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OMEGA DIAGNOSTICS GROUP PLC

("OMEGA DIAGNOSTICS" OR THE "COMPANY")

Proposed Placing to raise up to £7.75 million

Proposed acquisition of the IVD Business of Allergopharma

and Re-admission to AIM

Omega Diagnostics, the AIM-listed medical diagnostics company announces that the Company has conditionally agreed to acquire the business and certain assets of the IVD Business of Allergopharma Joachim Ganzer KG, a leading European allergy testing business.

Highlights

·; Transformational acquisition, enabling the Group to enter the mainstream allergy testing market

·; Consideration €6.0 million in cash (approximately £5.0 million)

·; Clear strategy to grow sales and profit:

▪ drive IVD Business sales through the Group's existing distributor network

▪ implement sophisticated instrumentation strategy to drive higher volume reagent sales

·; Placing of up to 64,583,350 new Ordinary Shares to raise up to £7.75 million (before expenses) to fund consideration and instrumentation strategy

Commenting on the acquisition David Evans, Non Executive Chairman, said:

"This acquisition enables Omega Diagnostics to enter the global, mainstream allergy testing market. It is a very attractive, growing market which we know well and the acquisition complements our existing intolerance testing business. We have a clear strategy to integrate and grow the business and the strong support we have received from our shareholders gives us the resources we need to deliver the strategy."

For further information please contact:

OMEGA DIAGNOSTICS GROUP PLC

("OMEGA DIAGNOSTICS" OR THE "COMPANY")

Proposed Placing of up to £7.75 million

Proposed acquisition of the IVD Business of Allergopharma

and Re-admission to AIM

Introduction

The Board of Omega Diagnostics is pleased to announce that the Company has agreed, subject to among other things, the approval of Shareholders at the General Meeting, to acquire the business and certain assets of the IVD Business of Allergopharma Joachim Ganzer KG, a leading European allergy testing business (the "IVD Business"). The Directors believe that the IVD Business will complement the Group's core food intolerance testing business by allowing it to enter a highly-attractive, adjacent market and they consider that it will significantly enhance the Group's growth prospects. The total consideration for the Acquisition is €6.0m (approximately £5.0 million), to be satisfied by a cash payment on completion.

In order to satisfy the consideration for the Acquisition and to enable the Company to implement its development strategy, the Board is proposing a placing to raise £7.75 million (approximately £6.70 million after expenses) by way of the Placing of 64,583,350 new Ordinary Shares at 12 pence per Placing Share.

The Acquisition constitutes a reverse takeover under the AIM Rules for Companies by virtue of the size of the transaction and is therefore conditional upon the approval of Shareholders, which is being sought at the General Meeting to be held on 17 December 2010.

The Admission Document, which contains details of these proposals, is being posted to Shareholders later today and will be available on the Company's website, www.omegadiagnostics.com.

Background to and Reasons for the Acquisition

Omega Diagnostics currently operates in the fields of food intolerance, autoimmune disease and infectious disease, providing immunoassay testing to the IVD market and food intolerance testing. The Company currently sells a wide range of products, primarily in the immunoassay IVD market, through a distribution network covering over 100 countries. Omega Diagnostics has a current headcount of approximately 65 employees and generated revenues of £6.2 million and adjusted profit before tax of £0.6 million for the financial year ended 31 March 2010.

The Directors have stated their intention to make a significant acquisition that will transform the Company's prospects. The Directors have searched for an acquisition that will complement the Group's core food intolerance testing business by allowing it to enter a highly attractive adjacent market. The Directors believe that the acquisition of the IVD Business, combined with the follow-on instrumentation strategy, will substantially increase the scale of Omega Diagnostics and allow it to develop allergy-based offerings through its international network as well as adding incremental profit from the instrumentation strategy, which should in turn create further value for Shareholders.

Recommendation

The Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they have irrevocably undertaken to do in respect of their own beneficial shareholdings amounting to, in aggregate, 1,609,818 Ordinary Shares (representing 7.8 per cent. of the Existing Ordinary Shares as at the date of this announcement).

Related Party Transactions

The following shareholders, considered related parties under the AIM Rules for Companies have conditionally agreed to take up Placing Shares as part of the Placing;

In each case the placing of the Placing Shares with these related parties constitutes a related party transaction under the AIM Rules. The Directors consider, having consulted with Cenkos as the Company's nominated adviser, that the terms of the placing of Placing Shares with the aforementioned related parties are fair and reasonable so far as Shareholders are concerned.

Principal terms of the Acquisition

Omega Diagnostics is proposing to acquire the business and certain assets of the IVD Business for cash consideration of €6.0m (approximately £5m), payable in cash at Completion. The consideration will be funded through a placing of new Ordinary Shares. The Acquisition will be made via a newly-incorporated German subsidiary of the Company, Omega Diagnostics GmbH.

The consideration is subject to a downwards-only adjustment to account for, among other things, any reduction in the value of the IVD Business' stock value compared to an agreed reference value. The assets to be acquired include but are not limited to the IVD Business' premises, the employment contracts of the employees of the IVD Business its intellectual property rights its technical and office equipment, contracts of the IVD Business and stock.

Completion of the Acquisition is conditional upon, among other things, the passing by the Shareholders of the Resolutions to be proposed at the General Meeting and Second Admission.

Information on the IVD Business

The IVD Business, which was established in 1990, is the in-vitro diagnostics division of Allergopharma Joachim Ganzer KG, a partnership of Merck KGaA and Mr Joachim Ganzer, a German entrepreneur. The IVD Business specialises in the research, development and production of in-vitro (lab based) allergy tests used by doctors to diagnose patients with allergies. Allergopharma also supplies the products used to treat the allergies although these products do not form part of the Acquisition.

The IVD Business occupies a site of 1,244 square metres at Allergopharma's site in Reinbek, a suburb of Hamburg, Germany and employs 29 staff. IVD products are sold in Germany and thirteen other markets, including Poland, Russia and Lebanon. Over 96 per cent. of the IVD Business' sales are made in the German market.

Allergy testing is performed by both in-vivo (skin testing) and in-vitro methods. Allergopharma provides allergens for both methods and, for in-vitro allergy diagnosis, offers more than 600 allergens, the substances that invoke the allergic response of IgE antibody production in the body.

The IVD Business employs classical allergen disc technology. The allergen disc is one of the most versatile solid phases and is used in conjunction with the EIA technology that is commonly used in clinical laboratories. The IVD Business also offers an allergy test in a simple dipstick form (Allergodip™) which allows for the testing of patients against multiple allergens in a doctor's office setting.

A set of unaudited, carve-out financial statements extracted from Allergopharma's financial statements show that for the year ended 31 December 2009, the IVD Business generated a turnover of €4.30 million (2008: €4.31 million), gross profit of €3.24 million (2008: €3.24 million) and an operating profit of €0.65 million (2008: €0.70 million). For the six months ended 30 June 2010 the IVD business reported turnover of €2.2 million, gross profit of €1.6 million and operating profit of €0.26 million.

Strategy of the Enlarged Group

The existing Group will continue to focus on the growth of two key product technologies: the Genarrayt™ microarray test and Food Detective™ for food intolerance. Both products are experiencing strong growth in the markets where they are being sold and further growth is expected in new territories where it is planned to launch the products. Other opportunities will be explored as the Genarrayt™ technology also has the potential to be used in other application areas where 'multiplexing' can confer a competitive advantage. Another focus is to generate additional business in the infectious disease range through stronger partnerships with global IVD companies.

The Directors believe that there is an opportunity to enter the global, mainstream allergy testing market which is currently dominated by one large multinational company. The acquisition of the IVD Business will be the Group's entry into this market. The allergy market is adjacent to the Group's existing intolerance market and the Directors believe that there will be significant benefits from integrating the businesses.

The allergy market in which the IVD Business operates may be described as comprising two segments: (i) initial screening to detect presence of IgE followed by testing against allergen groups to narrow down the cause of the allergic reaction; and (ii) a more detailed, confirmatory test against a small number of specific allergens to identify specific causes. The Directors consider that the IVD Business can be grown significantly by implementing more sophisticated instrumentation strategies for each of these two allergy testing segments. Accordingly, the acquisition of the IVD Business is intended to increase value for Shareholders through a three part strategy:

1. At present the test kits are mainly sold in Germany with very limited export sales. The Group has a large international distribution network providing access to potential customers and the Directors consider that the IVD Business can be grown significantly by distributing the existing products of the IVD Business through the Group's distribution network.

2. The Directors have identified an instrumentation strategy pursuant to which Omega Diagnostics intends to enter into an agreement with Immunodiagnostic Systems Holdings PLC (IDS) to gain exclusive global use, for performing allergy diagnostics, of their US FDA-approved IDS-iSYS platform, an automated 'closed system' analyzer. This is a proven instrument which is already established in immunoassay testing for multiple applications. The Directors believe that it requires only minor modifications to produce a competitive working system for confirmatory allergy testing that will be able to process higher volume of tests and thereby increase reagent revenues for the Enlarged Group.

3. The current IVD Business product range is used on 'open systems' which are used in lower test volume laboratories, with lower revenue generation. Omega Diagnostics intends to apply its Genarrayt™ microarrary test platform, which is currently utilised for food intolerance testing, to IgE Allergy screening. The Directors believe that the Genarrayt™ microarray detection system has the ability to be used in a wide variety of applications where multiplexing (testing for a large number of analytes simultaneously on a single blood sample) can confer a competitive advantage. The Board therefore believes that the Genarrayt™ system is ideally suited to routine, initial allergy screening where the physician wishes to commence the diagnostic process on a broad approach. Automation of slidehandling will allow more rapid processing of higher test volumes and thereby drive increased sales.

The IDS-iSYS and Genarrayt™microarray strategy will require additional investment of approximately £1.7 million, which will be funded from the proceeds of the Placing. Assay development time will be extensive due to the large number of individual allergy tests required on the test menu and this development requires funding but the Board believes that, following the Placing, adequate financial and technical resources will be available to the Enlarged Group and that this programme will result in additional value for Shareholders in the medium term.

Current Trading and Future Prospects

Trading in Omega Diagnostics for the current year is in line with management expectations and the Directors are confident in the prospects of the Enlarged Group. Trading in the IVD Business for the current year is in line with management expectations. The Directors are confident that the strategy going forward will significantly enhance the Group's growth prospects.

It is expected that Omega Diagnostics will begin to experience the financial benefits of the Acquisition in the second half of the 2012 financial year following the first launch of products from the IDS-iSYS and Genarrayt™ platforms. Greater benefits are expected in the following year including a significant increase in profitability from the IDS-iSYS and Genarrayt™ microarray platforms.

The Directors believe that the acquisition of the IVD Business, combined with the follow-on instrumentation strategy, will substantially increase the scale of Omega Diagnostics and allow it to develop allergy-based offerings through its international network as well as adding incremental profit from the instrumentation strategy, which should in turn create further value for Shareholders.

Board and Management

Upon Admission, the Directors will remain in their current positions and it is not envisaged that any new Directors will be appointed. The existing management team will be strengthened by the addition of the senior management team of the IVD Business.

Dividend Policy

It is the Directors' intention that the Company should achieve capital growth. The Directors believe it is inappropriate to attempt to predict the likely level or timescale for the declaration and payment of dividends by the Company. However, as soon as it becomes commercially prudent to declare dividends provided sufficient distributable reserves are available, the Directors intend to do so.

Information on the Placing

The Company is proposing to raise approximately £7.75 million before expenses, by way of a placing by Cenkos, as the Company's agent, of the Placing Shares, at the Placing Price with institutional and other investors. The Placing Shares comprise 4,999,950 new Ordinary Shares to be issued on First Admission, which is expected to occur on 20 December 2010, and 59,583,400 new Ordinary Shares to be issued on Second Admission, which is expected to occur on 21 December 2010. The Placing Shares will represent approximately 76 per cent. of the Enlarged Share Capital and will rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions thereafter declared, made or paid.

Pursuant to the Placing Agreement, Cenkos has conditionally agreed with the Company, on and subject to the terms set out therein, to use reasonable endeavours to procure investors to subscribe for the Placing Shares at the Placing Price. The Placing is conditional upon, among other things, the Resolutions being passed at the General Meeting, the Acquisition Agreement not being terminated and the Placing Agreement becoming unconditional and not being terminated in accordance with its terms. The Placing in respect of 4,999,950 of the Placing Shares is also conditional on First Admission taking place and the Placing in respect of 59,583,400 of the Placing Shares is also conditional upon Second Admission taking place.

Cenkos is entitled to terminate the Placing Agreement at its absolute discretion in certain specified circumstances prior to each of First Admission and Second Admission, including, among other things, for a breach of the terms of the Placing Agreement in any material respect by the Company or the Directors or if an event occurs or a matter arises prior to each of First Admission and Second Admission which renders any of the warranties untrue or incorrect in any material respect or in the event of force majeure arising.

All of the Directors, being David Evans, Andrew Shepherd, Kieron Harbinson, Geoff Gower and Mike Gurner, have agreed to subscribe for in aggregate 4,166,667 of the Placing Shares in the Placing. The Directors' subscription amounts and their percentage holdings in Ordinary Shares following Second Admission are as follows:

The Company will apply for admission of the Placing Shares to trading on AIM. If the Resolutions are passed at the General Meeting and the other conditions set out in the Placing Agreement are satisfied, trading in the Existing Ordinary Shares will be cancelled and First Admission, in respect of the 20,632,907 Existing Ordinary Shares and 4,999,950 of the Placing Shares, is expected to occur on 20 December 2010, and Second Admission, in respect of 59,583,400 of the Placing Shares, is expected to occur on 21 December 2010.

Use of Proceeds

The proceeds of the Placing receivable by the Company will be approximately £6.7 million after expenses. Approximately £5.0 million (€6.0 million) will be used to fund the cash consideration for the Acquisition and £1.7 million will be applied to implement the instrumentation elements of its growth strategy.

General Meeting

A General Meeting will be held at 9:00 a.m. on 17 December 2010 at the offices of Omega Diagnostics, Omega House, Alva, Clackmannanshire, FK12 5DQ to consider resolutions to:

1. approve the Acquisition as required by the AIM Rules for Companies;

2. authorise the Directors to allot new shares in the Company; and

3. disapply the statutory pre-emption rights in respect of shares allotted pursuant to that authority

For further information please contact:

DEFINITIONS

The following definitions apply throughout this announcement, unless the context requires otherwise: