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UNITED STATES  SECURITIES AND
    EXCHANGE COMMISSION
 WASHINGTON, D.C.
    20549
    FORM 10-K
  ANNUAL REPORT PURSUANT TO
    SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE  SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    000-16789
    INVERNESS MEDICAL INNOVATIONS,
    INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
 Delaware

04-3565120(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification No.)51 Sawyer Road, Suite 200, Waltham, Massachusetts

02453(Address of principal executive
    offices)

(Zip Code)  (781)
    647-3900
 (Registrants telephone
    number, including area code)
    Securities registered pursuant to
    Section 12(b) of the Securities Exchange Act of 1934 (the
    Exchange Act):
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 per share par value

New York Stock ExchangeSeries B Convertible Perpetual Preferred
    Stock, $0.001 per share par value

New York Stock Exchange   Securities registered pursuant to
    Section 12(g) of the Exchange Act: None
    þ o
  o þ
  þ o
  o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large accelerated
    filer þ     Accelerated
    filer o     Non-accelerated
    filer o     Smaller
    reporting
    company o
 (Do
    not check if a smaller reporting company)
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





INVERNESS
    MEDICAL INNOVATIONS, INC.
  FORM 10-K
 For The
    Fiscal Year Ended December 31, 2009
   
 PagePART IITEM 1.


Business


2ITEM 1A.


Risk Factors


13ITEM 1B.


Unresolved Staff Comments


29ITEM 2.


Properties


29ITEM 3.


Legal Proceedings


30ITEM 4.


Submission of Matters to a Vote of Security
    Holders


30PART IIITEM 5.


Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


30ITEM 6.


Selected Consolidated Financial Data


33ITEM 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


35ITEM 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


57ITEM 8.


Financial Statements and Supplementary Data


60ITEM 9.


Changes In and Disagreements With Accountants On
    Accounting and Financial Disclosure


62ITEM 9A.


Controls and Procedures


62PART IIIITEM 10.


Directors, Executive Officers and Corporate
    Governance


66ITEM 11.


Executive Compensation


66ITEM 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


66ITEM 13.


Certain Relationships and Related Transactions,
    and Director Independence


66ITEM 14.


Principal Accounting Fees and Services


66PART IVITEM 15.


Exhibits, Financial Statement Schedules


66Signatures


72EX-21.1 List of Subsidiaries of the CompanyEX-23.1 Consent of BDO Seidman, LLPEX-31.1 Section 302 Certification of Chief Executive OfficerEX-31.2 Section 302 Certification of Chief Financial OfficerEX-32.1 Section 906 Certification of Chief Executive Officer and Chief Financial Officer




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PART I  This Annual Report on
    Form 10-K
    contains forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. Readers can identify these statements by
    forward-looking words such as may,
    could, should, would,
    intend, will, expect,
    anticipate, believe,
    estimate, continue or similar words.
    Readers should carefully review statements that contain these
    words because they discuss our future expectations, contain
    projections of our future results of operations or of our
    financial condition or state other forward-looking
    information. We caution investors that all such forward-looking
    statements involve risks and uncertainties that could cause our
    actual results to differ materially from any projected results
    or expectations that we discuss in this report. You should
    therefore carefully review the risk factors and uncertainties
    discussed in Item 1A entitled Risk Factors,
    which begins on page 13 of this report, as well as those
    factors identified from time to time in our periodic filings
    with the Securities and Exchange Commission. We undertake no
    obligation to update any forward-looking statements.
  Unless the context requires otherwise, references in this
    Annual Report on
    Form 10-K
    to we, us, our, or our
    company refer to Inverness Medical Innovations, Inc. and
    its subsidiaries.
  ITEM 1.
    BUSINESS  GENERAL
      (781) 647-3900. Form 10-K, Form 10-Q, Form 8-K,
  Segments
     2




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Products
    and Services
  Professional Diagnostics. point-of-care, point-of-care point-of-care
  point-of-care
  point-of-care
  Cardiology.
  
    Triage BNP Test.  An immunoassay that measures
    B-type Natriuretic Peptide (BNP) in whole blood or plasma, used
    as an aid in the diagnosis and assessment of severity of heart
    failure. The test is also used for the risk stratification of
    patients with acute coronary syndrome and heart failure. We also
    offer a version of the Triage BNP Test for use on Beckman
    Coulter lab analyzers.
    Triage Cardiac Panel.  An immunoassay for the
    quantitative determination of CK-MB, myoglobin and troponin I in
    whole blood or plasma, used as an aid in the diagnosis of acute
    myocardial infarction.
    Triage CardioProfilER Panel.  An immunoassay
    for use as an aid in the diagnosis of acute myocardial
    infarction, the diagnosis and assessment of severity of
    congestive heart failure, risk stratification of patients with
    acute coronary syndromes and risk stratification of patients
    with heart failure. This panel combines troponin I, CK-MB,
    myoglobin and BNP to provide rapid, accurate results in whole
    blood and plasma.
    Triage Profiler Shortness of Breath (S.O.B.)
    Panel.An immunoassay for use as an aid in the
    diagnosis of myocardial infarction, the diagnosis and assessment
    of severity of congestive heart failure, the assessment and
    evaluation of patients suspected of having disseminated
    intravascular coagulation and thromboembolic events, including
    pulmonary embolism and deep vein thrombosis, and the risk
    stratification of patients with acute coronary syndromes. This
    panel combines troponin I, CK-MB, myoglobin, BNP and
    d-dimer to provide rapid, accurate results in whole blood and
    plasma. 3




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
    Triage D-Dimer Test.  An immunoassay for use as
    an aid in the assessment and evaluation of patients suspected of
    having disseminated intravascular coagulation or thromboembolic
    events, including pulmonary embolism and deep vein thrombosis.  point-of-care
  point-of-care
  ® point-of-care tm
    Womens Health.
    Infectious Disease.
 4




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point-of-care ®
  point-of-care ®
    Oncology.
    Drugs of Abuse.
   5




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point-of-care
    Health Management.
    
    embrace the entire lifespan, from pre-cradle to
    end-of-life,
    and targeted health states, from wellness to prevention to total
    health management of the individual for those having various
    chronic illnesses.
    target high-cost chronic conditions with programs designed to
    improve outcomes and reduce expenditures.
    provide health coaches who engage and motivate participants
    during teachable moments.
    help participants improve their health by supporting their
    individual health goals.
    bring greater clarity to healthcare with empowering technologies
    that lead to better outcomes.
    offer the expertise of 1,850 healthcare professionals who share
    a passion for patient and customer care.    Care.
   6




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and/or on-site
  Patient Self-Testing Services.
  Womens & Childrens
    Health.
  Oncology.
  Wellness.
  Technology Solutions .
 7




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
    personalized platform that acts as a virtual coach,
    presenting content based on data collected on the participant
    and delivering personal health support in a way that is designed
    to feel satisfying to the participant and when they need it the
    most,
    a meaningful, engaging experience with content and activities
    presented based on their preferences, activities and personal
    health data, and
    a deep, rich library of multi-media resources designed to
    address individual learning styles that can be generated
    dynamically by the system or located in a search by the
    participant.    Consumer Diagnostics. over-the-counter
    over-the-counter over-the-counter
  Methods
    of Distribution and Customers
  point-of-care
   8




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Manufacturing
    ® ®
  Research
    and Development
    Global
    Operations
      Competition
  Professional Diagnostics.
 9




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state-of-the-art
    point-of-care point-of-care point-of-care
  tm
    point-of-care
 10




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Health Management.
  Consumer Diagnostics. over-the-counter
  Patents
    and Proprietary Technology; Trademarks
           11




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Government
    Regulation
            Employees
   12




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ITEM 1A.
    RISK
    FACTORS  The risks described below may materially impact your
    investment in our company or may in the future, and, in some
    cases already do, materially affect us and our business,
    financial condition and results of operations. You should
    carefully consider these factors with respect to your investment
    in our securities. This section includes or refers to certain
    forward-looking statements; you should read the explanation of
    the qualifications and limitations on such forward-looking
    statements beginning on pages 2 and 35 of this report.
  Disruptions
    in the capital and credit markets related to the current
    national and worldwide financial crisis, which may continue
    indefinitely or intensify, could adversely affect our results of
    operations, cash flows and financial condition, or those of our
    customers and suppliers.
    Our
    business has substantial indebtedness, which could, among other
    things, make it more difficult for us to satisfy our debt
    obligations, require us to use a large portion of our cash flow
    from operations to repay and service our debt or otherwise
    create liquidity problems, limit our flexibility to adjust to
    market conditions, place us at a competitive disadvantage and
    expose us to interest rate fluctuations.
      
    make it more difficult to satisfy our obligations under our
    senior notes, our senior subordinated notes, our senior
    subordinated convertible notes, our secured credit facilities
    and our other debt-related instruments;
    require us to use a large portion of our cash flow from
    operations to pay principal and interest on our indebtedness,
    which would reduce the amount of cash available to finance our
    operations and service obligations, to delay or reduce capital
    expenditures or the introduction of new products
    and/or
    forego business opportunities, including acquisitions, research
    and development projects or product design enhancements;
    limit our flexibility to adjust to market conditions, leaving us
    vulnerable in a downturn in general economic conditions or in
    our business and less able to plan for, or react to, changes in
    our business and the industries in which we operate;
    impair our ability to obtain additional financing;
    place us at a competitive disadvantage compared to our
    competitors that have less debt; and 13




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
    expose us to fluctuations in the interest rate environment with
    respect to our indebtedness that bears interest at variable
    rates.    The
    agreements governing our indebtedness subject us to various
    restrictions that may limit our ability to pursue business
    opportunities.
    
    incur additional debt;
    pay dividends or make distributions or repurchase or redeem our
    stock or subordinated debt;
    acquire other businesses;
    make investments;
    make loans to or extend credit for the benefit of third parties
    or their subsidiaries;
    prepay indebtedness;
    enter into transactions with affiliates;
    raise additional capital;
    make capital or finance lease expenditures;
    dispose of or encumber assets; and
    consolidate, merge or sell all or substantially all of our
    assets.    Our
    secured credit facilities contain certain financial covenants
    that we may not satisfy, which, if not satisfied, could result
    in the acceleration of the amounts due under our secured credit
    facilities and the limitation of our ability to borrow
    additional funds in the future.
   14




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A default
    under any of the agreements governing our indebtedness could
    result in a default and acceleration of indebtedness under other
    agreements.
    We may
    not be able to satisfy our debt obligations upon a fundamental
    change or change of control, which could limit our opportunity
    to enter into a fundamental change or change of control
    transaction.
      Our
    acquisitions may not be profitable, and the integration of these
    businesses may be costly and difficult and may cause disruption
    to our business.
    
    consolidating manufacturing, research and development operations
    and health management information technology platforms, where
    appropriate;
    integrating newly acquired businesses or product lines into a
    uniform financial reporting system; 15




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
    coordinating sales, distribution and marketing functions and
    strategies, including the integration of our current health
    management products and services;
    establishing or expanding manufacturing, sales, distribution and
    marketing functions in order to accommodate newly-acquired
    businesses or product lines or rationalizing these functions to
    take advantage of synergies;
    preserving the important licensing, research and development,
    manufacturing and supply, distribution, marketing, customer and
    other relationships;
    minimizing the diversion of managements attention from
    ongoing business concerns; and
    coordinating geographically separate organizations.
    regulatory issues relating to the integration of acquisitions or
    of legacy entities.    If we
    choose to acquire or invest in new and complementary businesses,
    products or technologies rather than developing them internally,
    such acquisitions or investments could disrupt our business and,
    depending on how we finance these acquisitions or investments,
    could result in the use of significant amounts of
    cash.
    
    the inability to complete the acquisition or investment;
    disruption of our ongoing businesses and diversion of management
    attention;
    difficulties in integrating the acquired entities, products or
    technologies;
    difficulties in operating the acquired business profitably;
    difficulties in transitioning key customer, distributor and
    supplier relationships;
    difficulties in evaluating, integrating and retaining key
    management;
    risks associated with entering markets in which we have no, or
    limited, prior experience; and
    unanticipated costs.    
    issuances of dilutive equity securities, which may be sold at a
    discount to market price;
    use of significant amounts of cash;
    the incurrence of debt;
    the assumption of significant liabilities, including litigation;
    unfavorable financing terms;
    large one-time expenses; and
    the creation of intangible assets, including goodwill, the
    write-down of which may result in significant charges to
    earnings. 16




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If we
    fail to complete strategic acquisitions or investments our
    ability to meet our goals may be compromised and our future
    business prospects may be limited.
    
    we may not be able to agree on terms and conditions which we
    believe are reasonable;
    we may be out bid by another party or parties;
    we may not be able to finance the purchase price;
    we may not have enough available stock to use as consideration;
    a competitor may come to an agreement to acquire a targeted
    business before we are able to; or
    antitrust or other laws or regulations may prohibit the
    acquisition or prevent us from completing the acquisition or
    investment in a manner which we believe would benefit us.  Our joint
    venture transaction with P&G may not realize all of its
    intended benefits.
    
    difficulties in integrating our corporate culture and business
    objectives with that of P&G into the joint venture;
    diversion of our managements time and attention from other
    business concerns;
    difficulties in retaining key employees who are necessary to
    manage the joint venture; or
    difficulties in working with an entity based in Switzerland and
    thus remote or inconvenient to our Waltham, Massachusetts
    headquarters.    60-day
  We may
    not be successful in conducting future joint venture
    transactions.
    If
    goodwill and/or other intangible assets that we have recorded in
    connection with our acquisitions of other businesses become
    impaired, we could have to take significant charges against
    earnings.
   17




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We may
    experience manufacturing problems or delays due to, among other
    reasons, our volume, specialized processes or our global
    operations, which could result in decreased revenue or increased
    costs.
        We may
    experience difficulties that may delay or prevent our
    development, introduction or marketing of new or enhanced
    products or services.
    
    any of the products or services under development will prove to
    be effective in clinical trials;
    any products or services under development will not infringe on
    intellectual property rights of others;
    we will be able to obtain, in a timely manner or at all,
    regulatory approval to market any of our products or services
    that are in development or contemplated;
    the products and services we develop can be manufactured or
    provided at acceptable cost and with appropriate quality; or
    these products and services, if and when approved, can be
    successfully marketed.   18




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If the
    results of clinical studies required to gain regulatory approval
    to sell our products are not available when expected, or do not
    demonstrate the anticipated safety and effectiveness of those
    potential products, we may not be able to sell future products
    and our sales could be adversely affected.
      If we are
    unable to obtain required clearances or approvals for the
    commercialization of our products in the United States, we may
    not be able to sell future products and our sales could be
    adversely affected.
         19




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We are
    also subject to applicable regulatory approval requirements of
    the foreign countries in which we sell products, which are
    costly and may prevent or delay us from marketing our products
    in those countries.
    Failure
    to comply with ongoing regulations applicable to our businesses
    may result in significant costs or, in certain circumstances,
    the suspension or withdrawal of previously obtained clearances
    or approvals.
   20




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Healthcare
    reform legislation could adversely affect our revenue and
    financial condition.
    If we
    deliver products with defects, our credibility may be harmed,
    market acceptance of our products may decrease and we may be
    exposed to liability in excess of our product liability
    insurance coverage.
    The
    effect of market saturation may negatively affect the sales of
    our products, including our Triage BNP tests.
  first-to-market
 21




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The
    health management business is a relatively new component of the
    overall healthcare industry.
    
    our ability to differentiate our health management services from
    those of our competitors;
    the extent and timing of the acceptance of our services as a
    replacement for, or supplement to, traditional managed care
    offerings;
    the effectiveness of our sales and marketing and engagement
    efforts with customers and their health plan participants;
    our ability to sell and implement new and additional services
    beneficial to health plans and employers and their respective
    participants or employees;
    our ability to achieve, measure and effectively communicate cost
    savings for health plans and employers through the use of our
    services; and
    our ability to retain health plan and employee accounts as
    competition increases and as health plan customers may choose to
    provide  health management services themselves.    Increasing
    health insurance premiums and co-pays may cause individuals to
    forgo health insurance and avoid medical attention, either of
    which may reduce demand for our products and services.
  point-of-care
  Our
    health management business may be adversely affected by cost
    reduction pressures among our customers.
    Rising
    unemployment may negatively impact the collectability of
    uninsured accounts and patient due accounts and/or reduce total
    health plan populations.
   22




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If we are
    unable to retain and negotiate favorable contracts with managed
    care plans, our revenues may be reduced.
    A portion
    of our health management fees are contingent upon
    performance.
    If our
    costs of providing health management services increase, we may
    not be able to pass these cost increases on to our
    customers.
    Demands
    of non-governmental payers may adversely affect our growth in
    revenues.
    Our data
    management and information technology systems are critical to
    maintaining and growing our business.
   23




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Our
    financial condition or results of operations may be adversely
    affected by international business risks.
    
    increased costs or reduced revenue as a result of movements in
    foreign currency exchange rates;
    decreased liquidity resulting from longer accounts receivable
    collection cycles typical of foreign countries;
    lower productivity resulting from difficulties managing sales,
    support and research and development operations across many
    countries;
    lost revenues resulting from difficulties associated with
    enforcing agreements and collecting receivables through foreign
    legal systems;
    lost revenues resulting from the imposition by foreign
    governments of trade protection measures;
    higher cost of sales resulting from import or export licensing
    requirements;
    lost revenues or other adverse effects as a result of economic
    or political instability in or affecting foreign countries in
    which we sell our products or operate; and
    adverse effects resulting from changes in foreign regulatory or
    other laws affecting the sales of our products or our foreign
    operations.  Because
    our business relies heavily on foreign operations and revenues,
    changes in foreign currency exchange rates and our need to
    convert currencies may negatively affect our financial condition
    and results of operations.
    Intense
    competition could reduce our market share or limit our ability
    to increase market share, which could impair the sales of our
    products and harm our financial performance.
      
    develop technologies and products that are more effective than
    our products or that render our technologies or products
    obsolete or noncompetitive; 24




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
    obtain patent protection or other intellectual property rights
    that would prevent us from developing potential products; or
    obtain regulatory approval for the commercialization of our
    products more rapidly or effectively than we do.    We could
    suffer monetary damages, incur substantial costs or be prevented
    from using technologies important to our products as a result of
    a number of pending legal proceedings.
    The
    rights we rely upon to protect the intellectual property
    underlying our products may not be adequate, which could enable
    third parties to use our technology and would reduce our ability
    to compete in the market.
      
    pending patent applications we have filed, or to which we have
    exclusive rights, may not result in issued patents or may take
    longer than we expect to result in issued patents;
    claims of any patents which are issued may not provide
    meaningful protection;
    our inability to develop additional proprietary technologies
    that are patentable;
    patents licensed or issued to us or our customers may not
    provide a competitive advantage;
    other parties may challenge patents or patent applications
    licensed or issued to us or our customers;
    patents issued to other companies may harm our ability to do
    business;
    other companies may design around technologies we have patented,
    licensed or developed; and
    all patents have a limited life, meaning at some point valuable
    patents will expire and we may lose the competitive advantage
    which they provide.   25




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Claims by
    others that our products infringe on their proprietary rights
    could adversely affect our ability to sell our products and
    services and could increase our costs.
    We have
    initiated, and may need to further initiate, lawsuits to protect
    or enforce our patents and other intellectual property rights,
    which could be expensive and, if we lose, could cause us to lose
    some of our intellectual property rights, which would reduce our
    ability to compete in the market.
    
    assert claims of infringement;
    enforce our patents;
    protect our trade secrets or know-how; or
    determine the enforceability, scope and validity of the
    proprietary rights of others.     26




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Non-competition
    obligations and other restrictions will limit our ability to
    take full advantage of our management team, the technology we
    own or license and our research and development
    capabilities.
    Our
    operating results may fluctuate due to various factors and as a
    result
    period-to-period
    comparisons of our results of operations will not necessarily be
    meaningful.
    
    the timing of new product announcements and introductions by us
    and our competitors;
    market acceptance of new or enhanced versions of our products;
    the extent to which our current and future products rely on
    rights belonging to third parties;
    changes in manufacturing costs or other expenses;
    competitive pricing pressures;
    changes in healthcare reimbursement policies and amounts;
    public health measures or changes in practices or conduct which
    may increase or decrease incidents of disease or the need for
    diagnostic testing
    regulatory changes;
    the gain or loss of significant distribution outlets or
    customers;
    increased research and development expenses;
    liabilities and costs associated with litigation;
    length of sales cycle and implementation process for new health
    management customers;
    the costs and timing of any future acquisitions;
    general economic conditions; or
    general stock market conditions or other economic or external
    factors.    Period-to-period
    comparisons of our operating results may not be meaningful due
    to our acquisitions.
  Period-to-period
 27




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Future
    sales of our common stock issuable upon conversion of our
    Series B Convertible Perpetual Preferred Stock, or
    Series B Preferred Stock, or our senior subordinated
    convertible notes may adversely affect the market price of our
    common stock.
    The
    holders of our Series B Preferred Stock are entitled to
    receive liquidation payments in preference to the holders of our
    common stock.
    The terms
    of the Series B Preferred Stock may limit our ability to
    raise additional capital through subsequent issuances of
    preferred stock.
  two-thirds
  Anti-takeover
    provisions in our organizational documents and Delaware law may
    limit the ability of our stockholders to control our policies
    and effect a change of control of our company and may prevent
    attempts by our stockholders to replace or remove our current
    management, which may not be in your best interests.
    
    our certificate of incorporation provides for three classes of
    directors with the term of office of one class expiring each
    year, commonly referred to as a staggered board. By preventing
    stockholders from voting on the election of more than one class
    of directors at any annual meeting of stockholders, this 28




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provision may have the effect of keeping the current members of
    our board of directors in control for a longer period of time
    than stockholders may desire;  
    our certificate of incorporation authorizes our board of
    directors to issue shares of preferred stock without stockholder
    approval and to establish the preferences and rights of any
    preferred stock issued, which would allow the board to issue one
    or more classes or series of preferred stock that could
    discourage or delay a tender offer or change in control;
    our certificate of incorporation prohibits our stockholders from
    filling board vacancies, calling special stockholder meetings or
    taking action by written consent;
    our certificate of incorporation provides for the removal of a
    director only with cause and by the affirmative vote of the
    holders of 75% or more of the shares then entitled to vote at an
    election of directors; and
    our bylaws require advance written notice of stockholder
    proposals and director nominations.    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES       29




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ITEM 3.
    LEGAL
    PROCEEDINGS  Healthways,
    Inc. and Robert Bosch North America Corp., v. Alere,
    Inc.
  patents-in-suit
  Claims in
    the Ordinary Course and Other Matters
        ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Unregistered
    Sales of Equity Securities and Use of Proceeds
   30




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Market
    Information
    High

LowFiscal 2009Fourth Quarter

$
44.01


$
37.02Third Quarter

$
41.86


$
30.27Second Quarter

$
35.99


$
25.80First Quarter

$
28.93


$
18.59Fiscal 2008Fourth Quarter

$
30.52


$
12.33Third Quarter

$
36.42


$
28.10Second Quarter

$
38.71


$
30.00First Quarter

$
62.65


$
26.29     Dividend
    Policy
   31




---



##### Table of Contents



Stock
    Performance Graph
      
  Current
    Indices
  NYSE Composite

Dow Jones U.S.Date

IMA

Index

Healthcare Index12/31/04

$
100.00


$
100.00


$
100.0012/30/05

$
94.46


$
106.95


$
106.8712/29/06

$
154.18


$
126.05


$
112.4312/31/07

$
223.82


$
134.35


$
119.8012/31/08

$
75.34


$
79.41


$
91.0212/31/09

$
165.38


$
99.10


$
108.19    32




---



##### Table of Contents



ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA  Form 10-K.
  Form 10-K
      For the Year Ended December 31,2009


2008


2007


2006


2005(in thousands, except per share data)Statement of Operations Data:Net product sales

$
1,365,079


$
1,151,265


$
728,091


$
470,079


$
331,046Services revenue


528,487



405,462



16,646







Net product sales and services revenue


1,893,566



1,556,727



744,737



470,079



331,046License and royalty revenue


29,075



25,826



21,979



17,324



15,393Net revenue


1,922,641



1,582,553



766,716



487,403



346,439Cost of net product sales


619,503



543,317



365,545



257,785



192,326Cost of services revenue


240,026



177,098



5,261







Cost of license and royalty revenue


8,890



8,620



9,149



5,432



4,539Cost of net revenue


868,419



729,035



379,955



263,217



196,865Gross profit


1,054,222



853,518



386,761



224,186



149,574Operating expenses:Research and development


112,848



111,828



69,547



48,706



30,992Purchase of in-process research and development










173,825



4,960



Sales and marketing


441,646



381,939



163,028



89,700



66,300General and administrative


357,033



295,059



155,153



67,938



56,045(Gain) loss on dispositions, net


(3,355
)










3,498



Operating income (loss)


146,050



64,692



(174,792
)


9,384



(3,763
) 33




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##### Table of Contents



For the Year Ended December 31,2009


2008


2007


2006


2005(in thousands, except per share data)Interest expense and other expenses, net, including amortization
    of original issue discounts and write-off of deferred financing
    costs


(105,802
)


(102,939
)


(73,563
)


(17,595
)


(7,536
)Income (loss) from continuing operations before provision
    (benefit) for income taxes


40,248



(38,247
)


(248,355
)


(8,211
)


(11,299
)Provision (benefit)for income taxes


15,627



(16,644
)


(1,049
)


5,712



6,971Income (loss) from continuing operations before equity earnings
    of unconsolidated entities, net of tax


24,621



(21,603
)


(247,306
)


(13,923
)


(18,270
)Equity earnings of unconsolidated entities, net of tax


7,626



1,050



4,372



336



Income (loss) from continuing operations


32,247



(20,553
)


(242,934
)


(13,587
)


(18,270
)Income (loss) from discontinued operations, net of tax


1,934



(1,048
)


(418
)


(3,255
)


(939
)Net income (loss)


34,181



(21,601
)


(243,352
)


(16,842
)


(19,209
)Less: Net income attributable to non-controlling interests


465



167



1,401







Net income (loss) attributable to Inverness Medical Innovations,
    Inc. and subsidiaries


33,716



(21,768
)


(244,753
)


(16,842
)


(19,209
)Preferred stock dividends


(22,972
)


(13,989
)










Net income (loss) available to common stockholders(1)

$
10,744


$
(35,757
)

$
(244,753
)

$
(16,842
)

$
(19,209
)Basic net income (loss) per common share attributable to
    Inverness Medical Innovations, Inc. and subsidiaries:Net income (loss) per common share from continuing operations(1)

$
0.11


$
(0.45
)

$
(4.74
)

$
(0.39
)

$
(0.75
)Net income (loss) per common share from discontinued
    operations(1)

$
0.02


$
(0.01
)

$
(0.01
)

$
(0.10
)

$
(0.04
)Net (loss) income per common share

$
0.13


$
(0.46
)

$
(4.75
)

$
(0.49
)

$
(0.79
)Diluted net income (loss) per common share attributable to
    Inverness Medical Innovations, Inc. and subsidiaries:Net income (loss) per common share from continuing operations(1)

$
0.11


$
(0.45
)

$
(4.74
)

$
(0.39
)

$
(0.75
)Net income (loss) per common share from discontinued
    operations(1)

$
0.02


$
(0.01
)

$
(0.01
)

$
(0.10
)

$
(0.04
)Net income (loss) per common share(1)

$
0.13


$
(0.46
)

$
(4.75
)

$
(0.49
)

$
(0.79
)   34




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##### Table of Contents



December 31,2009


2008


2007


2006


2005(in thousands)Balance Sheet Data:Cash and cash equivalents

$
492,773


$
141,324


$
414,732


$
71,104


$
34,270Working capital

$
828,944


$
470,349


$
674,048


$
133,297


$
84,514Total assets

$
6,943,992


$
5,955,360


$
4,880,759


$
1,085,771


$
791,166Total debt

$
2,149,324


$
1,520,534


$
1,387,849


$
202,976


$
262,504Total stockholders equity

$
3,527,555


$
3,278,838


$
2,586,667


$
714,138


$
397,308     (1)
    
    Net income (loss) available to common stockholders and basic and
    diluted net income (loss) per common share are computed as
    described in Notes 2(n) and 14 of our consolidated
    financial statements included elsewhere in this Annual Report on
    Form 10-K.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Forward-Looking
    Statements
  Form 10-K,
  Overview
    ® point-of-care
 35




---



##### Table of Contents



point-of-care
    point-of-care point-of-care
    2009
    Financial Highlights
      Results
    of Operations
   36




---



##### Table of Contents



Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
  Net Product Sales and Services Revenue.
  Net Product Sales and Services Revenue by Business
    Segment.
  % Increase2009


2008


(decrease)Professional diagnostics

$
1,238,251


$
1,029,528



20
%Health management


521,695



392,399



33
%Consumer diagnostics


133,620



134,800



(1
)%Net product sales and services revenue

$
1,893,566


$
1,556,727



22
%   Professional
    Diagnostics
    Health
    Management
    Consumer
    Diagnostics
   37




---



##### Table of Contents



Net Product Sales and Services Revenue by Geographic
    Location.
  2009


2008


% IncreaseUnited States

$
1,302,376


$
1,098,894



19
%Europe


315,130



283,552



11
%Other


276,060



174,281



58
%Net product sales and services revenue

$
1,893,566


$
1,556,727



22
%     License and Royalty Revenue.
  Gross Profit and Margin.
    Gross Profit from Net Product Sales and Services Revenue by
    Business Segment.
  % Increase2009


2008


(decrease)Professional diagnostics

$
733,640


$
596,186



23
%Health management


280,547



214,356



31
%Consumer diagnostics


19,850



25,770



(23
)%Gross profit from net product sales and services revenue

$
1,034,037


$
836,312



24
%   Professional Diagnostics
   38




---



##### Table of Contents



Health
    Management
      Consumer
    Diagnostics
      Research and Development Expense.
    Sales and Marketing Expense.
    General and Administrative Expense.
   39




---



##### Table of Contents



Interest Expense.
  Other Income (Expense), Net.
  2009


2008


ChangeInterest income

$
2,342


$
6,566


$
(4,224
)Foreign exchange gains (losses), net


1,267



(457
)


1,724Other


(2,613
)


(7,916
)


5,303Other income (expense), net

$
996


$
(1,807
)

$
2,803     Provision (Benefit) for Income
    Taxes.
    Discontinued Operations, Net of Tax.
  Net Income (Loss). Form 10-K
 40




---



##### Table of Contents



Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Net Product Sales and Services Revenue.
  Net Product Sales and Services Revenue by Business
    Segment.
  % Increase2008


2007


(decrease)Professional diagnostics

$
1,029,528


$
565,265



82
%Health management


392,399



23,374



1,579
%Consumer diagnostics


134,800



156,098



(14
)%Net product sales

$
1,556,727


$
744,737



109
%   Professional Diagnostics
    Health
    Management
    Consumer
    Diagnostics
   41




---



##### Table of Contents



Net Product Sales and Services Revenue by Geographic
    Location.
  % Increase2008


2007


(decrease)United States

$
1,098,894


$
445,462



147
%Europe


283,552



192,593



47
%Other


174,281



106,682



63
%Net product sales and services revenue

$
1,556,727


$
744,737



109
%     License and Royalty Revenue.
  Gross Profit and Margin. write-up write-up
   42




---



##### Table of Contents



Gross Profit from Net Product Sales and Services Revenue by
    Business Segment.
  % Increase2008


2007


(decrease)Professional diagnostics

$
596,186


$
306,710



94
%Health management


214,356



11,979



1,689
%Consumer diagnostics


25,770



55,242



(53
)%Gross profit from net product sales

$
836,312


$
373,931



124
%   Professional Diagnostics
  write-up write-up
    Health
    Management
      Consumer
    Diagnostics
  50 50
  50 50
  Research and Development Expense.
 43




---



##### Table of Contents



Purchase of In-Process Research and Development
    (IPR&D).
  Discount RateUsed inCompany/









Estimating


Year of


EstimatedYear Assets

Purchase







Cash


Expected


Cost toAcquired

Price


IPR&D(1)


Programs Acquired

Flows(1)


Launch


CompleteDiamics/2007

$
4,000


$
682


PapMap (Pap Screening Methods)


63
%


2009-20101,049


C-Map (Automated Pap Screening)


63
%


2009-20103,094


POC (Point of Care Systems)


63
%


2009-2010$
4,825












$
7,476Biosite/2007

$
1,800,000


$
13,000


Triage Sepsis Panel


15
%


2008-2010156,000


Triage NGAL


15
%


2008-2010$
169,000












$
6,000     (1)
    
    Management assumes responsibility for determining the valuation
    of the acquired IPR&D projects. The fair value assigned to
    IPR&D for each acquisition is estimated by discounting, to
    present value, the cash flows expected once the acquired
    projects have reached technological feasibility. The cash flows
    are probability adjusted to reflect the risks of advancement
    through the product approval process. In estimating the future
    cash flows, we also considered the tangible and intangible
    assets required for successful exploitation of the technology
    resulting from the purchased IPR&D projects and adjusted
    future cash flows for a charge reflecting the contribution to
    value of these assets.  Sales and Marketing Expense. 50 50
 44




---



##### Table of Contents



General and Administrative Expense. 50 50
    Interest Expense.
  Other Income (Expense), Net.
  2008


2007


ChangeInterest income

$
6,566


$
11,286


$
(4,720
)Foreign exchange gains (losses), net


(457
)


(2,007
)


1,550Other


(7,916
)


145



(8,061
)Other income (expense), net

$
(1,807
)

$
9,424


$
(11,231
)       (Benefit) Provision for Income
    Taxes.
   45




---



##### Table of Contents



Discontinued Operations, Net of Tax.
  Net Loss. Form 10-K
  Liquidity
    and Capital Resources
    and/or and/or
  and/or
 46




---



##### Table of Contents



7.875% Senior Notes
                 47




---



##### Table of Contents



9% Senior Subordinated Notes
               48




---



##### Table of Contents



Secured
    Credit Facility
  line-of-credit
  line-of-credit
         49




---



##### Table of Contents



3% Senior Subordinated Convertible Notes
      Series B Convertible Perpetual Preferred Stock
    Summary
    of Changes in Cash Position
  50 50 lines-of-credit,
  Operating Cash Flows
   50




---



##### Table of Contents



Investing Cash Flows
      Financing Cash Flows
  lines-of-credit,
    Income
    Taxes
      Off-Balance
    Sheet Arrangements
   51




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodContractual Obligations

Total


2010


2011-2012


2013-2014


ThereafterLong-term debt obligations(1)

$
2,165,248


$
18,970


$
22,754


$
1,064,005


$
1,059,519Capital lease obligations(2)


1,857



920



837



100



Operating lease obligations(3)


156,560



29,628



46,688



43,139



37,105Long-term and other liabilities(4)


4,329



666



1,332



1,332



999Minimum royalty obligations


220



220











Acquisition-related obligations(5)


60,907



37,436



23,471







Purchase obligations  capital expenditure


19,085



19,085











Purchase obligations  other(6)


41,792



38,042



3,750







Interest on debt(7)


400,876



61,427



123,532



123,378



92,539Total

$
2,850,874


$
206,394


$
222,364


$
1,231,954


$
1,190,162     (1)
    
    Includes original issue discounts associated with the
    9% senior subordinated notes and 7.875% senior notes.
    See description of various financing arrangements in this
    section and Note 6 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(2)
    
    See Note 8 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(3)
    
    See Note 11(a) of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(4)
    
    Included in long-term and other liabilities is $4.3 million
    in pension
    obligations.(5)
    
    Includes $44.3 million of deferred payments associated with
    the acquisition of the ACON Second Territory Business,
    $15.0 million in deferred payments associated with the
    acquisition of Accordant common disease management programs, or
    Accordant, $1.2 million in deferred payments associated
    with the acquisition of Biolinker S.A. and $0.4 million in
    deferred payments associated with the acquisition of Jinsung
    Meditech, Inc.(6)
    
    Other purchase obligations relate to inventory purchases and
    other operating expense commitments.(7)
    
    Includes the 3% senior subordinated convertible notes and
    other non-variable interest-bearing debt. See description of
    various financing arrangements in this section and Note 6
    of our consolidated financial statements included elsewhere in
    this Annual Report on
    Form 10-K.    
    Accordant has a maximum earn-out of $6.0 million that, if
    earned, will be paid in quarterly payments of $1.5 million
    beginning in the fourth quarter of 2012.
    Ameditech, Inc., or Ameditech, has a maximum earn-out of
    $4.0 million that, if earned, will be paid during 2010 and
    2011.
    Binax Inc., or Binax, has a maximum remaining earn-out of
    $3.7 million that, if earned, will be paid no later than
    2010.
    Free & Clear has a maximum earn-out of
    $30.0 million that, if earned, will be paid in 2011.
    Gabmed GmbH, or Gabmed, has a maximum remaining earn-out of
    0.5 million that, if earned, will be paid in equal
    annual amounts during 2010 through 2012. 52




---



##### Table of Contents




    JSM has a maximum earn-out of $3.0 million that, if earned,
    will be paid in annual amounts during 2011 through 2013.
    Mologic Limited, or Mologic, has a maximum earn-out of
    $19.0 million that, if earned, will be paid in annual
    amounts during 2011 through 2012, payable in shares of our
    common stock.
    Tapestry has a maximum earn-out of $25.0 million that, if
    earned, will be paid in annual amounts during 2011 and 2013. The
    earn-out is to be paid in shares of our common stock, except in
    the case that the 2010 financial targets defined under the
    earn-out agreement are exceeded, in which case the seller may
    elect to be paid the 2010 earn-out in cash.
    Vision has a maximum remaining earn-out of $1.2 million
    that, if earned, will be paid in 2010.
    Privately-owned health management business acquired in 2008 has
    an earn-out that, if earned, will be paid in 2011.      Critical
    Accounting Policies
  Form 10-K Form 10-K
  Revenue
    Recognition
       53




---



##### Table of Contents



Use of
    Estimates for Sales Returns and Other Allowances and Allowance
    for Doubtful Accounts
          Valuation of Inventories
   54




---



##### Table of Contents



Valuation of Goodwill and Other Long-Lived and Intangible
    Assets
        Valuation of Goodwill
   55




---



##### Table of Contents



and/or
   Valuation of Other Long-Lived Tangible and Intangible
    Assets
    Stock-Based Compensation
      Accounting for Income Taxes
   56




---



##### Table of Contents



Loss
    Contingencies
  Form 10-K
    Recent
    Accounting Pronouncements
  Form 10-K,
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   57




---



##### Table of Contents



Interest
    Rate Risk
      line-of-credit
         58




---



##### Table of Contents



Interest ExpenseIncreaseInterest rates increase by 100 basis points

$
4,930Interest rates increase by 200 basis points

$
9,860   Foreign
    Currency Risk
          Approximate


ApproximateDecrease in


Decrease inNet Revenue


Net IncomeIf, during 2009, the U.S. dollar was stronger by:1%

$
5,013


$
5305%

$
25,050


$
2,65010%

$
50,096


$
5,300  59




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA        2009First

Second

Third

FourthQuarter(2)

Quarter(3)

Quarter(4)

Quarter(5)Net revenue

$
425,153


$
438,652


$
512,665


$
546,171Gross profit

$
234,450


$
237,896


$
280,297


$
301,579Income (loss) from continuing operations

$
7,738


$
4,886


$
19,870


$
(247
)(Loss) income from discontinued operations

$
(1,347
)

$
(166
)

$
413


$
3,034Net income (loss) available to common stockholders

$
771


$
(1,197
)

$
14,299


$
(3,129
)Basic  Income (loss) per common share attributable to
    Inverness Medical Innovations, Inc. and subsidiaries:Income (loss) per common share from continuing operations(1)

$
0.03


$
(0.02
)

$
0.17


$
(0.08
)(Loss) income per common share from discontinued operations

$
(0.02
)

$
0.00


$
0.01


$
0.04Net income (loss) per common share

$
0.01


$
(0.02
)

$
0.18


$
(0.04
)Diluted  Income (loss) per common share attributable
    to Inverness Medical Innovations, Inc. and subsidiaries:Income (loss) per common share from continuing operations(1)

$
0.03


$
(0.02
)

$
0.17


$
(0.08
)(Loss) income per common share from discontinued operations

$
(0.02
)

$
0.00


$
0.00


$
0.04Net income (loss) per common share

$
0.01


$
(0.02
)

$
0.17


$
(0.04
)   60




---



##### Table of Contents



2008First

Second

Third

FourthQuarter(6)

Quarter(7)

Quarter(8)

Quarter(9)Net revenue

$
351,744


$
381,175


$
417,174


$
432,460Gross profit

$
177,787


$
204,038


$
226,310


$
245,383(Loss) income from continuing operations

$
(4,471
)

$
(30,580
)

$
(3,231
)

$
17,729(Loss) income from discontinued operations

$
(80
)

$
291


$
57


$
(1,316
)Net (loss) income available to common stockholders

$
(4,174
)

$
(33,455
)

$
(9,052
)

$
10,924Basic  (Loss) income per common share attributable to
    Inverness Medical Innovations, Inc. and subsidiaries:(Loss) income per common share from continuing operations(1)

$
(0.05
)

$
(0.43
)

$
(0.12
)

$
0.16(Loss) income per common share from discontinued operations

$
0.00


$
0.00


$
0.00


$
(0.02
)Net (loss) income per common share

$
(0.05
)

$
(0.43
)

$
(0.12
)

$
0.14Diluted  (Loss) income per common share attributable
    to Inverness Medical Innovations, Inc. and subsidiaries:(Loss) income per common share from continuing operations(1)

$
(0.05
)

$
(0.43
)

$
(0.12
)

$
0.16(Loss) income per common share from discontinued operations

$
0.00


$
0.00


$
0.00


$
(0.02
)Net (loss) income per common share

$
(0.05
)

$
(0.43
)

$
(0.12
)

$
0.14     (1)
    
    Net income (loss) available to common stockholders and basic and
    diluted net income (loss) per common share are computed as
    consistent with the annual per share calculations described in
    Notes 2(n) and 14 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(2)
    
    Included in net income for the first quarter of 2009 is
    $5.4 million related to restructuring charges associated
    with the decision to close various facilities, a write-off in
    the amount of $4.7 million for acquisition-related costs
    recorded in connection with the adoption of a ASC 805,
    Business Combinations, on January 1, 2009 and
    $5.9 million of non-cash stock-based compensation expense.(3)
    
    Included in net income for the second quarter of 2009 is
    $4.9 million related to restructuring charges associated
    with the decision to close various facilities, a write-off in
    the amount of $1.7 million for acquisition-related costs
    recorded in connection with the adoption of ASC 805, Business
    Combinations, on January 1, 2009 and $6.6 million
    of non-cash stock-based compensation expense.(4)
    
    Included in net income for the third quarter of 2009 is
    $6.2 million related to restructuring charges associated
    with the decision to close various facilities, a write-off in
    the amount of $0.7 million relating to an inventory
    write-up
    recorded in connection with the acquisition of Concateno during
    the third quarter of 2009, acquisition-related costs in the
    amount of $5.1 million recorded in connection with the
    adoption of ASC 805, Business Combinations, on
    January 1, 2009, a $3.4 million gain associated with
    managements decision to dispose of our Diamics, Inc.
    operations, a $2.9 million net realized foreign currency
    gain associated with restricted cash established in connection
    with the acquisition of Concateno, a $1.9 million
    compensation-related charge recorded in connection with the
    acquisition of Concateno, a $0.3 million loss recorded in
    connection with the deferred payment of a portion of the ACON
    Second Territory Business purchase price consideration to be
    paid with our common stock and $7.8 million of non-cash
    stock-based compensation expense.(5)
    
    Included in net income for the fourth quarter of 2009 is
    $6.9 million related to restructuring charges associated
    with the decision to close various facilities, a write-off in
    the amount of $1.4 million relating to an inventory
    write-up
    recorded in connection with the acquisition of Concateno during
    the third quarter of 2009, acquisition-related costs in the
    amount of $4.3 million recorded in connection with the
    adoption of ASC 805, Business Combinations, on
    January 1, 2009, $1.8 million of expense recorded in
    connection with fair value adjustments to acquisition-related
    contingent consideration obligations in accordance with ASC 805,
    Business Combinations, a $3.2 million fair value
    write-down recorded in connection with an 61




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idle facility, expenses of $1.8 million ($1.1 million,
    net of tax) incurred in connection with the sale of our vitamins
    and nutritional supplements business and $7.9 million of
    non-cash stock-based compensation expense.(6)
    
    Included in net loss for the first quarter of 2008 is
    $16.3 million related to restructuring charges associated
    with the decision to close various facilities, a write-off of
    $1.7 million related to inventory
    write-ups
    recorded in connection with the acquisitions of Panbio and BBI,
    a $1.7 million net realized foreign currency loss
    associated with a cash escrow established in connection with the
    acquisition of BBI, and $5.6 million of non-cash
    stock-based compensation expense.(7)
    
    Included in net loss for the second quarter of 2008 is
    $23.6 million related to restructuring charges associated
    with the decision to close various facilities, a write-off of
    $0.3 million related to inventory
    write-ups
    recorded in connection with the acquisitions of Panbio Limited
    and BBI, and $7.2 million of non-cash stock-based
    compensation expense.(8)
    
    Included in net loss for the third quarter of 2008 is
    $5.8 million related to restructuring charges associated
    with the decision to close various facilities, and
    $7.0 million of non-cash stock-based compensation expense.(9)
    
    Included in net income for the fourth quarter of 2008 is
    $5.0 million related to restructuring charges associated
    with the decision to close various facilities and
    $6.7 million of non-cash stock-based compensation expense.  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Managements
    Conclusions Regarding the Effectiveness of Our Disclosure
    Controls and Procedures
  Rule 13a-15(e) Form 10-K.
  Managements Annual Report on Internal Control over
    Financial Reporting
  Rule 13a-15(f)
     62




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Internal Control 
    Integrated Framework
      Changes
    in internal control over financial reporting
   63




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REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  64




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##### Table of Contents



/s/  BDO
    Seidman, LLP
    65




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES    PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES      Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Statements of Operations for the
    Years Ended December 31, 2009, 2008 and 2007


F-3Consolidated Balance Sheets as of
    December 31, 2009 and 2008


F-4Consolidated Statements of Equity and
    Comprehensive Income (Loss) for the Years Ended
    December 31, 2009, 2008 and 2007


F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2009, 2008 and 2007


F-8Notes to Consolidated Financial Statements


F-9         2
.1

Agreement and Plan of Merger, dated as of May 17, 2007 by
    and among Inverness Medical Innovations, Inc., Inca Acquisition,
    Inc. and Biosite Incorporated (incorporated by reference to
    Exhibit 2.1 to the Companys Current Report on
    Form 8-K,
    event date May 17, 2007, filed on May 18, 2007) 66




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2
.2

Agreement and Plan of Merger, dated January 27, 2008,
    between Inverness Medical Innovations, Inc., Milano MH
    Acquisition Corp., Milano MH Acquisition LLC and Matria
    Healthcare, Inc. (incorporated by reference to Exhibit 2.1
    to the Companys Current Report on
    Form 8-K,
    event date January 28, 2008, filed on January 29, 2008)2
.3

Acquisition Agreement by and among Inverness Medical
    Innovations, Inc., ACON Laboratories, Inc., Azure Institute,
    Inc., Oakville Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co.,
    Ltd., and Karsson Overseas Ltd. dated March 16, 2009
    (incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K,
    event date April 30, 2009, filed on April 30, 2009)**3
.1

Amended and Restated Certificate of Incorporation of the Company
    (incorporated by reference to Exhibit 3.1 to the
    Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2001)3
.2

First Amendment to the Amended and Restated Certificate of
    Incorporation of the Company (incorporated by reference to
    Exhibit 3.4 to Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2007)3
.3

Second Amendment to the Amended and Restated Certificate of
    Incorporation of the Company (incorporated by reference to
    Exhibit 3.3 to Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2008)3
.4

Certificate of Designation, Preferences and Rights of
    Series A Convertible Preferred Stock of the Company
    (incorporated by reference to Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    dated December 20, 2001)3
.5

Certificate of Designations of Series B Convertible
    Perpetual Preferred Stock of the Company (incorporated by
    reference to Exhibit 3.1 to the Companys Current
    Report on
    Form 8-K,
    event date, May 9, 2008, filed on May 14, 2008)3
.6

Certificate of Elimination of Series A Convertible
    Preferred Stock of the Company (incorporated by reference to
    Exhibit 3.2 to the Companys Current Report on
    Form 8-K,
    event date, May 9, 2008, filed on May 14, 2008)3
.7

Certificate of Correction to the First Amendment to the Amended
    and Restated Certificate of Incorporation of the Company
    (incorporated by reference to Exhibit 3.5 to the
    Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2006)3
.8

Second Certificate of Correction to the First Amendment to the
    Amended and Restated Certificate of Incorporation of the Company
    (incorporated by reference to Exhibit 3.5 to Companys
    Registration Statement on
    Form S-4,
    as amended (File
    333-149259))3
.9

Amended and Restated By-laws of the Company (incorporated by
    reference to Exhibit 3.3 to the Companys Annual
    Report on
    Form 10-K,
    as amended, for the year ended December 31, 2001)4
.1

Indenture, dated May 14, 2007, between the Company and U.S.
    Bank Trust National Association (incorporated by reference
    to Exhibit 4.1 to the Companys Current Report on
    Form 8-K,
    event date May 9, 2007, filed on May 15, 2007)4
.2

Indenture dated as of May 12, 2009 between Inverness
    Medical Innovations, Inc., as issuer, and U.S. Bank National
    Association, as trustee (incorporated by reference to
    Exhibit 4.1 to the Companys Current Report on
    Form 8-K,
    event date May 12, 2009, filed on May 12, 2009)4
.3

First Supplemental Indenture dated as of May 12, 2009 among
    Inverness Medical Innovations, Inc., as issuer, the guarantor
    subsidiaries named therein, as guarantors, and U.S. Bank
    National Association, as trustee (incorporated by reference to
    Exhibit 4.2 to the Companys Current Report on
    Form 8-K,
    event date May 12, 2009, filed on May 12, 2009)4
.4

Second Supplemental Indenture dated as of June 9, 2009
    among Inverness Medical Innovations, Inc., as issuer, the
    guarantor subsidiaries named therein, as guarantors, and U.S.
    Bank National Association, as trustee (incorporated by reference
    to Exhibit 4.4 to the
    Form 8-A
    of Matria of New York Inc., dated June 9, 2009, filed on
    June 9, 2009) 67




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##### Table of Contents



4
.5

Third Supplemental Indenture dated as of August 4, 2009
    among Inverness Medical Innovations, Inc., as issuer, GeneCare
    Medical Genetics Center, Inc. and Alere CDM LLC, collectively as
    guarantors, and U.S. Bank National Association, as trustee
    (incorporated by reference to Exhibit 4.5 to GeneCare
    Medical Genetics Center, Inc. and Alere CDM LLCs
    Registration Statement on
    Form 8-A
    dated August 4, 2009)4
.6

Fourth Supplemental Indenture dated as of September 22,
    2009 among Inverness Medical Innovations, Inc., as issuer,
    ZyCare, Inc., as guarantor, and U.S. Bank National Association,
    as trustee (incorporated by reference to Exhibit 4.6 to
    ZyCare, Inc.s Registration Statement on
    Form 8-A
    dated September 24, 2009)4
.7

Indenture dated as of August 11, 2009 between Inverness
    Medical Innovations, Inc., as issuer, and The Bank of New York
    Mellon Trust Company, N.A., as trustee (incorporated by
    reference to Exhibit 4.1 to the Companys Current
    Report on
    Form 8-K,
    event date August 11, 2009, filed on August 11, 2009)4
.8

First Supplemental Indenture dated as of August 11, 2009
    among Inverness Medical Innovations, Inc., as issuer, the
    guarantor subsidiaries named therein, as guarantors, and The
    Bank of New York Mellon Trust Company, N.A., as trustee
    (incorporated by reference to Exhibit 4.2 to the
    Companys Current Report on
    Form 8-K,
    event date August 11, 2009, filed on August 11, 2009)4
.9

Second Supplemental Indenture dated as of September 22 , 2009
    among Inverness Medical Innovations, Inc., as Issuer, the
    guarantor subsidiaries named therein, as guarantors, and The
    Bank of New York Mellon Trust Company, N.A., as Trustee
    (incorporated by reference to Exhibit 4.4 to the Companys
    Quarterly Report on Form 10-Q for the period ended
    September 30, 2009)4
.10

Third Supplemental Indenture dated as of September 28, 2009
    among Inverness Medical Innovations, Inc., as Issuer, the
    guarantor subsidiaries named therein, as guarantors, and The
    Bank of New York Mellon Trust Company, N.A., as Trustee
    (incorporated by reference to Exhibit 4.2 to the
    Companys Current Report on
    Form 8-K,
    event date September 28, 2009, filed on September 28,
    2009)4
.11

Registration Rights Agreement dated as of September 28,
    2009 among Inverness Medical Innovations, Inc., the Guarantors
    named therein, Jefferies & Company, Inc., Goldman
    Sachs & Co., and Wells Fargo Securities (incorporated
    by reference to Exhibit 4.4 to the Companys Current
    Report on
    Form 8-K,
    event date September 28, 2009, filed on September 28,
    2009)+10
.1

BNP Assay Development, Manufacture and Supply Agreement between
    Biosite Incorporated and Beckman Coulter, Inc. effective
    June 24, 2003 (incorporated by reference to
    Exhibit 10.22 to Annual Report of Biosite Incorporated on
    Form 10-K,
    filed March 12, 2007)+10
.2

Shareholder Agreement dated as of May 17, 2007 among
    Inverness Medical Switzerland GmbH, Procter & Gamble
    International Operations, SA and SPD Swiss Precision Diagnostics
    GmbH (incorporated by reference to Exhibit 10.12 to
    Companys Quarterly Report on
    Form 10-Q,
    for the period ended June 30, 2007)10
.3

Option Agreement, dated as of May 17, 2007 among US CD LLC,
    SPD Swiss Precision Diagnostics GmbH, Inverness Medical
    Innovations, Inc., Inverness Medical Switzerland GmbH,
    Procter & Gamble International Operations, SA and
    Procter & Gamble RHD, Inc. (incorporated by reference
    to Exhibit 10.13 to Companys Quarterly Report on
    Form 10-Q,
    for the period ended June 30, 2007)10
.4

Post-Closing Covenants Agreement, dated as of November 21,
    2001, by and among Johnson & Johnson, IMT, the
    Company, certain subsidiaries of IMT and certain subsidiaries of
    the Company (incorporated by reference to Exhibit 10.1 to
    the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2001)10
.5

Amended and Restated Investor Rights Agreement, effective as of
    April 30, 2009, by and among Inverness Medical Innovations,
    Inc., Ron Zwanziger, ACON Laboratories, Inc., AXURE Institute,
    Inc., LBI, Inc., Oakville Hong Kong Co., Ltd., ACON Biotech
    (Hangzhou) Co., Ltd., Karsson Overseas Ltd., Manfield Top
    Worldwide Ltd., Jixun Lin and Feng Lin (incorporated by
    reference to Exhibit 99.2 to the Companys Current
    Report on
    Form 8-K,
    event date April 30, 2009, filed on April 30, 2009) 68




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10
.6

Lease between WE 10 Southgate LLC and Binax, Inc. dated as of
    August 26, 2004 (incorporated by reference to
    Exhibit 10.7 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005)10
.7

Form of Warrant for the Purchase of Shares of Common Stock of
    the Company issued pursuant to the Note and Warrant Purchase
    Agreement dated as of December 14, 2001 (incorporated by
    reference to Exhibit 99.5 to the Companys Current
    Report on
    Form 8-K
    dated December 20, 2001)10
.8

Warrant for the Purchase of Shares of Common Stock of the
    Company, dated as of March 31, 2005, issued to Roger Piasio
    (incorporated by reference to Exhibit 10.23 to the
    Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2006)10
.9

Form of Warrant Agreement issued pursuant to the Note and
    Warrant Purchase Agreement (incorporated by reference to
    Exhibit 99.3 to the Companys Current Report on
    Form 8-K
    dated January 4, 2002)10
.10

Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan, as amended (incorporated by reference to
    Appendix A to the Companys Proxy Statement filed on
    Schedule 14A as filed with the SEC on April 30, 2009)10
.11

Form of Non-Qualified Stock Option Agreement for Non-Employee
    Directors under the Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.4 to Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005) (relating to grants
    made prior to August 29, 2008)10
.12

Form of Non-Qualified Stock Option Agreement for Senior
    Executives under the Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.5 to Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005) (relating to grants
    made prior to August 29, 2008)10
.13

Form of Incentive Stock Option Agreement for Senior Executives
    under the Inverness Medical Innovations, Inc. 2001 Stock Option
    and Incentive Plan (incorporated by reference to
    Exhibit 10.6 to Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005) (relating to grants
    made prior to August 29, 2008)10
.14

Form of Non-Qualified Stock Option Agreement for Non-Employee
    Directors under the Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.30 to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2008) (relating to grants
    made on or after August 29, 2008)10
.15

Form of Non-Qualified Stock Option Agreement for U.S. Executives
    under the Inverness Medical Innovations, Inc. 2001 Stock Option
    and Incentive Plan (incorporated by reference to
    Exhibit 10.31 to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2008) (relating to grants
    made on or after August 29, 2008)10
.16

Form of Non-Qualified Stock Option Agreement for
    Non-U.S.
    Executives under the Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.32 to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2008) (relating to grants
    made on or after August 29, 2008)10
.17

Form of Incentive Stock Option Agreement for Executives under
    the Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan (incorporated by reference to Exhibit 10.33
    to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2008) (relating to grants
    made on or after August 29, 2008)10
.18

Rules of Inverness Medical Innovations, Inc. HM Revenue and
    Customs Share Option Plan (2007) (adopted as subplan to
    Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan) (incorporated by reference to Exhibit 10.34
    to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2008) (relating to grants
    made on or after August 29, 2008)10
.19

Rules of the Inverness Medical Innovations, Inc. 2001 Stock
    Option and Incentive Plan for the Grant of Options to
    Participants in France (adopted as subplan to Inverness Medical
    Innovations, Inc. 2001 Stock Option and Incentive Plan)
    (incorporated by reference to Exhibit 10.35 to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2008) 69




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10
.20

Rules of Inverness Medical Innovations, Inc. Inland Revenue
    Approved Option Plan (adopted as subplan to Inverness Medical
    Innovations, Inc. 2001 Stock Option and Incentive Plan)
    (incorporated by reference to Exhibit 10.2 to
    Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005)10
.21

Rules of Inverness Medical Innovations, Inc. HM Revenue and
    Customs Approved Share Option Plan (2007) (adopted as subplan to
    Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan) (incorporated by reference to Exhibit 10.31
    to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2007) (relating
    to grants made prior to August 29, 2008)10
.22

Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase
    Plan, as amended (incorporated by reference to Appendix B
    to the Companys Proxy Statement filed on Schedule 14A
    as filed with the SEC on April 30, 2009).10
.23

Underwriting Agreement dated as of May 7, 2009 among
    Inverness Medical Innovations, Inc., the subsidiary guarantors
    named therein, UBS Securities LLC, Goldman, Sachs &
    Co., and Banc of America Securities LLC, as representatives of
    the several underwriters named in the Underwriting Agreement
    (incorporated by reference to Exhibit 1.1 to the
    Companys Current Report on
    Form 8-K,
    event date May 12, 2009, filed on May 12, 2009)10
.24

Underwriting Agreement dated as of August 5, 2009 among
    Inverness Medical Innovations, Inc., the subsidiary guarantors
    named therein, Jefferies & Company, Inc., Goldman,
    Sachs & Co., and Wells Fargo Securities, LLC as
    representatives of the several underwriters named in the
    Underwriting Agreement (incorporated by reference to
    Exhibit 1.1 to the Companys Current Report on
    Form 8-K,
    event date August 11, 2009, filed on August 11, 2009)10
.25

Purchase Agreement dated as of September 23, 2009 among
    Inverness Medical Innovations, Inc., the Guarantors named
    therein, Jefferies & Company, Inc., Goldman,
    Sachs & Co., and Wells Fargo Securities, LLC
    (incorporated by reference to Exhibit 1.1 to the
    Companys Current Report on
    Form 8-K,
    event date September 28, 2009, filed on September 28,
    2009)10
.26

$1,050,000,000 First Lien Credit Agreement dated as of
    June 26, 2007 among IM US HOLDINGS, LLC, as Borrower,
    Inverness Medical Innovations, Inc, as Guarantor, The Lenders
    and L/C Issuers Party Hereto General Electric Capital
    Corporation, as Administrative Agent, Citizens Bank of
    Massachusetts, Fifth Third Bank and Merrill Lynch Capital, a
    division of Merrill Lynch Business Financial Services, Inc., as
    Co-Documentation Agents and UBS Securities LLC, as Joint Lead
    Arranger and Syndication Agent (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K,
    event date June 26, 2007, filed on July 2, 2007)10
.27

First Amendment to First Lien Credit Agreement dated as of
    November 15, 2007 among IM US Holdings, LLC, as Borrower,
    Inverness Medical Innovations, Inc., as a Guarantor, the Lenders
    signatory hereto and General Electric Capital Corporation, as
    collateral agent and administrative agent for the Lenders
    (incorporated by reference to Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    dated November 20, 2007)10
.28

$250,000,000 Second Lien Credit Agreement dated as of
    June 26, 2007 among IM US HOLDINGS, LLC, as Borrower,
    Inverness Medical Innovations, Inc., as a Guarantor, The Lenders
    General Electric Capital Corporation, as Administrative Agent
    and UBS Securities LLC, as Syndication Agent, Joint Lead
    Arranger and Sole Bookrunner (incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K,
    event date June 26, 2007, filed on July 2, 2007)10
.29

First Lien Guaranty And Security Agreement dated as of
    June 26, 2007 among IM US HOLDINGS, LLC, as Borrower, and
    Each Grantor and General Electric Capital Corporation, as
    Administrative Agent (incorporated by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K,
    event date June 26, 2007, filed on July 2, 2007)10
.30

Second Lien Guaranty And Security Agreement dated as of
    June 26, 2007 among IM US HOLDINGS, LLC, as Borrower, and
    Each Grantor and General Electric Capital Corporation, as
    Administrative Agent (incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K,
    event date June 26, 2007, filed on July 2, 2007) 70




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14
.50

Inverness Medical Innovations Business Conduct Guidelines
    (incorporated by reference to Exhibit 14.50 to the
    Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2006)*21
.1

List of Subsidiaries of the Company as of February 22, 2010*23
.1

Consent of BDO Seidman, LLP, Independent Registered Public
    Accounting Firm*31
.1

Certification by Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act*31
.2

Certification by Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act*32
.1

Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act    *
    
    Filed herewith.**
    
    The Company agrees to furnish supplementally to the Securities
    and Exchange Commission (the Commission) a copy of
    any omitted schedule or exhibit to this agreement upon request
    by the Commission.+
    
    We have omitted portions of this exhibit which have been granted
    confidential treatment. 71




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SIGNATURES       By:
    /s/  Ron
    Zwanziger   Chairman, Chief Executive Officer and President
 72




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##### 



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    FINANCIAL STATEMENTS
  Table of
    Contents
  
 PageReport of Independent Registered Public
    Accounting Firm

F-2Consolidated Statements of Operations for the
    Years Ended December 31, 2009, 2008 and 2007

F-3Consolidated Balance Sheets as of
    December 31, 2009 and 2008

F-4Consolidated Statements of Equity and
    Comprehensive Income (Loss) for the Years Ended
    December 31, 2009, 2008 and 2007

F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2009, 2008 and 2007

F-8Notes to Consolidated Financial Statements

F-9   F-1




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REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               /s/  BDO
    Seidman, LLP
    F-2




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  (in thousands, except per share amounts)
  2009


2008


2007Net product sales

$
1,365,079


$
1,151,265


$
728,091Services revenue


528,487



405,462



16,646License and royalty revenue


29,075



25,826



21,979Net revenue


1,922,641



1,582,553



766,716Cost of net product sales


619,503



543,317



365,545Cost of services revenue


240,026



177,098



5,261Cost of license and royalty revenue


8,890



8,620



9,149Cost of net revenue


868,419



729,035



379,955Gross profit


1,054,222



853,518



386,761Operating expenses:Research and development


112,848



111,828



69,547Purchase of in-process research and development










173,825Sales and marketing


441,646



381,939



163,028General and administrative


357,033



295,059



155,153Gain on disposition


(3,355
)






Operating income (loss)


146,050



64,692



(174,792
)Interest expense, including amortization of original issue
    discounts and write-off of deferred financing costs


(106,798
)


(101,132
)


(82,987
)Other income (expense), net


996



(1,807
)


9,424Income (loss) from continuing operations before provision
    (benefit) for income taxes


40,248



(38,247
)


(248,355
)Provision (benefit) for income taxes


15,627



(16,644
)


(1,049
)Income (loss) from continuing operations before equity
    earnings of unconsolidated entities, net of tax


24,621



(21,603
)


(247,306
)Equity earnings of unconsolidated entities, net of tax


7,626



1,050



4,372Income (loss) from continuing operations


32,247



(20,553
)


(242,934
)Income (loss) from discontinued operations, net of tax


1,934



(1,048
)


(418
)Net income (loss)


34,181



(21,601
)


(243,352
)Less: Net income attributable to non-controlling interests


465



167



1,401Net income (loss) attributable to Inverness Medical
    Innovations, Inc. and subsidiaries


33,716



(21,768
)


(244,753
)Preferred stock dividends


(22,972
)


(13,989
)


Net income (loss) available to common stockholders

$
10,744


$
(35,757
)

$
(244,753
)Basic net income (loss) per common share attributable to
    Inverness Medical Innovations, Inc. and subsidiaries:Income (loss) from continuing operations

$
0.11


$
(0.45
)

$
(4.74
)Income (loss) from discontinued operations

$
0.02


$
(0.01
)

$
(0.01
)Net income (loss) per common share

$
0.13


$
(0.46
)

$
(4.75
)Diluted net income (loss) per common share attributable to
    Inverness Medical Innovations, Inc. and subsidiaries:Income (loss) from continuing operations

$
0.11


$
(0.45
)

$
(4.74
)Income (loss) from discontinued operations

$
0.02


$
(0.01
)

$
(0.01
)Net income (loss) per common share

$
0.13


$
(0.46
)

$
(4.75
)Weighted average common shares  basic


80,572



77,778



51,510Weighted average common shares  diluted


81,967



77,778



51,510    F-3




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  (in thousands, except par value amounts)
  December 31,2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
492,773


$
141,324Restricted cash


2,424



2,748Marketable securities


947



1,763Accounts receivable, net of allowances of $12,462 and $9,961 at
    December 31, 2009 and 2008, respectively


354,453



261,369Inventories, net


221,539



173,585Deferred tax assets


66,492



104,311Income tax receivable


1,107



6,406Receivable from joint venture, net






12,018Prepaid expenses and other current assets


73,075



74,033Assets held for sale


54,148



58,166Total current assets


1,266,958



835,723Property, plant and equipment, net


324,388



274,478Goodwill


3,463,358



3,045,883Other intangible assets with indefinite lives


43,644



42,909Core technology and patents, net


421,719



459,307Other intangible assets, net


1,264,708



1,166,536Deferred financing costs, net, and other non-current assets


72,762



46,778Investments in unconsolidated entities


63,965



68,832Marketable securities


1,503



591Deferred tax assets


20,987



14,323Total assets

$
6,943,992


$
5,955,360LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt

$
18,970


$
19,058Current portion of capital lease obligations


899



451Accounts payable


126,322



96,582Accrued expenses and other current liabilities


279,732



230,090Payable to joint venture, net


533



Liabilities related to assets held for sale


11,558



19,193Total current liabilities


438,014



365,374Long-term liabilities:Long-term debt, net of current portion


2,128,515



1,500,557Capital lease obligations, net of current portion


940



468Deferred tax liabilities


442,049



462,787Deferred gain on joint venture


288,767



287,030Other long-term liabilities


116,818



59,437Total long-term liabilities


2,977,089



2,310,279Commitments and contingencies(Notes 8, 9 and 11)Stockholders equity:Series B preferred stock, $0.001 par value
    (liquidation preference, $793,696 at December 31, 2009 and
    $751,479 at December 31, 2008); Authorized:
    2,300 shares; Issued and outstanding: 1,984 shares at
    December 31, 2009 and 1,879 shares at
    December 31, 2008


694,427



671,501Common stock, $0.001 par value;Authorized: 150,000 shares;Issued and outstanding: 83,567 at December 31, 2009 and
    78,431 at December 31, 2008


84



78Additional paid-in capital


3,195,372



3,029,694Accumulated deficit


(359,874
)


(393,590
)Accumulated other comprehensive loss


(2,454
)


(28,845
)Total stockholders equity


3,527,555



3,278,838Non-controlling interests


1,334



869Total equity


3,528,889



3,279,707Total liabilities and equity

$
6,943,992


$
5,955,360    F-4




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME (LOSS)



(in
    thousands, except par value amounts)  Preferred Stock


Common Stock








Accumulated$0.001





$0.001


Additional





Other


Total








TotalNumber of


Par


Number of


Par


Paid-in


Accumulated


Comprehensive


Stockholders


Non-controlling


Total


ComprehensiveShares


Value


Shares


Value


Capital


Deficit


Income


Equity


Interest


Equity


LossBALANCE, DECEMBER 31, 2006





$




39,215


$
39


$
826,987


$
(127,069
)

$
14,181


$
714,138


$
170


$
714,308Issuance of common stock in connection with acquisitions and
    equity offerings, net of issuance costs of $44,204










35,204



35



1,859,985











1,860,020







1,860,020Exercise of common stock options and warrants and shares issued
    under employee stock purchase plan










2,370



3



55,095











55,098







55,098Stock-based compensation related to grants of common stock
    options


















57,480











57,480







57,480Fair value associated with options exchanged in acquisitions


















135,022











135,022







135,022Stock option income tax benefits


















2,574











2,574







2,574Minimum pension liability adjustment


























341



341







341


$
341Changes in cumulative translation adjustment


























12,758



12,758







12,758



12,758Unrealized loss on interest rate swap (Note 10)


























(9,518
)


(9,518
)






(9,518
)


(9,518
)Unrealized gain on
    available-for-sale
    securities


























3,507



3,507







3,507



3,507Earnings associated with non-controlling interest


































1,401



1,401Acquisition of non-controlling interests


































(702
)


(702
)Net loss






















(244,753
)






(244,753
)






(244,753
)


(244,753
)Total comprehensive loss









































$
(237,665
)BALANCE, DECEMBER 31, 2007





$




76,789


$
77


$
2,937,143


$
(371,822
)

$
21,269


$
2,586,667


$
869


$
2,587,536    F-5




---



##### Table of Contents






INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
    (LOSS)
 (Continued)
 (in thousands, except par value amounts)
  Common Stock








AccumulatedPreferred Stock





$0.001


Additional





Other


Total








TotalNumber of





Number of


Par


Paid-in


Accumulated


Comprehensive


Stockholders


Non-controlling


Total


ComprehensiveShares


Amount


Shares


Value


Capital


Deficit


Income (Loss)


Equity


Interest


Equity


LossBALANCE, DECEMBER 31, 2007





$




76,789


$
77


$
2,937,143


$
(371,822
)

$
21,269


$
2,586,667


$
869


$
2,587,536Issuance of Series B preferred stock in connection with
    acquisition of Matria Healthcare, Inc., net of issuance costs of
    $350


1,788



657,573























657,573







657,573Issuance of common stock in connection with acquisitions, net of
    issuance costs of $219










580







20,945











20,945







20,945Exercise of common stock options and warrants and shares issued
    under employee stock purchase plan










1,062



1



20,712











20,713







20,713Preferred stock dividends (Note 15)


91



13,928











(14,026
)










(98
)






(98
)Fair value associated with options exchanged in acquisitions


















20,973











20,973







20,973Stock-based compensation related to grants of common stock
    options


















26,405











26,405







26,405Stock option income tax benefits


















17,542











17,542







17,542Minimum pension liability adjustment


























(562
)


(562
)






(562
)

$
(562
)Changes in cumulative translation adjustment


























(32,889
)


(32,889
)






(32,889
)


(32,889
)Unrealized loss on interest rate swap (Note 10)


























(11,614
)


(11,614
)






(11,614
)


(11,614
)Unrealized loss on
    available-for-sale
    securities


























(5,049
)


(5,049
)






(5,049
)


(5,049
)Earnings associated with non-controlling interests


































167



167Acquisition of non-controlling interests


































(167
)


(167
)Net loss






















(21,768
)






(21,768
)






(21,768
)


(21,768
)Total comprehensive loss









































$
(71,882
)BALANCE, DECEMBER 31, 2008


1,879


$
671,501



78,431


$
78


$
3,029,694


$
(393,590
)

$
(28,845
)

$
3,278,838


$
869


$
3,279,707    F-6




---



##### Table of Contents









INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
    (LOSS)(Continued)
    (in thousands, except par value amounts)
  Common Stock








AccumulatedPreferred Stock





$0.001


Additional





Other


Total








TotalNumber of





Number of


Par


Paid-in


Accumulated


Comprehensive


Stockholders


Non-controlling


Total


ComprehensiveShares


Amount


Shares


Value


Capital


Deficit


(Loss)


Equity


Interest


Equity


IncomeBALANCE, DECEMBER 31, 2008


1,879


$
671,501



78,431


$
78


$
3,029,694


$
(393,590
)

$
(28,845
)

$
3,278,838


$
869


$
3,279,707Issuance of common stock and warrants in connection with
    acquisitions,










3,431



4



117,815











117,819







117,819Exercise of common stock options and shares issued under
    employee stock purchase plan










1,705



2



30,013











30,015







30,015Preferred stock dividends (Note 15)


105



22,926











(23,079
)










(153
)






(153
)Fair value associated with options exchanged in acquisitions


















2,881











2,881







2,881Stock-based compensation related to grants of common stock
    options


















28,220











28,220







28,220Stock option income tax benefits


















9,828











9,828







9,828Minimum pension liability adjustment


























(1,137
)


(1,137
)






(1,137
)

$
(1,137
)Changes in cumulative translation adjustment


























15,171



15,171







15,171



15,171Unrealized gain on interest rate swap (Note 10)


























11,389



11,389







11,389



11,389Unrealized gain on
    available-for-sale
    securities


























968



968







968



968Earnings associated with non-controlling interest


































465



465



Net income






















33,716







33,716







33,716



33,716Total comprehensive income









































$
60,107BALANCE, DECEMBER 31, 2009


1,984


$
694,427



83,567


$
84


$
3,195,372


$
(359,874
)

$
(2,454
)

$
3,527,555


$
1,334


$
3,528,889    F-7




---



##### Table of Contents








INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENT OF CASH FLOWS
    (in thousands)  2009


2008


2007Cash Flows from Operating Activities:Net income (loss)

$
34,181


$
(21,601
)

$
(243,352
)Income (loss) from discontinued operations, net of tax


1,934



(1,048
)


(418
)Income (loss) from continuing operations


32,247



(20,553
)


(242,934
)Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating activities:Interest expense related to amortization of original issue
    discounts and write-off of deferred financing costs


10,423



5,930



10,963Depreciation and amortization


312,435



265,654



97,982Non-cash stock-based compensation expense


28,220



26,405



52,210Charge for in-process research and development










173,825Impairment of inventory


1,467



4,193



Impairment of long-lived assets


6,983



20,031



3,872Loss on sale of fixed assets


1,205



777



59Equity earnings of unconsolidated entities, net of tax


(7,626
)


(1,050
)


(4,372
)Deferred and other non-cash income taxes


(9,124
)


(41,714
)


(28,008
)Other non-cash items


3,264



4,378



197Changes in assets and liabilities, net of acquisitions:Accounts receivable, net


(36,455
)


(39,546
)


46,152Inventories, net


(16,425
)


(41,945
)


(2,670
)Prepaid expenses and other current assets


9,081



(7,386
)


15,196Accounts payable


2,117



7,193



(2,156
)Accrued expenses and other current liabilities


(45,445
)


(29,091
)


(33,836
)Other non-current liabilities


(2,709
)


3,400



1,783Net cash provided by continuing operations


289,658



156,676



88,263Net cash (used in) provided by discontinued operations


(2,127
)


(8,832
)


492Net cash provided by operating activities


287,531



147,844



88,755Cash Flows from Investing Activities:Purchases of property, plant and equipment


(100,606
)


(65,699
)


(35,831
)Proceeds from sale of property, plant and equipment


803



1,070



264Cash paid for acquisitions and transactional costs, net of cash
    acquired


(468,527
)


(649,899
)


(2,036,116
)Cash received, net of cash paid, from formation of joint venture










324,170Cash received from (paid for) investments in minority interests
    and marketable Securities


12,560



12,133



(10,177
)Increase in other assets


(27,720
)


(10,500
)


(28,373
)Net cash used in continuing operations


(583,490
)


(712,895
)


(1,786,063
)Net cash used in discontinued operations


(237
)


(437
)


(467
)Net cash used in investing activities


(583,727
)


(713,332
)


(1,786,530
)Cash Flows from Financing Activities:Proceeds from borrowing under long-term debt


631,177







Decrease (increase) in restricted cash


418



139,204



(141,869
)Issuance costs associated with preferred stock






(350
)


Cash paid for financing costs


(17,756
)


(1,401
)


(40,675
)Proceeds from issuance of common stock, net of issuance costs


30,015



20,675



1,122,852Repayments on long-term debt


(11,055
)


(13,787
)


(22,326
)Net (repayments) proceeds from revolving
    lines-of-credit


(7,251
)


137,242



1,114,171Tax benefit on exercised stock options


9,269



17,542



867Principal payments of capital lease obligations


(798
)


(958
)


(94
)Other


(153
)


(56
)


Net cash provided by continuing operations


633,866



298,111



2,032,926Net cash used in discontinued operations


(12
)


(342
)


(542
)Net cash provided by financing activities


633,854



297,769



2,032,384Foreign exchange effect on cash and cash equivalents


13,791



(5,689
)


9,019Net increase (decrease) in cash and cash equivalents


351,449



(273,408
)


343,628Cash and cash equivalents, beginning of period


141,324



414,732



71,104Cash and cash equivalents, end of period

$
492,773


$
141,324


$
414,732    F-8




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    Description
    of Business and Basis of Presentation    over-the-counter
    and/or
        F-9




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (2)
    Summary
    of Significant Accounting Policies  (a) Use of Estimates
    (b) Foreign Currencies
      (c) Cash and Cash Equivalents
    (d) Restricted Cash
    (e) Marketable Securities
  available-for-sale
  (f) Inventories
  (first-in, work-in-process work-in-process
 F-10




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)  (g) Property, Plant and Equipment
  20-50 years;
  (h) Goodwill and Other Intangible Assets with Indefinite
    Lives
      and/or
  (i) Impairment of Other Long-Lived Tangible and
    Intangible Assets
   F-11




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)  (j) Business Acquisitions
        (k) Income Taxes
      (l) Revenue Recognition
     F-12




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)        (m) Employee Stock-Based Compensation Arrangements
  718-10, Compensation  Stock Compensation SFAS No. 123-R.
    (n) Net Income (Loss) per Common Share
    (o) Other Operating Expenses
 F-13




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)      (p) Concentration of Credit Risk, Off-Balance Sheet
    Risks and Other Risks and Uncertainties
        (q) Financial Instruments and Fair Value of Financial
    Instruments
    (r) Recent Accounting Pronouncements
    No. 2009-17, Consolidations (Topic 810): Improvements to Financial
    Reporting by Enterprises Involved with Variable Interest
    Entities 2009-17.
 F-14




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)    No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers
    of Financial Assets 2009-16.
  No. 2009-15, Accounting for Own-Share Lending Arrangements in
    Contemplation of Convertible Debt Issuance or Other
    Financing 2009-15. 2009-15
  No. 2009-14, Software (Topic 985): Certain Revenue Arrangements That
    Include Software Elements  a consensus of the FASB
    EITF 2009-14. 2009-14
  No. 2009-13, Revenue Recognition (Topic 650): Multiple-Deliverable Revenue
    Arrangements  a consensus of the FASB EITF 2009-13. 2009-13
   F-15




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)  No. 2009-12, Fair Value Measurements and Disclosure 2009-12.
  No. 2009-05, Measuring Liabilities at Fair Value 2009-05. 2009-05 Fair Value Measurements. 2009-05 and/or 2009-05
  The FASB
    Accounting Standards Codification and the Hierarchy of
    Generally Accepted Accounting Principles
    other-than-temporary-impairment
 F-16




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)        non-amortizable
         F-17




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)         (3)
    Other
    Balance Sheet Information    December 31,2009


2008Inventories, net:Raw materials

$
62,397


$
35,324Work-in-process


56,338



33,346Finished goods


102,804



104,915$
221,539


$
173,585Property, plant and equipment, net:Machinery, laboratory equipment and tooling

$
183,490


$
135,667Land and buildings


135,644



133,274Leasehold improvements


22,841



18,995Computer software and equipment


96,950



58,797Furniture and fixtures


19,340



15,116458,265



361,849Less: Accumulated depreciation and amortization


(133,877
)


(87,371
)$
324,388


$
274,478 F-18




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (3)
    Other
    Balance Sheet Information  (Continued)  December 31,2009


2008Accrued expenses and other current liabilities:Compensation and compensation-related

$
76,360


$
60,495Advertising and marketing


6,155



5,639Professional fees


9,743



7,721Interest payable


16,661



4,459Royalty obligations


17,451



13,757Deferred revenue


23,095



21,977Taxes payable


33,511



47,643Acquisition-related obligations


55,496



29,107Other


41,260



39,292$
279,732


$
230,090    (4)
    Business
    Combinations  (a) Acquisitions in 2009
      2010-2011
   F-19




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Current assets

$
2,684Property, plant and equipment


5,026Goodwill


39,351Intangible assets


10,680Other non-current assets


25Total assets acquired


57,766Current liabilities


4,691Non-current liabilities


2,242Total liabilities assumed


6,933Net assets acquired


50,833Less:Fair value of contingent consideration obligation


16,000Cash consideration

$
34,833       Amount


Amortizable LifeCustomer relationships

$
6,500



14 yearsTrade names


3,000



3 yearsNon-compete agreements


1,180



3 yearsTotal intangible assets with finite lives

$
10,680        F-20




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)        Current assets

$
17,183Property, plant and equipment


1,224Goodwill


83,054Intangible assets


44,100Other non-current assets


885Total assets acquired


146,446Current liabilities


8,237Non-current liabilities


17,155Total liabilities assumed


25,392Net assets acquired


121,054Less:Fair value of contingent consideration obligation


15,753Cash consideration

$
105,301       Amount


Amortizable LifeCustomer relationships

$
36,100



18 yearsCore technology


4,600



3 yearsTrade names


3,400



3 yearsTotal intangible assets with finite lives

$
44,100      F-21




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)        Current assets

$
40,433Property, plant and equipment


5,192Goodwill


159,281Intangible assets


102,734Total assets acquired


307,640Current liabilities


62,339Non-current liabilities


33,950Total liabilities assumed


96,289Net assets acquired


211,351Less:Fair value of common stock issued (2,091,080 shares)


70,218Fair value of stock options exchanged (315,227 options)


2,881Cash consideration

$
138,252       Amount


Amortizable LifeCustomer relationships

$
77,051



10-18 yearsCore technology


500



5 yearsTrademarks and trade names


25,183



15-20 yearsTotal intangible assets with finite lives

$
102,734      F-22




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)          Current assets

$
4,156Property, plant and equipment


305Goodwill


84,149Intangible assets


100,600Total assets acquired


189,210Current liabilities


117Total liabilities assumed


117Net assets acquired


189,093Less:Fair value of common stock issued (1,202,691 shares)


42,142Present value of deferred purchase price consideration


42,261Cash consideration paid at closing

$
104,690      F-23




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeCustomer relationships

$
94,200



13-19 yearsPatents


3,000



10 yearsTrademarks and trade names


1,900



3 yearsNon-compete agreements


1,500



2 yearsTotal intangible assets with finite lives

$
100,600         
    GeneCare Medical Genetics Center, Inc., or GeneCare, located in
    Chapel Hill, North Carolina, a medical genetics testing and
    counseling business (Acquired July 2009)
    Certain assets from CVS Caremarks Accordant Common disease
    management programs, or Accordant, whereby chronically-ill
    patients served by Accordant Common disease management programs
    will be managed and have access to expanded offerings provided
    by Alere (Acquired August 2009)
    ZyCare, Inc., or ZyCare, located in Chapel Hill, North Carolina,
    a provider of technology and services used to help manage many
    chronic illnesses (Acquired August 2009)
    Medim Schweiz GmbH., or Medim, located in Zug, Switzerland, a
    distributor of
    point-of-care
    diagnostics testing products primarily to the Swiss marketplace
    (Acquired September 2009)
    Biosyn Diagnostics Limited, or Biosyn, located in Belfast,
    Ireland, a distributor of
    point-of-care
    diagnostics testing products primarily to the Irish marketplace
    (Acquired October 2009) F-24




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)   
    Mologic Limited, or Mologic, located in Sharnbrook, United
    Kingdom, a research and development entity having a wide
    immunoassay experience, as well as a broad understanding of
    medical diagnostic devices and antibody development (Acquired
    October 2009)
    Jinsung Meditech, Inc., or JSM, located in Seoul, Korea, a
    distributor of
    point-of-care
    diagnostics testing products primarily to the South Korean
    marketplace (Acquired December 2009)
    Biolinker S.A., or Biolinker, located in Buenos Aires,
    Argentina, a distributor of
    point-of-care
    diagnostics testing products primarily to the Argentinean
    marketplace (Acquired December 2009)
    51.0% share in Long Chain International Corp., or Long Chain,
    located in Taipei, Taiwan, a distributor of
    point-of-care
    diagnostics testing products primarily to the Taiwanese
    marketplace (Acquired December 2009). In January 2010, we
    acquired the remaining 49.0% interest in Long Chain.      Current assets

$
23,231Property, plant and equipment


1,272Goodwill


35,358Intangible assets


39,414Other non-current assets


631Total assets acquired


99,906Current liabilities


15,134Non-current liabilities


6,213Total liabilities assumed


21,347Net assets acquired


78,559Less:Fair value of common stock issued (128,513 shares)


5,115Fair value of warrants issued


57Notes payable


7,819Present value of deferred purchase price consideration


14,264Fair value of contingent consideration obligation


9,606Cash consideration

$
41,698    F-25




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeCore technology

$
5,220



5-10 yearsSupplier relationships


1,581



8 yearsTrade names


270



2 yearsCustomer relationships


30,043



5.33-16.25 yearsNon-compete agreements


1,600



2-5 yearsIn-process research and development


700



N/ATotal intangible assets with finite lives

$
39,414     (b) Acquisitions in 2008
        Current assets

$
121,399Property, plant and equipment


23,659Goodwill


844,301Intangible assets


325,385Other non-current assets


35,063Total assets acquired


1,349,807Current liabilities


377,909Non-current liabilities


137,346Total liabilities assumed


515,255Net assets acquired


834,552Less:Acquisition costs


17,956Fair value of Series B convertible preferred stock issued
    (1,787,834 shares)


657,923Fair value of stock options exchanged (1,490,655 options)


17,334Cash consideration

$
141,339  F-26




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)      Amount


Amortizable LifeCore technology

$
31,000



3 yearsDatabase


25,000



10 yearsTrade names


1,185



5 monthsCustomer relationships


253,000



13 yearsNon-compete agreements


15,200



0.75-3 yearsTotal intangible assets with finite lives

$
325,385         Current assets

$
22,421Property, plant and equipment


7,603Goodwill


89,626Intangible assets


90,201Other non-current assets


3,001Total assets acquired


212,852Current liabilities


15,668Non-current liabilities


33,953Total liabilities assumed


49,621Net assets acquired


163,231Less:Acquisition costs


6,601Fair value of common stock issued (251,085 shares)


14,397Fair value of stock options/awards exchanged (329,612
    options/25,626 awards)


3,639Cash consideration

$
138,594    F-27




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeCore technology

$
28,043



15-20 yearsTrade names and other intangible assets


16,180



10-25 yearsCustomer relationships


45,978



7-25 yearsTotal intangible assets with finite lives

$
90,201         Current assets

$
12,835Property, plant and equipment


2,080Goodwill


13,968Intangible assets


17,717Other non-current assets


246Total assets acquired


46,846Current liabilities


3,527Non-current liabilities


6,810Total liabilities assumed


10,337Net assets acquired


36,509Less:Acquisition costs


566Cash consideration

$
35,943      F-28




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeCore technology

$
4,154



5-7 yearsTrade name


2,382



10 yearsCustomer relationships


11,181



17-25 yearsTotal intangible assets with finite lives

$
17,717       
    Certain assets from Mochida Pharmaceutical Co., Ltd, or Mochida.
    As part of the acquisition of certain assets, Mochida
    transferred the exclusive distribution rights in Japan for
    certain Osteomark products (Acquired April 2008)
    Privately-owned provider of care and health management services
    (Acquired July 2008)
    Vision Biotech Pty Ltd, or Vision, located in Cape Town, South
    Africa, a privately-owned distributor of rapid diagnostic
    products predominantly to the South African marketplace
    (Acquired September 2008)
    Global Diagnostics CC, or Global, located in Johannesburg, South
    Africa, a privately-owned contract manufacturer and distributor
    of high quality rapid diagnostic tests predominantly to the
    South African marketplace (Acquired September 2008)
    DiaTeam Diagnostika und Arzneimittel Großhandel GmbH, or
    DiaTeam, located in Linz, Austria, a privately-owned distributor
    of high quality rapid diagnostic tests predominantly to the
    Austrian marketplace (Acquired September 2008)
    Prodimol Biotecnologia S.A., or Prodimol, located in Brazil, a
    privately-owned distributor of high quality rapid diagnostic
    tests predominantly to the Brazilian marketplace (Acquired
    October 2008)
    Ameditech, Inc., or Ameditech, located in San Diego,
    California, a leading manufacturer of high quality drugs of
    abuse diagnostic tests (Acquired December 2008)    Current assets

$
10,960Property, plant and equipment


770Goodwill


15,623Other non-current assets


67Intangible assets


37,085Total assets acquired


64,505 F-29




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)  Current liabilities


5,830Non-current liabilities


8,033Total liabilities assumed


13,863Net assets acquired


50,642Less:Acquisition costs


1,767Realized foreign currency exchange loss


(179
)Accrued earned milestone and contingent consideration


57Cash consideration

$
48,997     Amount


Amortizable LifeCore technology

$
3,066



6-10 yearsTrade names


2,690



10 yearsCustomer relationships


29,424



3.5-14 yearsNon-compete agreements


1,063



2-5 yearsManufacturing know-how


842



5 yearsTotal intangible assets

$
37,085     (c) Acquisitions in 2007
        Current assets

$
34,498Property, plant and equipment


2,163Goodwill


161,916Intangible assets


61,449Total assets acquired


260,026 F-30




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)  Current liabilities


1,094Non-current liabilities


22,141Total liabilities assumed


23,235Net assets acquired


236,791Less:Acquisition costs


844Cash consideration

$
235,947       Amount


Amortizable LifeCore technology

$
6,900



5-10 yearsTrademarks


249



9 monthsSoftware


5,100



8 yearsNon-compete agreements


2,700



2 yearsCustomer relationships


46,500



6-21 yearsTotal intangible assets with finite lives

$
61,449         Current assets

$
11,234Property, plant and equipment


5,653Goodwill


37,296Intangible assets


66,020Other non-current assets


84Total assets acquired


120,287Current liabilities


2,947Non-current liabilities


63,533Total liabilities assumed


66,480Net assets acquired


53,807Less:Acquisition costs


546Cash consideration

$
53,261  F-31




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)      Amount


Amortizable LifeTrademarks

$
5,970



10 yearsNon-compete agreements


2,800



2-5 yearsCustomer relationships


57,250



11-12.5 yearsTotal intangible assets with finite lives

$
66,020           Current assets

$
13,332Property, plant and equipment


8,897Goodwill


254,842Intangible assets


55,500Other non-current assets


5,523Total assets acquired


338,094Current liabilities


10,651Non-current liabilities


16,157Total liabilities assumed


26,808Net assets acquired


311,286 F-32




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)  Less:Acquisition costs


959Fair value of common stock issued (2,762,182 shares)


161,086Fair value of stock options exchanged (380,894 options)


20,614Cash consideration

$
128,627       Amount


Amortizable LifeCore technology

$
6,100



3-6 yearsTrademarks


1,500



10 yearsCustomer relationships


46,300



9 yearsNon-compete agreements


1,600



0.5-1 yearTotal intangible assets with finite lives

$
55,500     point-of-care
    Current assets

$
23,399Property, plant and equipment


1,936Goodwill


148,840Intangible assets


100,670Other non-current assets


232Total assets acquired


275,077Current liabilities


15,217Non-current liabilities


15,811Total liabilities assumed


31,028Net assets acquired


244,049Less:Acquisition costs


939Fair value of common stock issued (3,691,369 shares)


226,415Fair value of stock options exchanged (380,732 options)


16,695Cash consideration

$
  F-33




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)      Amount


Amortizable LifeCore technology

$
24,130



1-10 yearsTrademarks


7,100



10 yearsCustomer relationships


69,100



20 yearsNon-compete agreements


300



1 yearInternally-developed software


40



10 yearsTotal intangible assets with finite lives

$
100,670         Current assets

$
83,377Property, plant and equipment


6,643Goodwill


140,395Intangible assets


209,078Other non-current assets


669Total assets acquired


440,162Current liabilities


17,434Non-current liabilities


68,067Total liabilities assumed


85,501Net assets acquired


354,661Less:Acquisition costs


4,556Fair value of common stock issued (6,840,361 shares)


329,774Fair value of stock options/awards exchanged (733,077
    options/awards)


20,331Cash consideration

$
    F-34




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeCore technology

$
83,833



13 yearsTrademarks


20,590



10 yearsCustomer relationships


99,060



26 yearsLicense agreement


355



7 yearsNon-compete agreements


5,040



1.5-2 yearsInternally-developed software


200



7 yearsTotal intangible assets with finite lives

$
209,078         Current assets

$
325,804Property, plant and equipment


145,144Goodwill


784,623Intangible assets


663,891In-process research and development


169,000Other non-current assets


102,343Total assets acquired


2,190,805Current liabilities


128,971Non-current liabilities


272,510Total liabilities assumed


401,481Net assets acquired


1,789,324Less:Acquisition costs


68,897Cash settlement of vested stock options


51,503Non-cash income tax benefits on stock options


2,574Fair value of stock options exchanged (753,863 options)


25,879Cash consideration

$
1,640,471  F-35




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)        Amount


Amortizable LifeCore technology

$
237,691



5-19.5 yearsTrademarks


78,100



10.5 yearsCustomer relationships


348,100



1.5-22.5 yearsTotal intangible assets with finite lives

$
663,891         Current assets

$
9,012Property, plant and equipment


141Goodwill


43,321Intangible assets


28,520Total assets acquired


80,994Current liabilities


4,273Non-current liabilities


15,947Total liabilities assumed


20,220Net assets acquired


60,774Less:Acquisition costs


348Fair value of common stock issued (463,399 shares)


21,530Cash consideration

$
38,896      F-36




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeTrademarks

$
3,170



5 yearsCustomer relationships


25,350



12 yearsTotal intangible assets with finite lives

$
28,520       
    Matritech, Inc., or Matritech, located in Newton, Massachusetts
    and Freiburg, Germany, a biotechnology company principally
    engaged in the development, manufacturing, marketing,
    distribution and licensing of cancer diagnostic technologies and
    products (Acquired December 2007)
    Aska Diagnostic, Inc., or Aska, located in Tokyo, Japan, a
    distributor of professional diagnostics in Japan (Acquired
    December 2007)
    90.91% share in Biosystems S.A., or Biosystems, located in Cali
    and Bogota, Colombia, a distributor of diagnostics tests,
    instruments and reagents throughout Colombia (Acquired December
    2007). In October 2008, we acquired the remaining 9.09% interest
    in Biosystems
    the assets of Akubio, a research company located in Cambridge,
    England (Acquired October 2007)
    Bio-Stat Healthcare Group, or Bio-Stat, located in Cheshire,
    United Kingdom, a privately-owned distributor of core laboratory
    and
    point-of-care
    diagnostic testing products to the U.K. marketplace (Acquired
    October 2007)
    Spectral Diagnostics Private Limited and its affiliate Source
    Diagnostics (India) Private Limited, or Spectral/Source, located
    in New Delhi and Shimla, India, distributes professional
    diagnostics in India (Acquired July 2007)
    52.45% share in Diamics, Inc., or Diamics, located in Novato,
    California, a developer of molecular-based cancer screening and
    diagnostic systems (Acquired July 2007)
    Quality Assured Services, Inc., or QAS, located in Orlando,
    Florida, a privately-owned provider of diagnostic home tests and
    services in the U.S. marketplace (Acquired June 2007)
    Orange Medical, or Orange, located in Tilburg, The Netherlands,
    a manufacturer and marketer of rapid diagnostic products to the
    Benelux marketplace (Acquired May 2007)
    Promesan S.r.l., or Promesan, located in Milan, Italy, a
    distributor of
    point-of-care
    diagnostic testing products to the Italian marketplace (Acquired
    January 2007) F-37




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)   
    First Check Diagnostics LLC, or First Check, located in Lake
    Forrest, California, a privately-held diagnostics company in the
    field of home testing for drugs of abuse, including marijuana,
    cocaine, methamphetamines and opiates (Acquired January 2007)
    the assets of Nihon Schering K.K., or NSKK, located in Japan, a
    diagnostic distribution business (Acquired January 2007)
    Gabmed GmbH, or Gabmed, located in Nettetal, Germany, a
    distributor of
    point-of-care
    diagnostic testing products in the German marketplace (Acquired
    January 2007)
    Med-Ox Chemicals Limited, or Med-Ox, located in Ottawa, Canada,
    a distributor of professional diagnostic testing products in the
    Canadian marketplace (Acquired January 2007)    Current assets

$
38,518Property, plant and equipment


4,145Goodwill


110,556Intangible assets


74,557In-process research and development


4,826Other non-current assets


183Total assets acquired


232,785Current liabilities


29,100Non-current liabilities


18,786Total liabilities assumed


47,886Net assets acquired


184,899Less:Acquisition costs


4,491Realized foreign currency gain


1,879Accrued earned milestones


194Fair value of common stock issued (1,017,244 shares)


54,111Cash consideration

$
124,224      F-38




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)    Amount


Amortizable LifeCore technology

$
4,234



7.0-13.5 yearsSupplier relationships


3,882



15 yearsTrademarks


9,278



2-10 yearsLicense agreements


920



15 yearsCustomer relationships


53,294



10-20 yearsNon-compete agreements


801



3-4 yearsInternally-developed software


1,910



7 yearsTotal intangible assets with finite lives


74,319Trademark


238



N/ATotal intangible assets with indefinite lives


238Total intangible assets

$
74,557   (d) Restructuring Plans Related to Business
    Combinations
    Severance


Facility


Total ExitRelated


And Other


ActivitiesBalance at December 31, 2006

$
1,494


$
789


$
2,283Acquisitions


19,823



1,327



21,150Payments


(6,763
)


(218
)


(6,981
)Currency adjustments


25







25Balance at December 31, 2007


14,579



1,898



16,477Acquisitions


19,561



3,897



23,458Payments


(23,407
)


(854
)


(24,261
)Currency adjustments


(385
)


(15
)


(400
)Balance at December 31, 2008


10,348



4,926



15,274Adjustments to prior year acquisitions


203



5,317



5,520Payments


(5,182
)


(3,243
)


(8,425
)Currency adjustments






2



2Balance at December 31, 2009

$
5,369


$
7,002


$
12,371      F-39




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)                   F-40




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)          (e) Pro Forma Financial Information
      2009


2008(unaudited)Pro forma net revenue

$
1,937,529


$
1,740,825Pro forma net income (loss)

$
34,049


$
(29,199
)Pro forma net income (loss) per common share  basic(1)

$
0.14


$
(0.62
)Pro forma net income (loss) per common share 
    diluted(1)

$
0.14


$
(0.62
)     (1)
    
    Net income (loss) per common share amounts are computed as
    described in Note 14.   (5)
    Goodwill
    and Other Intangible Assets    Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


Value


Useful LifeAmortized intangible assets:Core technology and patents

$
558,036


$
136,317


$
421,719



1-20 yearsOther intangible assets:Supplier relationships


18,939



11,781



7,158



1.8-15 yearsTrademarks and trade names


174,856



37,720



137,136



2-25 years F-41




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (5)
    Goodwill and Other Intangible Assets (Continued)  Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


Value


Useful LifeLicense agreements


10,825



9,881



944



5-8.5 yearsCustomer relationships


1,395,786



343,728



1,052,058



1.5-26 yearsManufacturing know-how


7,259



4,190



3,069



5-15 yearsOther


103,642



39,299



64,343



0.5-11 yearsTotal other intangible assets


1,711,307



446,599



1,264,708Total intangible assets with finite lives

$
2,269,343


$
582,916


$
1,686,427Intangible assets with indefinite lives:Goodwill

$
3,463,358


$



$
3,463,358Other intangible assets(1)


43,644







43,644Total intangible assets with indefinite lives

$
3,507,002


$



$
3,507,002     (1)
    
    Primarily includes trademarks and trade names.    Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


Value


Useful LifeAmortized intangible assets:Core technology and patents

$
547,816


$
88,509


$
459,307



1-20 yearsOther intangible assets:Supplier relationships


17,167



10,477



6,690



1.8-15 yearsTrademarks and trade names


142,867



22,028



120,839



2-25 yearsLicense agreements


10,445



9,655



790



5-8.5 yearsCustomer relationships


1,151,893



175,150



976,743



1.5-26 yearsManufacturing know-how


7,208



3,825



3,383



5-15 yearsOther


78,469



20,378



58,091



0.5-11 yearsTotal other intangible assets


1,408,049



241,513



1,166,536Total intangible assets with finite lives

$
1,955,865


$
330,022


$
1,625,843Intangible assets with indefinite lives:Goodwill

$
3,045,883


$



$
3,045,883Other intangible assets(1)


42,909







42,909Total intangible assets with indefinite lives

$
3,088,792


$



$
3,088,792     (1)
    
    Primarily includes trademarks and trade names.   F-42




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (5)
    Goodwill and Other Intangible Assets (Continued)      2010

$
270,6552011

$
231,7922012

$
196,0352013

$
164,8162014

$
143,373       Professional


Health


ConsumerDiagnostics


Management


Diagnostics


TotalGoodwill at December 31, 2007

$
1,634,600


$
463,066


$
50,984


$
2,148,650Acquisitions(1)


93,473



817,113



1,497



912,083Other(2)


(14,850
)










(14,850
)Goodwill at December 31, 2008

$
1,713,223


$
1,280,179


$
52,481


$
3,045,883Acquisitions(1)


262,567



141,964







404,531Other(2)


13,133



62



(251
)


12,944Goodwill at December 31, 2009

$
1,988,923


$
1,422,205


$
52,230


$
3,463,358     (1)
    
    Includes initial purchase price allocation, purchase accounting
    adjustments recorded to the acquired entities opening
    balance sheet and additional payments made for earn-outs and
    milestones achieved.(2)
    
    These amounts relate primarily to adjustments resulting from
    fluctuations in foreign currency exchange rates.   F-43




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (5)
    Goodwill and Other Intangible Assets (Continued)    (6)
    Long-term
    Debt    December 31,2009


2008First Lien Credit Agreement  Term loans

$
951,000


$
960,750First Lien Credit Agreement  Revolving
    line-of-credit


142,000



142,000Second Lien Credit Agreement


250,000



250,0003% Senior subordinated convertible notes


150,000



150,0009% Senior subordinated notes


388,278



7.875% Senior notes


243,959



Lines-of-credit


2,902



3,503Other


19,346



13,3622,147,485



1,519,615Less: Current portion


(18,970
)


(19,058
)$
2,128,515


$
1,500,557     (a) First Lien Credit Agreement and Second Lien Credit
    Agreement
  line-of-credit. line-of-credit line-of-credit
   F-44




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)  line-of-credit
      (b) 3% Senior Subordinated Convertible Notes,
    Principal Amount $150.0 million
    (c) 9% Senior Subordinated Notes
       F-45




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)              (d) 7.875% Senior Notes
   F-46




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)               F-47




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)      (e) Prior Senior Credit Facility
    (f) Senior Subordinated Notes, 8.75%, Principal Amount
    $150.0 million
    (g) Lines-of-credit
  line-of-credit lines-of-credit.
  (h) Other Debt
   F-48




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)  (i) Maturities of Long-term Debt
    2010

$
18,9702011


12,3722012


10,3822013


152,0052014


912,000Thereafter


1,059,5192,165,248Less: Original issue discounts


(17,763
)$
2,147,485    (7)
    Fair
    Value Measurements      Level 1
  Level 2
  Level 3
 F-49




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (7)
    Fair Value Measurements (Continued)    Quoted Prices in


Significant OtherDecember 31,


Active Markets


Observable Inputs


Unobservable InputsDescription

2009


(Level 1)


(Level 2)


(Level 3)Assets:Marketable securities

$
2,450


$
2,450


$



$
Total assets

$
2,450


$
2,450


$



$
Liabilities:Interest rate swap liability(1)

$
15,945


$



$
15,945


$
Contingent consideration obligations(2)


43,178











43,178Total liabilities

$
59,123


$



$
15,945


$
43,178     (1)
    
    Included in other long-term liabilities on our accompanying
    consolidated balances sheets.(2)
    
    The fair value measurement of the contingent consideration
    obligations related to the acquisitions of Accordant,
    Free & Clear, JSM, Mologic and Tapestry are valued
    using Level 3 inputs. We determine the fair value of the
    contingent consideration obligations based on a
    probability-weighted approach derived from earn-out criteria
    estimates and a probability assessment with respect to the
    likelihood of achieving the various earn-out criteria. The
    measurement is based upon significant inputs not observable in
    the market. Changes in the value of these contingent
    consideration obligations are recorded as income or expense, a
    component of operating income in our accompanying consolidated
    statements of operations.    Fair value of contingent consideration obligations,
    January 1, 2009

$
Acquisition date fair value of contingent consideration
    obligations recorded


41,359Payments


Adjustments, net (income) expense


1,819Fair value of contingent consideration obligations,
    December 31, 2009

$
43,178      F-50




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (7)
    Fair Value Measurements (Continued)    (8)
    Capital
    Leases    2010

$
9202011


6582012


1792013


822014


18Total future minimum lease payments


1,857Less: Imputed interest


(18
)Present value of future minimum lease payments


1,839Less: Current portion


(899
)$
940     Machinery, laboratory equipment and tooling

$
2,917Computer equipment


217Furniture and fixtures


43Leasehold improvements


573,234Less: Accumulated amortization


(1,183
)$
2,051      (9)
    Postretirement
    Benefit Plans  (a) Employee Savings Plans
  U.S.-based
 F-51




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (9)
    Postretirement Benefit Plans (Continued)  (b) U.K. Pension Plans
    2009


2008Change in projected benefit obligationBenefit obligation at beginning of year

$
9,078


$
12,627Interest cost


596



677Actuarial loss


1,990



534Benefits paid


(127
)


(182
)Curtailment loss (gain)


313



(1,113
)Foreign exchange impact


1,059



(3,465
)Benefit obligation at end of year

$
12,909


$
9,078Change in accumulated benefit obligationBenefit obligation at beginning of year

$
6,567


$
9,159Interest cost


596



677Actuarial loss


1,990



534Benefits paid


(127
)


(182
)Curtailment loss (gain)


313



(1,113
)Foreign exchange impact


784



(2,508
)Benefit obligation at end of year

$
10,123


$
6,567Change in plan assetsFair value of plan assets at beginning of year

$
5,928


$
9,143Actual return on plan assets


1,477



(1,543
)Employer contribution


854



835Benefits paid


(127
)


(182
)Foreign exchange impact


701



(2,325
)Fair value of plan assets at end of year

$
8,833


$
5,928Funded status at end of year

$
(4,076
)

$
(3,150
)     2009


2008Accrued benefit liability

$
(1,250
)

$
(603
)Long-term benefit liability


(7,080
)


(5,498
)Intangible asset


4,254



2,951Net amount recognized

$
(4,076
)

$
(3,150
)    F-52




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (9)
    Postretirement Benefit Plans (Continued)    2009


2008Assumptions used to determine benefit obligations:Discount rate


5.70
%


6.10
%Rate of compensation increase


4.25
%


3.85
%Assumptions used to determine net periodic benefit cost:Discount rate


6.10
%


5.80
%Expected return on plan assets


6.55
%


7.20
%Rate of compensation increase


3.85
%


4.15
%       2009


2008


2007Interest cost

$
596


$
677


$
660Expected return on plan assets


(444
)


(634
)


(620
)Amortization of net loss






(80
)


(90
)Curtailment loss (gain)


313



(1,113
)


Net periodic benefit cost (benefit)

$
465


$
(1,150
)

$
(50
)      F-53




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (9)
    Postretirement Benefit Plans (Continued)    Plan Assets at December 31,Asset Category

2009


2008Equity securities:U.K. equities

$
2,997


$
1,773Overseas equities


3,037



1,955Debt securities  corporate bonds


2,581



1,857Other  cash


218



342Total plan assets

$
8,833


$
5,928      (10)
    Derivative
    Financial Instruments    Fair Value at


Fair Value atDecember 31,


December 31,Derivative Instruments

Balance Sheet Caption

2009


2008Interest rate swap contracts(1)

Other long-term liabilities

$
15,945


$
21,132   Amount of Gain


Amount of LossRecognized


RecognizedDuring the Year


During the YearEnded


EndedLocation of Gain (Loss)

December 31,


December 31,Derivative Instruments

Recognized in Income

2009


2008Interest rate swap contracts(1)

Other comprehensive income (loss)

$
5,187


$
(11,614
)     (1)
    
    See Note 6(a) regarding our interest rate swaps which
    qualify as cash flow hedges.     (11)
    Commitments
    and Contingencies  (a) Operating Leases
 F-54




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)    2010

$
29,6282011


25,5332012


21,1552013


17,6462014


25,493Thereafter


37,105$
156,560     (b) Contingent Consideration Obligations
           F-55




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)                     F-56




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)      2010-2012.
            2010-2011.
 F-57




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)              (c)
    Contingent Obligation  ®
 F-58




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)  (d) Legal Proceedings
  Healthways, Inc. and Robert Bosch North America
    Corp., v. Alere, Inc.
  patents-in-suit
  Claims in the Ordinary Course and Other Matters
         (12)
    Co-development
    Agreement with ITI Scotland Limited   F-59




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (12)
    Co-development Agreement with ITI Scotland Limited
    (Continued)     (13)
    In-Process
    Research and Development        Discount RateUsed inCompany/









EstimatingYear Assets









Cash


Year of ExpectedAcquired

Purchase Price


IPR&D(1)


Programs Acquired

Flows(1)


LaunchDiamics/2007

$
4,000


$
682


PapMap (Pap Screening Methods)


63
%


2009-20101,049


C-Map (Automated Pap Screening)


63
%


2009-20103,094


POC (Point of Care Systems)


63
%


2009-2010$
4,825Biosite/2007

$
1,800,000


$
13,000


Triage Sepsis Panel


15
%


2008-2010156,000


Triage NGAL


15
%


2008-2010$
169,000     (1)
    
    Management assumes responsibility for determining the valuation
    of the acquired IPR&D projects. The fair value assigned to
    IPR&D for each acquisition is estimated by discounting, to
    present value, the cash flows expected once the acquired
    projects have reached technological feasibility. The cash flows
    are F-60




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (13)
    In-Process Research and Development (Continued)  probability adjusted to reflect the risks of advancement through
    the product approval process. In estimating the future cash
    flows, we also considered the tangible and intangible assets
    required for successful exploitation of the technology resulting
    from the purchased IPR&D projects and adjusted future cash
    flows for a charge reflecting the contribution to value of these
    assets.   (14)
    Income
    (Loss) Per Common Share    2009


2008


2007Income (loss) per common share  basic:Numerator  continuing operations:Income (loss) from continuing operations

$
31,782


$
(20,720
)

$
(244,335
)Less: Preferred stock dividends


(22,972
)


(13,989
)


Income (loss) available to common stockholders continuing
    operations

$
8,810


$
(34,709
)

$
(244,335
)Numerator  discontinued operations:Income (loss) from discontinued operations


1,934



(1,048
)


(418
)Numerator  net income (loss):Income (loss) from continuing operations

$
31,782


$
(20,720
)

$
(244,335
)Income (loss) from discontinued operations


1,934



(1,048
)


(418
)Net income (loss)


33,716



(21,768
)


(244,753
)Less: Preferred stock dividends


(22,972
)


(13,989
)


Net income (loss) available to common stockholders

$
10,744


$
(35,757
)

$
(244,753
)Denominator:Weighted average shares outstanding


80,572



77,778



51,510Income (loss) per common share from continuing operations

$
0.11


$
(0.45
)

$
(4.74
)Income (loss) per common share from discontinued operations

$
0.02


$
(0.01
)

$
(0.01
)Net income (loss) per common share

$
0.13


$
(0.46
)

$
(4.75
)   2009


2008


2007Income (loss) per common share  diluted:Numerator continuing operations:Income (loss) from continuing operations

$
31,782


$
(20,720
)

$
(244,335
)Less: Preferred stock dividends


(22,972
)


(13,989
)


Income (loss) available to common stockholders continuing
    operations

$
8,810


$
(34,709
)

$
(244,335
) F-61




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (14)
    Income (Loss) Per Common Share (Continued)  2009


2008


2007Numerator discontinued operations:Income (loss) from discontinued operations

$
1,934


$
(1,048
)

$
(418
)Numerator  net income (loss):Income (loss) from continuing operations

$
31,782


$
(20,720
)

$
(244,335
)Income (loss) from discontinued operations


1,934



(1,048
)


(418
)Net income (loss)

$
33,716


$
(21,768
)

$
(244,753
)Less: Preferred stock dividends


(22,972
)


(13,989
)


Net income (loss) available to common stockholders

$
10,744


$
(35,757
)

$
(244,753
)Denominator:Weighted average shares outstanding


80,572



77,778



51,510Stock options


1,228







Warrants


167







Total shares


81,967



77,778



51,510Income (loss) per common share from continuing operations

$
0.11


$
(0.45
)

$
(4.74
)Income (loss) per common share from discontinued operations

$
0.02


$
(0.01
)

$
(0.01
)Net income (loss) per common share

$
0.13


$
(0.46
)

$
(4.75
)        F-62




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (14)
    Income (Loss) Per Common Share (Continued)     (15)
    Stockholders
    Equity  (a) Common Stock
    (b) Preferred Stock
       F-63




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (15)
    Stockholders Equity (Continued)          (c) Stock Options and Awards
      2009


2008


2007Weighted





Weighted





WeightedAverage





Average





AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceOutstanding at January 1


10,155


$
32.65



7,836


$
31.42



3,775


$
21.11Exchanged


315


$
29.78



1,820


$
30.52



3,606


$
23.48Granted


1,243


$
36.28



1,787


$
34.13



2,807


$
49.53Exercised


(1,319
)

$
17.83



(836
)

$
16.84



(2,204
)

$
23.70 F-64




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (15)
    Stockholders Equity (Continued)  2009


2008


2007Weighted





Weighted





WeightedAverage





Average





AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceCanceled/expired/forfeited


(556
)

$
39.21



(452
)

$
37.75



(148
)

$
33.33Outstanding at December 31


9,838


$
34.72



10,155


$
32.65



7,836


$
31.42Exercisable at December 31


5,902


$
31.71



5,866


$
27.08



3,887


$
20.03     (d) Warrants
    WeightedNumber of





AverageShares


Exercise Price


Exercise Price(in thousands)Warrants outstanding and exercisable, December 31, 2006


306


$
3.81-$24.00


$
16.42Exchanged


285


$
14.52-$29.78


$
28.98Exercised


(122
)

$
13.54-$29.78


$
19.31Warrants outstanding and exercisable, December 31, 2007


469


$
3.81-$29.78


$
20.80Exercised


(12
)

$
13.54-$20.06


$
19.64Warrants outstanding and exercisable, December 31, 2008


457


$
3.81-$29.78


$
20.83Issued


4


$
50.00


$
50.00Warrants outstanding and exercisable, December 31, 2009


461


$
3.81-$50.00


$
21.09     Outstanding and ExercisableWeightedAverage


WeightedNumber of


Remaining


AverageExercise Price

Shares


Contract Life


Exercise Price(in thousands)


(in years)$3.81-$3.93


4



0.48


$
3.87$4.48-$4.57


1



0.54


$
4.54$5.44-$5.57


4



0.58


$
5.53$7.37-$7.55


2



0.66


$
7.48$13.54-$18.12


219



1.97-2.72


$
14.41$20.06-$29.78


152



5.78


$
29.66$24.00


75



5.25


$
24.00 F-65




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (15)
    Stockholders Equity (Continued)  Outstanding and ExercisableWeightedAverage


WeightedNumber of


Remaining


AverageExercise Price

Shares


Contract Life


Exercise Price(in thousands)


(in years)$50.00


4



6.50


$
50.00461



4.05


$
21.09     (e) Employee Stock Purchase Plan
     (16)
    Stock-based
    Compensation    2009


2008


2007Cost of net revenue

$
2,011


$
1,504


$
608Research and development


5,246



4,627



2,215Sales and marketing


4,236



4,264



1,699General and administrative


16,727



16,010



52,958$
28,220


$
26,405


$
57,480        F-66




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (16)
    Stock-based Compensation (Continued)      2009


2008


2007Risk-free interest rate


1.92-2.58
%


2.39-3.14
%


3.15-5.00
%Expected dividend yield










Expected life


5.20 years



5.19 years



6.25 yearsExpected volatility


43-45
%


37-43
%


44
%            (17)
    Other
    Comprehensive Income    Cumulative


Pension





AccumulatedTranslation


Liability





OtherAdjustment


Adjustment





Comprehensive(Note 2(b))


(Note 9(b))


Other(1)


Income (loss)(2)Balance at December 31, 2006


17,875



(3,738
)


44



14,181Period change


12,758



341



(6,011
)


7,088Balance at December 31, 2007


30,633



(3,397
)


(5,967
)


21,269 F-67




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (17)
    Other Comprehensive Income (Continued)  Cumulative


Pension





AccumulatedTranslation


Liability





OtherAdjustment


Adjustment





Comprehensive(Note 2(b))


(Note 9(b))


Other(1)


Income (loss)(2)Period change


(32,889
)


(562
)


(16,663
)


(50,114
)Balance at December 31, 2008


(2,256
)


(3,959
)


(22,630
)


(28,845
)Period change


15,171



(1,137
)


12,357



26,391Balance at December 31, 2009

$
12,915


$
(5,096
)

$
(10,273
)

$
(2,454
)     (1)
    
    Other represents (realization of) unrealized gains on
    available-for-sale
    securities and interest rate swap.(2)
    
    All of the components of accumulated other comprehensive income
    relate to our foreign subsidiaries, except item (1) above.
    No adjustments for income taxes were recorded against other
    comprehensive income of our foreign subsidiaries, as we intend
    to permanently invest in our foreign subsidiaries in the
    foreseeable future.   (18)
    Income
    Taxes    Continuing
    Operations:
  2009


2008


2007United States

$
(14,032
)

$
(52,805
)

$
(236,487
)Foreign


54,280



14,558



(11,868
)$
40,248


$
(38,247
)

$
(248,355
)   Discontinued
    Operations:
  2009


2008


2007United States

$
2,069


$
(107
)

$
180Foreign


33



(983
)


(528
)$
2,102


$
(1,090
)

$
(348
)     2009


2008NOL and capital loss carryforwards

$
96,355


$
102,484Tax credit carryforwards


26,316



15,884Nondeductible reserves


16,151



9,488Nondeductible accruals


39,505



67,142 F-68




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (18)
    Income Taxes (Continued)  2009


2008Difference between book and tax bases of tangible assets


13,662



3,133Difference between book and tax bases of intangible assets


38,956



35,986Gain on joint venture


33,709



33,264All other


30,476



1,162Gross deferred tax asset


295,130



268,543Less: Valuation allowance


(37,524
)


(12,740
)Total deferred tax assets


257,606



255,803Deferred tax liabilities:Difference between book and tax bases of tangible assets


32,248



10,824Difference between book and tax bases of intangible assets


571,611



588,766Other


8,317



366Total deferred tax liability


612,176



599,956Net deferred tax liability

$
354,570


$
344,153Reported as:Deferred tax assets, current portion

$
66,492


$
104,311Deferred tax assets, long-term


20,987



14,323Deferred tax liabilities, current portion






Deferred tax liabilities, long-term


(442,049
)


(462,787
)Net deferred tax liability

$
(354,570
)

$
(344,153
)      F-69




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (18)
    Income Taxes (Continued)            2009


2008


2007Current:Federal

$
(1,409
)

$
7,433


$
2,434State


2,435



7,250



2,073Foreign


23,725



10,387



22,40624,751



25,070



26,913Deferred:Federal


8,170



(5,859
)


(5,024
)State


(3,017
)


(4,233
)


(1,530
)Foreign


(14,277
)


(31,622
)


(21,408
)(9,124
)


(41,714
)


(27,962
)Total tax (benefit) provision

$
15,627


$
(16,644
)

$
(1,049
)  F-70




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (18)
    Income Taxes (Continued)    2009


2008


2007Current:Federal

$



$



$
State










Foreign


















Deferred:Federal


738



(38
)


63State


(269
)


(4
)


7Foreign


(301
)


0



0168



(42
)


70Total tax (benefit) provision

$
168


$
(42
)

$
70     2009


2008


2007Statutory rate


35
%


35
%


35
%Effect of Biosite in-process R&D write-off










(24
)Effect of Diamics in-process R&D write-off










(1
)Effect of Biosite compensation charges and other non-cash
    compensation










(6
)Effect of losses and expenses not benefited










Stock-based compensation


10



(10
)


Rate differential on foreign earnings


(8
)


3



Research and development benefit


(4
)


6



1State income taxes, net of federal benefit






2



(1
)Acquisition costs


6







Deferred tax on indefinite-lived assets










Accrual to return reconciliation










Other permanent items


3



(4
)


1Change in valuation allowance


(3
)


11



(4
)Effective tax rate


39
%


43
%


1
%    F-71




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (18)
    Income Taxes (Continued)      AmountBalances as of January 1, 2007

$
2,248Additions for tax positions taken during prior years


53Additions for tax positions in current year acquisitions


6,229Additions for tax positions taken during current year


235Expiration of statutes of limitations or closure of tax audits


Balances as of December 31, 2007


8,765Additions for tax positions taken during prior years


63Additions for tax positions in current and prior year
    acquisitions


2,296Additions for tax positions taken during current year


143Expiration of statutes of limitations or closure of tax audits


(134
)Balances as of December 31, 2008


11,133Reductions for tax positions taken during prior years


(728
)Reductions for tax positions in current and prior year
    acquisitions


(3,535
)Additions for tax positions taken during current year


360Expiration of statutes of limitations or closure of tax audits


(2,325
)Balance as of December 31, 2009

$
4,905     non-U.S. income
   (19)
    Financial
    Information by Segment   F-72




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (19)
    Financial Information by Segment (Continued)        CorporateProfessional


Health


Consumer


and2009

Diagnostics


Management


Diagnostics


Other


TotalNet revenue to external customers

$
1,263,511


$
521,947


$
137,183


$



$
1,922,641Operating income (loss)

$
235,412


$
(6,829
)

$
(2,008
)

$
(80,525
)

$
146,050Depreciation and amortization

$
187,907


$
116,800


$
6,637


$
1,091


$
312,435Restructuring charge

$
14,536


$
2,291


$
563


$



$
17,390Stock-based compensation

$



$



$



$
28,220


$
28,220Assets

$
4,261,716


$
2,031,260


$
219,647


$
431,369


$
6,943,992Expenditures for property, plant and equipment

$
45,588


$
50,871


$
3,536


$
611


$
100,606   CorporateProfessional


Health


Consumer


and2008

Diagnostics


Management


Diagnostics


Other


TotalNet revenue to external customers

$
1,051,301


$
392,399


$
138,853


$



$
1,582,553Operating income (loss)

$
97,994


$
11,241


$
9,505


$
(54,048
)

$
64,692Depreciation and amortization

$
171,980


$
85,990


$
6,821


$
863


$
265,654Restructuring charge

$
36,196


$



$
238


$



$
36,434Stock-based compensation

$



$



$



$
26,405


$
26,405Assets

$
3,687,685


$
1,850,236


$
223,383


$
194,056


$
5,955,360Expenditures for property, plant and equipment

$
46,859


$
7,935


$
1,917


$
8,988


$
65,699   CorporateProfessional


Health


Consumer


and2007

Diagnostics


Management


Diagnostics


Other


TotalNet revenue to external customers

$
582,250


$
23,374


$
161,092


$



$
766,716Operating income (loss)

$
61,067


$
(498
)

$
15,332


$
(250,693
)

$
(174,792
) F-73




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (19)
    Financial Information by Segment (Continued)  CorporateProfessional


Health


Consumer


and2007

Diagnostics


Management


Diagnostics


Other


TotalDepreciation and amortization

$
82,797


$
4,487


$
8,892


$
1,806


$
97,982Restructuring charge

$
3,965


$



$
2,737


$



$
6,702Stock-based compensation

$



$



$



$
57,480


$
57,480Expenditures for property, plant and equipment

$
30,581


$
2,257


$
1,434


$
1,559


$
35,831   2009


2008


2007Revenue by Geographic Area:United States

$
1,329,747


$
1,121,477


$
463,390Europe


316,623



285,696



194,739Other


276,271



175,380



108,587$
1,922,641


$
1,582,553


$
766,716   2009


2008Long-lived Tangible Assets by Geographic Area:United States

$
238,475


$
212,445United Kingdom


15,807



12,113China


22,112



19,491Other


47,994



30,429$
324,388


$
274,478    (20) Related
    Party Transactions
     F-74




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (20)
    Related Party Transactions (Continued)           (21)
    Valuation
    and Qualifying Accounts    AmountsBalance at





Charged


Balance atBeginning of





Against


End ofPeriod


Provision


Reserves


PeriodYear ended December 31, 2007

$
5,324


$
18,841


$
(17,318
)

$
6,847Year ended December 31, 2008

$
6,847


$
9,328


$
(6,214
)

$
9,961Year ended December 31, 2009

$
9,961


$
9,314


$
(6,813
)

$
12,462  F-75




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (21)
    Valuation and Qualifying Accounts (Continued)    AmountsBalance at





Charged


Balance atBeginning of





Against


End ofPeriod


Provision


Reserves


PeriodYear ended December 31, 2007

$
6,879


$
6,371


$
(6,613
)

$
6,637Year ended December 31, 2008

$
6,637


$
8,023


$
(5,042
)

$
9,618Year ended December 31, 2009

$
9,618


$
6,954


$
(3,940
)

$
12,632    (22)
    Restructuring
    Activities    2009


2008


2007Cost of net revenue

$
9,451


$
17,894


$
2,007Research and development


1,076



7,230



2,518Sales and marketing


1,856



4,219



772General and administrative


5,009



7,091



1,405$
17,392


$
36,434


$
6,702   (a) 2009 Restructuring Plans
    (b) 2008 Restructuring Plans
   F-76




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (22)
    Restructuring Activities (Continued)           F-77




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (22)
    Restructuring Activities (Continued)  point-of-care
         F-78




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (22)
    Restructuring Activities (Continued)      (c) 2007 Restructuring Plans
      (d) 2006 Restructuring Plans
   F-79




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (22)
    Restructuring Activities (Continued)    (e) Restructuring Reserves
    Balance at


Additions








Balance atBeginning


to the


Amounts





End ofof Period


Reserve


Paid


Other(1)


PeriodYear ended December 31, 2007

$
1,565


$
2,828


$
(3,264
)

$
(6
)

$
1,123Year ended December 31, 2008

$
1,123


$
25,642


$
(9,148
)

$
(2,823
)

$
14,794Year ended December 31, 2009

$
14,794


$
22,730


$
(18,021
)

$
(597
)

$
18,906     (1)
    
    Represents foreign currency translation adjustment.   (23)
    Equity
    Investments  Investments  Equity Methods and Joint Ventures,
      (ii)
    TechLab    (iii)
    Vedalab   F-80




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (23)
    Equity Investments (Continued)      Combined condensed results of operations:
  For The Years Ended December 31,2009


2008


2007Net revenue

$
203,812


$
204,912


$
122,305Gross profit

$
134,351


$
108,979


$
62,011Net income after taxes

$
14,821


$
1,209


$
8,183   Combined condensed balance sheets:
  As of December 31,2009


2008Current assets

$
87,880


$
78,752Non-current assets


26,881



25,269Total assets

$
114,761


$
104,021Current liabilities

$
61,959


$
59,655Non-current liabilities


1,492


$
847Total liabilities

$
63,451


$
60,502    (24) Gain
    on Disposition
     (25) Discontinued
    Operations
   F-81




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (25)
    Discontinued Operations (continued)    December 31,2009


2008AssetsAccounts receivable, net of allowances of $2,919 and $2,874 at
    December 31, 2009 and 2008, respectively

$
21,100


$
19,239Inventories, net


21,500



25,546Prepaid expenses and other current assets


160



201Property, plant and equipment, net


8,368



10,005Goodwill


200



200Other intangible assets with indefinite lives


135



75Other intangible assets, net


2,581



2,794Other non-current assets


104



106Total assets held for sale

$
54,148


$
58,166LiabilitiesAccounts payable

$
8,299


$
16,122Accrued expenses and other current liabilities


3,230



3,042Other long-term liabilities


29



29Total liabilities related to assets held for sale

$
11,558


$
19,193     2009


2008


2007Net revenue


99,517



88,873



72,824Income (loss) from discontinued operations before income taxes


2,102



(1,090
)


(348
)Provision (benefit) for income taxes


168



(42
)


70Net income (loss) from discontinued operations


1,934



(1,048
)


(418
)    (26)
    Supplemental
    Cash Flow Information  Cash Paid for Interest and Income Taxes:
     F-82




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (26)
    Supplemental Cash Flow Information (Continued)  Non-cash
    Investing Activities:
    Employee Stock Options/Restricted Stock AwardsCommon Stock Issued


ExchangedNumber of


Fair Value of


Number of


Fair Value ofCompany Acquired

Date of Acquisition

Shares


Shares


Shares


SharesMologic Limited

October 6, 2009


128,513


$
5,115






$
Concateno plc

August 11, 2009


2,091,800


$
70,218



315,227


$
2,881GeneCare Medical Genetics Center, Inc.

July 1, 2009


4,000


$
57






$
ACON Second Territory Business

April 30, 2009


1,210,842


$
42,427






$
Matria Healthcare, Inc.

May 9, 2008





$




1,490,655


$
17,334BBI Holdings Plc

February 12, 2008


251,085


$
14,397



355,238


$
3,639Matritech, Inc.

December 12, 2007


616,671


$
35,592






$
Biosystems S.A.

December 11, 2007


33,373


$
1,948






$
Alere Medical, Inc.

November 16, 2007


2,762,182


$
161,086



380,894


$
20,614HemoSense, Inc.

November 6, 2007


3,691,369


$
226,415



380,732


$
16,695Cholestech Corporation

September 12, 2007


6,840,361


$
329,774



733,077


$
20,331Spectral Diagnostics Private Limited(1)

July 27, 2007


93,558


$
3,737






$
Biosite Incorporated(2)

June 29, 2007





$




753,863


$
28,453Quality Assured Services, Inc.

June 7, 2007


273,642


$
12,834






$
Instant Technologies, Inc.

December 28, 2007


463,399


$
21,530






$
     (1)
    
    The acquisition of Spectral Diagnostics Private Limited also
    included its affiliate Source Diagnostics (India) Private
    Limited.(2)
    
    The value includes $2.6 million associated with net
    operating loss carryforwards related to stock options issued to
    Biosite Incorporated employees.  Non-cash
    Financing Activities:
     (27)
    Subsequent
    Event   Form 10-K
 F-83




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (27)
    Subsequent Event (continued)       (28)
    Guarantor
    Financial Information      F-84




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    STATEMENT OF OPERATIONS
    For the Year Ended December 31, 2009
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet product sales

$



$
877,135


$
597,266


$
(109,322
)

$
1,365,079Services revenue






521,509



6,978







528,487License and royalty revenue






6,441



26,470



(3,836
)


29,075Net revenue






1,405,085



630,714



(113,158
)


1,922,641Cost of net product sales


4,069



429,336



333,842



(147,744
)


619,503Cost of services revenue


700



236,016



3,310







240,026Cost of license and royalty revenue






(16
)


12,742



(3,836
)


8,890Cost of net revenue


4,769



665,336



349,894



(151,580
)


868,419Gross profit


(4,769
)


739,749



280,820



38,422



1,054,222Operating expenses:Research and development


27,503



59,137



26,208







112,848Sales and marketing


8,239



310,986



122,421







441,646General and administrative


68,909



213,346



74,778







357,033Gain on dispositions


(2,682
)






(673
)






(3,355
)Operating (loss) income


(106,738
)


156,280



58,086



38,422



146,050Interest expense, including amortization and write-off of
    deferred financing costs


(102,627
)


(50,261
)


(11,505
)


57,595



(106,798
)Other income (expense), net


55,476



(4,584
)


7,699



(57,595
)


996(Loss) income from continuing operations before (benefit)
    provision for income taxes


(153,889
)


101,435



54,280



38,422



40,248(Benefit) provision for income taxes


(31,695
)


36,144



10,987



191



15,627(Loss) income from continuing operations before equity
    earnings (loss) of unconsolidated entities, net of tax


(122,194
)


65,291



43,293



38,231



24,621Equity in earnings of subsidiaries, net of tax


155,725











(155,725
)


Equity earnings of unconsolidated entities, net of tax


1,747







5,972



(93
)


7,626Income (loss) from continuing operations


35,278



65,291



49,265



(117,587
)


32,247Income (loss) from discontinued operations, net of tax


(1,097
)


2,689



334



8



1,934Net income (loss)


34,181



67,980



49,599



(117,579
)


34,181Less: Net income attributable to non-controlling interests










465







465Net income (loss) attributable to Inverness Medical
    Innovations, Inc. and subsidiaries


34,181



67,980



49,134



(117,579
)


33,716Preferred stock dividends


(22,972
)














(22,972
)Net income (loss) available to common stockholders

$
11,209


$
67,980


$
49,134


$
(117,579
)

$
10,744  F-85




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    STATEMENT OF OPERATIONS
    For the Year Ended December 31, 2008
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet product sales

$



$
782,085


$
485,091


$
(115,911
)

$
1,151,265Services revenue






402,758



2,704







405,462License and royalty revenue






15,536



10,290







25,826Net revenue






1,200,379



498,085



(115,911
)


1,582,553Cost of net product sales


2,541



368,178



285,862



(113,264
)


543,317Cost of services revenue


77



176,421



600







177,098Cost of license and royalty revenue






3,759



6,438



(1,577
)


8,620Cost of net revenue


2,618



548,358



292,900



(114,841
)


729,035Gross profit


(2,618
)


652,021



205,185



(1,070
)


853,518Operating expenses:Research and development


27,709



50,631



33,488







111,828Sales and marketing


37,183



254,261



90,363



132



381,939General and administrative


59,784



167,509



67,766







295,059Operating (loss) income


(127,294
)


179,620



13,568



(1,202
)


64,692Interest expense, including amortization and write-off of
    deferred financing costs


(90,328
)


(72,435
)


(15,986
)


77,617



(101,132
)Other income (expense), net


78,604



(16,281
)


13,442



(77,572
)


(1,807
)(Loss) income from continuing operations before (benefit)
    provision for income taxes


(139,018
)


90,904



11,024



(1,157
)


(38,247
)(Benefit) provision for income taxes


(63,152
)


46,709



(201
)






(16,644
)(Loss) income from continuing operations before equity
    earnings (loss) of unconsolidated entities, net of tax


(75,866
)


44,195



11,225



(1,157
)


(21,603
)Equity in earnings of subsidiaries, net of tax


52,743











(52,743
)


Equity earnings of unconsolidated entities, net of tax


1,522



(23
)


(379
)


(70
)


1,050Income (loss) from continuing operations


(21,601
)


44,172



10,846



(53,970
)


(20,553
)Income (loss) from discontinued operations, net of tax






(112
)


(891
)


(45
)


(1,048
)Net income (loss)


(21,601
)


44,060



9,955



(54,015
)


(21,601
)Less: Net income attributable to non-controlling interests










167







167Net income (loss) attributable to Inverness Medical
    Innovations, Inc. and subsidiaries


(21,601
)


44,060



9,788



(54,015
)


(21,768
)Preferred stock dividends


(13,989
)














(13,989
)Net income (loss) available to common stockholders

$
(35,590
)

$
44,060


$
9,788


$
(54,015
)

$
(35,757
)  F-86




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    STATEMENT OF OPERATIONS
    For the Year Ended December 31, 2007
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet product sales

$
10,494


$
482,171


$
318,590


$
(83,164
)

$
728,091Services revenue






14,164



2,482







16,646License and royalty revenue






14,047



17,962



(10,030
)


21,979Net revenue


10,494



510,382



339,034



(93,194
)


766,716Cost of net product sales


27,208



230,491



201,164



(93,318
)


365,545Cost of services revenue






5,261











5,261Cost of license and royalty revenue






1,380



7,769







9,149Cost of net revenue


27,208



237,132



208,933



(93,318
)


379,955Gross profit


(16,714
)


273,250



130,101



124



386,761Operating expenses:Research and development


6,614



27,910



35,023







69,547Purchase of in-process research and development


169,000







4,825







173,825Sales and marketing


25,395



93,430



44,203







163,028General and administrative


78,499



40,298



36,356







155,153Operating (loss) income


(296,222
)


111,612



9,694



124



(174,792
)Interest expense, including amortization and write-off of
    deferred financing costs


(77,201
)


(49,892
)


(21,099
)


65,205



(82,987
)Other income (expense), net


71,183



3,979



(573
)


(65,165
)


9,424(Loss) income from continuing operations before (benefit)
    provision for income taxes


(302,240
)


65,699



(11,978
)


164



(248,355
)(Benefit) provision for income taxes


(12,949
)


9,631



2,269







(1,049
)(Loss) income from continuing operations before equity
    earnings (loss) of unconsolidated entities, net of tax


(289,291
)


56,068



(14,247
)


164



(247,306
)Equity in earnings of subsidiaries, net of tax


44,870











(44,870
)


Equity earnings of unconsolidated entities, net of tax


1,069







3,348



(45
)


4,372Income (loss) from continuing operations


(243,352
)


56,068



(10,899
)


(44,751
)


(242,934
)Income (loss) from discontinued operations, net of tax






195



(528
)


(85
)


(418
)Net income (loss)


(243,352
)


56,263



(11,427
)


(44,836
)


(243,352
)Less: Net income attributable to non-controlling interests


(243
)






476



1,168



1,401Net income (loss) attributable to Inverness Medical
    Innovations, Inc. and subsidiaries

$
(243,109
)

$
56,263


$
(11,903
)

$
(46,004
)

$
(244,753
)  F-87




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    BALANCE SHEET
    December 31, 2009
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
294,137


$
82,602


$
116,034


$



$
492,773Restricted cash






1,576



848







2,424Marketable securities






947











947Accounts receivable, net of allowances






197,442



169,291



(12,280
)


354,453Inventories, net






122,062



106,544



(7,067
)


221,539Deferred tax assets


36,907



27,947



1,638







66,492Income tax receivable






1,107











1,107Receivable from joint venture, net










1,637



(1,637
)


Prepaid expenses and other current assets


8,160



15,990



36,645



12,280



73,075Assets held for sale






53,545



603







54,148Intercompany receivables


861,596



329,771



12,500



(1,203,867
)


Total current assets


1,200,800



832,989



445,740



(1,212,571
)


1,266,958Property, plant and equipment, net


1,646



241,732



86,034



(5,024
)


324,388Goodwill


2,187,411



595,612



685,674



(5,339
)


3,463,358Other intangible assets with indefinite lives


700



21,120



21,824







43,644Core technology and patents, net


23,242



319,047



79,430







421,719Other intangible assets, net


79,609



866,104



318,995







1,264,708Deferred financing costs, net, and other non-current assets


43,368



5,640



23,754







72,762Investments in unconsolidated entities


1,525,927



367



38,443



(1,500,772
)


63,965Marketable securities


1,503















1,503Deferred tax assets










20,987







20,987Intercompany notes receivable


1,296,373



83,510







(1,379,883
)


Total assets

$
6,360,579


$
2,966,121


$
1,720,881


$
(4,103,589
)

$
6,943,992LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
9,750


$
2,392


$
6,828


$



$
18,970Current portion of capital lease obligations






499



400







899Accounts payable


2,580



63,204



60,538







126,322Accrued expenses and other current liabilities


(128,488
)


278,203



130,017







279,732Payable to joint venture, net






(1,242
)


3,412



(1,637
)


533Liabilities related to assets held for sale






11,556



2







11,558Intercompany payables


306,869



275,316



621,683



(1,203,868
)


Total current liabilities


190,711



629,928



822,880



(1,205,505
)


438,014Long-term liabilities:Long-term debt, net of current portion


2,125,006







3,509







2,128,515Capital lease obligations, net of current portion






698



242







940Deferred tax liabilities


(35,999
)


423,303



54,745







442,049Deferred gain on joint venture


16,309







272,458







288,767Other long-term liabilities


68,464



16,603



31,751







116,818Intercompany notes payable


503,064



746,456



127,822



(1,377,342
)


Total long-term liabilities


2,676,844



1,187,060



490,527



(1,377,342
)


2,977,089Equity


3,493,024



1,149,133



407,474



(1,520,742
)


3,528,889Total liabilities and equity

$
6,360,579


$
2,966,121


$
1,720,881


$
(4,103,589
)

$
6,943,992  F-88




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    BALANCE SHEET
    December 31, 2008
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
1,743


$
69,798


$
69,783


$



$
141,324Restricted cash






1,160



1,588







2,748Marketable securities






1,347



416







1,763Accounts receivable, net of allowances






180,324



97,281



(16,236
)


261,369Inventories, net






106,539



71,311



(4,265
)


173,585Deferred tax assets


80,926



22,334



1,051







104,311Income tax receivable






2,792



3,614







6,406Receivable from joint venture, net










15,227



(3,209
)


12,018Prepaid expenses and other current assets


10,887



20,007



26,903



16,236



74,033Assets held for sale






57,794



372







58,166Intercompany receivables


455,746



248,177



75,686



(779,609
)


Total current assets


549,302



710,272



363,232



(787,083
)


835,723Property, plant and equipment, net


2,395



211,340



62,422



(1,679
)


274,478Goodwill


2,020,528



599,317



427,251



(1,213
)


3,045,883Other intangible assets with indefinite lives






21,120



21,789







42,909Core technology and patents, net


43,700



331,892



83,715







459,307Other intangible assets, net


277,389



769,663



119,484







1,166,536Deferred financing costs, net, and other non-current assets


36,876



6,766



3,136







46,778Investments in unconsolidated entities


872,848



751



57,681



(862,448
)


68,832Marketable securities


591















591Deferred tax assets


(1,742
)






16,065







14,323Intercompany notes receivable


1,633,174



(50,660
)


2,454



(1,584,968
)


Total assets

$
5,435,061


$
2,600,461


$
1,157,229


$
(3,237,391
)

$
5,955,360LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
9,750


$
2,870


$
6,438


$



$
19,058Current portion of capital lease obligations






265



186







451Accounts payable


4,173



56,510



35,899







96,582Accrued expenses and other current liabilities


(120,656
)


260,356



93,599



(3,209
)


230,090Liabilities related to assets held for sale






19,170



23







19,193Intercompany payables


155,443



198,939



425,229



(779,611
)


Total current liabilities


48,710



538,110



561,374



(782,820
)


365,374Long-term liabilities:Long-term debt, net of current portion


1,493,000



2,302



5,255







1,500,557Capital lease obligations, net of current portion






66



402







468Deferred tax liabilities


(36,399
)


459,501



39,685







462,787Deferred gain on joint venture


16,310







270,720







287,030Other long-term liabilities


26,830



17,835



14,772







59,437Intercompany notes payable


607,772



853,470



119,594



(1,580,836
)


Total long-term liabilities


2,107,513



1,333,174



450,428



(1,580,836
)


2,310,279Equity


3,278,838



729,177



145,427



(873,735
)


3,279,707Total liabilities and equity

$
5,435,061


$
2,600,461


$
1,157,229


$
(3,237,391
)

$
5,955,360  F-89




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    STATEMENT OF CASH FLOWS
    For the Year Ended December 31, 2009
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedCash Flows from Operating Activities:Net income (loss)

$
34,181


$
67,980


$
49,599


$
(117,579
)

$
34,181(Loss) Income from discontinued operations, net of tax


(1,097
)


2,689



334



8



1,934Income (loss) from continuing operations


35,278



65,291



49,265



(117,587
)


32,247Adjustments to reconcile net (loss) income to net cash provided
    by (used in) operating activities:Equity in earnings of subsidiaries, net of tax


(155,725
)










155,725



Interest expense related to amortization of original issue
    discounts and write-off of deferred financing costs


9,711







712







10,423Depreciation and amortization


8,286



244,691



59,714



(256
)


312,435Non-cash stock-based compensation expense


28,220















28,220Impairment of inventory










1,467







1,467Impairment of long-lived assets






5,620



1,363







6,983(Gain) loss on sale of fixed assets


4



1,150



51







1,205Equity earnings of unconsolidated entities, net of tax


(1,747
)






(5,972
)


93



(7,626
)Deferred and other non-cash income taxes


(1,983
)


(32,979
)


44,934



(19,096
)


(9,124
)Other non-cash items


292



1,835



1,137







3,264Changes in assets and liabilities, net of acquisitions:Accounts receivable, net






(4,785
)


(43,950
)


12,280



(36,455
)Inventories, net






30,679



(12,666
)


(34,438
)


(16,425
)Prepaid expenses and other current assets


(4,741
)


2,686



11,136







9,081Accounts payable


(1,979
)


844



3,252







2,117Accrued expenses and other current liabilities


20,534



12,828



(78,807
)






(45,445
)Other non-current liabilities


1,651



4,529



(8,889
)






(2,709
)Intercompany payable (receivable)


(66,894
)


(252,414
)


319,308







Net cash (used in) provided by continuing operations


(129,093
)


79,975



342,055



(3,279
)


289,658Net cash (used in) provided by discontinued operations


(1,096
)


(1,097
)


59



7



(2,127
)Net cash provided by (used in) operating activities


(130,189
)


78,878



342,114



(3,272
)


287,531Cash Flows from Investing Activities:Purchases of property, plant and equipment


(610
)


(70,674
)


(32,594
)


3,272



(100,606
)Proceeds from sale of property, plant and equipment






454



349







803Cash paid for acquisitions and transactional costs, net of cash
    acquired


(203,460
)


15,455



(280,522
)






(468,527
)Cash received from (paid for) investments in minority interests
    and marketable securities


980







11,580







12,560Increase in other assets


(20,000
)


(7,313
)


(407
)






(27,720
)Net cash (used in) provided by continuing operations


(223,090
)


(62,078
)


(301,594
)


3,272



(583,490
)Net cash used in discontinued operations






(237
)










(237
)Net cash (used in) provided by investing activities


(223,090
)


(62,315
)


(301,594
)


3,272



(583,727
)Cash Flows from Financing Activities:Proceeds from borrowing under long-term debt


631,176



312



(311
)






631,177(Increase) decrease in restricted cash


4



(417
)


831







418Cash paid for financing costs


(17,756
)














(17,756
)Proceeds from issuance of common stock, net of issuance costs


30,015















30,015Repayments on long-term debt


(10,325
)


(3,054
)


2,324







(11,055
)Net proceeds (repayments) from revolving
    lines-of-credit










(7,251
)






(7,251
)Tax benefit on exercised stock options


9,269















9,269Principal payments of capital lease obligations






(584
)


(214
)






(798
)Other


(153
)














(153
)Net cash provided by (used in) continuing operations


642,230



(3,743
)


(4,621
)






633,866Net cash used in discontinued operations






(12
)










(12
)Net cash provided by (used in) financing activities


642,230



(3,755
)


(4,621
)






633,854Foreign exchange effect on cash and cash equivalents


3,443







10,348







13,791Net (decrease) increase in cash and cash equivalents


292,394



12,808



46,247







351,449Cash and cash equivalents, beginning of period


1,743



69,794



69,787







141,324Cash and cash equivalents, end of period

$
294,137


$
82,602


$
116,034


$



$
492,773  F-90




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    STATEMENT OF CASH FLOWS
    For the Year Ended December 31, 2008
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedCash Flows from Operating Activities:Net (loss) income

$
(21,601
)

$
44,060


$
9,955


$
(54,015
)

$
(21,601
)Income (loss) from discontinued operations, net of tax






(112
)


(891
)


(45
)


(1,048
)(Loss) Income from continuing operations


(21,601
)


44,172



10,846



(53,970
)


(20,553
)Adjustments to reconcile net (loss) income to net cash provided
    by (used in) operating activities:Equity in earnings of subsidiaries, net of tax


(52,743
)










52,743



Interest expense related to amortization of deferred financing
    costs


5,930















5,930Depreciation and amortization


48,754



173,963



42,937







265,654Non-cash stock-based compensation expense


26,405















26,405Impairment of inventory






2,300



1,893







4,193Impairment of long-lived assets






6,117



13,914







20,031(Gain) loss on sale of fixed assets


(1
)


255



523







777Equity earnings of unconsolidated entities, net of tax


(1,522
)


23



379



70



(1,050
)Deferred and other non-cash income taxes


(957
)


(25,455
)


(15,302
)






(41,714
)Other non-cash items


2,714



1,680



(16
)






4,378Changes in assets and liabilities, net of acquisitions:Accounts receivable, net






(28,321
)


(12,225
)


1,000



(39,546
)Inventories, net






(24,331
)


(12,677
)


(4,937
)


(41,945
)Prepaid expenses and other current assets


616



11,645



(24,758
)


5,111



(7,386
)Accounts payable


(84
)


9,669



(2,392
)






7,193Accrued expenses and other current liabilities


(154,680
)


111,764



15,476



(1,651
)


(29,091
)Other non-current liabilities


(1,104
)


139



4,365







3,400Intercompany payable (receivable)


224,208



(282,185
)


54,036



3,941



Net cash provided by continuing operations


75,935



1,435



76,999



2,307



156,676Net cash used in discontinued operations






(7,348
)


(1,439
)


(45
)


(8,832
)Net cash provided by (used in) operating activities


75,935



(5,913
)


75,560



2,262



147,844Cash Flows from Investing Activities:Purchases of property, plant and equipment


(1,009
)


(42,149
)


(24,220
)


1,679



(65,699
)Proceeds from sale of property, plant and equipment






96



974







1,070Cash paid for acquisitions and transactional costs, net of cash
    acquired


(470,393
)


10,185



(189,691
)






(649,899
)Cash received from (paid for) investments in minority interests
    and marketable securities


1,372



(1,113
)


11,874







12,133Increase in other assets


(1,000
)


(4,932
)


(4,568
)






(10,500
)Net cash (used in) provided by continuing operations


(471,030
)


(37,913
)


(205,631
)


1,679



(712,895
)Net cash used in discontinued operations






(437
)










(437
)Net cash (used in) provided by investing activities


(471,030
)


(38,350
)


(205,631
)


1,679



(713,332
)Cash Flows from Financing Activities:(Increase) decrease in restricted cash






(1,145
)


140,349







139,204Issuance costs associated with preferred stock


(350
)














(350
)Cash paid for financing costs


(1,401
)














(1,401
)Other


(56
)














(56
)Proceeds from issuance of common stock, net of issuance costs


20,675















20,675Net repayments on long-term debt


(9,750
)


(4,037
)










(13,787
)Net proceeds (repayments) from revolving
    lines-of-credit


142,000



(2,320
)


(2,438
)






137,242Tax benefit on exercised stock options


17,542















17,542Principal payments of capital lease obligations






(362
)


(596
)






(958
)Net cash provided by (used in) continuing operations


168,660



(7,864
)


137,315







298,111Net cash used in discontinued operations






(342
)










(342
)Net cash provided by (used in) financing activities


168,660



(8,206
)


137,315







297,769Foreign exchange effect on cash and cash equivalents






(866
)


(882
)


(3,941
)


(5,689
)Net (decrease) increase in cash and cash equivalents


(226,435
)


(53,335
)


6,362







(273,408
)Cash and cash equivalents, beginning of period


228,178



123,133



63,421







414,732Cash and cash equivalents, end of period

$
1,743


$
69,798


$
69,783


$



$
141,324   F-91




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (28)
    Guarantor Financial Information (Continued)  CONSOLIDATING
    STATEMENT OF CASH FLOWS
    For the Year Ended December 31, 2007
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedCash Flows from Operating Activities:Net (loss) income

$
(243,352
)

$
56,263


$
(11,427
)

$
(44,836
)

$
(243,352
)Income (loss) from discontinued operations, net of tax






195



(528
)


(85
)


(418
)Income (loss) from continuing operations


(243,352
)


56,068



(10,899
)


(44,751
)


(242,934
)Adjustments to reconcile net (loss) income to net cash provided
    by (used in) operating activities:Equity in earnings of subsidiaries, net of tax


(44,870
)










44,870



Interest expense related to amortization and write-off of
    deferred financing costs


6,884



2,122



1,957







10,963Depreciation and amortization


43,718



28,174



26,090







97,982Non-cash stock-based compensation expense


52,210















52,210Charge for in-process research and development


173,825















173,825Impairment of long-lived assets






108



3,764







3,872Loss (gain) on sale of fixed assets






115



(56
)






59Equity earnings of unconsolidated entities, net of tax


(1,069
)






(3,348
)


45



(4,372
)Interest in minority investments


















Deferred and other non-cash income taxes


(36,291
)


3,050



3,694



1,539



(28,008
)Other non-cash items


197















197Changes in assets and liabilities, net of acquisitions:Accounts receivable, net






25,796



(9,095
)


29,451



46,152Inventories, net






6,639



(9,230
)


(79
)


(2,670
)Prepaid expenses and other current assets


(2,669
)


45,319



141



(27,595
)


15,196Accounts payable


2,198



(8,704
)


4,350







(2,156
)Accrued expenses and other current liabilities


16,714



(34,766
)


(12,389
)


(3,395
)


(33,836
)Other non-current liabilities


407



220



1,156







1,783Intercompany payable (receivable)


1,385,254



(1,385,378
)


5,391



(5,267
)


Net cash provided by (used in) continuing operations


1,353,156



(1,261,237
)


1,526



(5,182
)


88,263Net cash provided by (used in) discontinued operations






18



559



(85
)


492Net cash provided by (used in) operating activities


1,353,156



(1,261,219
)


2,085



(5,267
)


88,755Cash Flows from Investing Activities:Purchases of property, plant and equipment


(1,538
)


(12,278
)


(22,015
)






(35,831
)Proceeds from sale of property, plant and equipment






171



93







264Cash paid for acquisitions and transactional costs, net of cash
    acquired


(2,147,492
)


179,154



(67,778
)






(2,036,116
)Cash received, net of cash paid, from formation of joint venture


30,881







293,289







324,170Cash (paid for) received from investments in minority interests
    and marketable securities


(1,471
)


1,550



(10,256
)






(10,177
)(Increase) decrease in other assets


(26,362
)


3,316



(5,327
)






(28,373
)Net cash (used in) provided by continuing operations


(2,145,982
)


171,913



188,006







(1,786,063
)Net cash used in discontinued operations






(467
)










(467
)Net cash (used in) provided by investing activities


(2,145,982
)


171,446



188,006







(1,786,530
)Cash Flows from Financing Activities:Increase in restricted cash






(15
)


(141,854
)






(141,869
)Cash paid for financing costs


(40,347
)


(164
)


(164
)






(40,675
)Proceeds from issuance of common stock, net of issuance costs


1,122,852















1,122,852Net repayments on long-term debt










(22,326
)






(22,326
)Net proceeds (repayments) from revolving
    lines-of-credit


1,166,601



(47,703
)


(4,727
)






1,114,171Tax benefit on exercised stock options


867















867Principal payments of capital lease obligations






(12
)


(82
)






(94
)Intercompany notes (receivable) payable


(1,245,000
)


1,245,000











Net cash provided by (used in) continuing operations


1,004,973



1,197,106



(169,153
)






2,032,926Net cash used in discontinued operations






(542
)










(542
)Net cash provided by (used in) financing activities


1,004,973



1,196,564



(169,153
)






2,032,384Foreign exchange effect on cash and cash equivalents






761



2,991



5,267



9,019Net increase in cash and cash equivalents


212,147



107,552



23,929







343,628Cash and cash equivalents, beginning of period


16,031



20,074



34,999







71,104Cash and cash equivalents, end of period

$
228,178


$
127,626


$
58,928


$



$
414,732   F-92