A charity for special needs children says it will go bust this week if it does not receive money promised by the Diana, Princess of Wales Memorial Fund.

The Life Options project in Llanelli, South Wales is entirely financed by the Fund.

But the charity has told BBC ONE's Real Story that it will have to close down on Friday if no funds are forthcoming.

Fourteen families who have been receiving support from the project for the last two-and-a-half years have been warned there will soon be no help for them.

We've built up relationships with these families - it does feel a bit like we're letting them down Kelly Gammon, Project co-ordinator

The Diana, Princess of Wales Memorial fund froze �10m of payments to 120 charities earlier this month when it discovered it was being sued for �15m by the Franklin Mint.

The Fund lost a previous case trying to ban the Mint from producing Diana Dolls and other memorabilia. Now the company has launched a �15m "malicious prosecution" claim for compensation.

Kelly Gammon, project co-ordinator for Life Options, told Real Story: "We will have to close on Friday unless we find funds from somewhere else.

"We have been waiting for �17,000 from the Memorial Fund which has now been frozen following their legal action with the Franklin Mint.

The Franklin Mint produces Diana memorabilia

"It's a dreadful situation. if the project were to come to anm end, which is a distinct possibility at the moment, 14 families would be left without the support we've provided and those young people's futures would look uncertain.

"It's a great worry for us. We've built up relationships with these families - it does feel a bit like we're letting them down."

The project helps young people such as 18-year-old Andrew Smith who suffered a brain haemorrhage when he was just six weeks.

'Dire situation'

Life Options is the only scheme his mother, Jane, found which could meet all his needs.

She told Real Story: "Andrew is profoundly handicapped. He has very, very special needs which aren't easily met.

Allegations that the trustees had malicious motives are groundless Andrew Purkis Diana Fund

"This project has been a great help to both of us and it will be a disaster if it closes down.

"Princess Diana was a very sensitive and caring person and I think that to be taking money away from this charity and others would be very disappointing to her."

Chief Executive of the Memorial Fund, Andrew Purkis, said: "We bitterly regret being in a position where our beneficiaries will suffer. It's a dire situation."

However, Mr Purkis believes the Franklin Mint will not win their counter-claim.

"We are very optimistic that we will win the case because the allegations that the trustees or the executors of Princess Diana's estate had malicious motives and didn't follow legal advice are groundless."

Real Story: Monday 28 July at 1930 BST on BBC ONE and the Real Story website.