Surgical Innovations Regulatory News (SUN)

17 May 2007 07:00

SURGICAL INNOVATIONS GROUP PLC ("Surgical Innovations", the "Company" or the "Group") PLACING TO RAISE ‚£4 MILLION

The Directors of Surgical Innovations (AIM: SUN), the designer and manufacturer of innovative surgical devices, are pleased to announce that the Company has carried out a conditional placing (the "Placing") through Hanson Westhouse Limited ("HansonWesthouse") to raise approximately ‚£4 million through the issue of, in aggregate, 114,285,714 new ordinary shares at 3.5p per share.

Background to and reasons for the Placing

The Directors intend to apply the net proceeds of the Placing, which are expected to be approximately ‚£3.8 million, primarily in three areas:

‚£000 Product development 750 Product licences 1,800 Working capital for US operations 1,250 3,800Product development

As set out in the announcement of preliminary results for the year ended 31 December 2006 which was released on 30 April 2007, the Group's product development programme has been focused primarily on the minimally invasive surgery product ranges. The results of the test marketing of a new range of the YelloPort Plus laparoscopic port access system have been encouraging and the product has been well received by surgeons in both the US and South Africa. Patents have been successfully filed on the technology which is intrinsic to one of the new products. Further funding is now required to accelerate the development of this range of products and put the necessary manufacturing capability in place.

Product licences

The Directors consider that the Group has developed the necessary sales channels to deliver its products to the key North American and European markets where purchasing procedures are varied and differing marketing strategies are required. The Group is now seeking to capitalise on the sales channels which have been developed with the introduction of further complementary product ranges to be sold under licence from third parties, a number of which have been identified. Funding is therefore required to enable the Group to enter into such licence agreements.

Working capital for US operations

The Directors consider that the Group has made a significant breakthrough in penetrating the laparoscopic market in the US, where 1.5 million general laparoscopic surgery cases were performed in 2006. Surgical Innovations has established relationships with several major suppliers of procedural trays which will now incorporate the YelloPort Plus laparoscopic port access system. In addition, the Group has established a direct relationship with the North Shore group of hospitals, New York as announced on 18 December 2006. The Group requires additional funding to expand its marketing efforts in the US to build on recent successes.

The Placing

The Group is proposing to raise ‚£4 million (before expenses) through a conditional placing by HansonWesthouse of the 114,285,714 new ordinary shares (the "Placing Shares") at 3.5p per share. The Placing Shares will represent 30.57 per cent. of the enlarged issued share capital immediately following completion of the Placing (the "Enlarged Issued Share Capital").

In order to enable the Company to satisfy the issue of the Placing Shares, the Company is seeking approval from its shareholders to increase its authorised share capital, increase its current authority to allot ordinary shares and disapply pre-emption rights in respect of the issue of the Placing Shares. It is also proposed to seek the renewal of the Company's annual authority to allot ordinary shares up to an agreed limit, including on a non-pre-emptive basis, at the Extraordinary General Meeting to be held on 11 June 2007 (the "EGM") rather than its annual general meeting..

Under the terms of a placing agreement with the Company (the "Placing Agreement"), HansonWesthouse has agreed to use its reasonable endeavours to procure placees for the Placing Shares at 3.5p per Placing Share. The Placing Agreement, is conditional, inter alia, on:

(a) admission of the Placing Shares to AIM occurring by not later than 8.00 a.m. on 12 June 2007 (or such later time and/or date as HansonWesthouse and the Company may agree but in any event not later than 26 June 2007);

(b) the resolution to be proposed at the EGM having been passed;

(c) the receipt by the Company (in a form reasonably satisfactory to HansonWesthouse) of written confirmation from the HM Revenue & Customs that the Placing Shares will be a qualifying holding for the taxation advantages offered under both HM Revenue & Customs' Venture Capital Trust and Enterprise Investment Schemes; and

(d) the obligations of HansonWesthouse not having been terminated prior to admission.

The Directors and the Medical Adviser to the board, Professor Michael McMahon, have agreed conditionally to subscribe in aggregate for 1,428,570 Placing Shares in the Placing. The table below details their individual subscriptions and shareholdings post Placing:

Placing Shares to Shareholding % of Enlarged be subscribed for immediately Issued Share following the Capital Placing Douglas Liversidge 285,714 3,071,821 0.82 Graham Bowland 142,857 258,749 0.07 Stuart Moran 142,857 3,341,862 0.89 Colin Glass 285,714 2,781,602 0.74 Ray Simkins 285,714 1,269,461 0.34 Directors' total 1,142,856 10,723,495 2.87 Michael McMahon 285,714 9,801,934 2.62Extraordinary General Meeting

An EGM will be held at the offices of Walker Morris at Kings Court, 12 King Street, Leeds LS1 2HL at 10.00 a.m. on 11 June 2007. At the EGM, shareholders will be asked to consider the resolution which will be proposed as follows:

1. to increase the authorised share capital of the Group from ‚£3,250,000 to ‚£

6,000,000 by the creation of 275,000,000 new ordinary shares;

2. to authorise the Directors to allot securities pursuant to section 80 of

the Companies Act 1985 up to a maximum nominal amount of ‚£2,388,996.81 (‚£ 1,142,857.14 of which relates to the Placing) representing approximately 48.01 per cent. of the existing ordinary shares as at the date of this document; and

3. to disapply the pre-emption rights contained in section 89(1) of the

Companies Act 1985 in connection with (i) the issue of the Placing Shares

pursuant to the Placing; and (ii) generally further up to an aggregate

nominal amount of ‚£747,683.80.

An electronic copy of the circular, which is being posted to shareholders today, can be downloaded from the Group's website at www.sigroupplc.com.

For further information please contact:

Surgical Innovations Group plc Douglas Liversidge CBE (Chairman) 0113 230 7597 Graham Bowland (Finance Director) graham.bowland@surginno.co.uk

Hanson Westhouse Limited 0113 246 2610 Tim Feather tim.feather@hansonwesthouse.com Matthew Johnson matthew.johnson@hansonwesthouse.com Media enquiries Abchurch 020 7398 7700 Justin Heath justin.heath@abchurch-group.com

HansonWesthouse, which is regulated by the Financial Services Authority, is acting on behalf of Surgical Innovations. HansonWesthouse is not acting for any other persons and will not be responsible to anyone other than Surgical Innovations for providing the protections afforded to customers of HansonWesthouse or for providing advice in relation to the Placing or any other matter referred to in this announcement.

This announcement is for information only and does not constitute an offer to sell or issue or the solicitation of an offer to buy, subscribe or acquire any securities in any jurisdiction. This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy, subscribe or acquire any securities in the capital of the Company in the United States, Canada, Australia, Japan or South Africa or in any jurisdiction in which such offer would be unlawful and should not be relied upon in connection with any decision to acquire Placing Shares or any other securities in the capital of the Company. The information contained in this announcement is not for release, publication or distribution, directly or indirectly, to or into the United States, Canada, Australia, Japan or South Africa or in any jurisdiction in which such publication or distribution would be unlawful.

This announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by HansonWesthouse or by any of its affiliates, directors, employees or agents as to or in relation to, the accuracy or completeness of this announcement, or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is hereby expressly disclaimed.