVE DIRECTORS' REMUNERATION

The cash remuneration of Non-Executive Directors comprises fixed annual fees. These fees are determined by the Board as a whole giving regard to the commitment of time required and the level of fees in similar companies. Non-Executive Directors are not eligible to participate in the Group's benefit plans. Director fees are £25,000 per annum per Non-Executive Director. Chairmen of the Audit Committee and the Remuneration Committee receive an additional £5,000 per annum. The Chairman of the Board receives £85,000 per annum. Expenses incurred in conducting Group business are reimbursed upon submission of appropriate documentation.

Performance-Related Bonus The Remuneration Committee, in consultation with management, establishes the financial and operational objectives that must be met for each financial year for the annual bonus to be paid. The purpose of the bonus is to incentivise and reward Executive Directors for achieving excellent performance. The Management Incentive Compensation Plan ("MICP") bonus targets might include revenue, profitability, quality, and strategic operational milestones. An assessment of personal performance can proportionally increase or decrease the Executive Directors' net payout. Personal performance is based on details of the Group's Performance Management Process, which takes into account the achievement of Group, business segments, and individual business objectives as well as the commitment to the Group's Core Values. The Executive Directors' target annual bonus is 75% of basic salary. For the year ended 31 December 2007, Mr Bosch earned an MICP bonus of $56,160, and Mr Goldan received an MICP bonus of $39,000, both of which were paid in the first quarter of 2008.

SHARE OPTIONS

Executive Directors The Executive Directors hold share options granted to them under the terms of the PuriCore plc Executive Omnibus Incentive Plan (the "Incentive Plan"), which is open to all employees, as well as certain option plans in existence prior to listing. The Remuneration Committee of the Board of Directors approves share options granted to Executive Directors. Equity grants are awarded to Executive Directors to recruit highly qualified individuals, to align their interests with those of shareholders, and to encourage retention by offering the opportunity for long-term rewards. The exercise price of share option grants is the fair market value of the underlying ordinary share (at market close) on the date of grant. Share options granted generally have a five- to ten-year term and a vesting period over three to four years, with proportional vesting annually on each anniversary following the date of grant. All employees, including Executive Directors, and share option holders signed a lock-up agreement that restricted them from exercising their options and selling the related shares for a period of one year from the date of the Group's admission to the Official List of the Financial Services Authority and to trading on the London Stock Exchange. This restriction as regards to Directors was not compliant with the Combined Code (A.2) as it falls short of the recommended non-exercise period of at least three years. The vesting of Executive Director share options is not dependent upon performance criteria; however, the Incentive Plan permits such criteria to be applied to future grants. Details of share option

EXECUTIVE DIRECTORS' REMUNERATION POLICY

The policy of the Remuneration Committee is to compensate Executive Directors in parity with the current remuneration of Executive Directors in comparable businesses, giving consideration to the experience and performance of the Executives. In its most recent review, the Committee considered the remuneration practices of both UKand US-based organisations because the Executive Directors reside in the US. The Committee looked at companies of similar size in similar industries. The advice of independent benefit consultants was considered in looking at fringe benefits. The results of the review will be finalized and any adjustments considered in 2008. The remuneration policy is structured to balance fixed base salary and performance-related elements of remuneration with longer term equity grants that align employee rewards with shareholder wealth creation. The main elements of the remuneration packages for Executive Directors are basic annual salary and benefits, performance-related bonus, and share options. Basic Salary and Benefits Each of the Executive Directors' basic salary is reviewed annually. In addition, Executive Directors receive benefits including a monthly car allowance of $1,500, medical insurance, enhanced disability insurance, enhanced life insurance with spousal beneficiary, and retirement benefits of 3% of gross compensation, which to the extent possible, is contributed to a qualifying retirement plan.

holdings of Executive Directors are shown on page 27. There were no share options issued to Executive Directors in 2007. In 2008, grants were made to Executive Directors, as described on page 19. These grants do include certain provisions, such as the establishment of performance criteria that determines vesting, which vary from previous practices. Non-Executive Directors The Non-Executive Directors hold share options granted to them under the terms of the Executive Omnibus Incentive Plan (the "Incentive Plan"), which is open to all employees, as well as certain option plans in existence prior to listing. The grant of options to Non-Executive Directors is not compliant with the Combined Code (B.1.3); however, shareholder approval of the Board of Director's authority to make such grants was obtained in advance of the initial grants being made. These grants were made to attract highly qualified Non-Executive Directors to the Group and it is the Board's position that such awards do not impact the independence of the Non-Executive Directors, but rather more closely align Non-Executive Directors' interests with those of shareholders. The terms of the grants are not compliant with the Combined Code (B.1.3) as it is not a requirement that any shares acquired by exercise of options by a Non-Executive Director be held until at least one year after the Non-Executive Director leaves the Board. Details of share option holdings of Executive Directors are shown on page 27. There were no share options issued to Non-Executive Directors in 2007. In 2008, grants were made to Non-Executive Directors, as described on page 19. These grants include certain provisions, such as the requirement that shares acquired through the exercise of stock options be held until at least one year after the Non-Executive Director leaves the Board, which vary from previous practices.

not compliant with the Combined Code (B.1.6) as it exceeds the recommended limit of 1 times annual basic salary. The change of control provision was included in the Executive Directors' contracts to be competitive with severance provisions offered to senior executives in similar companies. In addition, in certain events of termination, the Executive Directors' contracts provide that share options that would have vested in 12 months following termination will vest upon termination and they retain the ability to exercise their vested share options for the remainder of the option term. Non-Executive Directors Non-Executive Directors are employed for an initial period of one year, and thereafter their employment may be terminated on the giving of 12 months notice. In addition, the Non-Executive Directors are subject to retirement via rotation under the Articles of Association.

PERFORMANCE GRAPH

The following graph shows the Group's performance, measured by total shareholder return, compared with the performance of the FTSE Techmark MediScience and FTSE Pharma and Biotech indices. These indices have been selected by the Board as being the most appropriate measure as no readily identifiable benchmark group of companies exists. The FTSE Techmark MediScience index, a subset of the FTSE All Share Index, focuses on emerging healthcare companies in the early stages of growth. The FTSE Pharma and Biotech Sector index comprises those companies that have specified their principal business activity as being in either the pharmaceutical or biotechnology sector. It provides a benchmark that focuses on the sector as a whole.

120 100

DIRECTORS' CONTRACTS

Executive Directors Executive Directors' contracts were entered on 30 June 2006. It is the Group's policy that Executive Directors have contracts with an indefinite term providing for a maximum of one-year's notice. In certain events of termination, the Executive Directors' contracts provide for severance compensation up to a maximum of 1 times annual basic salary plus continuation of benefits for one year. In the event of a termination of employment upon or within 12 months after a change in control, severance compensation equal to 1.5 times the Executive Directors' annual basic salary will be paid. Such compensation is

80

60

40 PURI-LN 20 FTSE Techmark MediScience FTSE Pharma and Biotech

0 01/01 01/02 01/03 01/04 01/05 01/06 01/07 2007 01/08 01/09 01/10 01/11 01/12 31/12

The market value of ordinary shares as at 31 December 2007 was 29.50p. The market value of ordinary shares during the period ranged from 67.00 to 29.50.

PuriCore 2007 Annual Report

24 | 25

Directors' Remuneration Report

Continued

DIRECTORS' EMOLUMENTS (audited information)

Salary and fees $ Non-Executive Directors Mr Allen Mr Anderson Mr Birkett Mr Sapountzoglou Dr Suggett Dr Walsh Mr Wightman Executive Directors Mr Bosch Mr Goldan Total 361,713 251,328 1,103,483 56,160 39,000 95,160 43,177 45,625 88,802 461,050 335,953 1,287,445 50,045 50,045 60,054 60,054 50,045 50,045 170,154 Year ended 31 December 2007 Annual Other bonus benefits $ $ -

Total $ 50,045 50,045 60,054 60,054 50,045 50,045 170,154

In addition to the above, Mr Bosch and Mr Goldan had $11,475 and $7,973, respectively, contributed toward their retirement plans by the Group. Salary and fees $ Non-Executive Directors Mr Allen(1) Mr Anderson Mr Birkett Mr Sapountzoglou Dr Suggett Dr Walsh Mr Wightman Executive Directors Mr Bosch Mr Goldan Total

(2) Includes IPO bonus of $50,000 (3) Includes IPO bonus of $30,000

Year ended 31 December 2006 Annual Other bonus benefits $ $ -

Total $ 42,556 15,368 36,668 27,668 15,368 15,368 153,203

42,556 15,368 36,668 27,668 15,368 15,368 153,203

338,015 214,214 858,428

72,500(2) 45,750 (3) 118,250

22,898 21,667 44,565

433,413 281,631 1,021,243

(1) Includes fees paid to Mr Allen for consulting services rendered in additional to his duties as Non-Executive Director

On 26 June 2006, PuriCore plc acquired the entire issued share capital of the PuriCore, Inc., group of companies as shown in note 24. Although the Group was not incorporated until 21 April 2006, Directors' emoluments for the Group for the year ended 31 December 2006 are presented above as a continuation of the Directors' emoluments of the PuriCore, Inc., group of companies. In addition to the above, Mr Bosch and Mr Goldan had $13,500 and $9,259, respectively, paid into their 401(k) retirement plans by the Group.

DIRECTORS' INTERESTS

The beneficial interests of the Directors in the shares and options over the shares of the Group are shown below. No options were issued to Directors in 2007. The difference in share holdings between 31 December 2006 and 2007 is due to open-market purchases. No Director had shares in any other Group subsidiary. As at 31 December 2007 Ordinary shares of 1p Shares Mr Allen Mr Anderson Mr Birkett Mr Bosch Mr Goldan Mr Sapountzoglou Dr Suggett Dr Walsh Mr Wightman 50,000 33,433 12,221 75,000 35,000 60,000 1,288,511 Options 450,000 100,000 270,000 4,028,100 1,450,000 270,000 100,000 100,000 4,500,000 As at 31 December 2006 Ordinary shares of 1p Shares 33,433 12,221 1,288,511 Options 450,000 100,000 270,000 4,028,100 1,450,000 270,000 100,000 100,000 4,500,000

There have been no changes to Directors' shareholdings since the year end. There were share options issued since year end as discussed on pages 24 and 25.

DIRECTORS' SHARE OPTIONS (audited information)

Options at 31 Dec 06 Mr Allen Mr Anderson Mr Birkett Mr Bosch Mr Goldan Mr Sapountzoglou Dr Suggett Dr Walsh Mr Wightman 450,000 100,000 270,000 4,028,100 1,450,000 270,000 100,000 100,000 4,500,000 Options granted in 2007 Options at 31 Dec 07(1) 450,000 100,000 270,000 4,028,100 1,450,000 270,000 100,000 100,000 4,500,000 Exercise price (£) 0.45 to 0.55 0.82 0.45 to 0.55 0.33 to 0.55 0.33 to 0.55 0.45 to 0.55 0.82 0.82 0.33 to 0.55 Options exercisable at 31 Dec 07 450,000 33,000 270,000 3,053,575 1,130,000 270,000 33,000 33,000 4,500,000 Latest expiry date 12 Apr 11 12 Sep 11 24 Feb 11 1 Nov 14 4 Oct 14 24 Feb 11 12 Sep 11 12 Sep 11 23 Feb 11

(1) No options lapsed or were exercised by Directors during 2007.

The average share price during the twelve-month period ending 31 December 2007 was 47.7p per share. Michael Sapountzoglou Chairman of the Remuneration Committee 29 April 2008

PuriCore 2007 Annual Report

26 | 27

Directors' Responsibilities in the Preparation of Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group (PuriCore plc and subsidiaries) as well as Parent Company (PuriCore plc alone) Financial Statements for each financial year. Under that law, the Directors are required to prepare Group financial statements in accordance with International Financial Reporting Standards (IFRS) adopted by the EU and have elected to prepare the Company financial statements on the same basis. The Group and Company financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and Company and the performance for that period. The Companies Act 1985 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. In preparing each of the Group and Company financial statements, the Directors are required to: · select suitable accounting policies and then apply them consistently; · make judgements and estimates that are reasonable and prudent; · state whether they have been prepared in accordance with IFRS adopted by the EU; and · prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the requirements of the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Director Report, Directors' Remuneration Report, and Corporate Governance Statement that comply with that law and those regulations. The Directors are also responsible for the maintenance and integrity of the corporate and financial information included on the Group website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Articles of Association It is proposed in resolution 10 to adopt new articles of association (the "New Articles") to update the Company's current articles of association (the "Current Articles") primarily to take account of changes in English company law brought about by the Companies Act 2006. The Company is also proposing changes to its Current Articles to incorporate dispute resolution provisions all as detailed below. The principal changes introduced in the New Articles are summarised below. Other changes, which are of a minor, technical, or clarifying nature and also some minor changes that merely reflect changes made by the Companies Act 2006, have not been noted below. The New Articles showing all the changes to the Current Articles are available for inspection, as noted on page 29 of this document. (a) Articles that duplicate statutory provisions Provisions in the current Articles that replicate provisions contained in the Companies Act 2006 are in the main amended to bring them into line with the Company Act 2006. Certain examples of such provisions include provisions as to the form of resolutions, the variation of class rights, the requirement to keep account records, and provisions regarding the period of notice required to convene general meetings. The main changes made to reflect this approach are detailed below. (b) Form of resolution The Current Articles contain a provision that, where for any purpose an ordinary resolution is required, a special or extraordinary resolution is also effective. The provision is being amended as the concept of extraordinary resolutions has not been retained under the Companies Act 2006. The Current Articles enable members to act by written resolution, which does not comply with the Companies Act 2006. The Companies Act 2006 public companies can no longer pass written resolutions. These provisions have therefore been removed in the New Articles.

(c) Convening extraordinary and annual general meetings The provisions in the Current Articles dealing with the convening of general meetings and the length of notice required to convene general meetings have been amended to conform to new provisions in the Companies Act 2006. In particular an extraordinary general meeting to consider a special resolution can be convened on 14 days' notice whereas previously 21 days' notice was required. Note that an annual general meeting still requires 21 days' notice. (d) Votes of members Under the Companies Act 2006, proxies are entitled to vote on a show of hands whereas under the Current Articles proxies are only entitled to vote on a poll. Multiple proxies may be appointed provided that each proxy is appointed to exercise the rights attached to a different share held by the shareholder. Multiple corporate representatives can be appointed (but if they purport to exercise their rights in a different way, then the power is treated as not being exercised). The New Articles reflect all of these new provisions. (e) Chairman's casting vote The Current Articles contain a provision giving the Chairman a casting vote, which has been removed in the New Articles in accordance with the Companies Act 2006. (f) Age of directors on appointment The Current Articles contain a provision requiring a director's age to be disclosed if he has reached the age of 70 years or more in the notice convening a meeting at which the director is proposed to be elected or re-elected. Such provision could now fall foul of the Employment Equality (Age) Regulations 2006 and so has been removed from the New Articles. (g) Conflicts of Interest The Companies Act 2006 sets out Directors' general duties, which largely codify the existing law but with some changes. Under the Companies Act, from 1 October 2008 a Director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company's interests. The requirement is very broad and could apply, for example, if a Director becomes a Director of another company or a trustee of another organisation. The Companies Act 2006 allows Directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect. The Companies Act 2006 also allows the articles of association to contain other

provisions for dealing with Directors' conflicts of interest to avoid a breach of duty. The New Articles give the Directors authority to approve such situations and include other provisions to allow conflicts of interest to be dealt with in a similar way to the current position. There are safeguards that will apply when Directors decide whether to authorise a conflict or potential conflict. First, only Directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the company's success. The Directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate. (h) Directors' indemnities and loans to fund expenditure The Companies Act 2006 has, from 1 October 2007, restated the law in relation to the Directors' indemnities as previously stated in the Companies Act 1085. Article 165 has been updated to incorporate the new references. (i) Dispute resolution The Company believes it is appropriate to provide for a dispute resolution procedure and governing law in its articles. The New Articles provide that arbitration in accordance with the Rules of Arbitration of the International chamber of Commerce will be the primary procedure for dispute resolution in matters involving the Company. Where a court determines that the arbitration provisions cannot be used in respect of a particular dispute or in cases where a member is bringing a derivative claim under the provisions of the Companies Act 2006, the New Articles provide that the courts of England and Wales are to have exclusive jurisdiction. The governing law of the New Articles is expressed to be English law. (j) General Generally the opportunity has been taken to bring clearer language into the New Articles and in some areas to conform the language of the New Articles. The terms of the proposed amendments to the Articles will be available for inspection at the Company's registered office and at the Stafford office (Wolseley House, Dyson Way, Staffordshire Technology Park, Beaconside, Stafford ST18 OGA, UK), location of the Annual General Meeting, 15 minutes before and during the Annual General Meeting.

PuriCore 2007 Annual Report

28 | 29

Independent Auditor's Report to the Members of PuriCore plc

KPMG Audit Plc St James' Square Manchester M2 6DS United Kingdom We have audited the group and parent company financial statements (the `'financial statements'') of PuriCore plc for the year ended 31 December 2007 which comprise the Consolidated Income Statement, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Recognised Income and Expenses and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described as having been audited. This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors The Directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the Statement of Directors' Responsibilities on page 28. Our responsibility is to audit the financial statements and the part of the Directors' Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the group financial statements, Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements. The information given in the Directors' Report includes that information presented in the Chairman and Chief Executive Officer Review, the Financial Review and the Corporate Governance Statement that is cross referred from the Review of the Business and Future Development section of the Directors' report. In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We review whether the Corporate Governance Statement reflects the company's compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group's corporate governance procedures or its risk and control procedures. We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors' Remuneration Report to be audited. Opinion In our opinion: · the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the group's affairs as at 31 December 2007 and of its loss for the year then ended; · the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company's affairs as at 31 December 2007; · the financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the group financial statements, Article 4 of the IAS Regulation; and · the information given in the Directors' Report is consistent with the financial statements. Emphasis of Matter ­ Going Concern In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in the basis of preparation note to the financial statements concerning the Company's and Group's ability to continue as a going concern. The Group's cash flow forecasts include inflows from a proposed fund-raising exercise and growth in revenues from existing and new markets. These conditions, along with the other matters set out in the basis of preparation note to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Company's and Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company and Group were unable to continue as a going concern. KPMG Audit Plc Chartered Accountants Registered Auditor 29 April 2008

PuriCore 2007 Annual Report

30 | 31

Consolidated Income Statement

For the Year Ended 31 December 2007

Note

2007 $

2006 $ 15,867,232 (12,943,478) 2,923,754 (7,319,127) (11,568,711) (2,120,795) (18,084,879) (1,261,644) 1,341,385 79,741 (18,005,138) 166,160 (17,838,978)

CONTINUING OPERATIONS

Revenue Cost of sales Gross Profit Sales and marketing expenses General and administrative expenses Research and development expenses Loss before interest and tax Finance costs Finance income Net Finance Income Loss before taxation Taxation Loss for the year Attributable to: Equity holders of the parent Loss Per Share Continuing operations (21,314,664) $/share (17,838,978) $/share 1-7 8 6 7 1 18,642,124 (15,703,628) 2,938,496 (7,997,289) (14,148,836) (2,405,930) (21,613,559) (1,190,501) 1,372,962 182,461 (21,431,098) 116,434 (21,314,664)

Basic and Diluted

9

(0.14)

(0.14)

Consolidated Statement of Recognised Income and Expense

For the Year Ended 31 December 2007

Note Exchange differences on translation of foreign operations Net Income Recognised In Equity Loss for the financial year Total Recognised Income And Expense Total Recognised Income And Expense Is Attributable To: Equity holders of the parent 26 26

2007 $ 86,124 86,124 (21,314,664) (21,228,540)

2006 $ 1,094,179 1,094,179 (17,838,978) (16,744,799)

(21,228,540)

(16,744,799)

PuriCore 2007 Annual Report

32 | 33

Company Statement of Recognised Income and Expense

For the Year Ended 31 December 2007

Note Exchange differences on translation from functional to presentational currency Net Income Recognised In Equity Loss for the financial year Transfer from merger reserve Total Recognised Income And Expense As Previously Reported Prior Year Adjustment Total Recognised Income And Expense As Restated Total Recognised Income And Expense Is Attributable To: Equity holders of the parent

2007 $

Restated 2006 $ 10,759,702 10,759,702 (671,246) 10,088,456 1,589,565 11,678,021

26

3,967,536 3,967,536

26 (132,965,644) 125,595,700 (3,402,408) (3,402,408)

(3,402,408)

11,678,021

Consolidated Balance Sheet

At 31 December 2007

Note

2007 $

2006 $

ASSETS

Non Current Assets Intangible assets Property, plant, and equipment Restricted cash Trade and other receivables Total Non Current Assets Current Assets Inventories Trade and other receivables Restricted cash Cash and cash equivalents Total Current Assets 14 15 17 17 5,683,726 4,689,389 3,033,000 15,861,207 29,267,322 3,672,381 6,496,776 2,250,000 37,683,515 50,102,672 10 11 17 15 6,042,265 8,002,124 487,039 14,531,428 5,329,721 9,323,024 3,033,000 17,685,745

Total Assets

43,798,750

67,788,417

LIABILITIES

Current Liabilities Trade and other payables Loans and borrowings Provisions 18 19 23 (7,326,745) (7,991,371) (93,870) (6,295,128) (5,933,974) (91,989)

Total Current Liabilities

(15,411,986)

(12,321,091)

Non Current Liabilities Loans and borrowings 19 (1,549,064) (8,762,225)

Total Non Current Liabilities

(1,549,064)

(8,762,225)

Total Liabilities

(16,961,050)

(21,083,316)

Net Assets

26,837,700

46,705,101

PuriCore 2007 Annual Report

34 | 35

Consolidated Balance Sheet

At 31 December 2007

Continued

Note

2007 $

2006 $ 2,758,718 144,931,003 5,387,301

EQUITY

Share capital Share premium Other reserves Retained earnings Cumulative translation adjustment 26 26 26 2,777,795 145,455,962 6,204,404

26 (128,804,935) (107,490,271) 26 1,204,474 1,118,350

Issued capital and reserves attributable to equity holders of the parent Total Equity

26

26,837,700 26,837,700

46,705,101 46,705,101

The consolidated financial statements on pages 32 to 35 were approved by the Board of Directors and authorised for issue on 29 April 2008 and were signed on its behalf by: Keith A. Goldan Chief Financial Officer

Company Balance Sheet

At 31 December 2007

Note

2007 $

Restated 2006 $

ASSETS

Non-Current Assets Investments in subsidiaries Total Non Current Assets Current Assets Trade and other receivables Cash and cash equivalents Total Current Assets Total Assets 15 17 65,258 6,270,611 6,335,869 66,335,869 440,118 17,335,429 17,775,547 190,215,621 12 60,000,000 60,000,000 172,440,074 172,440,074

LIABILITIES

Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets 18 (7,686,763) (7,686,763) (7,686,763) 58,649,106 (3,929,547) (3,929,547) (3,929,547) 186,286,074

EQUITY

Share capital Share premium Merger reserve Other reserves Retained earnings Cumulative translation adjustment Total Equity Attributable to Equity Holders of the Parent 26 26 26 26 26 26 2,777,795 46,778,595 3,395,569 (9,030,091) 14,727,238 58,649,106 2,758,718 46,253,635 125,595,700 2,578,466 (1,660,147) 10,759,702 186,286,074

The Company financial statements on pages 33 to 36 were approved by the Board of Directors and authorised for issue on 29 April 2008 and were signed on its behalf by: Keith A. Goldan Chief Financial Officer

PuriCore 2007 Annual Report

36 | 37

Consolidated Cash Flow Statement

For the Year Ended 31 December 2007

Note Cash Flows From Operating Activities Loss for the year Adjustments for: Taxation Finance costs Finance income Depreciation and amortisation Share based payment expense Loss/(gain) on disposal of property, plant, and equipment Operating Loss Before Movement In Working Capital (Increase)/decrease in inventories Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables Increase in provisions Cash Absorbed By Operations Interest received Income tax credit recieved Net Cash Flow From Operating Activities Cash Flows From Investing Activities Purchase of property, plant and equipment Proceeds from sale of property, plant, and equipment Cash paid for internally generated intangibles Net Cash Flow From Investing Activities Cash Flows From Financing Activities Issue of shares, options, and warrants Proceeds from new loan notes Proceeds from new bank loans Repayment of borrowings Interest paid on borrowings Repayments of obligations under finance leases Decrease in overdraft Net Cash Flow From Financing Activities Net (Decrease)/Increase In Cash And Cash Equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes on cash held Restricted cash Cash and cash equivalents Total cash held at end of year 17

2007 $ (21,314,664) (116,434) 1,190,501 (1,372,962) 4,937,879 817,103 270,211 (15,588,366) (2,011,345) 1,015,595 1,031,617 1,881 (15,550,618) 1,372,962 116,434 (14,061,222)

2006 $ (17,838,978) (166,160) 1,261,644 (1,341,385) 2,995,164 2,578,466 (31,221) (12,542,470) 58,669 (964,356) (380,680) 66,237 (13,762,600) 1,341,385 166,160 (12,255,055)

(3,294,420) (1,787,122) (5,081,542)

(8,067,069) 143,382 (1,102,626) (9,026,313)

544,036 4,500,000 (9,519,069) (885,748) (64,246) (72,451) (5,497,478) (24,640,242) 42,966,515 567,934 3,033,000 15,861,207 18,894,207

52,480,096 5,128,367 7,529,081 (2,075,985) (1,151,269) (69,119) (635,356) 61,205,815 39,924,447 952,842 2,089,226 5,283,000 37,683,515 42,966,515

Company Cash Flow Statement

For the Year Ended 31 December 2007

Note Cash Flows From Operating Activities Loss for the period Adjustments for: Share based payment expense Impairment of investment in subsidiary Finance income Operating Loss Before Movement In Working Capital Decrease/(increase) in trade and other receivables Increase in trade and other payables Cash Generated By Operations Net Cash Flow From Operating Activities Cash Flows From Investing Activities Investments in subsidiaries Finance income Net Cash Flow From Investing Activities Cash Flows From Financing Activities Issue of shares, options, and warrants Net Cash Flow From Financing Activities Net (Decrease)/Increase In Cash And Cash Equivalents Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes on cash held Cash And Cash Equivalents At End Of Period 17

1 January 2007 to 31 December 2007 $ (132,962,644) 139,115 131,520,756 (560,937) (1,866,710) 374,860 3,757,216 2,265,366 2,265,366

21 April 2006 to 31 December 2006 $ (1,660,147) 988,901 (510,364) (1,181,610) (413,271) 5,220,573 3,625,692 3,625,692

(10,617,000) 560,937 (10,056,063)

(35,794,754) 510,364 (35,284,390)

544,037 544,037 (7,246,660) 17,335,429 (3,818,158) 6,270,611

47,080,096 47,080,096 15,421,398 1,914,031 17,335,429

PuriCore 2007 Annual Report

38 | 39

Accounting Policies

BASIS OF PREPARATION

PuriCore plc (the "Company") is incorporated in the UK. PuriCore, Inc., is incorporated under the laws of Delaware in the USA. The Group financial statements consolidate those of the PuriCore, Inc. Group and PuriCore plc. The Group financial statements are authorised for issue by the Board of Directors on 29 April 2008. European Union law (EULAW) (IAS Regulation EC 1606/2002) requires that the financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU (Adopted IFRSs). The financial statements have been prepared on the basis of the recognition and measurement requirements of Adopted IFRSs that are endorsed by the EU and effective at 31 December 2007. The Company has chosen to present its own results under Adopted IFRSs and by publishing the Company financial statements here, with the Group financial statements, the Company is taking advantage of the exemption in s230 of the Companies Act 1985 not to present its individual income statement and related notes. The accounting policies set out below have, unless otherwise stated, been applied consistently throughout the year. In these financial statements, the following Adopted IFRSs are effective for the first time and comparatives have been restated accordingly: · IFRIC 8 `Scope of IFRS 2: Share Based Payments': This standard has been applied in the preparation of the individual Company financial statements. The impact of adoption on prior year and opening reserves is described later in this note. Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 32. The financial statements are presented in US dollars (USD), rounded to the nearest dollar. The USD has been chosen as the presentational currency as the Group headquarters are located in the US and a significant portion of the Group's revenue and expenses are denominated in USD.

and sales and marketing phase of the Group's life cycle and the continual work to develop further applications of the Sterilox System, significant research, development, sales, and marketing costs have been incurred to date in excess of gross profit. The Group meets its day-to-day working capital requirements through cash reserves and external funding facilities. At 31 December 2007 cash held was $18.9 million (including $3.0 million restricted cash), a draw down of $4.5 million had been made against an available line of credit, and outstanding notes payable were $4.7 million. The $4.5 million line of credit was repaid in April 2008. The nature of the Group's operations means that future income is dependent on securing additional contracts within the markets it currently operates in and on developing new applications for the Sterilox System and penetrating those related markets. The Board has prepared projected cash flow information for the period ending 20 months from the date of its approval of the financial statements, which show a net cash outflow. These projections include the release of $3.0 million restricted cash from 1 January 2009 in line with the current terms of the agreement, and assume additional funding of $10 million to be raised in June 2008. Whilst the Group has not raised further funding to date, the Group is currently in negotiations with a number of potential lenders in relation to the $10 million projected to be raised in June 2008 and further funds that are expected to be required in the 20 month period. On the basis of these projections and negotiations, the Board considers that the Group will continue to operate with sufficient funding. However, given the general inherent risk with forecasting revenues in the current markets in which the Group operates, the uncertainty inherent in the development of new applications and penetrating the related markets for the Group's product and the uncertainty in the fund raising exercises to be undertaken by the Group, there can be no certainty in relation to these matters. These uncertainties might cast significant doubt on the Company's and Group's ability to continue as a going concern and therefore the Company and Group might be unable to continue to realise their assets and discharge their liabilities in the normal course of business. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

GOING CONCERN

The financial statements are being prepared on a going concern basis, which the Directors believe to be appropriate for the reasons set out below. The Group's operations are focused on the application and development of hypochlorous acid solutions for customers at a range of concentrations to meet the needs of each application. Given the research and development

MEASUREMENT CONVENTION

The Group and Company financial statements are prepared on the historical cost basis.

BASIS OF CONSOLIDATION

The PuriCore plc consolidated financial statements, incorporate the financial statements of the PuriCore, Inc. Group of companies that are prepared under acquisition

accounting made up to 31 December each year. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intergroup balances and any unrealised gains and losses or income and expense arising from intergroup transactions are eliminated in preparing the consolidated financial statements.

part of the total lease. These assets are held on the balance sheet of the Group in property, plant, and equipment and are amortised over three to five years.

FOREIGN CURRENCIES

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates the fair value was determined. The assets and liabilities of operations with a functional currency other than US Dollars, including goodwill and fair value adjustments arising on consolidation, are translated at foreign exchange rates ruling at the balance sheet date. The revenue and expenses of operations with a functional currency other than US Dollars are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are taken directly to the translation reserve. They are released into the income statement upon disposal. The presentational currency adopted by the Group and Parent Company is the US Dollar ($). The functional currencies of the principal companies in the Group are as follows: PuriCore plc PuriCore, Inc. PuriCore International Limited PuriCore Europe Limited Sterling (£) US Dollar ($) Sterling (£) Sterling (£)

REVENUE

Revenue includes the cash received on the sale of inventories and ex-rental machines subsequently sold, leasing income received on short term operating lease arrangements, and service income. Revenue from the sale of inventories and ex-rental machines subsequently sold is recognised by the Group when the risks and rewards associated with the transaction have been transferred to the purchaser, which is demonstrated when all the following conditions are met: evidence of a binding arrangement exists (generally purchase orders), products have been delivered or services have been rendered, and amounts are collectable under normal payment terms. Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed. Rental income received on short term operating lease arrangements is recognised in profit or loss on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income over the term of the lease. Revenue represents the net amounts charged or chargeable in respect of services rendered and goods supplied, excluding intercompany sales, value added tax, and other sales taxes. Revenue is recognised net of any discounts given to the customer.

SEGMENTAL ANALYSIS

The Group operates in three business sectors (endoscopy, food, and other). Therefore the primary reporting format is business segments and the secondary reporting format is geographical. All directly attributable revenues, expenses, assets, and liabilities are allocated to these segments. All central and corporate revenues, expenses, assets, and liabilities are disclosed separately; these are not apportioned to the above segments.

The exchange rates used to translate the Sterling (£) financial statements into US Dollar ($) financial statements are as follows: · Closing rate at 31 December 2007: 1.9973 · Average rate for 2007: 2.0018 · Closing rate at 31 December 2006: 1.9572 · Average rate for 2006: 1.8436 The share capital of the Parent Company is denominated in Sterling (£) and translated at the historical rate ruling at the date of issue for the purpose of the financial statements.

LEASED ASSETS ­ RECEIVABLE

Receipts under operating leases are recognised in revenue on a straight-line basis over the term of the lease. Lease incentives given are recognised in revenue as an integral

PuriCore 2007 Annual Report

40 | 41

Accounting Policies

Continued

FINANCIAL INSTRUMENTS

Classification of Financial Instruments issued by the Group Financial instruments issued by the Group are treated as equity (i.e., forming part of shareholders' funds) only to the extent that they meet the following two conditions: (a) they include no contractual obligations upon PuriCore plc (or the Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to PuriCore plc (or the Group); and (b) where the instrument will or may be settled in PuriCore plc's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of PuriCore plc's own equity instruments or is a derivative that will be settled by PuriCore plc exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of PuriCore plc's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares. Where a financial instrument that contains both equity and financial liability components exists, these components are separated and accounted for individually under the above policy. The finance cost on the financial liability component is expensed to the income statement over the life of the instrument. Finance costs associated with financial liabilities are dealt with as part of finance expenses. Finance costs associated with financial instruments that are classified in equity are dividends and are recorded directly in equity. Recognition and Valuation of Financial Instruments Financial assets or liabilities are recognised when, and only when, PuriCore plc becomes a party to the contractual provisions of the instrument. Borrowings are measured initially at fair value and subsequently measured at their amortised cost. Cash and cash equivalents comprise cash in hand, restricted cash (see note 17), and on demand deposits less overdrafts together with highly liquid investments of less than three months maturity. Unless an enforceable right of set-off exists, the components of cash and cash equivalents are reflected on a gross basis in the balance sheet. Restricted cash is recorded separately on the balance sheet and measured at fair value. The carrying value of other financial assets, including short-term receivables, are stated at amortised cost less

any impairment provision. The carrying value of other financial liabilities, including short-term payables, are stated at amortised cost.

EMPLOYEE BENEFITS

Defined Contribution Plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred. Share-Based Payment Transactions The share option programme allows employees to acquire shares of PuriCore plc to be settled in equity. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black Scholes option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices not achieving the threshold for vesting. In line with IFRIC 8, the cost of share options granted to employees of subsidiaries are accounted for as a capital contribution to those subsidiaries.

FINANCE COSTS

Net financing costs comprise interest payable, net foreign exchange losses, and finance charges on finance leases. Interest payable is recognised in the income statement as it accrues, using the effective interest method.

FINANCE INCOME

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

INTANGIBLE ASSETS

All intangible assets, excluding goodwill, are stated at their cost less amortisation and any provision for impairment. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment annually. Other intangible assets are amortised from the date they are available for use. Expenditure on internally generated goodwill and brands is recognised as an expense in the income statement.

RESEARCH AND DEVELOPMENT COSTS

Expenditure on development and improvement of new and existing products that do not meet the recognition criteria of an intangible asset are expensed as incurred. Research costs are expensed as incurred. Development activities involve a plan of design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, and overhead costs that are directly attributable to preparing the asset for its intended use. If physical assets, such as tooling, exist these are capitalised as property, plant, and equipment. Other development expenditure is recognised in the income statement as incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recorded on a straight-line basis over the product's life up to a maximum of four years, starting from the date on which production commences.

GOODWILL ­ BUSINESS COMBINATIONS

Goodwill arising on consolidation consists of the excess of the fair value of the consideration over the fair value of the identifiable intangible and tangible assets net of the fair value of the liabilities including contingencies of businesses acquired at the date of acquisition. Goodwill in respect of business combinations of subsidiaries is recognised as an intangible asset. Where negative goodwill arises, following re-assessment of fair values, it is credited to the income statement in the period in which the acquisition is made. Goodwill is carried at cost less any recognised impairment losses that arise from annual assessment of its carrying value. To the extent that the carrying value exceeds the recoverable amount, determined by estimating the future net cash flows and discounting back to their present value where the carrying value exceeds the recoverable amount, the goodwill is written down and an impairment charge is recognised in the income statement.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost plus any related costs of installation less accumulated depreciation and impairment losses. Where parts of an item of property, plant, and equipment have different useful lives, they are accounted for as separate items of property, plant, and equipment. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant, and equipment. Land is not depreciated. Residual values and useful economic lives of assets are assessed at each year-end. Depreciation is not charged to the income statement once the asset's carrying value equals its estimated residual value. The estimated useful lives are as follows: · Leasehold improvements · Plant and machinery · Fixtures and fittings 36-72 months 3-5 years 5 years

COMPUTER SOFTWARE COSTS

Where computer software is not integral to an item of property, plant, or equipment its costs are capitalised and categorised as intangible assets. Amortisation is provided on a straight-line basis over its economic useful life, which is in the range of three to five years.

INVESTMENTS

Investments in subsidiaries recorded in the Parent Company financial statements are carried at cost less impairment.

ACQUIRED INTANGIBLE ASSETS ­ BUSINESS COMBINATIONS

Intangible assets that are acquired as a result of a business combination including but not limited to customer contracts, order backlog, intellectual property rights, patents, and know-how and that can be separately measured at fair value on a reliable basis, are separately recognised on acquisition at their fair value. Amortisation is charged on a straight-line basis to the income statement over their expected useful lives as follows: · Intellectual property · Development costs and software 10-20 years 3-4 years

LEASED ASSETS

Operating Lease Payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Finance Lease Payments Where non-current assets are financed by leasing arrangements that give rights approximating to ownership, the assets are treated as if they had been

PuriCore 2007 Annual Report

42 | 43

Accounting Policies

Continued

purchased and the capital element of the leasing commitment is shown as obligations under finance leases. The rentals payable are apportioned between interest, which is charged to the income statement, and capital, which reduces the outstanding obligation.

of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversal of Impairment An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first in, first out method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling, and distribution.

IMPAIRMENT

The carrying amounts of the Group's assets other than inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of the Group's receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted, unless there is objective evidence of an impairment. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments

TAXATION AND DEFERRED TAXATION

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future profits will be available against which the asset can be utilised.

PROVISIONS

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, when it is probable that an outflow of resources will be required and a reliable estimate can be made of the amount of the obligation.

Prior year adjustment ­ Company only During the year the company adopted IFRIC 8 `Scope of IFRS 2: Share based payments.' This interpretation provides guidance on the application of IFRS 2, which has resulted in the Company recognizing an increase in the cost of investment in subsidiary undertakings, with a corresponding increase in retained earnings, to represent the fair value of share options granted by the Company to employees of its subsidiaries.

In accordance with IFRIC 8, prior year results have been restated to reflect the adoption of IFRIC 8, which has resulted in an increase in retained earnings of $1,589,565 at 1 January 2007 and a current year increase to retained earnings of $677,988.

Group For the year ended 31 December 2006 Investments in subsidiary undertakings Retained earnings As previously reported $ 170,850,509 (3,249,712) Prior year adjustment $ 1,589,565 1,589,565 As restated $ 172,440,074 (1,660,147)

ADOPTED IFRS NOT YET APPLIED

The following adopted IFRS were available but have not been applied by the Group in these financial statements: New Standards and Interpretations Endorsed but not yet Adopted: A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2007, and have not been applied in preparing these consolidated financial statements: · IFRS 8 Operating Segments introduces the "management approach" to segment reporting. IFRS 8, which becomes mandatory for the Group's 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker in order to assess each segment's performance and to allocate resources to them. Currently the Group presents segment information in respect of its business and geographical segments (see note 2). · IFRIC 11 IFRS 2 ­ Group and Treasury Share Transactions requires a share-based payment arrangement in which an entity receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments are obtained. IFRIC 11 will become mandatory for the Group's 2008 financial statements, with retrospective application required. It is not expected to have any impact on the consolidated financial statements.

New Standards and Interpretations not yet Endorsed: The following new standards and interpretations applicable to the Group have not yet been endorsed and therefore have not been applied in preparing these consolidated financial statements: · Revised IFRS 3 Business Combinations (accounting periods beginning on or after 1 July 2009) · Amendment to IAS 1 Presentation of Financial Statements: A Revised Presentation (accounting periods beginning on or after 1 January 2009) · Amendment to IAS 27 Consolidated and separate financial statements (accounting periods beginning on or after 1 July 2009) · Amendment to IFRS 2 Share based payment: vesting conditions and cancellations (accounting periods beginning on or after 1 January 2009) · Amendment to IAS 1 Puttable financial Instruments and Obligations existing on Liquidation (accounting periods beginning on or after 1 January 2009) · Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised IAS 23 will become mandatory for the Group's 2009 financial statements and will constitute a change in accounting policy for the Group. In accordance with the transitional provisions the Group will apply the revised IAS 23 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. The Group does not anticipate that the adoption of these standards and interpretations, if endorsed, will have a material effect on its financial statements.

PuriCore 2007 Annual Report

44 | 45

Notes to the Financial Statements

For the Year Ended 31 December 2007

1 REVENUE

An analysis of the Group's revenue is as follows: 2007 $ Continuing Operations Sale of inventories and ex-rental machines subsequently sold Equipment leasing income Servicing of machines 4,903,213 8,212,653 5,526,258 18,642,124 6,803,163 6,904,314 2,159,755 15,867,232 2006 $

2 SEGMENTAL ANALYSIS

The Group is managed by type of business. Segmental information is provided having regard to the nature of the goods and services provided and the markets served. Under `other,' we have identified the Group's Global Dental business and certain business development activities not yet generating significant revenues. Primary Reporting Format ­ Business Segments For the year ended 31 December 2007 Revenue Loss Before Interest, Tax, Depreciation, And Amortisation Depreciation and amortisation Loss Before Interest And Tax1 Segment Assets Non current assets Current assets Total assets Segment Liabilities Current liabilities Non current liabilities Total liabilities Other Segment Items Capital expenditure: property, plant & equipment Capital expenditure: intangible asset

All business segments shown above are continuing.

Endoscopy $ 10,263,513

Food Safety $ 7,861,836

Other $ 516,775

Corporate & unallocated $ -

Total as reported for the Group $ 18,642,124

(7,054,985) (280,257) (7,335,242)

(2,802,303) (2,922,330) (5,724,633)

230,813 230,813

(7,049,205) (1,735,292) (8,784,497)

(16,675,680) (4,937,879) (21,613,559)

1,748,996 5,435,474 7,184,470

415,396 8,358,745 8,774,141

226,191 226,191

12,367,036 15,246,912 27,613,948

14,531,428 29,267,322 43,798,750

(4,530,368) (4,530,368)

(3,289,460) (1,471,006) (4,760,466)

-

(7,592,158) (78,058) (7,670,216)

(15,411,986) (1,549,064) (16,961,050)

330,785 400,531

1,153,968 632,482

-

1,809,667 754,109

3,294,420 1,787,122

For the year ended 31 December 2006 Revenue Loss Before Interest, Tax, Depreciation, And Amortisation Depreciation and amortisation Loss Before Interest And Tax1 Segment Assets Non current assets Current assets Total assets Segment Liabilities Current liabilities Non current liabilities Total liabilities Other Segment Items Capital expenditure: property, plant & equipment Capital expenditure: intangible assets

All business segments shown above are continuing.

Endoscopy $ 8,902,951

Food Safety $ 6,477,618

Other $ 486,663

Corporate & unallocated $ -

Total as reported for the Group $ 15,867,232

(3,303,543) (233,213) (3,536,756)

(442,747) (2,171,260) (2,614,007)

(649,176) (649,176)

(10,694,249) (590,691) (11,284,940)

(15,089,715) (2,995,164) (18,084,879)

1,816,881 4,663,731 6,480,612

7,542,917 2,476,623 10,019,540

46,156 349,385 395,541

8,279,791 42,612,933 50,892,724

17,685,745 50,102,672 67,788,417

(4,035,610) (4,035,610)

(420,845) (420,845)

(168,562) (168,562)

(7,696,074) (8,762,225) (16,458,299)

(12,321,091) (8,762,225) (21,083,316)

329,273 267,645

6,791,863 728,426

20,850 28,221

925,083 78,334

8,067,069 1,102,626

1 Loss Before Interest and Tax represents the segment result for purposes of IAS 14. 31 December 2007 loss includes a charge from "Corporate and unallocated" to Food Safety in the amount of $3.3 million for General and Administrative services. The charge was not made in 2006.

Intra-Group sales, which are priced on an `arm's-length' basis, between both segments and regions are not significant. The analysis of Earnings Before Interest and Taxes by business includes an allocation, based on their nature, of costs incurred centrally in the United Kingdom and United States of America. Unallocated costs represent corporate expenses. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year.

PuriCore 2007 Annual Report

46 | 47

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

Secondary Reporting Format ­ Geographical Segments Sales 2007 $ Continuing Operations United Kingdom United States 10,263,513 8,378,611 18,642,124 8,902,951 6,964,281 15,867,232 7,427,549 36,371,201 43,798,750 3,699,922 64,088,495 67,788,417 1,293,430 3,788,112 5,081,542 1,270,892 7,898,803 9,169,695 2006 $ Segment assets 2007 $ 2006 $ Capital expenditure 2007 $ 2006 $

The above analysis is based on the location of the customers.

Products and Services Provided PuriCore's Sterilox Systems electrochemically generate hypochlorous acid solutions for customers on-site and on-demand at a range of concentrations to meet the needs of each application. Requiring only common salt, water, and electricity, these systems are reliable, safe, effective, and user-friendly. Given hypochlorous acid quickly breaks down into salty water, Sterilox Systems produce the Solutions on-site for immediate use. Each Sterilox System includes a combination of proprietary electrolysis cells, software, and control systems within a custom-designed unit. These proprietary control systems ensure that the optimum concentration of hypochlorous acid is produced consistently and reliably within narrow specification tolerances. The Sterilox Solution produced is near neutral pH (between 5 and 7) to maximise the levels that are generally recognised to be substantially more biocidal yet safe. (Below pH 4, the solution is aqueous chlorine; above pH 7.4, the solution is hypochlorite, the chemical in common bleach.) The Sterilox Systems can be remotely monitored and incorporate a series of internal controls to ensure that only effective solution is available for use.

The Sterilox Solution is currently used in the following areas: UK Endoscopy--Endoscopes are commonly used in many medical procedures such as colonoscopies and bronchoscopies. These endoscopes are designed to be reprocessed between patient clinical procedures. Strict regulations govern specific cleaning processes to ensure adequate safety and quality controls to prevent pathogen transmission and patient protection. These processes include a manual cleaning step, automated washing, disinfection with an approved chemical/sterilant, and final wash with a bacteria-free rinse water. US Food Safety--Sterilox is a proven intervention to improve shelf life and home life for fresh produce, floral, and seafood. The patented technology produces a non-toxic, food-safe sanitizer at a fraction of the costs of traditional chemicals whilst ensuring a safer product for supermarket produce consumers. US & UK Dental--Water lines used in dental surgeries suffer from the build up of biofilms and other contamination. Sterilox Solutions act to decontaminate water lines and maintain acceptable water quality levels providing a safer, healthier work environment for patients and staff.

3 LOSS BEFORE INTEREST AND TAX

Group 2007 $ Loss before interest, tax, depreciation, and amortisation (EBITDA) Depreciation and amortisation Loss before interest and tax (16,675,680) (4,937,879) (21,613,559) 2006 $ (15,089,715) (2,995,164) (18,084,879)

4 LOSS FOR THE YEAR

Loss for the year has been arrived at after charging/(crediting): Group 2007 $ Cost of inventories recognised as an expense Cost of goods sold (excluding inventories) Sales and marketing expenses Loss/(gain) on disposal of property, plant and equipment Non-cash stock compensation expense Inventories written down Amortisation and impairment of intangible assets Depreciation of property, plant and equipment Auditors' remuneration for all services 3,662,173 12,041,454 7,997,289 270,211 817,103 208,956 850,876 4,087,003 382,332 2006 $ 4,824,131 8,119,347 7,319,127 (31,221) 2,416,781 160,490 474,369 2,520,795 315,195

PuriCore 2007 Annual Report

48 | 49

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

Group 2007 $ Auditors' Remuneration Audit services Audit of Parent Company financial statements Audit of Group financial statements Audit of Subsidiary financial statements 36,000 142,304 170,217 35,000 78,000 154,000 2006 $

Tax services Compliance services Advisory services 12,643 21,168 29,395 18,800

Auditors' remuneration for all services

382,332

315,195

In addition to the amounts charged above, in 2006 $2,137,000 Auditor's remuneration has been charged to Share Premium in relation to float related services.

5 STAFF COSTS

2007 Number The average number of persons employed by the Group (including Executive Directors) during the year, analysed by category, was as follows: Research and development Sales and marketing Engineers (including field service) Head office and administration Average total persons employed 18 26 39 27 110 2007 $ The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs Share based payment costs 10,252,726 659,725 361,300 817,103 12,090,854 8,253,720 700,980 154,164 2,416,781 11,525,645 15 19 37 27 98 2006 $ 2006 Number

Key Management The key management of the Group comprises the Executive Directors of PuriCore plc together with senior members of the management team. Their aggregate remuneration is shown below: 2007 $ Key Management Remuneration Salaries and short term employee benefits Post employment benefits Share based payment 2,462,450 76,755 453,228 2,992,433 2,170,412 74,753 926,970 3,172,135 2006 $

No share options lapsed or were exercised by key management during 2007. Share options of 150,000 were granted to key management during 2007. Group 2007 $ Directors' Remuneration Emoluments Retirement plan contributions 1,287,445 19,448 1,021,243 22,759 2006 $

Total emoluments

1,306,893

1,044,002

6 FINANCE COSTS

Group 2007 $ Interest on bank loans Interest on other loans Interest on finance leases Amortisation of debt issue costs Net foreign exchange loss 818,740 63,955 17,138 290,668 1,190,501 2006 $ 364,825 592,290 16,703 176,650 111,176 1,261,644

7 FINANCE INCOME

Group 2007 $ Interest on cash balances 1,372,962 2006 $ 1,341,385

PuriCore 2007 Annual Report

50 | 51

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

8 INCOME TAX

Group 2007 $ Recognised in the Income Statement Current tax: Current year income 116,434 166,160 2006 $

Total current tax income

116,434

166,160

Deferred tax: Origination and reversal of temporary differences -

Total deferred tax

-

-

Total tax income in income statement

116,434 Group 2007 $

166,160

2006 $

Reconciliation of Effective Tax Rate Loss before tax (21,431,098) (18,005,138)

Tax using the UK corporation tax rate of 30% (2006: 30%) Non-deductible expenses Deferred tax asset on current year losses not recognised Other unrecognised temporary differences Difference in overseas tax rate Research and development tax credit

(6,429,329) 140,344 6,147,582 (704,169) 845,572 116,434

(5,401,541) 132,821 5,159,677 82,971 26,072 166,160

Total tax in income statement

116,434

166,160

Factors that might affect future tax rate and total tax charge: It has been announced that the corporation tax rate applicable to the Group on its UK operation has changed from 30% to 28% from 1 April 2008. The impact of this on the reversal of future deferred tax balances has been reflected as at 31 December 2007.

9 LOSS PER SHARE

The calculation of basic and diluted earnings per share is based on the following data: Group 2007 $ Loss Loss for the purpose of basic and diluted loss per share (21,314,664) (17,838,978) Group 2007 Number Number of Shares Weighted average number of ordinary shares for the purpose of basic loss per share 151,901,613 125,665,449 Group 2007 $/share Loss per Share From continuing operations: Basic and diluted (0.14) (0.14) 2006 $/share 2006 Number 2006 $

The calculation for diluted loss per share is identical to that used for basic loss per share. This is because the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33 `Earnings per share.'

PuriCore 2007 Annual Report

52 | 53

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

10 INTANGIBLE ASSETS

2007 DevelopIntellectual ment costs Goodwill property & software $ Cost At beginning of year Acquisitions ­ internally developed Effect of movements in foreign exchange At end of year 4,673,228 5,162,475 2,845,119 12,680,822 4,673,228 5,162,475 1,471,336 11,307,039 $ $ 2006 DevelopIntellectual ment costs Goodwill property & software $ $ $ Group Total $ Total $

-

-

1,787,122

1,787,122

-

-

1,102,626

1,102,626

4,673,228

5,162,475

(224,922)

(224,922)

4,673,228

5,162,475

271,157

271,157

4,407,319 14,243,022

2,845,119 12,680,822

Amortisation and Impairment At beginning of year Amortisation for the year Impairment loss Effect of movements in foreign exchange At end of year Net Book Value At end of year At beginning of year 605,211 1,926,693 3,510,361 6,042,265 605,211 2,236,963 2,487,547 5,329,721 4,068,017 2,925,512 310,270 357,572 222,020 318,586 7,351,101 532,290 318,586 4,068,017 2,615,241 310,271 89,536 164,098 6,772,794 474,369 -

4,068,017

3,235,782

(1,220) 896,958

(1,220) 8,200,757

4,068,017

2,925,512

103,938 357,572

103,938 7,351,101

605,211

2,236,963

2,487,547

5,329,721

605,211

2,547,234

1,381,800

4,534,245

See Note 32 for details of impairment testing in the year.

11 PROPERTY, PLANT, AND EQUIPMENT

2007 Leasehold improvements $ Cost At beginning of year Additions Disposals Effect of movements in foreign exchange At end of year 959,052 290,184 925,905 12,505,457 14,390,414 499,978 (19,515) 2,504,258 (400,987) 3,294,420 (420,502) 340,478 606,654 (31,276) 808,393 196,788 (91,427) 5,063,792 7,355,147 (301,837) 6,212,663 8,158,589 (424,540) Furniture Machinery & & fixtures equipment $ $ Leasehold improvements Total $ $ 2006 Furniture Machinery & & fixtures equipment $ $ Group Total $

16,999 1,266,235

(23,872)

104,606

97,733

43,196 959,052

12,151

388,355

443,702

1,382,496 14,713,334 17,362,065

925,905 12,505,457 14,390,414

Accumulated Depreciation At beginning of year Depreciation charge for the year Disposals Effects of movement in foreign exchange At end of year Net book value At end of year At beginning of year 539,701 648,416 6,814,007 8,002,124 667,029 507,468 8,148,527 9,323,024 292,023 418,437 4,356,930 5,067,390 84,138 375,438 2,103,675 2,563,251

360,358 -

263,415 (3,576)

3,463,230 (146,715)

4,087,003 (150,291)

216,608 (29,090)

122,273 (91,427)

2,181,914 (191,862)

2,520,795 (312,379)

74,153 726,534

55,804 734,080

225,882 7,899,327

355,839 9,359,941

20,367 292,023

12,153 418,437

263,203 4,356,930

295,723 5,067,390

667,029

507,468

8,148,527

9,323,024

256,340

432,955

2,960,117

3,649,412

Leased Plant and Machinery At 31 December 2007 the net carrying amount of machinery and equipment under finance leases was $108,955 (2006: $176,270) and the leased equipment secures finance lease obligations. Minimum lease payments are $155,956, the present value of which is $138,909. Included in cost above are the following items of property, plant, and equipment that are fully depreciated but still in use within the business: · Leasehold improvements ­ $170,193 · Furniture and fixtures ­ $214,327 · Machinery and equipment ­ $1,904,540

PuriCore 2007 Annual Report 54 | 55

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

12 INVESTMENTS IN SUBSIDIARIES

Name of Subsidiary (class of shares) PuriCore, Inc. (common)

Details of the Group's subsidiaries at 31 December 2007 are as follows: Place of incorporation (or registration) and operation USA Proportion Principal of of ownership voting activity power held interest % % Proportion 100 100 US operating company UK operating company UK holding company

PuriCore International Ltd (ordinary) (as a subsidiary of PuriCore, Inc.) PuriCore Europe Ltd (ordinary) (as a subsidiary of PuriCore, Inc.)

UK

100

100

UK

100

100

PuriCore plc acquired the entire share capital of PuriCore, Inc. on 26 June 2006 as part of a share for share exchange. Restated $ At 21 April 2006 Capital contribution to subsidiaries Acquisition of PuriCore Inc. and subsidiaries Foreign exchange movement At 1 January 2007 as previously reported Prior year adjustment At 1 January 2007 as restated Capital contribution to subsidiaries Share options issued to subsidiaries Foreign exchange movement Impairment charge At 31 December 2007 34,179,300 125,596,709 11,074,500 170,850,509 170,850,509 1,589,565 172,440,074 14,367,840 677,988 4,034,854 (131,520,756) 60,000,000

13 DEFERRED TAX ASSETS AND LIABILITIES

Recognised Deferred Tax Assets and Liabilities No deferred tax assets or liabilities have been recognised in the period. Un-Provided Deferred Tax Assets and Liabilities Un-provided deferred tax assets and liabilities are attributable to the following: Group Assets 2007 $ Property, plant, and equipment Tax losses ­ UK Tax losses ­ US Other temporary differences Net tax (assets)/liabilities (673,731) (7,494,779) (27,348,662) (537,079) (36,054,251) 2006 $ (348,203) (5,996,833) (21,063,580) (2,018,817) (29,427,433) Group Liabilities 2007 $ 391,732 391,732 2006 $ 203,084 203,084 Group Net 2007 $ (673,731) (7,103,047) (27,348,662) (537,079) (35,662,519) 2006 $ (145,399) (5,996,833) (21,063,580) (2,018,817) (29,224,629)

Net deferred tax assets have not been recognised as their realisation is currently uncertain. The US tax losses will begin to expire in 2011 if unused.

14 INVENTORIES

Group 2007 Number Raw materials Supplies and parts Finished goods 224,035 2,657,479 2,802,212 5,683,726 2006 Number 882,211 32,272 2,757,898 3,672,381

Included above are finished goods of $0 (2006: $481) carried at net realisable value. All raw materials and supplies and parts are carried at cost. Inventories of $208,956 (2006: $160,490) were written down in the period. All inventories held at the year end are expected to be realised within one year.

PuriCore 2007 Annual Report

56 | 57

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

15 TRADE AND OTHER RECEIVABLES

Group 2007 $ Current: Trade receivables Less: provision for impairment of receivables 3,261,243 (295,374) 2,965,869 Amounts owed by Group undertakings Other receivables Prepayments and accrued income 77,592 1,645,928 4,689,389 Non-current prepayment and accrued income 487,039 5,176,428 An analysis of the provision for impairment of receivables is as follows: 2007 $ Balance at start of year Charge for the year Utilised during the year 283,622 48,305 (36,553) 2006 $ 155,154 144,214 (15,746) 3,802,533 (283,622) 3,518,911 498,670 2,479,195 6,496,776 6,496,776 65,258 65,258 65,258 308,611 131,507 440,118 440,118 2006 $ Company 2007 $ 2006 $

Balance at end of year

295,374

283,622

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The age profile of the net trade receivables for the Group at the year end is as follows: 2007 Group Trade Receivables Value % 1,586,842 49 568,072 18 454,883 14 240,205 7 141,494 4 269,747 8 3,261,243 100 Not past due 0-30 days Debt age ­ "days past due" 31-60 days 61-90 days 91-120 days Over 120 days Total

2006 Group Trade Receivables Value % 1,679,823 44 461,658 12 Not past due 0-30 days

Debt age ­ "days past due" 31-60 days 270,861 7 61-90 days 366,943 10 91-120 days 199,433 5 Over 120 days 823,815 22 Total 3,802,533 100

An analysis of trade and other receivables by currency is as follows: Group 2007 $ Sterling US Dollar 2,538,507 508,613 3,047,316 2006 $ 2,802,693 1,038,743 3,841,436 Company 2007 $ 65,258 65,258 2006 $ 440,118 440,118

An analysis of the provision for impairment of receivables by geographical location is as follows: Group 2007 $ United States United Kingdom 38,880 256,494 295,374 2006 $ 71,614 212,008 283,622

16 OPERATING LEASE RENTALS

Group 2007 $ Minimum lease payments under operating leases recognised as income in the year 8,212,653 2006 $ 6,904,314

At the balance sheet date the Group has total outstanding receivables commitments under non-cancellable operating leases, which fall due as follows: Group 2007 $ Within one year In the second to fifth years inclusive After five years 7,471,969 3,557,356 11,029,325 Operating lease receipts represent rentals receivable from customers for the use of certain property, plant, and equipment. Leases have varying terms and renewal rights.

PuriCore 2007 Annual Report 58 | 59

2006 $ 6,967,101 8,775,807 9,125 15,752,033

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

17 CASH AND CASH EQUIVALENTS

Group 2007 $ Cash at bank and in hand Restricted cash: current Restricted cash: non current 15,861,207 3,033,000 2006 $ 37,683,515 2,250,000 3,033,000 Company 2007 $ 6,270,611 2006 $ 17,335,429 -

Total Cash and Cash Equivalents

18,894,207

42,966,515

6,270,611

17,335,429

Restricted Cash The terms of the Promissory Notes are such that $3,033,000 (2006: $5,283,000) is held in a separate account, with the funds being utilised for any re-payments that the Group do not satisfy on the promissory notes. The Group has no interest in the holdback account, other than to earn accrued interest at competitive market rates. The holdback agreement sets out a specific payment schedule for when the Group is entitled to receive the funds provided there are no non-payments under the Note and Security Agreement. The current agreement is such that the funds become available to the Group on 31 December 2008. See note 19 for further details of the terms and conditions of the promissory notes.

18 TRADE AND OTHER PAYABLES

Group 2007 $ Trade payables Amounts owed to Group undertakings Other taxes and social security Other payables Accruals and deferred income 2,081,568 492,128 4,753,049 7,326,745 2006 $ 2,250,780 160,320 3,884,028 6,295,128 Company 2007 $ 188,734 7,435,878 15,658 46,493 7,686,763 2006 $ 109,331 3,610,297 195,079 14,840 3,929,547

The Directors believe that the carrying amount of trade and other payables approximates their fair value.

19 LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group and interest bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk see note 20. 2007 $ Current Liabilities Finance lease liabilities Bank overdraft Draw down on bank Line of Credit Promissory 7.5% loan note (November 2008) Promissory 7.5% loan note (January 2009) Promissory 7.0% loan note (November 2009) Bank loan 8.16%-8.38% 60,851 176,617 4,500,000 592,607 687,490 1,973,806 7,991,371 Non-Current Liabilities Finance lease liabilities Promissory 7.5% loan note (November 2008) Promissory 7.5% loan note (January 2009) Promissory 7.0% loan note (November 2009) Bank loan 8.16%-8.38% 78,058 4,212 1,466,794 1,549,064 Notes Payable In November 2005 PuriCore, Inc., borrowed $2,063,872 in the form of a secured promissory note. The note is payable in 35 monthly installments beginning January 2006, bears interest at a rate of 7.5%, and is secured by leased equipment (and related payments). Monthly payments on this note are aligned with the payments due to PuriCore, Inc., for the leased equipment. As of 31 December 2007, $592,607 (2006: $1,391,517) was outstanding on this note. In December 2005 PuriCore, Inc., borrowed $2,131,341 in the form of a secured promissory note. The note is payable in 35 monthly installments beginning February 2006, bears interest at a rate of 7.5%, and is secured by leased equipment (and related payments). Monthly payments on this note are aligned with the payments due to PuriCore, Inc., for the leased equipment. As of 31 December 2007, $691,702 (2006: $1,501,029) was outstanding on this note. In December 2006 PuriCore, Inc., borrowed $5,128,367 in the form of a secured promissory note. The note is payable in 34 monthly installments beginning February 136,484 656,251 756,712 3,437,272 3,775,506 8,762,225 66,671 249,068 735,266 744,317 1,691,095 2,447,557 5,933,974 2006 $

2007, bears interest at a rate of 7.0%, and is secured by leased equipment (and related payments). Monthly payments on this note are aligned with the payments due to PuriCore, Inc., for the leased equipment. As of 31 December 2007, $3,440,600 (2005: $5,128,367) was outstanding on this note. Bank Loan Between April and July 2006 PuriCore, Inc., borrowed $7,499,081 in the form of a secured bank loan. The loan is repayable in 35 monthly installments beginning May 2006, bears interest at rates between 8.16% and 8.38%, and is secured by leased equipment (and related payments). This bank loan was retired with the Line of Credit discussed below. As of 31 December 2007, $nil (2006: $6,223,063) was outstanding on this loan. Line of Credit In October 2007 PuriCore, Inc., opened a $20 million secured line of credit. The line of credit is secured by compensating cash balances and incurred interest at variable rates between 6.44% and 6.78%. As of 31 December 2007, $4.5 million was outstanding on this loan.

PuriCore 2007 Annual Report 60 | 61

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

2007 Carrying amount $ Terms and Debt Repayment Schedule Bank overdraft Promissory 7.5% loan note (November 2008) Promissory 7.5% loan note (January 2009) Promissory 7.0% loan note (November 2009) Bank loan 8.16%-8.38% Line of Credit (variable) 176,617 592,607 691,702 3,440,600 4,500,000

2007 Contractual cash flows $

2006 Carrying amount $

2006 Contractual cash flows $

176,617 611,941 717,039 3,727,206 4,500,000

249,068 1,391,517 1,501,029 5,128,367 6,223,063 -

249,068 1,414,995 1,531,146 5,352,238 6,461,316 -

Borrowings (excluding finance lease liabilities) The borrowings are repayable as follows:

9,401,526

9,732,804

14,493,044

15,008,763

2007 Carrying amount $ On demand or within one year In the second year In the third to fifth years inclusive 7,930,520 1,471,006 9,401,526 Finance lease liabilities are payable as follows: 2007 Minimum lease payments $ Within one year In the second to fifth years inclusive 69,718 86,238 155,956 Less future finance charges (17,047) 138,909

2007 Contractual Cash flows $ 7,991,371 1,741,433 9,732,804

2006 Carrying amount $ 6,142,842 5,833,273 2,516,929 14,493,044

2006 Contractual Cash flows $ 5,867,303 6,040,844 3,100,616 15,008,763

Present value of minimum lease payments $ 60,851 78,058 138,909 138,909

2006 Minimum lease payments $ 83,878 155,949 239,827 (36,672) 203,155

Present value of minimum lease payments $ 66,671 136,484 203,155 203,155

The above leasing arrangements do not contain any restrictive covenants or contingent rents. Leases are used to acquire major items of machinery and equipment as they provide a significant cash flow advantage to the customer over an outright cash purchase.

20 FINANCIAL INSTRUMENTS

ANALYSIS BY CURRENCY

All financial instruments held by the Group, as detailed in this note, are classified as "Loans and Receivables" and "Financial Liabilities Measured at Amortised Cost" under IAS 39. See notes 15 and 19, respectively, for the carrying amount of these financial instruments.

Borrowings Group Sterling US Dollar 2007 $ 176,617 9,224,909 9,401,526 2006 $ 249,068 14,243,976 14,493,044

Cash and cash equivalents 2007 $ 6,270,611 9,590,596 15,861,207 2006 $ 17,335,429 20,348,086 37,683,515

Cash and cash equivalents Company Sterling 2007 $ 6,270,611 2006 $ 17,335,429

UNDRAWN COMMITTED BORROWING FACILITIES

At the year end the Group had the following undrawn committed borrowing facilities: 2007 $ Expiring within one year 614,761 2006 $ 533,812

INTEREST BEARING ASSETS AND LIABILITIES

The interest rate exposure of the Group is as follows: 2007 Fixed rate $ Borrowings Cash and cash equivalents (4,901,526) (4,901,526) Floating rate $ (4,500,000) 15,861,207 11,361,207 Total $ (9,401,526) 15,861,207 6,459,681 Fixed rate $ (14,243,976) (14,243,976) 2006 Floating rate $ (249,068) 37,683,515 37,434,447 Total $ (14,493,044) 37,683,515 23,190,471

INTEREST BEARING ASSETS AND LIABILITIES

The interest rate exposure of the Company is as follows: 2007 Floating rate $ Cash and cash equivalents 6,270,611 2006 Floating rate $ 17,335,429

62 | 63

PuriCore 2007 Annual Report

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

FAIR VALUE OF BORROWINGS AND CASH AND CASH EQUIVALENTS

The comparison of book and fair values of all the Group's financial assets and liabilities at the year end is set out below: 2007 Book value $ Cash at bank and in hand Trade and other receivables Trade and other payables Short-term borrowings Long-term borrowings 18,894,207 5,176,428 (7,326,745) (7,991,371) (1,549,064) 7,203,455 Fair value $ 18,894,207 5,176,428 (7,326,745) (7,991,371) (1,741,433) 7,011,086 2006 Book value $ 42,966,515 6,496,776 (6,295,128) (5,933,974) (8,762,225) 28,471,964 Fair value $ 42,966,515 6,496,776 (6,295,128) (5,933,974) (9,277,944) 27,956,245

FAIR VALUE OF BORROWINGS AND CASH AND CASH EQUIVALENTS

The comparison of book and fair values of all the Company's financial assets and liabilities at the period end is set out below: 2007 Book value $ Cash at bank and in hand Trade and other receivables Trade and other payables 6,270,611 65,258 (7,686,763) (1,350,894) The following methods and assumptions were used in estimating fair values for financial instruments: Short-term borrowings, cash, and deposits approximate to book value due to their short maturities. For bank and other loans, carrying fixed rates of interest, included within long-term borrowings, the repayments which the Group is committed to make have been discounted at the respective interest rates as presented in note 19. Fair value $ 6,270,611 65,258 (7,686,763) (1,350,894) 2006 Book value $ 17,335,429 440,118 (3,929,547) 13,846,000 Fair value $ 17,335,429 440,118 (3,929,547) 13,846,000

Risk management policies have been set by the Board and applied by the Group. (a) Foreign Exchange Risk The Group has transactional currency exposures arising from sales or purchases by operating subsidiaries in currencies other than the Group's functional currency. However, the operating subsidiaries require sales be denominated in local currency (US dollars for PuriCore, Inc. and Sterling for PuriCore International, Ltd.) and minimal purchases are made in currency other than the local currency. A 5% change in foreign exchange (USD) would change operating profit by approximately $12,000. (b) Interest Rate Risk The Group operates an interest rate policy designed to optimise interest costs and reduce volatility in reported earnings. This policy is achieved by maintaining a target range of fixed and floating rate debt for discrete annual periods, over a defined time horizon.

FINANCIAL RISK MANAGEMENT

The Group's multi-national operations and debt financing expose it to a variety of financial risks that include the effects of changes in debt market prices, foreign exchange rates, credit risks, liquidity and interest rates. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques.

As at 31 December 2007, $18,894,207 (Group), $6,270,611 (Company) (2006: $42,966,515 (Group), $17,335,429 (Company)) was on deposit with various banks and $176,617 (Group), $nil (Company) (2006: $249,068 (Group), $nil (Company)) overdraft was utilised of which the $176,617 (Group), $nil (Company) (2006: $249,068 (Group), $nil (Company)) overdraft was held in the UK. A 1% change in interest rates would have a $190,708 (Group), $nil (Company) (2006: $427,174 (Group), $nil (Company)) impact on loss before tax. (c) Credit Risk The Group's financial assets are bank balances and cash, trade and other receivables. The carrying value of these assets represent the Group's maximum exposure to credit risk in relation to financial assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and their assessment of the current economic environment. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The Group continually reviews customer credit limits based on market conditions and historical experience. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

Note 15 sets out the impairment provision for credit losses on trade receivables and the ageing analysis of overdue trade receivables. There are no impairment losses recognised on other financial assets. (d) Liquidity Risk The Group actively maintains committed facilities that are designed to ensure the Group has sufficient funds for operations and planned expansions. The maturity analysis of financial liabilities is given in note 19 and further discussion in respect of future borrowing commitments are given in the basis of preparation note to the financial statements.

21 EMPLOYEE BENEFITS

Defined Contribution Plan The Group operates a defined contribution pension plan. The total expense relating to this plan in the current year was $361,300 (2006: $154,164).

22 SHARE BASED PAYMENTS

During the year ended 31 December 2007 PuriCore plc operated an Employee Share Option Scheme. The share options granted under the scheme are not subject to performance conditions and have an exercise period of up to 10 years. There are no vesting conditions attached to the options other than completion of service, with options becoming vested at various points in time following the completion of one year's employment with PuriCore plc. Group 2007 Weighted average exercise price $ Group 2006 Weighted average exercise price $ 1.62 1.12 0.18 1.24 1.12 1.16

Number of options $ 20,142,700 687,500 (50,000) (389,250) 20,390,950 16,867,674

Number of options $ 17,495,950 4,065,000 (370,000) (1,048,250) 20,142,700 13,910,899

Outstanding at beginning of year Granted during the year Exercised during the year Forfeited during the year Outstanding at end of year Exercisable at end of year

1.12 0.98 0.90 1.10 1.23 1.26

The weighted average share price for the year was $0.953 (2006: $1.051). The options shown above relate to options of PuriCore plc.

PuriCore 2007 Annual Report

64 | 65

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

The following table summarises the options outstanding for the Group at the year end: 2007 Exercise price $ 0-0.325 0.326-0.650 0.651-0.975 0.976-1.950 1.951-2.600 2.601-3.480 3.490-4.000 Options outstanding Number 10,047,500 7,777,350 1,815,500 750,600 20,390,950 Options exercisable Number 9,097,500 5,204,074 1,815,500 750,600 16,867,674 Weighted average life Years 2.5 3.7 1.3 2.0 Exercise price $ 0-0.325 0.326-0.650 0.651-0.975 0.976-1.950 1.951-2.600 2.601-3.480 3.490-4.000 2006 Options outstanding Number 1,300,000 8,560,000 7,716,600 2,566,100 20,142,700 Options exercisable Number 1,250,000 7,047,499 3,422,300 2,191,100 13,910,899 Weighted average life Years 3.4 3.5 4.7 2.5 -

The above exercise prices have been translated at the exchange rate at the date of grant. The weighted average fair value of the options granted in 2007 was calculated as $0.44 (2006: $0.29) per option according to the Black Scholes option valuation model. The inputs into the model were as follows: Group 2007 Weighted average share price ($) Weighted average exercise price ($) Expected volatility (%) Risk free interest rate (%) 95.3 95.3 35 3.39-4.85 2006 1.05 1.12 35 2.61-5.16

Expected volatility has been estimated using a weighted average of comparable companies and indices relevant to the Group's operations. Awards are considered to be equity settled under IFRS 2. PuriCore plc has recognised total expenses of $817,103 (2006: $2,416,781) related to Director and employee equity settled share based payment transactions during the year.

23 PROVISIONS

Group 2007 Property provision $ Balance at start of year Provisions made during the year Provisions used during the year Balance at end of year Current Non-current Balance at end of year 91,989 1,881 93,870 93,870 93,870 Warranty and repairs provision $ 25,752 (25,752) 2006 Property provision $ 91,989 91,989 91,989 91,989

Total $ 91,989 1,881 93,870 93,870 93,870

Total $ 25,752 91,989 (25,752) 91,989 91,989 91,989

The property provision relates to costs payable to return certain leasehold property to its original condition upon conclusion of the lease.

24 REVERSE ACQUISITION

On 16 May 2006, PuriCore, Inc., Sterilox MergerCo, Inc., a wholly owned subsidiary of PuriCore plc, and PuriCore entered into an agreement and plan of merger (the "Merger Agreement"). Pursuant to the terms of the Merger Agreement, on 26 June 2006, PuriCore, Inc., merged with and into Sterilox MergerCo, Inc., with PuriCore, Inc., surviving. All outstanding common shares of PuriCore, Inc., par value $0.01 per share, were cancelled and PuriCore, Inc.'s shareholders each received one ordinary share of PuriCore plc, £0.01 par value per share, for each common share held as of 26 June 2006. Upon completion of the merger transaction, PuriCore, Inc., became a wholly-owned subsidiary of PuriCore. Professional fees incurred related to this transaction totalled $127,123.

PuriCore 2007 Annual Report

66 | 67

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

25 SHARE CAPITAL

The following note relates to the share capital of the legal parent Company, PuriCore plc. Authorised Ordinary shares of £1 each Number On incorporation Redesignation on 21 April 2006 Subdivision on 16 May 2006 New shares on 16 May 2006 New shares on 16 May 2006 At 31 December 2006 and 31 December 2007 50,000 (49,998) (2) Ordinary shares of £0.01 each Number 200 199,999,800 10,000,000 210,000,000 Ordinary shares of £1 each £ 50,000 (49,998) (2) Ordinary shares of £0.01 each £ 2 1,999,998 100,000 2,100,000

Allotted, called up and fully paid Ordinary shares of £1 each Number On incorporation Subdivision on 16 May 2006 Cancellation of existing shares Allotment on 16 May 2006 Allotment on 26 June 2006 Allotment on 30 June 2006 At 31 December 2006 Allotment on 1 January 2007 Allotment on 20 December 2007 At 31 December 2007 2 (2) Ordinary shares of £0.01 each Number 200 (200) 106,384,246 45,454,546 151,838,792 50,000 1,000,000 152,888,792 Ordinary shares of £1 each £ 2 (2) Ordinary shares of £0.01 each £ 2 (2) 1,063,842 454,545 1,518,387 500 10,000 1,528,887

Each of the ordinary shares carries one vote per share and is entitled to dividends at the discretion of the Directors. There are no restrictions on any of the shares. Capital The Group manages capital to ensure that it has adequate resources to enable it to continue operating its principal activities efficiently. Managements' policies are to invest Group assets in low risk investments that maximise liquidity. Capital includes share capital, share premium, shares to be issued and retained earnings. There are no externally imposed capital requirements on the Group.

Warrants During the year ended 31 December 2003, PuriCore, Inc., issued a warrant to purchase 200,000 shares of common stock to holders of bridge loans. The warrant was immediately exercisable, expires in April 2008, and has an exercise price of $3.00 per share. Additionally, during the year ended 31 December 2004, PuriCore, Inc., issued warrants to purchase 36,000 shares of common stock to a third party for consulting services. The warrants were immediately exercisable, expire in March 2009, and have an exercise price of $3.25 per share. The warrants were valued based upon the fair market value of the services rendered. The fair value of the services rendered was calculated by reference to the invoices received from the consultants. In December 2004, in conjunction with the issuance of a bridge note, PuriCore, Inc., issued warrants to purchase 1,000,000 shares of common stock. The warrants were immediately exercisable and have an exercise price of $0.50 per share and expired in December 2007. These warrants were all redeemed in December 2007 at $0.50 per share. In January 2006, in conjunction with a private sale of the Company's common stock, PuriCore, Inc., issued warrants to purchase 652,174 additional shares of the Company's common stock. As a result, the Company recorded a charge of $161,685 to reserves. As of 31 December 2007, 1,171,947, (2006: 2,441,636) warrants remain outstanding. Warrants to purchase shares of PuriCore, Inc., transferred to PuriCore plc upon completion of the 2006 IPO.

The following table summarises the warrants outstanding at the year end: 2007 Exercise price $ 0.50 0.92 1.00 3.00 3.20 3.25 Warrants outstanding Number 760,870 200,000 200,000 11,077 1,171,947 Warrants exercisable Number 760,870 200,000 200,000 11,077 1,171,947 Weighted average life Years 1.05 0.9 0.3 1.25 Exercise price $ 0.50 0.92 1.00 3.00 3.20 3.25 2006 Warrants outstanding Number 1,000,000 760,870 200,000 200,000 269,689 11,077 2,441,636 Warrants exercisable Number 1,000,000 760,870 200,000 200,000 269,689 11,077 2,441,636 Weighted average life Years 1.2 0.9 0.3 0.4 0.6 0.0

The weighted average fair value of the warrants granted in 2006 was $0.20 per warrant according to the Black Scholes option valuation model using the assumptions described in note 27. No warrants were issued in 2007.

PuriCore 2007 Annual Report

68 | 69

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

26 CHANGES IN EQUITY

Group At 31 December 2005 Total recognised income and expense Shares issued Share for share exchange on reverse acquisition Shares issued on IPO Share based payment movement At 31 December 2006 Total recognised income and expense Shares issued Share based payment movement At 31 December 2007 Share capital $ 99,494 Share premium $ 93,283,890 Other reserves $ 2,808,835 Retained earnings $ (89,651,293) Cumulative translation adjustment $ 24,171 Total $ 6,565,097

6,522 1,826,241 825,591 870 2,758,718

5,393,478 46,019,738 233,897 144,931,003

2,578,466 5,387,301

(17,838,978) (107,490,271)

1,094,179 1,118,350

(16,744,799) 5,400,000 1,826,241 46,845,329 2,813,233 46,705,101

19,077 2,777,795

524,959 145,455,962

817,103 6,204,404

(21,314,664) (128,804,935)

86,124 1,204,474

(21,228,540) 544,036 817,103 26,837,700

Company At 31 December 2005 Total recognised income and expense Share for share exchange on reverse acquisition Shares issued on IPO Share based payment movement At 31 December 2006 as previously reported Restatement At 31 December 2006 as restated Total recognised income and expense Shares issued Application of merger reserve Share based payment movement At 31 December 2007

Share capital $

Share premium $

Merger reserve

Other reserves $

Retained earnings $

Cumulative translation adjustment $

Total $

-

-

-

-

-

-

-

-

-

-

-

(671,246)

10,759,702

10,088,456

1,932,257 825,591

46,019,738

125,595,700 -

-

-

-

127,527,957 46,845,329

870

233,897

-

2,578,466

(2,578,466)

-

234,767

2,758,718 -

46,253,635 -

125,595,700 -

2,578,466 -

(3,249,712) 1,589,565

10,759,702 -

184,696,509 1,589,565

2,758,718

46,253,635

125,595,700

2,578,466

(1,660,147)

10,759,702

186,286,074

19,077

524,960

-

-

(132,965,644) -

3,967,536 -

(128,998,108) 544,037

-

-

(125,595,700)

-

125,595,700

-

-

-

-

-

817,103

-

-

817,103

2,777,795

46,778,595

-

3,395,569

(9,030,091)

14,727,238

58,649.106

PuriCore 2007 Annual Report

70 | 71

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

Share capital includes the par value for all shares of common stock issued and outstanding. Share premium includes the value of investments in the Company in excess of the par value of shares issued. Other reserves includes the value of options and warrants issued for shares of the Company's common stock not yet exercised. Retained earnings include the accumulated profits and losses arising from the consolidated income statement and certain items from the statement of recognised income and expense attributable to equity shareholders less distributions to shareholders.

The cumulative translation adjustment reserve incorporates the net exchange gains and losses recognised on the translation of subsidiary financial statements to the presentational currency of US Dollars ($) as recorded since the date of incorporation. The merger reserve for PuriCore plc includes the fair value of shares exchanged during the acquisition by PuriCore plc of the entire share capital of PuriCore, Inc., from its shareholders. The consideration paid by PuriCore plc was in the form of ordinary shares credited as fully paid up (pursuant to a Merger Agreement dated 16 May 2006). The merger reserve balance of $125,595,700 was transferred to retained earnings during 2007.

27 OPERATING LEASES PAYABLE

Group 2007 $ Minimum lease payments under operating leases recognised as an expense in the period 1,154,657 2006 $ 1,214,606

At the balance sheet date, the Group has outstanding commitments under non-cancellable operating leases, which fall due as follows: 2007 $ Land and Buildings Within one year In the second to fifth years inclusive After five years 820,272 1,400,174 419,852 553,684 1,862,780 646,522 2006 $

Plant and Machinery Within one year In the second to fifth years inclusive After five years 264,193 223,276 3,127,767 381,608 1,219,844 302,055 4,966,493

Operating lease payments represent rentals payable by the Group for certain of its properties and equipment. Leases have varying terms and renewal rights. The above leasing arrangements do not contain any restrictive covenants, contingent rents or purchase options.

28 SIGNIFICANT NON-CASH TRANSACTIONS

2007 Finance leases

The following significant non-cash transactions occurred during the year: At 1 January 2007 $ (178,648) At 1 January 2006 $ Finance leases (139,543) New finance leases $ New finance leases $ (91,521) Exchange movement $ At 31 December 2007 $ (138,909) At 31 December 2006 $ (178,648)

Cash flow $ 39,739

2006

Cash flow $ 52,416

Exchange movement $ -

29 RELATED PARTY TRANSACTIONS

In the ordinary course of business, sales and purchases of goods take place between Group companies. These transactions take place on an arm's length basis. In addition, PuriCore, Inc., charges PuriCore International Ltd. for management services performed on behalf of the subsidiary. In 2007, that management charge was $800,000. PuriCore International Ltd. charges PuriCore, Inc., for research and development services performed on behalf of the parent. In 2007, that research and development charge was $893,319. There are no related party transactions between the Company and Group companies. Payments to key management in the year are disclosed in note 5 to the financial statements. In 2007 the Group paid a company controlled by its Chairman, Christopher Wightman, fees of £10,000 for administrative services that enable the Executive Directors to have offices in London when they are traveling to meet with current and prospective institutional investors. Services include use of offices, phones, computers, administrative personnel, etc. The Group considers the fees paid to be fair market value for the services rendered. Additionally, the Company uses its Chairman's address as its registered office in the United Kingdom.

30 ULTIMATE CONTROLLING PARTY

Fund Manager Sustainable Asset Management* Invesco Perpetual** Newton Investment Management Oracle Management Limited BlackRock Management Limited*** No of shares 12,966,802 9,891,929 8,622,573 5,544,584 4,819,745

As at 31 March 2008, excluding Directors' holdings, these are the fund managers we understand to hold over 3% of the Group's Issued Share Capital ("ISC"): % of ISC 8.48% 6.47% 5.64% 3.63% 3.15%

* Includes the holding of JB MP SAM Sustainable Water Fund (8,501,035 shares; 5.56%) ** Includes the holding of Perpetual Income & Growth Investment Trust plc (7,291,986 shares; 4.77%) *** Holding on behalf of the MLIIF UK Fund

PuriCore 2007 Annual Report

72 | 73

Notes to the Financial Statements

For the Year Ended 31 December 2007

Continued

In addition, we understand the following owners to hold more than 3% of the ISC as at the same date: Owner Woolwich International Holdings Gacita Limited Kanton Services Limited Deutsche Bank AG Mr Stewart Newton* No of shares 15,954,983 12,688,986 10,521,739 7,640,044 5,929,038 % of ISC 10.44% 8.30% 6.88% 5.00% 3.88%

32 ACCOUNTING ESTIMATES AND JUDGEMENTS

Some asset and liability amounts reported in the accounts are based on management estimates and assumptions. There is therefore a risk of significant changes to the carrying amounts for these assets and liabilities within the next financial year. Inventory Provision The Group has provisions for slow moving and obsolete inventory of $378,074 (2006: $530,804). Provisions for inventory are based on historical experience and forecast usage and are judgemental by their nature. Impairment Provisions The Group has goodwill of $605,211 (2006: $605,211). No impairment provision has been provided against this goodwill as management has calculated the recoverable amount to be in excess of its carrying value. This judgement is based on current conditions and in future years may change resulting in material impairment provisions against goodwill being required. Classification of Leases The Group utilises assets subject to operating and financing leases. The classification of these leases is based on a number of factors, such as length of use and the fair value of minimum lease payments. Lease classification is made at the inception of the lease. The Group also leases certain machines to customers. These are currently classified as operating leases. The classification of these leases is based on the same factors as those noted above. Lease classification is made at the inception of the lease. Share-Based Payment The charge to the income statement, in relation to options and warrants, is based on valuation techniques (principally the Black-Scholes option pricing model). These valuation techniques require a number of assumptions to be made such as those in relation to volatility, movement in interest rates and dividend yields. These assumptions are made on the basis of information and conditions that exist at the time of the valuation.

* Holds via two registered shareholdings each below 3% threshold

31 POST BALANCE SHEET EVENTS

The Group was awarded a contract worth approximately $11 million in 2008 to install its Sterilox Food Safety Systems into roughly half of the retail locations of one of the largest supermarkets in the U.S. The contract was announced on 11 January 2008. In compliance with the Combined Code, Joseph William Birkett was appointed Senior Independent Director of the Group on 31 January 2008. The Group signed an agreement to acquire nine issued U.S. patents related to electrolyzed water equipment and processes from ECT, with the intent to expand its operations in commercial and industrial water treatment. The Group also signed separate agreements to hire two senior ECT scientists who bring many years of collective experience in electrolysed water technology. These agreements were announced 20 February 2008 and are subject to the approval of the United States Bankruptcy Court for the Eastern District of Missouri. The Group granted options over Ordinary Shares in the Company to the Directors and PDMRs under the terms of the PuriCore plc Executive Omnibus Incentive Plan. The grant was announced 21 February 2008. The total number of options over Ordinary Shares in the Company issued to Directors, PDMRs, and employees was 3,696,000. Refer to note 22 of the financial statements for additional information on share-based payments. On 14 April 2008 the Group repaid the $4.5 million balance on the line of credit facility with Brown Brothers Harriman. The Sterilox Solution was approved for Organic Food production, processing, and handling by the Organic Materials Review Institute, as announced on 28 April 2008.

Goodwill Impairment Goodwill acquired in a business combination is allocated to the cash generating units that are expected to benefit from that business combination. The carrying value of goodwill has been allocated to the following cash generating units: 2007 $ Endoscopy segment 605,211 2006 $ 605,211

Intellectual Property The Group owns intellectual property related to a portfolio of branded systems that produce hypochlorous acid solutions from water, electricity, and common salt. These systems generate the solutions at a range of concentrations and at nearly neutral pH. The Group has 34 granted patents and has a further 32 pending applications that are currently outstanding in various jurisdictions. Development Costs In accordance with IAS 38, the Group capitalised certain development costs associated with projects anticipated to generate future revenues. The carrying value of these amounts is reviewed against anticipated cash flows on an annual basis. A discount rate of 10% was used for 3 years in calculating future cash flows. A 1% change in discount rate does not impact the net book value of capitalised development costs. Going Concern As detailed on the basis of preparation note, the Group has prepared cash flow forecasts for the 20 month period ended 31 December 2009 that include a number of significant assumptions made by management.

Goodwill is allocated to cash generating units and is not amortised but is tested annually for impairment. To the extent that the carrying value exceeds the value in use, determined from estimated discounted future net cash flows or recoverable amount, goodwill is written down to the value in use and an impairment charge is recognised. During the year, goodwill was tested for impairment in accordance with IAS 36 `Impairment of assets'. The recoverable amounts for each cash-generating unit exceeded the carrying amount of goodwill recorded. The recoverable amount for the cash-generating unit has been measured on a value in use calculation. The value in use calculation has been based on management approved forecasts covering three years. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates, and expected changes to selling price and direct costs during the period. A pre-tax discount rate of 10% was used in the value in use calculation based on the Group's weighted average cost of capital, including a market risk premium in line with industry guidance. In determining the value in use, cashflows have been increased to reflect potential growth over the next three years. Changes in selling price and direct costs are based on management's expectations of future changes in the market. The assumptions used in these calculations have historically proved to be materially accurate. A 1% change in pre-tax discount rate or forecasted revenues does not impact the carrying value of Goodwill.

PuriCore 2007 Annual Report

74 | 75

Notice Of Annual General Meeting

NOTICE is hereby given that the ANNUAL GENERAL MEETING of PuriCore plc (the "Company") will be held at Wolseley House, Dyson Way, Staffordshire Technology Park, Beaconside, Stafford ST18 OGA, UK, on 26 June 2008 at 9:00 am BST to transact the following business:

ORDINARY BUSINESS

As ordinary business, to consider and if thought fit, to pass the following resolutions, which will be proposed as ordinary resolutions: 1. To receive and adopt the financial statements for the year ended 31 December 2007 together with the Reports of the Directors and of the Auditors thereon. 2. To re-appoint KPMG Audit Plc as auditor of the Company, to hold office until the conclusion of the next general meeting at which accounts are laid before the Company. 3. To authorise the Directors to determine the remuneration of the auditors. 4. To re-appoint Mr Allen as a Director. 5. To re-appoint Dr Walsh as a Director. 6. To re-appoint Dr Suggett as a Director. 7. To approve the Directors' Remuneration Report for the year ended 31 December 2007.

General Meeting, but so that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of such an offer or agreement notwithstanding that the authority conferred by this resolution has expired. 9. THAT, subject to the passing of resolution 8 as set out in the notice of this meeting, and in accordance with Article 5.2 of the Articles of Association of the Company, the Directors be and they are empowered pursuant to section 95 of the Act to allot equity securities (within the meaning of section 94 of the Act) wholly for cash pursuant to the general authority conferred by resolution 8 as set out in the notice of this meeting as if section 89(1) of the Act did not apply to any such allotment or sale, provided that this power shall be limited to the allotment of equity securities: (a) in connection with or pursuant to an offer of such securities by way of rights, open offer or other pre-emptive offer to holders of ordinary shares in the Company and other persons entitled to participate therein in proportion (as nearly as may be practicable) to their respective holdings of such shares, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems under the laws of any territory, or the regulations or requirements of any regulatory authority or stock exchange in any territory; and (b) otherwise than pursuant to sub-paragraph (a) above up to an aggregate nominal amount of £152,888 (being ten percent (10%) of the issued share capital) and such power shall expire on the conclusion of the next Annual General Meeting of the Company but so that the Company may, before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. 10. THAT, subject to the passing of resolution 8 as set out in the notice of this meeting, but resolution 9 not having been passed, and in accordance with Article 5.2 of the Articles of Association of the Company, the Directors be and they are empowered pursuant to section 95 of the Act to allot equity securities (within the meaning of section 94 of the

SPECIAL BUSINESS

As special business, to consider and, if thought fit, pass the following resolutions, of which resolution 8 will be proposed as an ordinary resolution and resolutions 9, 10, and 11 will be proposed as special resolutions. 8. THAT, subject to and in accordance with Article 5.1 of the Articles of Association of the Company, the Directors be and they are generally authorised for the purposes of section 80 of the Companies Act 1985 (the "Act") (in substitution for any existing authority to allot relevant securities) to exercise all the powers to the Company to allot relevant securities (within the meaning of that section) up to an aggregate nominal amount of £343,381, provided that this authority is for a period expiring at the Company's next Annual

Act) wholly for cash pursuant to the general authority conferred by resolution 8 as set out in the notice of the meeting as if section 89(1) of the Act did not apply to any such allotment or sale, provided that this power shall be limited to the allotment of equity securities: (a) in connection with or pursuant to an offer of such securities by way of rights, open offer or other pre-emptive offer to holders of ordinary shares in the Company and other persons entitled to participate therein in proportion (as nearly as may be practicable) to their respective holdings of such shares, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or other arrangements or any legal or practical problems under the laws of any territory, or the regulations or requirements of any regulatory authority or stock exchange in any territory; and (b) otherwise than pursuant to sub-paragraph (a) above up to an aggregate nominal amount of £76,444 (being five percent (5%) of the issued share capital) and such power shall expire on the conclusion of the next Annual General Meeting of the Company but so that the Company may, before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. 11. THAT the Articles of Association produced to the Annual General Meeting and initialled by the chairman of the Annual General Meeting for the purpose of identification be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association. 2 June 2008 Registered Office: 58 Davies Street London W1K 5JF By Order of the Board Andrea Holtzman Drucker Company Secretary

NOTES: 1. A member entitled to attend and vote at the Annual General Meeting convened by the notice set out above is entitled to appoint one or more proxies (who need not be members of the Company) to attend and, on a poll, to vote instead of the member. Completion and return of a form of proxy will not preclude a member from attending and voting at the meeting in person, should he subsequently decide to do so. 2. In order to be valid, any form of proxy and power of attorney or other authority under which it is signed, or notarially certified, or office copy of such power or authority, must reach the Company's Registrars, Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6ZX not less than 48 hours before the time of the meeting or of any adjournment to the meeting. 3. To appoint a proxy or to amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer's agent (ID 7RA01) by 9.00am on Tuesday 24 June 2008. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsor or voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings, please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

PuriCore 2007 Annual Report

76 | 77

Notice Of Annual General Meeting

Continued

4. In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered on the Company's register of members not later than 6:00 pm, 24 June 2008, or if the Annual General Meeting is adjourned, shareholders entered on the Company's register of members not later than 48 hours before the time fixed for the adjourned Annual General Meeting shall be entitled to attend and vote at the Annual General Meeting. Such shareholders may only cast votes in respect of shares held at such time. Changes to entries on the relevant register after that time shall be disregarded in determining the rights of any person to attend or vote at the Annual General Meeting. 5. To facilitate voting by corporate representatives at the Annual General Meeting, arrangements will be put in place at the Annual General Meeting so that (i) if a corporate shareholder has appointed the Chairman of the Annual General Meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the Annual General Meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the Annual General Meeting but the corporate shareholder has not appointed the Chairman of the Annual General Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives ­ www.icsa.org.uk­ for further details of this procedure.

6. Copies of the service contracts of each of the Directors and the register of Directors' interests in shares of the Company kept pursuant to section 228 of the Companies Act 2006 will be available for inspection at the registered office of the Company during business hours on any weekday (Saturdays and public holidays excluded) from the date of this notice until the date of the Annual General Meeting and at the Annual General Meeting from at least 15 minutes prior to and until the conclusion of the Annual General Meeting. 7. Biographical details of each Director being proposed for re-appointment or re-election by shareholders are set out on pages 11 and 12 of the Annual Report of the Company for the year ended 31 December 2007. 8. By virtue of section 89 of the Act, any issue by the Company of equity capital for cash made otherwise than to existing shareholders on a proportional basis requires the consent of the shareholders of the Company unless the Company has obtained the authority of the shareholders under section 95 of the Act. These arrangements are intended to ensure that the interests of existing shareholders are protected whilst at the same time giving the Company the ability to issue equity on a non preemptive basis, for the reasons outlined below. Whilst the Company does not have any immediate need to carry out an equity fundraising, we may wish to do so at some stage in the future. At the last Annual General Meeting, shareholders supported the resolution to disapply pre-emption rights (which would enable the Company to carry out a cash placing) in respect of up to five per cent (5%) of the Company's issued share capital. As in 2006, the Company is seeking disapplication of pre-emption rights . This year, Resolution 9 requests disapplication at a level of ten per cent (10%) of the current issued share capital. Your Board highlights the following factors, which it considers to be relevant to its recommendation to vote in favour of Resolution 9.

(A) Stock markets for bioscience companies can be extremely volatile and opportunities for equity fundraising can open and close very quickly. The prescribed period of time for which pre-emptive issues must remain open can prejudice the ultimate success of an issue and invariably expose the share price to downward pressure. (B) The authority could be used, for example, to issue equity for cash to invest in a focussed and timely manner for specific opportunities for progressing development or commercialization of one or more of our products. This would enable the commercial value of those products to be enhanced and further the Company's overall strategic objective to continue to add shareholder value. (C) This proposed level of ten per cent (10%) disapplication would allow a non pre-emptive issue to be made up to the maximum size of issue that is possible without the requirement to issue a prospectus. Avoiding the requirement to produce a prospectus would minimise significantly the delay, cost and management time generally required for this process. The Board intends, that if given, this authority will be exercised in a manner consistent with the Statement of Principles of the Pre-Emption Group and in the interests of shareholders as a whole. In keeping with the Company's policy of open and clear communication with shareholders, the Company would consult with major shareholders ahead of any issue of equity on a non pre-emptive basis.

Contingency plan Should Resolution 9 not be successful, the Company would rely on the lower five percent (5%) level sought under Resolution 10. The Company may also seek to raise further funds by approaching all shareholders on a pre-emptive basis although this would entail higher transaction costs and introduce time delays which may make the strategy more difficult to deliver. EVEN IF YOU SUPPORT THE PASSING OF RESOLUTION 9, THE DIRECTORS URGE YOU TO ALSO VOTE FOR RESOLUTION 10. HOWEVER, IF RESOLUTION 9 IS PASSED, RESOLUTION 10 WILL BE WITHDRAWN. Recommendation The Board considers all of the Resolutions set out in this Notice and explained above to be in the best interests of the Company and its shareholders, and unanimously recommends shareholders to vote in favour of the Resolutions.

PuriCore 2007 Annual Report

78 | 79

Directors and Advisers

DIRECTORS

Bishop Allen (appointed 16 May 2006) William Birkett (appointed 21 April 2006) Gregory Todd Bosch (appointed 21 April 2006) Keith Alan Goldan (appointed 21 April 2006) Michael Sapountzoglou (appointed 21 April 2006) Christopher Wightman (appointed 21 April 2006) Timothy Anderson (appointed 12 September 2006) James Walsh (appointed 12 September 2006) Alan Suggett (appointed 12 September 2006)

FINANCIAL PUBLIC RELATIONS

Financial Dynamics Limited Holborn Gate 26 Southampton Buildings London WC2A 1PB UK

REGISTRARS

Equiniti Aspect House Spencer Road Lancing, West Sussex BN99 6DA UK

COMPANY SECRETARY

Andrea Holtzman Drucker (appointed 13 November 2006)

SOLICITORS

Morgan Lewis Condor House 5-10 St Paul's Churchyard London EC4M 8AL UK

REGISTERED OFFICE

PuriCore plc 58 Davies Street London W1K 5JF www.puricore.com Company no: 05789798 UK

AUDITORS

KPMG Audit Plc St James' Square Manchester M2 6DS UK

FINANCIAL ADVISER, BROKER, AND SPONSOR

Nomura Code Securities Limited 1 Curey Lane London EC2V 8AE UK

© 2008 PuriCore plc. All rights reserved. PuriCore, Sterilox, Vashe, Aqualox, and Active Ice are registered trademarks of PuriCore, Inc. Aquatine is a trademark of PuriCore, Inc. All other brands and products referenced in this document are acknowledged to be the trademarks or registered trademarks of their respective holders.

Financial Calendar

The following table gives indicative dates: Annual General Meeting Financial year end 26 June 2008 31 December 2008

As dates are confirmed they will be included in the financial calendar displayed on the Group's website, www.puricore.com.

green

This is a

Design: Creative Strategy Group | csg-design.com

27 trees preserved for the future 55.24 lbs water-borne waste not created

TM

ANNUAL REPORT

www.GreenAnnualReport.com

PuriCore saved the following resources by producing this Green Annual ReportTM:

5,883 gals wastewater flow saved

1,287 lbs solid waste not generated

2,175 lbs net greenhouse gases prevented

12 million BTUs energy not consumed

Calculations based on research by Environmental Defense and other members of the Paper Task Force.

Cert no. SGS-COC-003409

Headquarters

PuriCore

508 Lapp Road Malvern, Pennsylvania 19355 USA Phone: +1 484 321 2700

European Operations

PuriCore

Wolseley House, Dyson Way Staffordshire Technology Park Beaconside, Stafford ST18 0GA UK Phone: +44 1785 782420

www.puricore.com

Information

86 pages

Report File (DMCA)

Our content is added by our users. We aim to remove reported files within 1 working day. Please use this link to notify us:

Report this file as copyright or inappropriate

24774


You might also be interested in

BETA
Sterilox Food Safety 2200 launch final