NANOSONICS LIMITED — Capital/Financing Update 2012

Jun 27, 2012

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28 June 2012

Company Announcements Office Australian Securities Exchange

Nanosonics issues Convertible Notes

Further to the announcement on 25 June 2012, Nanosonics Limited (ASX:NAN) advises that today it has issued A$7.5million in Convertible Notes to GE through GE Capital Finance Pty Ltd (as trustee for GE Capital Commercial Real Estate Financing & Services (Australia) Unit Trust).

CLEANSING NOTICE given under paragraph 708(12C)(e) of the Corporations Act 2001 (Cth) (as inserted by ASIC Class Order [CO 10/322])

1. Introduction

• 1.1 This notice ( Cleansing Notice ) is given by Nanosonics Limited ACN 095 076 896 ( Company ) under paragraph 708A(12C)(e) of the Corporations Act 2001 (Cth) ( Corporations Act ) (as inserted by the Australian Securities and Investment Commission ( ASIC ) Class Order [CO 10/322]), to enable fully paid ordinary shares ( Shares ) in the capital of the Company issued upon the conversion of the Convertible Notes described below, to be on-sold to retail investors, within 12 months of the issue of the Shares, without the need for further disclosure.

• 1.2 This Cleansing Notice is important and should be read in its entirety.

2. Background

• 2.1 As announced to the Australian Securities Exchange ( ASX ) on 25 June 2012, the Company and GE Capital Finance Pty Ltd (as trustee for the GE Capital Commercial Real Estate Financing & Services (Australia) Unit Trust) ( Noteholder ), have entered into a convertible note subscription agreement ( Subscription Agreement ) under which the Company has agreed to issue, and the Noteholder has agreed to subscribe for, convertible notes having a total face value (issue price) of $7,500,000 ( Convertible Notes ).

• 2.2 The terms of the Convertible Notes are set out in a convertible note deed poll ( Deed Poll ) executed by the Company in favour of the Noteholder. The Convertible Notes bear interest at 6% per annum on a simple interest basis and have a maturity date of four years from their issue date ( Maturity Date ). The key terms of the Convertible Notes are summarised in section 5.1 below.

• 2.3 The conditions for the issue of the Convertible Notes under the Subscription Agreement have been satisfied and the Company has today issued the following Convertible Notes:

• (a) a Tranche A Convertible Note with a total face value (issue price) of $4,000,000, which is convertible in whole or in part into Shares in the Company, at a conversion price of $0.75 per Share (as may be adjusted as

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outlined in Section 5.1 below) at any time from their issue date until their Maturity Date ( Tranche A Convertible Note ); and

• (b) a Tranche B Convertible Note with a total face value (issue price) of $3,500,000, which, subject to approval by shareholders of the Company ( Shareholders ) of the right to convert that Note into Shares for the purposes of ASX Listing Rule 7.1, is convertible in whole or in part into Shares, at a conversion price of $0.75 per Share (as may be adjusted as outlined in Section 5.1 below) at any time from the date of such approval until the Maturity Date ( Tranche B Convertible Notes ). The Company intends to seek approval from Shareholders to approve this right to convert and the issue of Shares upon such conversion of the Tranche B Convertible Note at its 2012 Annual General Meeting.

The key terms of the Shares in which the Convertible Notes will convert are summarised in section 6.3 below.

3. Purpose of the issue of Convertible Notes

• 3.1 The Directors consider that the raising of capital by the issue of the Convertible Notes is in the best interests of the Company as it secures, on acceptable terms, funding that is likely to be required by the Company for the continued development and growth of its business. Further details regarding this transaction were set out in the announcement to ASX made on 25 June 2012.

• 3.2 In particular, the Company intends to use the proceeds from the issue of the Convertible Notes to:

• (a) expand and consolidate office and manufacturing facilities of the Company and its subsidiaries (together, the Company Group and each a Group Company );

• (b) conduct sales and marketing for products of the Company Group; and

• (c) fund working capital of the Company Group.

4. The effect of the offer of Convertible Notes on the Company

Effect on the cash and liabilities of the Company

• 4.1 The principal effects of the issue of the Convertible Notes on the Company will be to:

• (a) increase the Company's cash reserves by $7,500,000 upon the issue of the Convertible Notes (before any expenses associated with the issue of the Convertible Notes); and

• (b) give rise to the Company having a liability for the amount of the face value of the Convertible Notes plus all accrued and unpaid interest ( Redemption Amount ) which may be repayable upon the occurrence of certain events of default (as outlined in section 5.1 below); and

• (c) if the Convertible Notes are converted, either whole or in part, increase the number of Shares on issue as a consequence of the issue of Shares on conversion of the Convertible Notes ( Conversion Shares ).

Pro-Forma Statement of Financial Position

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• 4.2 To illustrate the effect of the issue of the Convertible Notes on the Company, an unaudited pro-forma Statement of Financial Position has been prepared based on the Company’s Statement of Financial Position as at 31 December 2011, adjusted to reflect the adjustments and prepared on the basis specified below.

Pro Forma Statement of Financial Position as at 31 December 2011 Actual 31 December 2011 $’000 Current assets Cash and cash equivalents 9,169 Trade and other receivables 1,357 Inventories 1,735 Other current 371 Total current assets 12,632 Non-current assets Property, plant and equipment 1,456 Intangible assets 97 Other 117 Total non-current assets 1,670 Total assets 14,302 Current liabilities Payables 1,894 Provisions 831 Borrowings 6 Total current liabilities 2,731 Noncurrent liabilities Borrowings 33 Total-noncurrent liabilities 33 Total liabilities 2,764 Net assets 11,538 Equity Equity attributable to equity holders of the parent Contributed equity 58,160 Reserves 1,379 Accumulated losses (48,001) Total equity 11,538	Actual 31 December 2011 $’000	Pro-forma Adjustments Pro-forma 31 December 2011 $’000 $’000
	9,169 1,357 1,735 371	22,712 31,881 - 1,357 - 1,735 - 371
	12,632	22,712 35,344
	1,456 97 117	- 1,456 - 97 - 117
	1,670	- 1,670
	14,302	22,712 37,014
	1,894 831 6	- 1,894 - 831 - 6
	2,731	- 2,731
	33	7,024 7,057
	33	7,024 7,057
	2,764	7,024 9,788
	11,538	15,688 27.226
		15,688 73,848 - 1,379 - (48,001)
	11,538	15,688 27,226

The pro-forma Statement of Financial Position is:

• (a) prepared on a basis consistent with the policies adopted and as described in the Company’s Financial Report for the half year ended 31 December 2011, including the assessment of the Convertible Notes pursuant to the requirements of AASB 132 and AASB 139 relating to financial instruments and the assumptions as set out below. The classification of the Convertible Notes and the allocations between debt and equity for the Convertible Notes may change in the future; and

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• (b) presented in an abbreviated form in so far as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial statements and is not audited.

The unaudited pro-forma Statement of Financial Position as at 31 December 2011 set out above has been prepared on the basis and assumption that there has been and will be no material movements in the assets and liabilities of the consolidated Company Group between 31 December 2011 and the date of this Cleansing Statement other than the following matters, and has been compiled as if the following matters had all occurred on 31 December 2011:

• (a) the issue of 29,245,283 Shares through a placement completed on 4 May 2012 to raise a total of $15,500,000 million less the issue expenses of $188,000. Net proceeds from the placement amounted to $15,312,000. The placement was made to sophisticated and professional investors at a price of $0.53 per Share;

• (b) the issue of the Convertible Notes to the Noteholder will raise $7,500,000 in cash (before issue expenses which are not expected to exceed $100,000). The debt component of the Convertible Notes recognised in the pro-forma Statement of Financial Position is $7,024,000 while the equity component is $376,000; and

• (c) the cash position of the Company shown in the above pro forma Statement of Financial Position has been calculated as follows:

	$9,169,000	$9,169,000	Cash as at 31 December 2011 less pro-forma adjustments:
	$15,312,000		net proceeds of placement completed on 4 May 2012
		$7,400,000	expected net proceeds of issue of Convertible Notes
	$22,712,000		Total pro-forma adjustments
	$31,881,000		Pro-forma cash position

It should be noted that as reported in the Company’s Appendix 4C Report, lodged with the ASX on 30 April 2012, the actual cash position of the Company as at 31 March 2012 was $7,409,000 compared with the actual cash position as at 31 December 2011 of $9,169,000. This means that a 31 March 2012 pro-forma cash position after the effect of the above listed assumptions would have been $30,121,000.

The above pro-forma statement does not take into account the possible effect of the Share Purchase Plan ( SPP ) which the Company announced on 4 May 2012 offering up to 9,433,962 shares at an issue price of $0.53 to raise $5,000,000 if fully subscribed, as the SPP will only close on 16 July 2012 and until then it is not certain the actual amount that will be subscribed under the SPP.

Effect on the capital structure of the Company

• 4.3 The table below sets out the Company's capital structure as at the date of this Cleansing Notice and before the Convertible Notes are converted to Shares.

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Capital structure prior to issue of the Convertible Notes	Capital structure prior to issue of the Convertible Notes
Type of security	No. of securities
Shares (see section 4.5 below)	259,982,918
Options issued under the Employee Share Option Plan	3,525,719
Options issued under the General Share Option Plan	232,550

• 4.4 Under the SPP, Shareholders can each acquire up to $15,000 worth of Shares at $0.53 per Share, in order for the Company to raise up to a total amount of $5,000,000. If all Shares available under this Plan are taken up by Shareholders, this would result in the issue of up to an additional 9,433,962 Shares. As the SPP has not yet closed and it is not certain how many Shares will be issued under the SPP, any Shares to be issued under the SPP have not been included in the capital structure table set out in Section 4.3.

• 4.5 The capital structure of the Company will be affected by the conversion of the Convertible Notes by the Noteholders which will result in additional Shares being issued and the liability position of the Company decreasing accordingly.

• 4.6 The Noteholder can elect to convert the Tranche A Convertible Note at any time, and the Tranche B Convertible Note can be converted at any time after Shareholders approve the conversion rights for the Tranche B Convertible Note. The Noteholder may elect to convert both the face value of the Convertible Notes together with any accrued and unpaid interest. If all interest is accrued over the full four year term of the Convertible Notes, this could amount to $1,800,000.

• 4.7 The number of Shares issued under each Convertible Note will be calculated by dividing the amount elected to be converted by the Conversion Price. The Conversion Price is $0.75 (subject to certain adjustment events as outlined in section 5.1 below). The calculations below assume a Conversion Price of $0.75 and no adjustments.

• 4.8 If the Noteholder elects to wholly convert both the Tranche A Convertible Note and Tranche B Convertible Note and to also convert all accrued and unpaid interest over the four year period of the Convertible Notes then the following Shares would be issued (assuming the Conversion Price remains at $0.75):

Convertible Notes Face Value	$7,500,000	@ $0.75	10,000,000 Shares
Accrued and unpaid interest	$1,800,000	@ $0.75	2,400,000 Shares
Total	$9,300,000		12,400,000 Shares

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• 4.9 Based on the capital structure table set out above and assuming all Options currently on issue are exercised (but without accounting for any Shares acquired pursuant to the SPP), this would result in the Noteholder holding:

• (a) 12,400,000 Shares out of a total of 276,141,187 Shares representing approximately 4.49% of the Company's issued Share capital on a fully diluted basis, if all Convertible Notes and accrued interest are converted into Shares; or

• (b) 10,000,000 Shares out of a total of 273,741,187 Shares representing approximately 3.65% of the Company's issued Share capital on a fully diluted basis, if all Convertible Notes are converted into Shares but all accrued interest is not converted into Shares.

• 4.10 If for any reason the Tranche B Convertible Notes do not become convertible, then the total Shares that could be issued upon conversion of the Tranche A Convertible Note would be 5,333,334 Shares if the full face value of $4,000,000 is converted, and additional 1,280,000 Shares if all accrued interest (totalling $960,000 over four years) also is converted. This would comprise a total of 6,613,334 Shares compared to a total of 12,400,000 Shares if both Tranche A Convertible Note and Tranche B Convertible Note and all accrued interest are fully converted.

• 4.11 It is important to note that the effect of the conversion of the Convertible Notes on the Share capital of the Company, as illustrated above, is based on circumstances where the Convertible Notes are wholly converted into Shares and where all interest on the Convertible Notes has accrued over a period of four years and is also fully converted. Under the Deed Poll, the Noteholder may elect to partially convert each of the Convertible Notes, can elect whether to convert accrued interest or to be paid such interest in cash and may exercise its conversion right at different times. Accordingly, the actual effect on the share capital of the Company may differ depending on these factors.

5. The rights and liabilities attaching to the Convertible Notes

• 5.1 A summary of the key rights and liabilities attaching to the Convertible Notes is set out below.

out below.
Issue/Subscription Date	28 June 2012.
Face Value	The Convertible Notes have the following principal amounts: (a) Tranche A Convertible Note - $4,000,000; and (b) Tranche B Convertible Note - $3,500,000.
Maturity Date	Four years after the Issue Date.
Ranking	The Convertible Notes will, save for any obligations that may be preferred by mandatory provision of an applicable law, rank behind any secured obligations and equally with all other unsecured unsubordinated obligations of the Company.
Interest	The Company must pay interest on any outstanding Convertible Note at the rate of 6% per annum on a simple interest basis. Interest on each Convertible Note is calculated by reference to the relevant Face Value (excluding any interest accrued to such Face Value which will not bear further interest), on the basis of a 365 day year and accrues daily. Subject to the below, interest on each Convertible Note is

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	payable on each anniversary of the Issue Date, Redemption Date and Conversion Date (each, anInterest Payment Date). In the first two years from the Issue Date, the Company will not pay Interest to the Noteholder, but Interest will accrue and form part of the Face Value (but will not bear any further interest). After that period, the Noteholder may elect whether to receive Interest in cash, or to have such Interest accrue and form part of the Face Value (but this will not bear further Interest). If payment of principal of a Convertible Note is improperly withheld or refused on the Maturity Date, or any earlier date fixed for redemption of the Convertible Note, interest will continue to accrue (both before and after judgment) at the default rate of 9% per annum (or such higher percentage as may apply to any judgment) until the day on which all sums due in respect of the Convertible Note up to that day are received by or on behalf of the Noteholder.
Conversion Rights	The Tranche A Convertible Note may be converted at any time up until the Maturity Date. The Tranche B Convertible Note will not be convertible until: (a) Shareholders approve the conversion rights under the Tranche B Convertible Note in accordance with ASX Listing Rule 7.1 (see below); or (b) the Company has sufficient placement capacity under ASX Listing Rule 7.1 for such a Conversion Right to be effected and the ASX has confirmed in writing that this does not result in the Tranche B Convertible Note being regarded as "equity securities" under the ASX Listing Rules or that such Conversion Right otherwise will be exercisable for the purposes of ASX Listing Rule 7.1 (ASX Confirmation). The Convertible Notes may be converted in whole or in part into a number of Shares determined by dividing the Face Value of the Convertible Note to be converted by the Conversion Price (Conversion Right). When exercising a Conversion Right, the Noteholder may elect by giving prior written notice to the Company, that either any unpaid interest accrued to the Face Value be converted into Shares, or be paid in cash.
Conversion of Tranche B Convertible Note	The Tranche B Convertible Note will not have a Conversion Right and may not be converted into Shares unless and until Shareholder approval under ASX Listing Rule 7.1 for the issue of these Shares under that Convertible Note or ASX Confirmation has been obtained. If the Company is not able to obtain Shareholder approval of the Tranche B Convertible Note or ASX Confirmation by the next annual general meeting the Noteholder may require the Company to: (a) continue to use its best efforts to obtain that approval; (b) continue to use its best efforts to obtain an ASX Confirmation; and/or

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	(c) take all such actions required to provide the Tranche B Convertible Note with the same Conversion Rights as the Tranche A Convertible Note before it issues further equity securities within its 15% placement limit under ASX Listing Rule 7.1. Until the earlier of 5 May 2013, the date the Tranche B Convertible Note is entitled to a full and unconditional Conversion Right that is identical to the Tranche A Convertible Note or the date of redemption of all of the face value of the Tranche B Convertible Note, the Company must not issue any securities in the Company that would use or diminish the Company's placement capacity under ASX Listing Rule 7.1 or be inconsistent with obtaining Shareholder approval of the Tranche B Convertible Note Conversion Right without Noteholder consent, and ensure that if it has further placement capacity under ASX Listing Rule 7.1, it will be used to ensure that the Tranche B Convertible Note is entitled to a Conversion Right. If the Company is unable to obtain Shareholder approval for Tranche B Convertible Note or ASX Confirmation before 5 May 2013, the Noteholder may redeem all or any part of the Tranche B Convertible Note at anytime thereafter.
Conversion Price	$0.75 per Share, subject to any adjustments to the Conversion Price as outlined below.
Adjustments to the Conversion Price	If the Company makes a pro rata share issue or bonus share issue, or undertakes a capital reorganisation, or the Company sub-divides or consolidates or returns capital, then the Conversion Price will be adjusted in accordance with the terms of the Deed Poll in a manner consistent with the ASX Listing Rules.
Participation in new issue of securities	If the Company proposes to make any offer for a subscription for any Securities in the Company (other than an offer which results in an adjustment of the Conversion Price as outlined above, or an issue of Shares or options under an employee share or option scheme approved by Shareholders) (New Securities) to any person, the Company must offer, on the same terms, each Noteholder the right to purchase its proportionate share of such New Securities (as if its Convertible Notes had been converted at the applicable Conversion Price immediately prior to the offer).
Conversion Shares	Conversion Shares issued upon conversion of a Convertible Note will be fully paid and rank equally with all other fully paid Shares from their date of issue and the Company will apply for official quotation by ASX of the Conversion Shares on the conversion date.
Redemption	Upon the occurrence of a Redemption Event (as defined below), the Company must immediately notify the Noteholder and the Noteholder may at any time (subject to any prior rectification of the Redemption Event), require the Company to redeem some or all of the Convertible Notes held by the Noteholder. A Redemption Event occurs upon:

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(a) an Event of Default; or (b) a change of control of the Company where a person acquires more than 50% of the voting power (as defined under the Corporations Act) in the Company, a person acquires all or substantially all of the Group's assets or the exclusive licensing of all or substantially all of the Group's intellectual property; or (c) the Shareholder approval for the Tranche B Convertible Note or ASX Confirmation not being obtained prior to 5 May 2013,but only with respect to the Tranche B Convertible Note. If a takeover, scheme of arrangement or other change in control transaction is made or proposed the Noteholder may give a Redemption Notice or Conversion notice conditional upon such change in control transaction becoming unconditional or effected. On the Maturity Date, the Company must redeem all Convertible Notes held by the Noteholder that have not otherwise been redeemed or converted by paying the Redemption Amount (being the Face Value plus all accrued but unpaid interest) to the Noteholder.

Events of Default

The key Events of Default are: (a) failure to pay the Redemption Amount or any interest for the Convertible Notes when due; (b) failure to issue and deliver Conversion Shares; (c) a Group Company commits a material breach of undertakings such as those relating to compliance with laws, use of proceeds, maintenance of listing, reduction of Share capital, information rights or insolvency; (d) failure to perform its obligations under the Deed Poll or other transaction document relating to the issue of the Convertible Notes (Transaction Document) which is incapable of remedy or is not remedied within the stated timeframe; (e) the Company Shares are not subject to ASX Quotation or are suspended from trading for more than 10 days in any 12 month period; (f) the Group has incurred certain financial liabilities that cause such financial liabilities to equal or exceed 67% of the Company's total equity; (g) there is a cross-default under any present or future indebtedness of a Group Company which becomes due for payment or capable of being declared due for payment before its stated maturity by reason of an actual or potential default, which equals or exceeds $5,000,000; (h) an insolvency event occurs with respect to the Company or a Group Company; (i) an administrator or liquidator is appointed in respect of the Company or a Group Company or a court order is

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	made or a resolution passed for the winding-up or dissolution of the Company or a Group Company; (j) it is, or will become, unlawful for a Group Company to perform or comply with any one or more of its obligations under the Convertible Notes or any Transaction Document; (k) all or a material part of the deed poll or any other Transaction Document is validly terminated or is or becomes void, illegal, invalid or unenforceable or of limited force and effect (other than because of equitable principles or laws affecting creditors' rights generally); or (l) a representation, warranty or statement made or deemed to be made by a Group Company in a Transaction Document is untrue or misleading and if that default is capable of remedy, is not remedied within the stated timeframe.
Transferability	To the extent permitted by the Corporations Act and any applicable laws, the Noteholder may transfer all or some of the Convertible Notes to any person upon lodging a transfer form with the Company.
Rights of Noteholder	Except as otherwise provided in the Deed Poll, the Convertible Notes will not entitle the Noteholder to vote at general meetings of the Company, to receive dividends or other distributions or participate in any issue of securities other than in accordance with the terms of the Deed Poll. The Noteholder has the same rights as a Shareholder to receive notices of general meetings, reports and financial statements of the Company and, in certain circumstances, to inspect the books of the Company.
ASX listing	The Convertible Notes will not be quoted on the ASX or any other securities exchange.

6. The rights and liabilities attaching to the Shares

• 6.1 The Shares issued upon the conversion of Convertible Notes will be fully paid ordinary Shares and will rank equally in all respects with Shares that are on issue at that time.

• 6.2 The rights and liabilities attaching to Shares arise from a combination of the constitution of the Company ( Constitution ), statute, the ASX Listing Rules ( Listing Rules ) and general law.

• 6.3 A summary of the rights and liabilities attaching to the Shares, as set out in the Constitution, is set out below. This summary is not intended to be an exhaustive description of the rights and liabilities attaching to the Shares.

The directors of the Company ( Directors ) may issue, grant Share capital options in relation to, or otherwise dispose of a share to a person as the Directors think fit. The Directors' discretion includes but is not limited to terms on: (i) price, conditions and timing; (ii) a special right or restriction which may be preferred or deferred; and (iii) dividends, voting, return of capital and participation in the property in the property of the Company on a winding up.

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General meetings	Subject to the Constitution, the Company must give notice of a general meeting in accordance with the Corporations Act and ASX Listing Rules Listing Rules and Shareholders will be entitled to attend and vote at general meeting.
Voting rights	Subject to the Constitution, at a general meeting : (i) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote; and (ii) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote for each Share the Shareholder holds.
Dividend rights	Subject to the Constitution the Corporations Act and ASX Listing Rules, the Directors may pay any interim and final dividend as the financial position of the Company justifies. The payment of a dividend does not require any confirmation by a general meeting and the Company will not pay interest on any dividend.
Rights on winding up	If the Company is wound up, and the property of the Company is more than sufficient to pay all the debts and liabilities of the Company and the costs of winding up, the excess property will be divided among Shareholders in accordance with the Constitution in proportion to the number of Shares held by Shareholders. The liquidator may, with the sanction of a special resolution, divide among the Shareholders the whole or any part of the property of the Company and determine how the division is to be carried out as between the Shareholders or different classes of Shareholders. A division may be otherwise than in accordance with the legal rights of the Shareholders and any class of Shareholders may be given preferential or special rights or be excluded altogether or in part.
Transfer of shares	Subject to the Constitution, the Corporations Act, the Listing Rules and the ASX Settlement Rules, shares in the Company are freely transferable. The Directors may refuse to register a transfer or apply a holding lock to prevent a transfer of shares if permitted to do so by the Listing Rules.
Variation of rights	Subject to the Corporations Act and the Listing Rules, the rights, privileges and restrictions attaching to Shares, or to any other class of shares which may be issued in the future, can only be varied or cancelled by a special resolution passed at a general meeting of the holders of shares of the relevant class or with the written consent of the holders of at least three quarters of shares of the relevant class on issue.

7. The Company is a "disclosing entity"

• 7.1 The Company is a "disclosing entity" under the Corporations Act. Accordingly, the Company is subject to regular reporting and disclosure obligations under both the Corporations Act and the Listing Rules.

• 7.2 These obligations require the Company to notify ASX of information about specific events and matters as they arise. In particular, the Company has an obligation under ASX Listing Rule 3.1 and section 674 of the Corporations Act (subject to certain limited exceptions) to notify ASX immediately once it becomes aware of information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Shares.

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8. Copies of documents

• 8.1 The Company is required to prepare and lodge with ASIC yearly and half-yearly financial statements accompanied by a Directors' statement and report, and an audit report or review. Copies of documents lodged with ASIC in relation to the Company may be obtained from, or inspected at, an office of ASIC.

• 8.2 The ASX maintains detailed records of the Company's announcements made to ASX. These announcements are available from the ASX and can be viewed at www.asx.com.au.

• 8.3 The Company will provide a copy of the following documents, free of charge, to any person on request:

• (a) the annual financial report most recently lodged with ASIC by the Company, being the annual financial report of the Company for the year ended 30 June 2011 ( 2011 Financial Report );

• (b) the half-year financial report most recently lodged with ASIC by the Company after the 2011 Financial Report, being the half-year financial report of the Company for the half-year ended 31 December 2011; and

• (c) any continuous disclosure notices given by the Company after the lodgment of the 2011 Financial Report and before the lodgment of this Cleansing Notice with ASX, being the following documents:

Date	Announcement
25/06/2012	GE announces extension of strategic relationship with Nanosonics
25/06/2012	GE makes strategic investment in Nanosonics with $7.5 million in convertible notes at $0.75
18/06/2012	Appendix 3B – Exercise of 51,850 options under the Nanosonics Employee Share Option Plan (ESOP), lapse of 3,323 options under the Nanosonics ESOP and issue of 20,305 options under the Nanosonics ESOP
18/06/2012	Extension of SPP closing date – SPP closing date extended from 25 June 2012 until 16 July 2012
22/05/2012	Nanosonics Shareholder Report - Quarter ended March 2012
16/05/2012	SPP Offer
14/05/2012	Becoming a substantial holder - Allan Gray Australia Ltd
11/05/2012	Details of SPP
04/05/2012	Appendix 3B – Issue of 29,245,283 Shares under Placement
04/05/2012	Announcement of Placement and SPP – $15.5 million raised under Placement and up to $5 million to be raised under Share Purchase Plan if fully subscribed
02/05/2012	Trading Halt Request - Pending announcement of material fundraising
02/05/2012	Trading Halt
30/04/2012	Appendix 4C - Consolidated Statement of Cash Flow for quarter ended March 2012
10/04/2012	Change of Director's Interest Notice - Amended – Mr Richard England

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10/04/2012	Investor Briefing - April 2012
10/04/2012	Change of Director's Interest Notice - Mr Richard England
10/04/2012	Appendix 3B – Exercise of 132,500 options under the Nanosonics ESOP and Nanosonics General Option Share Option Plan (GSOP); issue of 319,080 options under the Nanosonics ESOP.
16/02/2012	Announcement of release of Half Year Results - Financial half-year ended 31 December 2011
16/02/2012	Half Yearly Report and Accounts - Financial half-year ended 31 December 2011
30/01/2012	Appendix 4C and Sales Update - Consolidated Statement of Cash Flow for quarter ended December 2011
25/01/2012	Appendix 3Y - Change of director's Interests Notice – Dr Ronald Weinberger
25/01/2012	Appendix 3B - Issue of 318,057 options, and lapsing of 230,000 options, under the Nanosonics ESOP
19/12/2011	Appointment of Managing Director / Chief Executive Officer - Appointment Dr Ronald Peter Weinberger
13/12/2011	Medica and Radiological Society of North America Congress Commercial Update - Presentation of Trophon EPR (N20) at exhibitions and trade shows; production, funding and development update
12/12/2011	Appendix 3B - Issue of 24,750 options under Nanosonics ESOP
21/11/2011	Appendix 3B - Issue of 195,000 options under Nanosonics GSOP
11/11/2011	Results of Meeting - 2011 Annual General Meeting
11/11/2011	Chairman and CEO Address to Shareholders - 2011 Annual General Meeting
10/11/2011	Ceasing to be a substantial holder from - Wilson HTM Investment Group Ltd
25/10/2011	Appendix 4C - Consolidated Statement of Cash Flow for quarter ended September 2011
14/10/2011	Commercial Update - Scale up of production capacity of Trophon EPR unit, launch of new model of Trophon EPR, new model of Trophon EPR featured at 21stWorld Congress on Ultrasound in Obstetrics and Gynaecology
13/10/2011	Notice of Annual General Meeting/Proxy Form - 2011 Annual General Meeting
06/10/2011	Appendix 3B - Exercise of 37,950 options under the Nanosonics ESOP and Nanosonics GSOP

9. No excluded information

• 9.1 As at the date of this Cleansing Notice and other than as set out in this Cleansing Notice, there is no information that:

• (a) has been excluded from a continuous disclosure notice in accordance with the Listing Rules; and

• (b) is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:

  • (i) the assets and liabilities, financial position and performance, profits and losses and prospects of the Company; and

  • (ii) the rights and liability attaching to the Convertible Notes or Shares.

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In accordance with ASX Listing Rule 3.10.5 the Appendix 3B is attached relating to the issue of the Convertible Notes.

Nanosonics Limited

Dr Ron Weinberger Managing Director

For further information, please contact: Dr Ron Weinberger, Managing Director, +61 2 8063 1600 McGregor Grant, Chief Financial Officer +61 2 8063 1600

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Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 1/7/96. Origin: Appendix 5. Amended 1/7/98, 1/9/99, 1/7/2000, 30/9/2001, 11/3/2002, 1/1/2003, 24/10/2005.

Name of entity

Nanosonics Limited

ABN

11 095 076 896

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of+securities issued or to be issued 2 Number of +securities issued or to be issued (if known) or maximum number which may be issued	Convertible Notes
	One Tranche A Convertible Note with a face value of $4,000,000; and One Tranche B Convertible Note with a face value of $3,500,000, (Convertible notes).

3 Principal terms of the +securities (eg, if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)	The principal terms of the Convertible Notes are set out in the Cleansing Notice dated 28 June 2012.

• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

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4 Do the +securities rank equally in all respects from Any shares issued upon conversion of the Convertible the date of allotment with Notes will rank equally with other ordinary fully paid shares an existing[+] class of quoted in the Company. +securities? If the additional securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or Tranche A Convertible Note – $4,000,000; and consideration Tranche B Convertible Note – $3,500,000. 6 Purpose of the issue The purpose of the issue of the Convertible Notes is set out (If issued as consideration in the Cleansing Notice dated 28 June 2012. for the acquisition of assets, clearly identify those assets)

7 Dates of entering[+] securities into 28 June 2012 uncertificated holdings or despatch of certificates

• Number +Class

• 8 Number and +class of all +securities quoted on ASX 259,982,918 Ordinary shares (NAN) ( including the securities in clause 2 if applicable)

• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

Number	+Class
45,000	ASX Code NANAD – Unquoted Employee Options, with exercise price of A$0.30, expiring on 19 November 2012.
501,600	ASX Code NANAF – Unquoted Employee Options, with exercise price of A$0.345, **expiring on 26 June 2013. **
34,000	ASX Code NANAG – Unquoted General Options, with exercise price of A$0.345, **expiring on 26 June 2013. **
48,550	ASX Code NANAH – Unquoted General Options, with exercise price of A$0.345, **expiring on 26 June 2013. **
50,000	ASX Code NANAJ – Unquoted General Options, with exercise price of A$0.55, expiring on 5 January 2014.
700,000	ASX Code NANAL – Unquoted Employee Options, with exercise price of A$0.556, expiring on 19 July 2014.
100,000	ASX Code NANAM – Unquoted General Options, with exercise price of A$0.784, expiring on 1October 2014.
30,000	ASX Code NANAN – Unquoted Employee Options, with exercise price of A$0.918 expiring on 23 February **2015. **
1,400,000	ASX Code NANAO – Unquoted Employee Options, with exercise price **of A$0.85 expiring on 28 April 2016. **
195,000	ASX Code NANAP – Unquoted Employee Options, with exercise price of A$0.5320 expiring on 21 November **2015. **
318,057	NANAQ – Unquoted Employee Options, with exercise price of A$0.00 expiring on 1Oct 2012
315,757	NANAR – Unquoted Employee Options, with exercise price of A$0.00 expiring on 1 April 2013
20,305	NANAS – Unquoted Employee Options, with exercise price of A$0.00 expiring on 1 April 2015
1	Tranche A Convertible Note with a face value of $4,000,000
1	Tranche B Convertible Note with a face value of$3,500,000

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• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

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10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Not Applicable

Part 2 - Bonus issue or pro rata issue

Questions 11 to 33

Not Applicable

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of securities ( tick one )

• (a) Securities described in Part 1

• (b) All other securities

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

• 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 ‐ 1,000

1,001 ‐ 5,000

5,001 ‐ 10,000 10,001 ‐ 100,000 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

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Entities that have ticked box 34(b)

Questions 38 to 42

Not Applicable

Quotation agreement

• 1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted[+] quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no‐one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the +securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document not available now, will give it to ASX before[+] quotation of the[+] securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are true and complete.

Sign here: ............................................................ Date: 28 June 2012 (Company secretary)

Print name: McGregor Grant Company Secretary

== == == == == == == == == ==

• See chapter 19 for defined terms.

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