Sphere Medical Holding Regulatory News (SPHR)

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THIS ANNOUNCEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES AND NEITHER THIS ANNOUNCEMENT NOR ANYTHING HEREIN FORMS THE BASIS FOR ANY CONTRACT OR COMMITMENT WHATSOEVER. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION AND THE SECURITIES DESCRIBED HEREIN WILL BE SOLD IN ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS.

THE DEFINED TERMS SET OUT IN THE APPENDIX APPLY IN THIS ANNOUNCEMENT.

28 June 2013

Sphere Medical Holding plc

("Sphere", "Sphere Medical", or the "Company")

Proposed Collaboration Agreement, Fundraising and Notice of General Meeting

Sphere Medical is pleased to announce that it has entered into a Collaboration Agreement with Ortho Clinical Diagnostics, Inc. ("OCD"), a subsidiary of Johnson & Johnson, for the development of Proxima 4 and the enhancement of Sphere's operational and production capabilities. The Collaboration Agreement also provides a framework for OCD and Sphere Medical to negotiate a proposed global commercialisation deal for Proxima 4.

In connection with its entering into the Collaboration Agreement, the Company has conditionally raised approximately £5.1 million (before expenses) through the Placing of 12,682,500 Placing Shares with new and existing institutional investors and approximately £3.3 million through the Subscription by Johnson & Johnson Development Corporation ("JJDC") (a subsidiary and the investment arm of Johnson & Johnson) of 8,141,250 Subscription Shares. In addition, the Company is seeking to raise up to £4.2 million by way of the Open Offer of 10,515,898 Open Offer Shares to Qualifying Shareholders.

The Board also announces that the Company has entered into a £5 million equity financing facility with Darwin Strategic Limited, a company majority owned by funds managed by the Henderson Volantis Capital Team, a subsidiary of Henderson Global Investors.

The Issue Price represents a discount of 29.2 per cent. to the 56.5 pence closing middle market price of an Ordinary Share on 27 June 2013, being the last trading day prior to the publication of this announcement.

Sphere will shortly be publishing a Circular in connection with the Fundraising and will convene a General Meeting on 16 July 2013 to approve certain matters necessary to implement the proposed Fundraising.

Summary

·; Over the next few months the development of Proxima 3 will be finalised. Following which the Board expects to commence verification and validation of Proxima 3 which is expected to take approximately four months which will pave the way for the final third party compliance testing which is expected to lead to European CE marking of Proxima 3 in H1 2014 and subsequent launch by the Company of Proxima 3 in the UK and potentially other approved territories.

·; Pursuant to the Collaboration Agreement, Sphere and OCD will collaborate in relation to the development of Proxima 4, Sphere's next generation disposable patient-dedicated arterial blood gas analyser for use in the hospital intensive care units, theatres and other acute care settings, and the enhancement of Sphere's operational and production capabilities. The Collaboration Agreement also provides a framework to negotiate a proposed global commercialisation deal for Proxima 4.

·; Under the Collaboration Agreement, OCD and Sphere will form a Joint Steering Group to oversee, and a Project Team to implement the Collaboration Agreement activities concerning:

o Operational capabilities;

o Market assessment; and

o Product development.

·; Subject to determination by the Joint Steering Group (in respect of the Collaboration Agreement), the Company expects to deploy approximately £7.9 million net proceeds of the Fundraising towards the development of Proxima 4 and the enhancement of Sphere's operational and production capabilities.

·; The Fundraising is conditional on the passing of the Resolutions at the General Meeting. If the Resolutions are passed and the other conditions to the Fundraising are satisfied, it is expected that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 17 July 2013.

The Circular concerning the Collaboration and Fundraising will shortly be sent to Shareholders and will also be made available on the Company's website www.spheremedical.co.uk.

Stuart Hendry, CEO of Sphere said:

"The Board's principal strategic objective is to transition the Group to becoming revenue generating and ultimately a cash generative company through the exploitation of its products and intellectual property. We are now in advanced preparations for Proxima 3 CE Marking and expect to launch Proxima 3 into the UK market in H1 2014. Today's announcement of our collaboration with OCD and the accompanying equity investment by JJDC and new and existing investors, points to a strong future for Proxima and consequently for Sphere."

"OCD is a subsidiary of Johnson & Johnson, the world's largest and most diverse medical devices and diagnostics company."

Further details of Collaboration Agreement and Fundraising are set out in this announcement. Readers are referred to the important notice that applies to this announcement. Unless otherwise stated, references to time contained in this announcement are to UK time. This announcement has been issued by and is the sole responsibility of Sphere Medical Holding plc.

For further information contact:

Note regarding forward-looking statements:

This announcement contains certain forward looking statements relating to the Company's future prospects, developments and business strategies.

Forward looking statements are identified by their use of terms and phrases such as "targets" "estimates", "envisages", "believes", "expects", "aims", "intends", "plans", "will", "may", "anticipates", "would", "could" or similar expressions or the negative of those, variations or comparable expressions, including references to assumptions.

The forward looking statements in this announcement are based on current expectations and are subject to risks and uncertainties which could cause actual results to differ materially from those expressed or implied by those statements.

These forward looking statements relate only to the position as at the date of this announcement. Neither the Directors nor the Company undertake any obligation to update forward looking statements or risk factors, other than as required by the AIM Rules for Companies or by the rules of any other applicable securities regulatory authority, whether as a result of the information, future events or otherwise.

You are advised to read this announcement and, once available the Circular and the information incorporated by reference therein, in their entirety for a further discussion of the factors that could affect the Company's or the Group's future performance and the industries in which they operate. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

Neither the content of the Company's website (or any other website) nor any website accessible by hyperlinks on the Company's website (or any other website) is incorporated in, or forms part of, this announcement.

Any person receiving this announcement is advised to exercise caution in relation to the Fundraising. If in any doubt about any of the contents of this announcement, independent professional advice should be obtained.

This summary should be read in conjunction with the full text of the announcement which follows.

Expected timetable

Notes:

(1) The ability to participate in the Open Offer is subject to certain restrictions relating to Shareholders with registered addresses outside the UK.

(2) The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by Sphere Medical Holding plc, in which event details of the new times and dates will be notified to the UK Listing Authority, the London Stock Exchange and, where appropriate, Qualifying Shareholders by means of an announcement through a Regulatory Information Service.

(3) References to times in this announcement are to times in London unless otherwise stated.

(4) Different deadlines and procedures for return of forms may apply in certain cases.

(5) If you have any queries on the procedure for acceptance and payment, you should contact Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA on 0871 384 2050between 8.30 a.m. and 5.30 p.m. (London time) Monday to Friday (except UK public holidays) from within the UK or +44 121 415 0259 if calling from outside the UK. Calls to the 0871 384 2050 number cost 8 pence per minute (excluding VAT) plus your service provider's network extras. Calls to the helpline from outside the UK will be charged at applicable international rates. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Open Offer or the Fundraising nor give any legal or tax advice.

Introduction

Sphere Medical is pleased to announce that it has entered into a Collaboration Agreement with Ortho Clinical Diagnostics, Inc. ("OCD"), a subsidiary of Johnson & Johnson, for the development of Proxima 4 and the enhancement of Sphere's operational and production capabilities. The Collaboration Agreement also provides a framework for OCD and Sphere Medical to negotiate a proposed global commercialisation deal for Proxima 4. Proxima 4 is Sphere Medical's next generation disposable patient-dedicated arterial blood analyser for use in hospital intensive care units, operating theatres and other acute care settings, further details of which are set out below.

In connection with its entering into the Collaboration Agreement, the Company has conditionally raised approximately £5.1 million (before expenses) through the Placing of 12,682,500 Placing Shares with new and existing institutional investors and approximately £3.3 million through the Subscription by Johnson & Johnson Development Corporation ("JJDC") (a subsidiary and the investment arm of Johnson & Johnson) of 8,141,250 Subscription Shares. In addition, the Company is seeking to raise up to £4.2 million by way of the Open Offer of 10,515,898 Open Offer Shares to Qualifying Shareholders.

Shareholders will be asked to approve the Resolutions to approve the Fundraising, details of which are set out in this announcement and in the Circular. The General Meeting of the Company is to be held at 5 New Street Square, London EC4A 3TW at 10.00 a.m. on 16 July 2013, formal notice of which is set out in the Circular.

Background to the Collaboration Agreement and reasons for the Fundraising

Sphere Medical was admitted to AIM in November 2011 after nine years as a privately funded company. On its admission to AIM in November 2011, the Company raised £14 million (before expenses) against a background of very difficult equity market conditions. The Company has been able to significantly advance the development of Proxima utilising net proceeds from the IPO and the preliminary results issued today contain a comprehensive update of recent developments.

From a product development and commercialisation viewpoint, Proxima is Sphere Medical's core product, although the Company has continued to make progress with both its cardiopulmonary bypass device and also Pelorus 1500, the world's first point of care device for the rapid measurement in blood of the concentration of propofol, one of the largest selling intravenous anaesthetic drugs.

Proxima is Sphere Medical's patient-dedicated arterial blood gas analyser for use in the hospital intensive care units, operating theatres and other acute care settings. Proxima is a disposable multi-parameter microanalyser that is integrated into a patient's existing arterial line. When a blood gas reading is required, arterial blood is drawn across the microanalyser and measured to laboratory analyser accuracy and the blood gases and electrolyte results displayed are on a dedicated Sphere Medical made monitor at the bedside. With Proxima 3 all blood is returned into the patient after the reading is taken.

At the time of the Company's admission to AIM and in subsequent announcements, the Directors have stated that a key priority would be the securing of a partner who is committed to and capable of maximising the commercial potential of Proxima 4. The signing of the Collaboration Agreement with OCD is the culmination of an extensive process which attracted significant engagement and interest from a number of the world's leading medical device companies.

The Directors believe that in OCD, the Company has secured the best possible partner for Sphere Medical and Proxima 4 and a Collaboration Agreement that will maximise the potential for Proxima 4.

OCD is a global business serving the transfusion medicine community and laboratories around the world. OCD is a leading provider of in vitro diagnostic products and services, offering accurate, timely and cost-effective solutions for screening, diagnosing, monitoring and confirming diseases. For nearly 70 years, OCD has pioneered some of the most important technological advances in diagnostics and is committed to enabling diagnostics to fulfil its important role in the continuum of care and changing the focus of healthcare from treating sickness to promoting wellness. OCD aims to develop new growth platforms that can lead to further understanding of health and disease, enabling doctors to predict conditions.

The Board believes that OCD's interest in Proxima and its entry into the Collaboration Agreement:

·; endorses the Proxima technology;

·; supports Sphere Medical's ability to deliver the Proxima technology; and

·; provides a framework upon which to secure a global commercialisation agreement.

Over the next few months the development of Proxima 3 will be finalised. Following which, the Board expects to commence verification and validation of Proxima 3 in the Company's facility at Harston, Cambridgeshire, UK. Satisfactory completion of verification and validation, which is expected to take approximately four months, will pave the way for the final third party compliance testing which is expected to lead to the European CE Marking of Proxima 3 in H1 2014 and the subsequent launch by the Company of Proxima 3 in the UK and potentially other approved territories. The development and commercialisation of Proxima 3 will further enable the development of next generation offerings.

Details of the Subscription and Placing

The Company proposes to raise gross proceeds up to approximately £8.3 million (approximately £7.9 million net of estimated expenses) from new and existing institutional shareholders, comprising:

·; a Subscription by JJDC of Subscription Shares to raise approximately £3.3 million (before expenses), pursuant to the Subscription Agreement; and

·; a Placing to existing and new institutional investors of Placing Shares to raise approximately £5.1 million (before expenses) pursuant to the Placing Agreement.

A full take up of the Placing Shares and the Subscription Shares would together represent approximately 57 per cent. of the Existing Ordinary Shares.

The Issue Price represents a discount of 29.2 per cent. to the 56.5 pence closing middle market price of an Ordinary Share on 27 June 2013, being the last trading day prior to the publication of this announcement.

The Placing Shares and the Subscription Shares will rank pari passu in all respects with the Existing Ordinary Shares. Application will be made for the Placing Shares and the Subscription Shares to be admitted to trading on AIM. It is expected that Admission will take place, and dealings in the New Ordinary Shares will commence, on 17 July 2013.

Under the Subscription Agreement, JJDC will receive warrants pursuant to the JJDC Warrants 2013. Under the Placing Agreement, the Placees will receive warrants pursuant to the Placee Warrants 2013. Further details of the JJDC Warrants 2013 and Placee Warrants 2013 are set out below.

The Placing is conditional, inter alia, on:

·; the passing of the Resolutions at the General Meeting to be held on 16 July 2013;

·; the Subscription Agreement not having been terminated or rescinded prior to Admission and becoming unconditional save as to Admission;

·; the EFF having been entered into and not terminated;

·; the Placing Agreement entered into between the Company and Peel Hunt becoming unconditional in all relevant respects prior to the scheduled time for issue of the EIS Eligible Shares, VCT Eligible Shares and Non Eligible Shares respectively; and

·; in respect of the Non Eligible Shares, Admission becoming effective by no later than 8.00 a.m. on 17 July 2013 or such other date (being not later than 8.00 a.m. on 31 July 2013) as Peel Hunt and Sphere Medical may agree.

The Subscription is conditional, inter alia, on:

·; the passing of the Resolutions at the General Meeting to be held on 16 July 2013;

·; the Subscription Agreement becoming unconditional;

·; the EFF having been entered into and not terminated;

·; Admission becoming effective; and

·; the Company raising no less than £8 million (including the monies raised pursuant to the Subscription Agreement) under the Placing.

Details of the EFF and Darwin Warrant Instrument

The EFF agreement with Darwin provides Sphere with a facility of up to £5 million which (subject to certain limited restrictions) can be drawn down at any time over the next five years. The timing and floor subscription price of any draw down is at the sole discretion of the Company.

The Company is under no obligation to make a draw down and may make drawdowns at its discretion, up to the total value of the EFF, by way of issuing subscription notices to Darwin. Following delivery of a subscription notice, Darwin will subscribe and the Company will allot to Darwin Ordinary Shares.

The subscription price for any Ordinary Shares to be subscribed by Darwin under a subscription notice will be the average of the three lowest closing bid prices of the Ordinary Shares over the 15 trading days following the subscription notice.

Sphere is also obliged to specify in each subscription notice a minimum price below which Ordinary Shares will not be issued to Darwin. The Company will have the right (with the consent of Darwin) to modify that minimum price at any time during the 15 day period following relevant subscription notice.

The number of Ordinary Shares which may be issued under any individual subscription notice may be up to the lower of 25 per cent. of the Company's issued share capital following completion of the relevant subscription, or four times the average daily trading volume of Sphere's Ordinary Shares over the 15 trading days preceding the issue of the relevant subscription notice. This may be reduced in certain circumstances, including where the minimum price is not maintained or the trading volume is less than 1,000 shares. The maximum amount of a subscription notice may not exceed £500,000 without Darwin's permission. Darwin is entitled to a commission of up to 5 per cent of amounts subscribed but may agree with the Company in lieu thereof for the subscription price for the Ordinary Shares to be discounted by 5 per cent.

There is also an over-allotment facility available to Sphere, under which the Company may authorise Darwin, at Darwin's discretion, to increase the amount of the draw down by up to the aggregate undrawn amount under the EFF. Darwin may direct allotments under the EFF to its parent fund, Henderson Global Investors' AlphaGen Volantis Fund. Darwin and Sphere may mutually agree at the end of the pricing period to a variation of subscription price.

This may allow for a larger subscription via any over-allotment facility authorised by the Company. The issuance of a subscription notice is conditional upon the satisfaction of certain conditions, including, inter alia, that the Board has authority to allot Ordinary Shares the subject of the subscription notice, that there has been no material breach of the warranties given by the Company under the EFF, that trading of the Ordinary Shares has not been suspended and that no material adverse effect has accrued which affects or is likely to affect the Company's ability to perform its obligations under the EFF or the continued admission of the Ordinary Shares to trading on AIM. Any subscription notice which Sphere may issue will only be valid to the extent that it has the requisite shareholder authority to issue the maximum number of Ordinary Shares that Darwin may be required to subscribe under the relevant subscription notice. Darwin and Sphere may terminate the EFF agreement if certain conditions are not met.

The Directors are seeking the approval of Shareholders to allot up to 12,500,000 Ordinary Shares which represents the maximum number of Ordinary Shares issuable to Darwin assuming such Ordinary Shares are issued at the Issue Price.

The Company has provided customary warranties, indemnities and covenants to Darwin pursuant to the EFF.

The EFF may be terminated by Darwin, inter alia, where the Ordinary Shares cease to be traded on AIM or trading is suspended for more than three months, or where an event or circumstance occur in relation to the Company or the Subsidiary which have a material adverse effect.

In conjunction with the EFF, the Company proposes to enter into the Darwin Warrant Instrument under which the Company has agreed to issue in aggregate 250,000 Darwin Warrants. Each Darwin Warrant confers the right to subscribe for one Ordinary Share per warrant. The Darwin Warrants are exercisable at a price of 80 pence per Ordinary Share for a period of five years from the date of grant.

Details of the Open Offer

The Board considers it important to provide the Company's loyal and supportive Shareholders with an opportunity to participate in the Fundraising in recognition of their continued support to the Company. Each Director intends to take up their full Open Offer Entitlements.

Qualifying Shareholders can therefore subscribe for, in aggregate, up to £4.2 million (before expenses) in Open Offer Shares without the Company having to produce a prospectus (in accordance with the Prospectus Rules) which would have both cost and timing implications for the Company.

Qualifying Shareholders, on and subject to the terms and conditions of the Open Offer, will be given the opportunity under the Open Offer to apply for any number of Open Offer Shares at the Issue Price pro rata to their holdings on the following basis:

2 Open Offer Shares for every 7 Existing Ordinary Shares

The Open Offer Shares will rank pari passu in all respects with the Existing Ordinary Shares. Fractions of Open Offer Shares will not be allotted to Qualifying Shareholders in the Open Offer and entitlements under the Open Offer will be rounded down to the nearest whole number of Open Offer Shares. The Issue Price represents a discount of 29.2 per cent. to the 56.5 pence closing middle market price of an Ordinary Share on 27 June 2013, being the last trading day prior to the publication of this announcement. The size of the discount is to allow Qualifying Shareholders to participate at the same level of discount as the placees under the Placing and the Subscription. However, no Qualifying Shareholder will receive either Placee Warrants 2013 or JJDC Warrants 2013.

There will be up to 10,515,898 New Ordinary Shares available to Qualifying Shareholders under the Open Offer. A full take up of the Open Offer Shares would together represent approximately 28.6 per cent. of the Existing Ordinary Shares.

The Company is also obliged, in accordance with the terms of the Share Option Agreements, to provide the Option Holders with the opportunity to participate in the Open Offer (in kind) as if they were Qualifying Shareholders (excluding Qualifying Placee Shareholders). The Company will make a like offer as if the Option Holder had exercised the relevant options constituted under the relevant Share Option Agreement. For further information on the like offer being made to Option Holders please refer to the section titled 'Options' below.

Qualifying Shareholders (excluding Qualifying Placee Shareholders) are being offered the opportunity to apply for additional Open Offer Shares in excess of their Open Offer Entitlement to the extent that other Qualifying Shareholders (excluding Qualifying Placee Shareholders) do not take up their Open Offer Entitlements in full.

Qualifying Placee Shareholders are also being offered the opportunity to apply for additional Open Offer Shares in excess of their Open Offer Entitlement to the extent that other Qualifying Shareholders do not take up their Open Offer Entitlements in full.

The Open Offer is not underwritten and therefore there is no certainty that any funds will be raised under the Open Offer.

A Qualifying Shareholder may only apply for additional Open Offer Shares if they have themselves agreed to take up their Open Offer Entitlement in full.

In the event that Qualifying Shareholders apply for, in aggregate, for an amount that is greater than the £4.2 million, the Directors will use their discretion to scale back such applications such that this threshold is not exceeded.

In the event that applications are received from Qualifying Shareholders (excluding Qualifying Placee Shareholders) and Option Holders for in excess of 10,515,898 Open Offer Shares, it is intended that excess applications will be scaled back pro rata to such Qualifying Shareholders' (excluding Qualifying Placee Shareholders') and Option Holders' subscriptions under the Open Offer.

Applications for Open Offer Shares received from Qualifying Placee Shareholders will only be satisfied to the extent that all applications for Open Offer Shares received from Qualifying Shareholders (excluding Qualifying Placee Shareholders) and Option Holders have been satisfied in full. In circumstances where Qualifying Shareholders (excluding Qualifying Placee Shareholders) and Option Holders apply for, in aggregate, less than 10,515,898 Open Offer Shares (the "Shortfall") and applications are received from Qualifying Placee Shareholders for Open Offer Shares, in aggregate, in excess of the Shortfall (so that aggregate applications from Qualifying Shareholders (including Qualifying Placee Shareholders) and Option Holders exceed 10,515,898 Open Offer Shares), applications received from Qualifying Placee Shareholders will be scaled back pro rata to Qualifying Placee Shareholders' subscriptions under the Open Offer.

The Open Offer Shares have not been placed under the Placing or the Subscription subject to clawback under the Open Offer nor have they been underwritten. Consequently, there may be no or fewer than 10,515,898 Open Offer Shares issued pursuant to the Open Offer.

The Directors believe that all of the Open Offer Shares should be eligible (subject to the circumstances of the investors) for tax reliefs under EIS legislation.

For the purposes of the Open Offer and FSMA the exchange rate between Euro and sterling has been taken at €1:£1.17 as at the close of business on 26 June 2013, being the latest practicable date prior to the publication of this announcement.

Application has been made for the Open Offer Entitlements and Excess CREST Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST on 1 July 2013. The Open Offer Entitlements and Excess CREST Open Offer Entitlements will also be enabled for settlement in CREST on 1 July 2013. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

The latest time and date for acceptance and payment in full under the Open Offer will be 11.00 a.m. on 15 July 2013, unless otherwise announced by the Company via a Regulatory Information Service. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that their Application Form is not a negotiable document and cannot be traded.

The Open Offer will be conditional, inter alia, on the approval of the Resolutions by the Shareholders at the General Meeting and upon the Subscription and Placing Agreement becoming unconditional in all respects (other than as to Admission) and (with the exception of the Open Offer Shares that are EIS Eligible Shares) Admission of the Open Offer Shares becoming effective by not later than 8.00 a.m. on 17 July 2013 (or such later time and/or date as the Company and Peel Hunt may determine, not being later than 8.00 a.m. on 31 July 2013).

If Admission does not take place on or before 8.00 a.m. on 17 July 2013 (or such later time and/or date as the Company and Peel Hunt may determine, not being later than 8.00 a.m. on 31 July 2013), the Open Offer will lapse, any Open Offer Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest as soon as practicable thereafter. Any Open Offer Shares that are EIS Eligible Shares and that have been allotted at 5.30 p.m. on the Business Day prior to Admission shall not be affected by any lapse in the Open Offer and subscription monies in respect of such shares shall not be returned.

Settlement and dealings

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 17 July 2013.

Details of the Collaboration Agreement

Pursuant to the Collaboration Agreement, the Company, the Subsidiary and OCD will collaborate in relation to the development of Proxima 4, Sphere Medical's next generation disposable patient-dedicated arterial blood gas analyser for use in the hospital intensive care units, operating theatres and other acute care settings, and the enhancement of Sphere's operational and production capabilities. The Collaboration Agreement also provides a framework to negotiate a proposed global commercialisation deal for Proxima 4.

Under the Collaboration Agreement, OCD and Sphere Medical will form a Joint Steering Group to oversee, and a Project Team to implement the Collaboration Agreement activities concerning:

·; Operational capabilities;

·; Market assessment; and

·; Product development.

The Joint Steering Group will be responsible for the approval of the project plan and budget for these activities and the Project Team will be responsible for the day to day implementation of the project plan.

Under the Collaboration Agreement, Sphere Medical will grant to OCD a right of first offer (the "OCD ROFO") which shall continue until 17 November 2013. Following the execution of the Collaboration Agreement, Sphere Medical will agree not to enter into discussions with any third party (other than Edwards) over the granting of rights (including in respect of distribution or other commercialisation activity) in respect of Proxima 4 for the duration of the OCD ROFO. The OCD ROFO will irrevocably and automatically convert into a right of first refusal related to Proxima 4 (an "OCD ROFR") on 18 November 2013.

Under the OCD ROFR, Sphere Medical will grant an option to OCD to enter into good faith negotiations for the exclusive rights to commercialise (including rights to sell, promote, market and distribute) Proxima 4. In connection with the OCD ROFR, Sphere Medical has certain obligations to compile and deliver to OCD a data package detailing key product attributes and commercial observations related to both Proxima 3 and Proxima 4. The data package must include milestone reports on each of Proxima 3 (Milestone Report 1), manufacturing improvements (Milestone Report 2) and Proxima 4 target product profile validation (Milestone Report 3).

The Collaboration Agreement is conditional on the execution of the Subscription Agreement and completion of the investment by JJDC of £3.3 million for Subscription Shares at the Issue Price.

Use of Proceeds

Subject to determination by the Joint Steering Group (in respect of the Collaboration Agreement), the Company expects to deploy approximately £10.8 million (being the aggregate of the £7.9 million net proceeds of the Fundraising and the Company's existing cash and short term deposits of £2.9 million as at 31 May 2013) towards the on-going business of the Company, to include bringing Proxima 3 to market, and the development of Proxima 4 and the enhancement of Sphere's operational and production capabilities, as follows:

·; Operations - approximately £4.9 million;

·; Product development and clinical - approximately £3.8 million;

·; Sales and marketing - approximately £1.6 million; and

·; Regulatory - approximately £500,000.

Working Capital

As at 31 May 2013, the Company had cash and short term deposits of approximately £2.9 million. In the opinion of the Directors, having made due and careful enquiry, and taking into account the net proceeds of the Placing and Subscription receivable by the Company, the working capital available to the Group will from the time of Admission be sufficient for its present requirements - that is for at least twelve months from the date of Admission.

Importance of Vote

Shareholders should be aware that, if the Resolutions are not approved at the General Meeting, the net proceeds of the Placing, Subscription and Open Offer will not be received by the Company. If this were to happen the Company would only have sufficient working capital to trade through to the end of October 2013 and therefore the Board would need to seek alternative financing which may or may not be forthcoming. The Directors consider that such a scenario would not be in the best interests of the Company or its Shareholders and that any alternative financing, if available, could be on less favourable terms and could risk leading to substantial dilution for Shareholders. Furthermore, given the importance of the Fundraising, even if certain Qualifying Shareholders decide not to participate in the Open Offer, the Board encourages those Shareholders to vote in favour of the Resolutions nonetheless. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions.

Board Changes

Pursuant to the Subscription Agreement, and conditional on Admission, it has been agreed, that for so long as JJDC or its affiliates hold not less than 3 per cent. of the Ordinary Shares, JJDC shall be entitled to designate (or otherwise approve) a non-executive director to the Board ("New Director") (and, upon the resignation or removal of any person so appointed, JJDC shall be entitled to designate (or otherwise approve) a replacement). The designation (or approval) of the New Director shall not be construed as conferring any power or authority on such person to represent or act on behalf of JJDC. The appointment of a New Director shall be discussed between JJDC and the Company and will be subject to approval by the Company's nominations committee and the Board. As soon as a New Director is appointed a RIS announcement will be made.

Total Voting Rights

Following the issue of the New Ordinary Shares (assuming a full take up under the Open Offer), the total issued share capital of the Company will be 68,145,192 Ordinary Shares. The Company holds no Ordinary Shares in treasury. Accordingly, after Admission, the total number of voting rights in the Company will be 68,145,292 (assuming a full take up under the Open Offer).

JJDC Warrants 2013 and Placee Warrants 2013

Upon completion of the subscription by JJDC of the Subscription Shares at the Issue Price, the Company has agreed, under the terms of the Subscription Agreement, to issue to JJDC 814,125 Series 1 JJDC Warrants 2013 and 814,125 Series 2 JJDC Warrants 2013. Each JJDC Warrant 2013 confers the right to subscribe for one Ordinary Share per warrant. The Series 1 JJDC Warrants 2013 are exercisable at a price of 92.5 pence per Ordinary Share and the Series 2 JJDC Warrants 2013 are exercisable at a price of 44 pence per Ordinary Share (being a 10 per cent. premium to the Issue Price), in each case, for a period of five years from the date of grant.

Upon completion of the placing of the Placing Shares at the Issue Price, the Company has agreed, under the terms of the Placing Agreement, to issue to certain Placees, in aggregate, 1,268,250 Series 1 Placee Warrants 2013 and 1,268,250 Series 2 Placee Warrants 2013. Each Placee Warrant 2013 confers the right to subscribe for one Ordinary Share per warrant. The Series 1 Placee Warrants 2013 are exercisable at a price of 92.5 pence per Ordinary Share and the Series 2 Placee Warrants 2013 are exercisable at a price of 44 pence per Ordinary Share (being a 10 per cent. premium to the Issue Price), in each case, for a period of five years from the date of grant.

Options

On 10 November 2011 the Company entered into Share Option Agreements with each of Beer & Partners Limited, Mr Lawrence Fenelon and Mr Stephen McEwen, (the "Option Holders", each an "Option Holder") providing such parties with the right to subscribe for an aggregate of 4,554 Ordinary Shares (subject to adjustment in accordance with customary adjustment provisions) at an exercise price of £1.70 per Ordinary Share, with such rights lapsing on the seventh anniversary of entry into such Share Option Agreements.

As a consequence of the proposed issue of Open Offer Shares under the Open Offer, the Company is obliged to make a like offer to the Option Holders under the terms of the Open Offer. The Option Holders cannot participate in the Open Offer directly as they do not hold Ordinary Shares. However, under the terms of the Share Option Agreements, for the purposes of the Company making such like offer to the Option Holders, the Option Holders are treated as if they had exercised their respective options immediately prior to the Record Date, and in effect are treated as if they hold, in aggregate, 4,554 Ordinary Shares.

The Option Holders will not be granted additional options but will be given the opportunity to purchase such number of Open Offer Shares (and excess Open Offer Shares under the terms of the Excess Application Facility) at the Issue Price on the same terms and conditions that apply to Qualifying Shareholders under the Open Offer. The Option Holders will also be given the opportunity to apply for Open Offer Shares which are EIS Eligible Shares subject to the terms and conditions of the Open Offer and the respective Option Holder meeting certain EIS relief conditions and limits.

VentureCapital Schemes

The Company has applied for and obtained advance assurance from HMRC that the VCT Eligible Shares may constitute a qualifying holding for VCT Scheme purposes and the Company has also applied for and obtained provisional advance assurance from HMRCthat the EIS Eligible Shares should satisfy the requirements for tax relief under EIS. However, none of the Non Eligible Shares will satisfy such requirements. Eligibility is also dependent on a Shareholder's own position and not just that of the Company, and accordingly, you should take your own independent advice.

The General Meeting

The Fundraising is subject to the approval of the Shareholders at a General Meeting to be held at 5 New Street Square, London EC4A 3TW on 16 July 2013 at 10.00 a.m.

Shareholders should note that Resolutions 1 and 4 to be proposed at the General Meeting are inter-conditional and if any one of them is not passed the Placing, Subscription and Open Offer will not proceed.

The Company is proposing that the Shareholders pass the Resolutions in order to:

·; grant authority to the Directors under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum aggregate nominal amount of £361,376 being the maximum required for the purposes of issuing the New Ordinary Shares (and Additional Warrant Shares and the Warrants 2013); and

·; grant authority to the Directors under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum aggregate nominal amount of £125,000 being the maximum required for the purposes of issuing Ordinary Shares under the EFF (if such shares were to be issued at the Issue Price);

·; empower the Directors, pursuant to section 570 of the Companies Act, to allot the New Ordinary Shares (and Additional Warrant Shares and the Warrants 2013) on a non pre-emptive basis (but on the basis set out in this announcement); and

·; empower the Directors, pursuant to section 570 of the Companies Act, to allot the Ordinary Shares pursuant to the EFF on a non pre-emptive basis.

In addition, in order to give the Company a degree of flexibility to raise further cash at short notice that may be required to take advantage of strategic opportunities that create Shareholder value, the Company is proposing that the Shareholders pass the following resolutions in order to grant authority to the Directors:

·; under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum nominal amount of £227,151 being one-third of the Enlarged Issued Share Capital;

·; under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum nominal amount of £454,302 (such amount to be reduced by any allotments or grants made under the paragraph above), being two-thirds of the Enlarged Issued Share Capital, pursuant to a rights issue in respect of which all Shareholders are entitled to participate as nearly as possible in proportion to their holding of Ordinary Shares at the time; and

·; empower the Directors, pursuant to section 570 of the Companies Act, to allot Ordinary Shares up to the maximum nominal amount of £68,145 (being 10 per cent. of the Enlarged Issued Share Capital) on a non pre-emptive basis. This resolution also disapplies the statutory pre-emption provisions in connection with a rights issue or open offer and allows the Directors to make appropriate arrangements in relation to fractional entitlements or other legal or practical problems which might arise.

Admission, Settlement and CREST

Application will be made to the London Stock Exchange for each of the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will become effective on 17 July 2013 and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on that date.

The Articles permit the Company to issue shares in uncertificated form. CREST is a computerised paperless share transfer and settlement system which allows shares and other securities, including depository interests, to be held in electronic rather than paper form. The Ordinary Shares are already admitted to CREST and therefore the New Ordinary Shares will also be eligible for settlement in CREST.

CREST is a voluntary system and Shareholders who wish to retain certificates will be able to do so upon request. The New Ordinary Shares due to uncertificated holders will be delivered in CREST on 17 July 2013.

Definitive share certificates in respect of New Ordinary Shares are expected to be despatched by 24 July 2013.

Recommendation

The Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their own beneficial holdings of Existing Ordinary Shares amounting, in aggregate, to 363,145 Existing Ordinary Shares, representing, in aggregate, approximately 1 per cent. of the Existing Ordinary Shares.

It is anticipated that a Circular providing further details of the Collaboration and Fundraising and convening the General Meeting will be published today and posted to Shareholders.

APPENDIX

In this announcement, the following expressions have the following meanings unless the context requires otherwise:

IMPORTANT NOTICE

This announcement does not constitute or form part of any offer or invitation to purchase, or otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in the capital of the Company in any jurisdiction.

The information contained in this announcement is not to be released, published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States or to any US Person. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any US Person. Securities may not be offered or sold in the United States absent: (i) registration under the Securities Act; or (ii) an available exemption from registration under the Securities Act. The securities mentioned herein have not been, and will not be, registered under the Securities Act and will not be offered to the public in the United States.

This announcement does not constitute an offer to buy or to subscribe for, or the solicitation of an offer to buy or subscribe for, New Ordinary Shares or any other security in any jurisdiction in which such offer or solicitation is unlawful. The securities mentioned herein have not been, and the New Ordinary Shares will not be, qualified for sale under the laws of any of Canada, Australia, the Republic of South Africa or Japan and may not be offered or sold in Canada, Australia, the Republic of South Africa, or Japan or to any national, resident or citizen of Canada, Australia, the Republic of South Africa or Japan. Neither this announcement nor any copy of it may be sent to or taken into the United States, Canada, Australia, the Republic of South Africa, or Japan. In addition, the securities to which this announcement relates must not be marketed into any jurisdiction where to do so would be unlawful.

In the Netherlands, this announcement has not been approved by and will not be submitted for approval to the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) for the purposes of public offering or sale in the Netherlands. Therefore, in connection with any public offering, this announcement may only be distributed in the Netherlands to "qualified investors" (gekwalificeerde beleggers) as defined in article 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht). This announcement does not constitute a personal recommendation or an investment recommendation pursuant to Netherlands law.

This announcement has been issued by and is the sole responsibility of the Company.

Peel Hunt LLP is authorised and regulated in the UK by the Financial Conduct Authority and is advising the Company and no one else in connection with the Placing, Open Offer and Subscription (whether or not a recipient of this announcement). Peel Hunt will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to customers of Peel Hunt nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it. The responsibilities of Peel Hunt, as nominated adviser under the AIM Rules for Nominated Advisers, are owed solely to London Stock Exchange and are not owed to the Company or to any Director or Shareholder or to any other person in respect of their decision to acquire New Ordinary Shares in reliance on any part of this announcement.

This announcement has been prepared for the purposes of complying with the applicable law and regulation of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.