ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GENERAL

To date, our activities have included the market analysis and development of our MedClose device and counterpulsation units and the raising of development and working capital. We have developed and prepared for market our counterpulsation units, including a stand-alone unit known as the CPCA 2000. In March 2003, we received FDA clearance to market the CPCA 2000 counterpulsation unit as a Class III medical device. We are also engaged in the business of developing a patented internal puncture closure device and technique known as "MedClose". We have not commenced revenue producing operations.

During 2003 and 2004, we pursued the potential sale of CPCA 2000, Inc., our subsidiary that owns our counterpulsation technologies and products. Based on the analysis and inquiries by our investment banker, along with our own internal inquiries and analysis, we are of the opinion that there is not sufficient interest in the acquisition of CPCA 2000, Inc. or our counterpulsation technologies at this time due to declines in the amount of reimbursable patient costs for counterpulsation treatments under the Medicare program. Between 2002 and 2005, the amount of reimbursable patient costs for counterpulsation treatments under Medicare declined by approximately 30%. The decline in coverage has had a material negative impact on projected profitability of operations based on our counterpulsation technologies and products.

At the present time, we have no intention of commencing operations based on our counterpulsation technologies, and we are no longer pursuing the potential sale of CPCA 2000, Inc. While we believe that our counterpulsation technologies continue to retain value, we do not believe we will be able to negotiate a sale of CPCA 2000, Inc. or its counterpulsation technologies that will result in a meaningful return to us or our shareholders until such as the reimbursable patient costs for counterpulsation treatments under the Medicare program are significantly increased. We have historically charged to expense all research and development costs and expenses associated with our counterpulsation technologies. As of December 31, 2006, we had no assets on our consolidated balance sheet relating to our counterpulsation products or technologies, other than trademarks of less than $2,000.

The MedClose(TM) VCS is a medical device that is designed to seal femoral arterial puncture sites in patients who have undergone diagnostic or interventional catheterization procedures. It utilizes a proprietary catheter system that is designed to enhance manual compression by delivering a biologic sealant which forms an elastic coagulum that is fully resorbed within 10 to 14 days. The MedClose VCS is designed to significantly reduce the time to hemostasis (the stoppage of bleeding), thereby accelerating the patient's post-operative recovery and reducing the amount of time spent by post-operative professionals. The MedClose(TM) VCS applications and usage capabilities are intended for cardiac diagnostic and interventional cardiology procedures as well as interventional radiological and proposed carotid stenting procedures. As of the date of this report, MedClose(TM) VCS is undergoing human clinical trials and is not available for commercial distribution. We hold three patents for both the instrument and the technique used in connection with MedClose, and two additional patents pending.

We estimate that the costs of conducting and completing clinical studies of the MedClose device to be between $178,000 to $430,000. We believe that we have sufficient working capital to on hand to complete clinical studies. We intend to analyze our options for moving forward with the commercial exploitation of the MedClose, including licensing or sale of the product and our manufacture, marketing and sale of the product directly. If we pursue the manufacture or marketing of the MedClose product, we will, in all likelihood require significant additional capital. In that event we will endeavor to acquire the necessary working capital from the sale of our securities. However, there can be no assurance we will be able to obtain the required additional working capital on commercially reasonable terms or at all.

We expect to commence revenue producing operations subject to foreign regulatory approvals of MedClose. We do not expect to purchase or sell significant plant or equipment during 2007, nor do we expect a significant change in the number of our employees during the year.

In order to meet our general working capital requirements and to fund the commercial exploitation of the MedClose, in September 2007, we commenced a private placement of our Series E Preferred Stock. Pursuant to the original terms of the offering, the Series E Preferred shares were being sold at $19.75 per share and each share was convertible into common shares at a conversion price of $14.80 per share until August 31, 2008, when the conversion price would have been adjusted to the lower of $14.80 or 75% of the average last sale price of the common stock for the 30 trading days immediately preceding such date on any stock exchange; provided that the conversion price shall not be adjusted to an amount below $13.00 per share.

As of January 2008, and prior to having sold any Series E Preferred shares, we amended the Series E Preferred share offering terms. Pursuant to the amended offering terms, we are selling 2,025,316 shares of our Series E Preferred Stock, at $6.00 per share. As of March 12, 2008, we have sold 99,167 shares of Series E Preferred shares for the gross proceeds of $595,000. The Series E Preferred stock has no voting rights and has a 10% annual dividend payable in cash or common stock at our option. Each Series E Preferred share is convertible into our common shares at a conversion price of $4.50 per share

until August 31, 2008, when the conversion price will be adjusted to the lower of 75% of the average last sale price of the common stock for the 30 trading days immediately preceding such date on any stock exchange or $4.50 per share; provided that the conversion price shall not be adjusted to an amount below $3.92 per share. The shares of Series E Preferred Stock have not been, and will not be, registered under the 1933 Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Series E preferred shares are being sold by our executive officers and the proceeds of the offering are expected to be used for clinical trials, regulatory compliance, manufacturing and marketing relating to the MedClose device, and working capital.

RESULTS OF OPERATIONS

During the 2007 fiscal year, we incurred $1,628,203 of research and development expenses compared to $1,600,818 during fiscal 2006 and $1,266,093 during fiscal 2005. Research and development expenses relate to our ongoing development and testing of our internal puncture closure device and technique known as "Medclose." Our research and development costs were higher in 2007 and 2006 due to our commencement of human clinical trials in the third quarter of 2006. We expect our research and development costs to increase as we get further into human trials and proceed towards the submission of a submit applications for CE Mark/European commercial and eventually a FDA pre-market approval thereafter.

During fiscal 2007, we incurred $902,094 of general and administrative expenses, compared to administrative expenses of $1,372,079 in fiscal 2006 and $882,292 in fiscal 2005. General and administrative expenses in fiscal 2007 decreased by $469,995 over fiscal 2006. The decrease consisted primarily of a decrease in FDA counsel fees of $171,903 in 2007 as a result of decreased regulatory activity associated with our MedClose device, decreased stock option expenses of $241,234 over amounts incurred in 2006, decrease in accounting fees of $73,401 in 2007 as a result of fewer transactions and efficiencies in 404 testing, offset by a small increase in other areas.

FINANCIAL CONDITION

As of December 31, 2007, we had a working capital deficit of ($1,813,200), which includes accrued dividends of $2,089,132 payable on our outstanding shares of Series C preferred stock and Series D preferred stock as of such date. Our Series C and Series D preferred stock both have a 5% annual dividend payable in cash or shares of our common stock, at the option of the holder. Those dividends are convertible into our common shares at the rate of $3.57 per share in the case of the Series C preferred stock and $6.86 per share in the case of the Series D preferred stock. To date, all holders of the Series C and D preferred shares have elected to receive their dividends in common shares, and we believe that as long as the market price for our common shares stays substantially above $6.86 per share holders will continue to elect to receive dividends in common shares instead of cash.

In September 2007, we commenced a private placement of our Series E Preferred Stock, and since December 31, 2007, we have sold 129,167 shares of Series E Preferred shares for the gross proceeds of $775,000. We believe that our working capital on hand as of the date of this report, along with our ability to raise capital and meet certain operating expense obligations through the issuance of stock or stock equivalents, provide us with the capital we need for at least the next 12 months. However, we believe that our ability to operate beyond the next 12 months will require us to raise significant additional capital, of which there can be no assurance. In addition, in the event we receive substantial requests for dividend payments in cash or we encounter a material amount of unexpected expenses, we may require additional capital earlier than 12 months from the date of this report. In the event we receive substantial requests for dividend payments or encounter higher than expected expenses, there can be no assurance we will be able to access capital as and when needed or, if so, that the terms of any available financing will be subject to commercially reasonable terms.

The report of our independent registered public accounting firm for the fiscal year ended December 31, 2007 states that due to our working capital deficiency at December 31, 2007 there is a substantial doubt about our ability to continue as a going concern.

As noted above, we are currently analyzing our options for moving forward with the commercial exploitation of the MedClose, including licensing or sale of the product and our manufacture, marketing and sale of the product directly. If we pursue the direct manufacture and marketing of the MedClose product, we will, in all likelihood require up to $40 million of additional capital in order to (i) complete clinical trials and regulatory approvals in North America and designated foreign markets; (ii) commence manufacturing of the device; and (iii) commence marketing and sales of the device, including the development of a internal infrastructure necessary to support manufacturing and marketing.

We will endeavor to raise additional funds through the sale of our Series E preferred shares and any other available financing sources in order to meet our general working capital requirements and to fund the commercial exploitation of the MedClose. However, there are no agreements or understandings with any third parties at this time for our receipt of additional working capital and there can be no guarantee that such funds will be available on commercially reasonable terms, if at all. If we are unable to access additional

capital on a timely basis, we will be unable to expand or continue our development of the MedClose device and our operating results will be adversely affected.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet financing arrangements.

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements that are based on our beliefs as well as assumptions and information currently available to us. When used in this report, the words "believe," "expect," "anticipate," "estimate" and similar expressions are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and assumptions, including, without limitation, the risks and uncertainties concerning FDA approval of our products; the risks and uncertainties concerning the acceptance of our services and products by our potential customers; our present financial condition and the risks and uncertainties concerning the availability of additional capital as and when required; the risks and uncertainties concerning technological changes and the competition for our services and products; and the risks and uncertainties concerning general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you not to place undue reliance on any forward-looking statements, all of which speak only as of the date of this report.