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UNITED STATES  SECURITIES AND
    EXCHANGE COMMISSION
 WASHINGTON, D.C.
    20549
    
   FORM 10-K/A
 
 
 (Amendment
    No. 1)
 
  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, 2008oro

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
  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, 2008
   
 
 PagePART IITEM 1.

Business


3ITEM 1A.

Risk Factors


14ITEM 1B.

Unresolved Staff Comments


30ITEM 2.

Properties


30ITEM 3.

Legal Proceedings


31ITEM 4.

Submission of Matters to a Vote of Security Holders


32PART IIITEM 5.

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


33ITEM 6.

Selected Consolidated Financial Data


35ITEM 7.

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


37ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk


64ITEM 8.

Financial Statements and Supplementary Data


65ITEM 9.

Changes In and Disagreements With Accountants On Accounting and
    Financial Disclosure


67ITEM 9A.

Controls and Procedures


67PART IIIITEM 10.

Directors, Executive Officers and Corporate Governance


71ITEM 11.

Executive Compensation


71ITEM 12.

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


71ITEM 13.

Certain Relationships and Related Transactions, and Director
    Independence


71ITEM 14.

Principal Accounting Fees and Services


71PART IVITEM 15.

Exhibits, Financial Statement Schedules


71SignaturesEx-23.1 Consent of BDO Seidman, LLPEx-31.1 Section 302 Certification of the Chief Executive OfficerEx-31.2 Section 302 Certification of the Chief Financial OfficerEx-32.1 Section 906 Certification of the Chief Executive Officer and Chief Financial Officer




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EXPLANATORY
    NOTE
  Form 10-K Form S-3
     2




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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
   3




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Products
    and Services
  Professional Diagnostics.
      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 4




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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.  
    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.        Womens Health.
    Infectious Disease.
 5




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®
  ®
    Oncology.
    Drugs of Abuse.
       6




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Health Management.
  
    Embrace the entire lifespan, from pre-cradle to end-of-life, and
    targeted health states, from wellness to prevention to complex
    care
    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 2,200+ healthcare professionals who share a passion for
    excellence in everything we do    Care. and/or on-site
  Womens & Childrens
    Health.
 7




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Oncology.
  Wellness.
  Consumer Diagnostics.
      Vitamins and Nutritional Supplements.
     8




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Methods
    of Distribution and Customers
          Manufacturing
  ® ®
   9




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Research
    and Development
      Global
    Operations
      Competition
  Professional Diagnostics.
     10




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tm
      Health Management.
  Consumer Diagnostics.
 11




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Vitamins and Nutritional Supplements.
    Patents
    and Proprietary Technology; Trademarks
           12




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Government
    Regulation
            Employees
   13




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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 36 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 the
    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; 14




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
    place us at a competitive disadvantage compared to our
    competitors that have less debt; and
    expose us to fluctuations in the interest rate environment with
    respect to our indebtedness that bears interest at variable
    rates.    We have entered into agreements governing our indebtedness
    that subject us to various restrictions that may limit our
    ability to pursue business opportunities.
    
    incur additional indebtedness;
    pay dividends or make distributions or repurchase or redeem our
    stock;
    acquire other businesses;
    make investments;
    make loans to or extend credit for the benefit of third parties
    or their subsidiaries;
    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 these
    facilities and the limitation of our ability to borrow
    additional funds in the future.
   15




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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.
  and/or
  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;
    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; 16




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
    preserving the important licensing, research and development,
    manufacturing and supply, distribution, marketing, customer and
    other relationships;
    minimizing the diversion of managements attention from
    on-going business concerns; and
    coordinating geographically separate organizations.    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 on-going 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;
    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.  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;
    difficulties or delays in transitioning clinical studies; 17




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
    diversion of our managements time and attention from other
    business concerns;
    higher than anticipated costs of integration at the joint
    venture;
    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
  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.
    We may experience manufacturing problems or delays, which
    could result in decreased revenue or increased costs.
     18




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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.    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 utility 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 on-going regulation 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.
   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.    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.
    Our health management business may be adversely affected by
    cost reduction pressures among our customers.
    Rising unemployment may negatively impact the collectibility
    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.
  non-governmental
  Our data management and information technology systems are
    critical to maintaining and growing our business.
    Our sales of branded nutritional supplements have been
    trending downward since 1998 due to the maturity of the market
    segments they serve and the age of that product line, and we may
    experience further declines in sales and/or profitability of
    those products.
   23




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Our sales of specific vitamins and nutritional supplements
    could be negatively affected by media attention or other news
    developments that challenge the safety and effectiveness of
    those specific vitamins and nutritional supplements.
    Because sales of our private label nutritional supplements
    are generally made at low margins, the profitability of these
    products may suffer significantly as a result of relatively
    small increases in raw material or other manufacturing costs.
    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; 24




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
    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;
    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.     25




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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.
      
    the 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;
    the claims of any patents which are issued may not provide
    meaningful protection;
    we may not be able to develop additional proprietary
    technologies that are patentable;
    the 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; and
    other companies may design around technologies we have patented,
    licensed or developed.   26




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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.      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.
   27




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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;
    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.
    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.
   28




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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.
    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
    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.   29




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES                 30




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ITEM 3.
    LEGAL
    PROCEEDINGS  Estate of
    Melissa Prince Quisenberry v. Alere Medical, Inc., TA
    Associates, Inc., Covington Associates, et al.
  and/or and/or
  Healthways,
    Inc. and Robert Bosch North America Corp. v. Alere Medical,
    Inc.
    Claims in
    the Ordinary Course and Other Matters
         31




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   32




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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
      Market
    Information
    High


LowFiscal 2008Fourth Quarter

$
30.52


$
12.33Third Quarter

$
36.42


$
28.10Second Quarter

$
38.71


$
30.00First Quarter

$
62.65


$
26.29Fiscal 2007Fourth Quarter

$
65.00


$
52.38Third Quarter

$
55.79


$
44.17Second Quarter

$
53.85


$
38.00First Quarter

$
44.72


$
36.90     Dividend
    Policy
   33




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Stock
    Performance Graph
      
  Current
    Indices
  NYSE Composite


Dow Jones U.S.Date

IMA


Index


Healthcare Index12/31/03

$
100.00


$
100.00


$
100.0012/31/04

$
115.24


$
112.16


$
103.5312/30/05

$
108.86


$
119.96


$
110.6412/29/06

$
177.69


$
141.38


$
116.3912/31/07

$
257.94


$
150.69


$
124.0312/31/08

$
86.82


$
89.06


$
94.23      34




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ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA  Form 10-K.
  Form 10-K
    For the Year Ended December 31,2008


2007


2006


2005


2004(in thousands, except per share data)Statement of Operations Data:Net product sales

$
1,240,138


$
800,915


$
552,130


$
406,457


$
365,432Services revenue


405,462



16,646











Net product sales and services revenue


1,645,600



817,561



552,130



406,457



365,432License and royalty revenue


25,826



21,979



17,324



15,393



8,559Net revenue


1,671,426



839,540



569,454



421,850



373,991Cost of net product sales


624,654



431,403



334,799



264,999



223,669Cost of services revenue


177,098



5,261











Cost of license and royalty revenue


9,115



9,149



5,432



4,539



3,318Cost of net revenue


810,867



445,813



340,231



269,538



226,987Gross profit


860,559



393,727



229,223



152,312



147,004Operating expenses:Research and development


111,828



69,547



48,706



30,992



31,954Purchase of in-process research and development






173,825



4,960







Sales and marketing


386,284



167,770



94,445



72,103



57,957General and administrative


298,595



158,438



71,243



59,990



52,707Loss on dispositions, net










3,498







Operating income (loss)


63,852



(175,853
)


6,371



(10,773
)


4,386Interest expense and other expenses, net, including amortization
    of original issue discounts and write-off of deferred financing
    costs


(103,356
)


(74,251
)


(17,822
)


(1,617
)


(18,707
)Loss before (benefit) provision for income taxes


(39,504
)


(250,104
)


(11,451
)


(12,390
)


(14,321
)(Benefit) provision for income taxes


(16,686
)


(979
)


5,727



6,819



2,275Equity earnings of unconsolidated entities, net of tax


1,050



4,372



336







Net loss


(21,768
)


(244,753
)


(16,842
)


(19,209
)


(16,596
)Preferred stock dividends


(13,989
)














 35




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##### Table of Contents



For the Year Ended December 31,2008


2007


2006


2005


2004(in thousands, except per share data)Net loss available to common stockholders(1)

$
(35,757
)

$
(244,753
)

$
(16,842
)

$
(19,209
)

$
(17,345
)Net loss per common share  basic and diluted(1)

$
(0.46
)

$
(4.75
)

$
(0.49
)

$
(0.79
)

$
(0.87
)   December 31,2008


2007


2006


2005


2004(in thousands)Balance Sheet Data:Cash and cash equivalents

$
141,324


$
414,732


$
71,104


$
34,270


$
16,756Working capital

$
457,198


$
674,066


$
133,313


$
84,523


$
62,615Total assets

$
5,955,360


$
4,880,759


$
1,085,771


$
791,166


$
568,269Total debt

$
1,520,534


$
1,387,849


$
202,976


$
262,504


$
191,224Total stockholders equity

$
3,278,838


$
2,586,667


$
714,138


$
397,308


$
271,416     (1)
    
    Net loss available to common stockholders and basic and diluted
    net loss per common share are computed as described in
    Notes 2(n) and 15 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K. 36




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Forward-Looking
    Statements
  Form 10-K,
  Overview
  NMP-22
   37




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##### Table of Contents



2008
    Financial Highlights
  The Equity
    Method of Accounting for Investments in Common Stock.
  write-up write-up
   38




---



##### Table of Contents



Results
    of Operations
  Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Net Product Sales.
  Net Product Sales by Business Segment.
  % Increase2008


2007


(decrease)Professional diagnostics

$
1,000,190


$
565,265



77
%Health management


18,632



9,210



102
%Consumer diagnostics


132,443



153,616



(14
)%Vitamins and nutritional supplements


88,873



72,824



22
%Net product sales

$
1,240,138


$
800,915



55
%   Professional
    Diagnostics
    Health
    Management
    Consumer
    Diagnostics
   39




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##### Table of Contents



Vitamins
    and Nutritional Supplements
    Services Revenue.
  Services Revenue by Business Segment.
  2008


2007Professional diagnostics

$
29,338


$
Health management


373,767



14,164Consumer diagnostics


2,357



2,482Total services revenue

$
405,462


$
16,646   Professional
    Diagnostics
    Health
    Management
    Consumer
    Diagnostics
   40




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##### Table of Contents



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


2007


(decrease)United States

$
1,186,583


$
511,941



132
%Europe


283,552



196,379



44
%Other


175,465



109,241



61
%Net product sales and services revenue

$
1,645,600


$
817,561



101
%     License and Royalty Revenue.
  Gross Profit and Margin. write-up write-up
    Gross Profit from Net Product Sales by Business
    Segment.
  % Increase2008


2007


(decrease)Professional diagnostics

$
581,806


$
306,710



90
%Health management


2,729



3,076



(11
)%Consumer diagnostics


23,413



52,760



(56
)%Vitamins and nutritional supplements


7,536



6,966



8
%Gross profit from net product sales

$
615,484


$
369,512



67
%  41




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##### Table of Contents



Professional
    Diagnostics
  write-up write-up
    Health
    Management
      Consumer
    Diagnostics
      Vitamins
    and Nutritional Supplements
      Gross Profit from Services Revenue.
  Gross Profit from Services Revenue by Business
    Segment.
 42




---



##### Table of Contents



2008


2007Professional diagnostics

$
14,380


$
Health management


211,627



8,903Consumer diagnostics


2,357



2,482Gross profit from services revenue

$
228,364


$
11,385   Professional
    Diagnostics
      Health
    Management
      Consumer
    Diagnostics
    Research and Development Expense.
   43




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##### 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
   
  General and Administrative Expense.
 
 44




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##### Table of Contents



Interest Expense.
  Other Income (Expense), Net.
  2008


2007


ChangeInterest income

$
6,718


$
11,486


$
(4,768
)Foreign exchange gains (losses), net


(897
)


(1,609
)


712Other


(8,033
)


(1,103
)


(6,930
)Other income (expense), net

$
(2,212
)

$
8,774


$
(10,986
)       (Benefit) Provision for Income
    Taxes.
    Net Loss.
 45




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##### Table of Contents



Form 10-K
  Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
    Net Product Sales.
  Net Product Sales by Business Segment.
  % Increase2007


2006


(decrease)Professional diagnostics

$
565,265


$
298,472



89
%Health management


9,210








%Consumer diagnostics


153,616



171,607



(11
)%Vitamins and nutritional supplements


72,824



82,051



(11
)%Net product sales

$
800,915


$
552,130



45
%   Professional
    Diagnostics
  (iv) Bio-Stat,
 46




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##### Table of Contents



Health
    Management
    Consumer
    Diagnostics
    Vitamins
    and Nutritional Supplements
    Services Revenue.
  Net Product Sales and Services Revenue by Geographic
    Location.
  % Increase2007


2006


(decrease)United States

$
511,941


$
323,046



58
%Europe


196,379



134,528



46
%Other


109,241



94,556



16
%Net product sales and services revenue

$
817,561


$
552,130



48
%     License and Royalty Revenue.
  Gross Profit and Margin.
 47




---



##### Table of Contents



write-up
    Gross Profit from Net Product Sales by Business
    Segment.
  % Increase2007


2006


(decrease)Professional diagnostics

$
306,710


$
129,636



137
%Health management


3,076








%Consumer diagnostics


52,760



82,658



(36
)%Vitamins and nutritional supplements


6,966



5,037



38
%Gross profit from net product sales

$
369,512


$
217,331



70
%   Professional
    Diagnostics
  write-up
    Health
    Management
      Consumer
    Diagnostics
  mark-up
 48




---



##### Table of Contents



Vitamins
    and Nutritional Supplements
      Gross Profit from Services Revenue.
  Research and Development Expense.
    Purchase of In-Process Research and Development
    (IPR&D).
 49




---



##### Table of Contents



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












$
6,000Clondiag/2006

$
24,000


$
1,800


CHF (Congestive Heart Failure)


37
%


2008-20092,500


ACS (Acute Coronary Syndrome)


37
%


2009-2010660


HIV (Human Immuno-deficiency Virus)


37
%


2008-2009$
4,960












$
9,500     (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.
    General and Administrative Expense.
   50




---



##### Table of Contents



Interest Expense.
  Other Income (Expense), Net.
  2007


2006


ChangeInterest income

$
11,486


$
1,693


$
9,793Foreign exchange gains (losses), net


(1,609
)


2,643



(4,252
)Other


(1,103
)


4,412



(5,515
)Other income (expense), net

$
8,774


$
8,748


$
26       (Benefit) Provision for Income
    Taxes.
    Net Loss. Form 10-K
  Liquidity
    and Capital Resources
   51




---



##### Table of Contents



and/or and/or
  and/or
       52




---



##### Table of Contents



Summary
    of Changes in Cash Position
    Operating
    Cash Flows
   53




---



##### Table of Contents



Investing
    Cash Flows
      Financing
    Cash Flows
      Income
    Taxes
  No. 141-R, Business Combinations SFAS No. 141-R
    Off-Balance
    Sheet Arrangements
   54




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodContractual Obligations

Total


2009


2010-2011


2012-2013


ThereafterLong-term debt obligations(1)

$
1,519,615


$
19,058


$
26,530


$
20,027


$
1,454,000Capital lease obligations(2)


973



495



446



32



Operating lease obligations(3)


94,382



25,377



34,539



20,996



13,470Long-term and other liabilities(4)


3,403



469



938



938



1,058Minimum royalty obligations


220



220











Acquisition-related obligations(5)


6,473



5,428



1,045







Purchase obligations  capital expenditure


17,492



17,492











Purchase obligations  other(6)


69,763



68,996



767







Interest on debt(7)


33,177



4,500



9,000



9,000



10,677Total

$
1,745,498


$
142,035


$
73,265


$
50,993


$
1,479,205     (1)
    
    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 are
    $0.2 million in technology license payment obligations and
    $3.4 million in pension obligations. Our liability
    associated with Financial Accounting Standards Board
    (FASB) Interpretation No. 48
    (FIN 48), Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    109, has not been included in the table above, as we
    estimate payments  annually.(5)
    
    Amounts represent obligations associated with our acquisitions
    which are discussed in more detail below.(6)
    
    Other purchase obligations relate to inventory purchases and
    other operating expense commitments.(7)
    
    Amounts are based on $150.0 million senior subordinated
    notes. Amounts exclude interest on all other debt due to
    variable interest rates. See Note 6 of our consolidated
    financial statements included elsewhere in this Annual Report on
    Form 10-K.     55




---



##### Table of Contents



56




---



##### Table of Contents



Critical
    Accounting Policies
  Form 10-K Form 10-K
  Revenue
    Recognition
     57




---



##### Table of Contents



Use of
    Estimates for Sales Returns and Other Allowances and Allowance
    for Doubtful Accounts
         58




---



##### Table of Contents



Valuation
    of Inventories
    Valuation
    of Goodwill and Other Long-Lived and Intangible Assets
      Goodwill and Other Intangible Assets
 59




---



##### Table of Contents



Valuation
    of Goodwill
      Valuation
    of Other Long-Lived Tangible and Intangible Assets
    Stock-Based
    Compensation
  SFAS No. 123-R, Share-Based Payment
  SFAS No. 123-R SFAS No. 123-R,
 60




---



##### Table of Contents



Accounting
    for Income Taxes
    SFAS No. 141-R, Business Combinations.
  Accounting for Uncertainty in
    Income Taxes  an Interpretation of FASB Statement
    109
  Loss
    Contingencies
  Form 10-K
   61




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Recently
    Issued Standards
  No. 07-05, Determining Whether an Instrument (or Embedded Feature) is
    Indexed to an Entitys Own Stock
  14-1, Accounting for Convertible Debt Instruments That May Be
    Settled In Cash upon Conversion (Including Partial Cash
    Settlement) 14-1 14-1
   FSP 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 FSP 142-3
  Disclosures about Derivative Instruments and Hedging
    Activities  an Amendment of FASB Statement
    No. 133
  No. 07-01, Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property No. 99-19, No. 07-01
 62




---



##### Table of Contents



Noncontrolling Interests in Consolidated Financial
    Statements  an Amendment of Accounting Research
    Bulletin (ARB) No. 51
  SFAS No. 141-R, Business Combinations SFAS No. 141-R SFAS No. 141-R SFAS No. 141-R
  Recently
    Adopted Standards
  FSP 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active FSP 157-3
  No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or
    Services to Be Used in Future Research and Development
    Activities EITF 07-03
  The Fair Value Option for Financial
    Assets and Financial Liabilities  Including an
    Amendment of FASB No. 115
  Fair Value Measurements,
 63




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
           64




---



##### Table of Contents



Interest ExpenseIncreaseInterest rates increase by 100 basis points

$
5,028Interest rates increase by 200 basis points

$
10,055   Foreign
    Currency Risk
        Approximate


ApproximateDecrease in


Increase inNet Revenue


Net LossIf, during 2008, the U.S. dollar was stronger by:1%

$
3,909


$
2295%

$
19,545


$
1,14310%

$
39,089


$
2,287   ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   65




---



##### Table of Contents



2008First


Second


Third


FourthQuarter(2)


Quarter(3)


Quarter(4)


Quarter(5)Net revenue

$
372,233


$
401,127


$
438,800


$
459,266Gross profit

$
180,390


$
206,102


$
228,148


$
245,919Net (loss) income

$
(4,174
)

$
(30,348
)

$
(3,659
)

$
16,413Net (loss) income per common share  basic and
    diluted(1)

$
(0.05
)

$
(0.43
)

$
(0.12
)

$
0.14   2007First


Second


Third


FourthQuarter(6)


Quarter(7)


Quarter(8)


Quarter(9)Net revenue

$
158,979


$
154,965


$
237,636


$
287,960Gross profit

$
78,338


$
66,340


$
110,298


$
138,751Net income (loss)

$
6,305


$
(54,674
)

$
(180,612
)

$
(15,772
)Net income (loss) per common share  basic and
    diluted(1)

$
0.14


$
(1.17
)

$
(3.74
)

$
(0.24
)     (1)
    
    Net (loss) income available to common stockholders and basic and
    diluted net (loss) income per common share are computed as
    consistent with the annual per share calculations described in
    Notes 2(n) and 15 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(2)
    
    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 Limited
    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.(3)
    
    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.(4)
    
    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.(5)
    
    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.(6)
    
    Included in net income for the first quarter of 2007 is
    $0.6 million related to the restructuring charge associated
    with the closure of our ABI operation, a $0.2 million
    charge to write-off deferred financing costs related to the
    payment of outstanding debt, and $1.6 million of non-cash
    stock-based compensation expense.(7)
    
    Included in net loss for the second quarter of 2007 is
    $0.4 million related to restructuring charges associated
    with the decision to close facilities and the formation of our
    joint venture with P&G, a $1.2 million write-off
    related to an inventory
    write-up
    recorded in connection with the Biosite acquisition, a charge of
    $15.4 million associated with the write-off of debt
    origination costs and a prepayment premium paid upon early
    extinguishment of related debt, a $1.9 million foreign
    currency gain realized on the settlement of intercompany notes,
    and $47.3 million of non-cash stock-based compensation
    expense.(8)
    
    Included in net loss for the third quarter of 2007 is
    $0.5 million related to restructuring charges associated
    with the decision to close facilities and the formation of our
    joint venture with P&G, a $6.3 million write-off
    related to inventory
    write-ups
    recorded in connection with the Biosite and Cholestech
    acquisitions, a 66




---



##### Table of Contents



write-off of $169.0 million associated with the value of
    purchased IPR&D incurred in connection with the Biosite
    acquisition, and $3.3 million in non-cash stock-based
    compensation expense.(9)
    
    Included in net loss for the fourth quarter of 2007 is
    $5.2 million related to restructuring charges associated
    with the decision to close facilities and formation of our joint
    venture with P&G, a $0.8 million write-off related to
    inventory
    write-ups
    recorded in connection with the Cholestech and HemoSense
    acquisitions, a write-off of $4.8 million associated with
    the value of purchased IPR&D incurred in connection with
    the Diamics acquisition, a $3.9 million unrealized foreign
    currency loss associated with a cash escrow established in
    connection with the acquisition of BBI, and $5.3 million in
    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)
         67




---



##### Table of Contents



Internal Control 
    Integrated Framework
      Changes
    in internal control over financial reporting
   68




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              69




---



##### Table of Contents



/s/  BDO
    Seidman, LLP
    70




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    Section 303A-12(a) Form 10-K,
  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, 2008, 2007 and 2006

F-3Consolidated Balance Sheets as of December 31, 2008 and 2007

F-4Consolidated Statements of Stockholders Equity and
    Comprehensive Loss for the Years Ended December 31, 2008,
    2007 and 2006

F-5Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2008, 2007 and 2006

F-8Notes to Consolidated Financial Statements

F-9    71




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##### Table of Contents



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)2
.2

Agreement and Plan of Reorganization dated as of June 4,
    2007, among Inverness Medical Innovations, Inc., Iris Merger
    Sub, Inc. and Cholestech Corporation (incorporated by reference
    to Exhibit 2.1 to the Companys Current Report on
    Form 8-K,
    event date June 4, 2007, filed on June 4, 2007)2
.3

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)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 30, 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)+10
.1

Distribution Agreement between Biosite and Fisher Scientific
    Company L.L.C. effective January 1, 2006 (incorporated by
    reference to Exhibit 10.18 to Annual Report of Biosite
    Incorporated on
    Form 10-K,
    filed March 12, 2007)10
.2

Amendment No. 1 to Distribution Agreement between Biosite
    and Fisher Scientific Company L.L.C., effective January 1,
    200610
.3

Amendment No. 2 to Distribution Agreement between Biosite
    and Fisher Scientific Company L.L.C., effective June 30,
    200810
.4

Amendment No. 2B to Distribution Agreement between Biosite
    and Fisher Scientific Company L.L.C., effective July 8,
    2008 
 72




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##### Table of Contents



10
.5

Amendment No. 3 to Distribution Agreement between Biosite
    and Fisher Scientific Company L.L.C., effective July 11,
    2008+10
.6

Semi-exclusive BNP Diagnostic License Agreement Between Biosite
    Diagnostics Incorporated and Scios, Inc. effective
    December 30, 1996 (incorporated by reference to
    Exhibit 10.19 to Annual Report of Biosite Incorporated on
    Form 10-K,
    filed March 12, 2007)+10
.7

First Amendment to Semi-exclusive BNP Diagnostic License
    Agreement between Biosite Incorporated and Scios, Inc. effective
    August 1, 1997 (incorporated by reference to
    Exhibit 10.20 to Annual Report of Biosite Incorporated on
    Form 10-K,
    filed March 12, 2007)+10
.8

Amendment #2 To Semi-exclusive BNP Diagnostic License Agreement
    Biosite Incorporated and Scios, Inc. effective August 30,
    2002 (incorporated by reference to Exhibit 10.21 to Annual
    Report of Biosite Incorporated on
    Form 10-K,
    filed March 12, 2007)+10
.9

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
.10

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
.11

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
.12

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
.13

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
.14

Agreement, dated December 1, 1986, between Bernard Levere,
    Zelda Levere, Pioneer Pharmaceuticals, Inc. and Essex Chemical
    Corp. and Unconditional Guarantee by Essex Chemical Corp.
    (incorporated by reference to Exhibit 10.33 to the
    Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2001)10
.15

Option to Assume and Extend Lease, dated as of
    February   , 1995, between Bernard Levere, Zelda
    Levere and International Vitamin Corporation (incorporated by
    reference to Exhibit 10.34 to the Companys Annual
    Report on
    Form 10-K,
    as amended, for the year ended December 31, 2001)10
.16

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
.17

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
.18

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
.19

Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan (incorporated by reference to Exhibit 10.1
    to the Companys Registration Statement on
    Form S-4,
    as amended
    (File No. 333-67392))10
.20

Amendment No. 1 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 4.4 to the Companys Registration Statement on
    Form S-8
    (File No. 333-90530) 
 73




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##### Table of Contents



10
.21

Amendment No. 2 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 4.6 to Companys Registration Statement on
    Form S-8,
    as amended (File
    No. 333-106996))10
.22

Amendment No. 3 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.3 to Companys Quarterly Report on
    Form 10-Q,
    for the period ended June 30, 2005)10
.23

Amendment No. 4 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.41 to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2006)10
.24

Amendment No. 5 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.42 to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2006)10
.25

Amendment No. 6 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.40 to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2007)10
.26

Amendment No. 7 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (incorporated by reference to
    Exhibit 10.41 to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2007)10
.27

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
.28

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
.29

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
.30

Form of Non-Qualified Stock Option Agreement for Non-Employee
    Directors under the Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (relating to grants made on or
    after August 29, 2008)10
.31

Form of Non-Qualified Stock Option Agreement for U.S. Executives
    under the Inverness Medical Innovations, Inc. 2001 Stock Option
    and Incentive Plan (relating to grants made on or after
    August 29, 2008)10
.32

Form of Non-Qualified Stock Option Agreement for
    Non-U.S.
    Executives under the Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan (relating to grants made on or
    after August 29, 2008)10
.33

Form of Incentive Stock Option Agreement for Executives under
    the Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan (relating to grants made on or after
    August 29, 2008)10
.34

Inverness Medical Innovations, Inc. HM Revenue and Customs Share
    Option Plan (2007) (relating to grants made on or after
    August 29, 2008)10
.35

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)10
.36

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
.37

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 30, 2007) 
 74




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##### Table of Contents



10
.38

Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase
    Plan (incorporated by reference to Exhibit 10.2 to the
    Companys Registration Statement on
    Form S-4,
    as amended (File
    No. 333-67392))10
.39

Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase
    Plan  First Amendment (incorporated by reference to
    Exhibit 10.9 to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2001)10
.40

Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase
    Plan  Second Amendment (incorporated by reference to
    Exhibit 10.6 to the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2006)10
.41

Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase
    Plan  Third Amendment (incorporated by reference to
    Exhibit 10.1 to Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2008)10
.42

Underwriting Agreement dated January 25, 2007 (incorporated
    by reference to Exhibit 1.1 to the Companys Current
    Report on
    Form 8-K,
    dated January 26, 2007)10
.43

Underwriting Agreement dated November 14, 2007
    (incorporated by reference to Exhibit 1.1 to the
    Companys Current Report on
    Form 8-K,
    dated November 16, 2007)10
.44

$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
.45

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
.46

$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
.47

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
.48

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)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 30, 2006)21
.1

List of Subsidiaries of the Company as of February 25, 2009*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.+
    
    We have omitted portions of this exhibit which have been granted
    confidential treatment. 75




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##### Table of Contents



SIGNATURES     
   
 By:
    /s/  Ron
    Zwanziger   Chairman, Chief Executive Officer and President
 
 
 76




---



##### 



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, 2008, 2007 and 2006

F-3Consolidated Balance Sheets as of
    December 31, 2008 and 2007

F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Loss for the Years Ended
    December 31, 2008, 2007 and 2006

F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2008, 2007 and 2006

F-8Notes to Consolidated Financial Statements

F-9   F-1




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##### Table of Contents



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)
  
 2008


2007


2006Net product sales

$
1,240,138


$
800,915


$
552,130Services revenue


405,462



16,646



Net product sales and services revenue


1,645,600



817,561



552,130License and royalty revenue


25,826



21,979



17,324Net revenue


1,671,426



839,540



569,454Cost of net product sales


624,654



431,403



334,799Cost of services revenue


177,098



5,261



Cost of license and royalty revenue


9,115



9,149



5,432Cost of net revenue


810,867



445,813



340,231Gross profit


860,559



393,727



229,223Operating expenses:Research and development


111,828



69,547



48,706Purchase of in-process research and development






173,825



4,960Sales and marketing


386,284



167,770



94,445General and administrative


298,595



158,438



71,243Loss on dispositions, net










3,498Operating income (loss)


63,852



(175,853
)


6,371Interest expense, including amortization of original issue
    discounts and write-off of deferred financing costs


(101,144
)


(83,025
)


(26,570
)Other (expense) income, net


(2,212
)


8,774



8,748Loss before (benefit) provision for income taxes


(39,504
)


(250,104
)


(11,451
)(Benefit) provision for income taxes


(16,686
)


(979
)


5,727Equity earnings of unconsolidated entities, net of tax


1,050



4,372



336Net loss


(21,768
)


(244,753
)


(16,842
)Preferred stock dividends


(13,989
)






Net loss available to common stockholders

$
(35,757
)

$
(244,753
)

$
(16,842
)Net loss per common sharebasic and diluted

$
(0.46
)

$
(4.75
)

$
(0.49
)Weighted average sharesbasic and diluted


77,778



51,510



34,109  
   F-3




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS  (in thousands, except par value amounts)
  December 31,2008


2007ASSETSCurrent assets:Cash and cash equivalents

$
141,324


$
414,732Restricted cash


2,748



141,869Marketable securities


1,763



2,551Accounts receivable, net of allowances of $12,835 and $12,167 at
    December 31, 2008 and 2007, respectively


280,608



163,380Inventories, net


199,131



148,231Deferred tax assets


104,311



18,170Income tax receivable


6,406



5,256Receivable from joint venture, net


12,018



Prepaid expenses and other current assets


74,234



58,785Total current assets


822,543



952,974Property, plant and equipment, net


284,483



267,880Goodwill


3,046,083



2,148,850Other intangible assets with indefinite lives


42,984



43,097Core technology and patents, net


459,307



432,583Other intangible assets, net


1,169,330



869,644Deferred financing costs, net, and other non-current assets


46,884



51,747Investments in unconsolidated entities


68,832



77,753Marketable securities


591



20,432Deferred tax assets


14,323



15,799Total assets

$
5,955,360


$
4,880,759LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
19,058


$
20,320Current portion of capital lease obligations


451



776Accounts payable


112,704



72,061Accrued expenses and other current liabilities


233,132



174,935Payable to joint venture, net






10,816Total current liabilities


365,345



278,908Long-term liabilities:Long-term debt, net of current portion


1,500,557



1,366,395Capital lease obligations, net of current portion


468



358Deferred tax liabilities


462,787



326,128Deferred gain on joint venture


287,030



293,078Other long-term liabilities


60,335



29,225Total long-term liabilities


2,311,177



2,015,184Commitments and contingencies(Notes 8, 9 and 11)Stockholders equity:Series B preferred stock, $0.001 par value
    (liquidation preference, $751,479)Authorized: 2,300 sharesIssued and outstanding: 1,879 shares


671,501



Common stock, $0.001 par valueAuthorized: 150,000 sharesIssued and outstanding: 78,431 shares at December 31,
    2008 and 76,789 shares at December 31, 2007


78



77Additional paid-in capital


3,029,694



2,937,143Accumulated deficit


(393,590
)


(371,822
)Accumulated other comprehensive (loss) income


(28,845
)


21,269Total stockholders equity


3,278,838



2,586,667Total liabilities and stockholders equity

$
5,955,360


$
4,880,759    F-4




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE
    LOSS



(in
    thousands, except par value amounts)  Preferred Stock


Common Stock





Notes





Accumulated$0.001





$0.001


Additional


Receivable





Other


Total


TotalNumber of


Par


Number of


Par


Paid-in


From


Accumulated


Comprehensive


Stockholders


ComprehensiveShares


Value


Shares


Value


Capital


Stockholders


Deficit


Income


Equity


LossBALANCE, DECEMBER 31, 2005





$




27,497


$
27


$
515,147


$
(14,691
)

$
(110,227
)

$
7,052


$
397,308Issuance of common stock in connection with acquisitions and
    equity offering, net of issuance costs of $9,617










10,893



11



295,488















295,499Exercise of common stock options and warrants and shares issued
    under employee stock purchase plan










825



1



10,330















10,331Stock-based compensation related to grants of common stock
    options


















5,455















5,455Stock option income tax benefits


















567















567Repayment of notes receivable from stockholder options






















14,691











14,691Effect of adoption of SFAS No. 158






























(3,738
)


(3,738
)Changes in cumulative translation adjustment






























10,823



10,823


$
10,823Unrealized gain on available-for-sale securities






























44



44



44Net loss


























(16,842
)






(16,842
)


(16,842
)Total comprehensive loss





































$
(5,975
)BALANCE, DECEMBER 31, 2006





$




39,215


$
39


$
826,987


$



$
(127,069
)

$
14,181


$
714,138    F-5




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE LOSS
    (Continued)
    (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


ComprehensiveShares


Value


Shares


Value


Capital


Deficit


Income


Equity


LossBALANCE, DECEMBER 31, 2006





$




39,215


$
39


$
826,987


$
(127,069
)

$
14,181


$
714,138Issuance of common stock in connection with acquisitions and
    equity offerings, net of issuance costs of $44,204










35,204



35



1,859,985











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










2,370



3



55,095











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


















57,480











57,480Fair value associated with options exchanged in acquisitions


















135,022











135,022Stock option income tax benefits


















2,574











2,574Minimum pension liability adjustment


























341



341


$
341Changes in cumulative translation adjustment


























12,758



12,758



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


























(9,518
)


(9,518
)


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


























3,507



3,507



3,507Net loss






















(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    F-6




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE 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


ComprehensiveShares


Amount


Shares


Value


Capital


Deficit


Income (Loss)


Equity


LossBALANCE, DECEMBER 31, 2007





$




76,789


$
77


$
2,937,143


$
(371,822
)

$
21,269


$
2,586,667Issuance of Series B preferred stock in connection with
    acquisition of Matria Healthcare, Inc., net of issuance costs of
    $350


1,788



657,573























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










580







20,945











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










1,062



1



20,712











20,713Preferred stock dividends (Note 16)


91



13,928











(14,026
)










(98
)Fair value associated with options exchanged in acquisitions


















20,973











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


















26,405











26,405Stock option income tax benefits


















17,542











17,542Minimum pension liability adjustment


























(562
)


(562
)

$
(562
)Changes in cumulative translation adjustment


























(32,889
)


(32,889
)


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


























(11,614
)


(11,614
)


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


























(5,049
)


(5,049
)


(5,049
)Net loss






















(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    F-7




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENT OF CASH FLOWS  (in thousands)
  2008


2007


2006Cash Flows from Operating Activities:Net loss

$
(21,768
)

$
(244,753
)

$
(16,842
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Interest expense related to amortization of original issue
    discounts and write-off of deferred financing costs


5,930



10,963



4,158Non-cash income related to currency hedge










(217
)Non-cash stock-based compensation expense


26,405



52,210



5,455Charge for in-process research and development






173,825



4,960Impairment of inventory


4,193







707Impairment of long-lived assets


20,031



3,872



8,866Loss (gain) on sale of fixed assets


777



59



(1,528
)Equity earnings of unconsolidated entities


(1,050
)


(4,372
)


(336
)Interest in minority investments


167



1,401



(299
)Depreciation and amortization


267,927



101,113



39,362Deferred and other non-cash income taxes


(41,756
)


(27,892
)


(409
)Other non-cash items


4,378



197



714Changes in assets and liabilities, net of acquisitions:Accounts receivable, net


(48,650
)


47,018



(13,846
)Inventories, net


(49,226
)


(1,463
)


167Prepaid expenses and other current assets


(7,373
)


15,432



(86
)Accounts payable


16,467



(6,745
)


210Accrued expenses and other current liabilities


(32,008
)


(33,893
)


3,294Other non-current liabilities


3,400



1,783



(60
)Net cash provided by operating activities


147,844



88,755



34,270Cash Flows from Investing Activities:Purchases of property, plant and equipment


(66,061
)


(36,398
)


(19,717
)Proceeds from sale of property, plant and equipment


1,070



264



2,244Cash paid for acquisitions and transactional costs, net of cash
    acquired


(649,899
)


(2,036,116
)


(131,465
)Cash received, net of cash paid, from formation of joint venture






324,170



Cash received from (paid for) investments in minority interests
    and marketable securities


12,133



(10,177
)


(25,817
)Increase in other assets


(10,575
)


(28,273
)


(4,077
)Net cash used in investing activities


(713,332
)


(1,786,530
)


(178,832
)Cash Flows from Financing Activities:Decrease (increase) in restricted cash


139,204



(141,869
)


Issuance costs associated with preferred stock


(350
)






Cash paid for financing costs


(1,401
)


(40,675
)


(2,787
)Dividends to preferred stockholders


(56
)






Proceeds from issuance of common stock, net of issuance costs


20,675



1,122,852



234,961Net repayments on long-term debt


(13,787
)


(22,326
)


(20,000
)Net proceeds (repayments) from revolving lines-of-credit


137,242



1,114,171



(47,879
)Repayments of notes receivable










14,691Tax benefit on exercised stock options


17,542



867



567Principal payments of capital lease obligations


(1,300
)


(636
)


(546
)Net cash provided by financing activities


297,769



2,032,384



179,007Foreign exchange effect on cash and cash equivalents


(5,689
)


9,019



2,389Net (decrease) increase in cash and cash equivalents


(273,408
)


343,628



36,834Cash and cash equivalents, beginning of period


414,732



71,104



34,270Cash and cash equivalents, end of period

$
141,324


$
414,732


$
71,104    F-8




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    Description
    of Business and Basis of Presentation      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
  Foreign Currency
    Translation.
    (c) Cash and Cash Equivalents
    (d) Restricted Cash
    (e) Marketable Securities
  Accounting for
    Certain Investments in Debt and Equity Securities
 F-10




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)  (f) Inventories
  (first-in, work-in-process work-in-process
  (g) Property, Plant and Equipment
  20-50 years; 2-15 years.
  (h) Goodwill and Other Intangible Assets with Indefinite
    Lives
  Goodwill and Other Intangible Assets
      (i) Impairment of Other Long-Lived Tangible and
    Intangible Assets
  Accounting for the
    Impairment or Disposal of Long-Lived 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
  Business
    Combinations.
      No. 95-3, Recognition of Liabilities in Connection with a Purchase
    Business Combination.
  No. 99-12, Determination of the Measurement Date for the Market Price of
    Acquirer Securities Issued in a Purchase Business
    Combination.
  SFAS No. 123-R, ShareBased Payments
 F-12




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)  (k) Income Taxes
  Accounting for Income Taxes,
  Accounting for
    Uncertainty in Income Taxesan Interpretation of FASB
    Statement No. 109
  (l) Revenue Recognition
           F-13




---



##### 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
  SFAS No. 123-R, Share-Based Payment SFAS No. 123-R, SFAS No. 123-R.
    (n) Net (Loss) Income per Common Share
  Earnings per Share
  (o) Other Operating Expenses
      (p) Concentration of Credit Risk, Off-Balance Sheet
    Risks and Other Risks and Uncertainties
     F-14




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)      (q) Financial Instruments and Fair Value of Financial
    Instruments
  Accounting for Derivative
    Instruments and Hedging Activities Amendment of Statement 133
    on Derivative Instruments and Hedging Activities.
  (r) Recent Accounting Pronouncements
    No. 07-05, Determining Whether an Instrument (or Embedded Feature) is
    Indexed to an Entitys Own Stock
  14-1, Accounting for Convertible Debt Instruments That May Be
    Settled In Cash upon Conversion (Including Partial Cash
    Settlement) 14-1 14-1
  FSP 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 FSP 142-3
  Disclosures about Derivative Instruments and Hedging
    Activitiesan Amendment of FASB Statement No. 133
 F-15




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)    No. 07-01, Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property No. 99-19, No. 07-01
  Noncontrolling Interests in Consolidated Financial
    Statementsan Amendment of Accounting Research Bulletin
    (ARB) No. 51
  SFAS No. 141-R, Business Combinations SFAS No. 141-R SFAS No. 141-R SFAS No. 141-R
    FSP 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active FSP 157-3
 F-16




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (2)
    Summary
    of Significant Accounting Policies (Continued)    No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or
    Services to Be Used in Future Research and Development
    Activities EITF 07-03
  The Fair Value Option for Financial
    Assets and Financial LiabilitiesIncluding an Amendment of
    FASB No. 115
  Fair Value Measurements
 F-17




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (3)
    Other
    Balance Sheet Information    December 31,2008


2007Inventories, net:Raw materials

$
45,161


$
45,111Work-in-process


41,651



40,184Finished goods


112,319



62,936$
199,131


$
148,231Property, plant and equipment, net:Machinery, laboratory equipment and tooling

$
152,760


$
134,776Land and buildings


139,186



132,512Leasehold improvements


22,158



29,032Computer software and equipment


60,135



34,857Furniture and fixtures


15,449



16,301389,688



347,478Less: Accumulated depreciation and amortization


(105,205
)


(79,598
)$
284,483


$
267,880Accrued expenses and other current liabilities:Compensation and compensation-related

$
60,495


$
55,397Advertising and marketing


7,433



6,308Professional fees


8,517



23,436Interest payable


4,459



2,436Royalty obligations


13,821



8,221Deferred revenue


21,977



5,337Taxes payable


47,658



39,778Acquisition-related obligations


29,107



22,375Other


39,665



11,647$
233,132


$
174,935    (4)
    Business
    Combinations  (a) Acquisitions in 2008
     F-18




---



##### Table of Contents



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

$
109,106Property, plant and equipment


24,460Goodwill


836,178Intangible assets


325,385Other non-current assets


27,184Total assets acquired


1,322,313Current liabilities


358,270Non-current liabilities


129,486Total liabilities assumed


487,756Net assets acquired


834,557Less:Acquisition costs


17,961Fair 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       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      F-19




---



##### Table of Contents



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

$
22,421Property, plant and equipment


7,603Goodwill


87,713Intangible assets


90,201Other non-current assets


3,001Total assets acquired


210,939Current liabilities


15,587Non-current liabilities


32,141Total liabilities assumed


47,728Net assets acquired


163,211Less:Acquisition costs


6,581Fair 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       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      F-20




---



##### Table of Contents



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

$
12,835Property, plant and equipment


2,080Goodwill


13,556Intangible assets


17,717Other non-current assets


246Total assets acquired


46,434Current liabilities


3,115Non-current liabilities


6,810Total liabilities assumed


9,925Net assets acquired


36,509Less:Acquisition costs


566Cash consideration

$
35,943       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   (iv)
    Other acquisitions in 2008    
    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) F-21




---



##### Table of Contents



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

$
10,966Property, plant and equipment


655Goodwill


16,238Other non-current assets


173Intangible assets


36,938Total assets acquired


64,970Current liabilities


5,838Non-current liabilities


9,955Total liabilities assumed


15,793Net assets acquired


49,177Less:Acquisition costs


1,725Accrued earned milestone and contingent consideration


5,466Cash consideration

$
41,986     Amount


Amortizable LifeCore technology

$
2,866



6-10 yearsTrade names


2,690



10 yearsCustomer relationships


29,477



3.5-14 yearsNon-compete agreements


1,063



2-5 yearsManufacturing know-how


842



5 yearsTotal intangible assets

$
36,938    F-22




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (4)
    Business Combinations (Continued)  (b) Acquisitions in 2007
        Current assets

$
34,498Property, plant and equipment


2,163Goodwill


168,172Intangible assets


61,449Total assets acquired


266,282Current liabilities


1,094Non-current liabilities


28,397Total liabilities assumed


29,491Net 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      F-23




---



##### Table of Contents



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

$
11,234Property, plant and equipment


5,653Goodwill


21,471Intangible assets


66,020Other non-current assets


84Total assets acquired


104,462Current liabilities


2,947Non-current liabilities


47,708Total liabilities assumed


50,655Net assets acquired


53,807Less:Acquisition costs


546Cash consideration

$
53,261       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        F-24




---



##### Table of Contents



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

$
13,332Property, plant and equipment


8,897Goodwill


262,565Intangible assets


55,500Other non-current assets


5,523Total assets acquired


345,817Current liabilities


10,651Non-current liabilities


23,880Total liabilities assumed


34,531Net assets acquired


311,286Less: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      F-25




---



##### Table of Contents



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

$
23,399Property, plant and equipment


1,936Goodwill


137,791Intangible assets


100,670Other non-current assets


232Total assets acquired


264,028Current liabilities


15,232Non-current liabilities


4,747Total liabilities assumed


19,979Net 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

$
       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      F-26




---



##### Table of Contents



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

$
83,377Property, plant and equipment


6,643Goodwill


143,611Intangible assets


209,078Other non-current assets


669Total assets acquired


443,378Current liabilities


17,685Non-current liabilities


71,032Total liabilities assumed


88,717Net 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

$
       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      F-27




---



##### Table of Contents



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

$
325,804Property, plant and equipment


145,144Goodwill


778,734Intangible assets


663,891In-process research and development


169,000Other non-current assets


102,343Total assets acquired


2,184,916Current liabilities


128,971Non-current liabilities


266,621Total liabilities assumed


395,592Net 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         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      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)    Current assets

$
9,012Property, plant and equipment


141Goodwill


43,708Intangible assets


28,520Total assets acquired


81,381Current liabilities


4,273Non-current liabilities


16,334Total liabilities assumed


20,607Net assets acquired


60,774Less:Acquisition costs


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


21,530Cash consideration

$
38,896       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) 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)   
    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)
    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) 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 assets

$
38,518Property, plant and equipment


4,145Goodwill


110,255Intangible assets


74,557In-process research and development


4,826Other non-current assets


838Total assets acquired


233,139Current liabilities


29,100Non-current liabilities


19,584Total liabilities assumed


48,684Net assets acquired


184,455Less:Acquisition costs


4,488Notes payable


9,551Accrued earned milestones


259Fair value of common stock issued (1,017,244 shares)


54,111Cash consideration

$
116,046      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 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   (c) Acquisitions in 2006
         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)    Current assets

$
25,914Property, plant and equipment


10,274Goodwill


120,920Intangible assets


48,000Total assets acquired


205,108Current liabilities


4,081Non-current liabilities


8,125Total liabilities assumed


12,206Net assets acquired


192,902Less:Acquisition costs


12,962Fair value of common stock issued (1,871,250 shares)


53,052Cash consideration

$
126,888       Amount


Amortizable LifeCore technology

$
16,200



7 yearsSupplier relationships


3,300



1.8 yearsTrademarks


800



10 yearsCustomer relationships


27,700



16.8-17.8 yearsTotal intangible assets with finite lives

$
48,000        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)        Current assets

$
1,191Property, plant and equipment


1,783Goodwill


16,937Intangible assets


11,310In-process research and development


4,960Other non-current assets


20Total assets acquired


36,201Current liabilities


1,296Non-current liabilities


850Total liabilities assumed


2,146Net assets acquired


34,055Less:Acquisition costs


92Realized foreign currency exchange gain


221Accrued obligation cost


55Fair value of common stock issued (467,415 shares)


12,457Cash consideration

$
21,230    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

$
11,310



20 yearsTotal intangible assets with finite lives

$
11,310   (d) Restructuring Plans Related to Business
    Combinations
  No. 95-3,
  Severance


Facility


Total ExitRelated


And Other


ActivitiesBalance at December 31, 2005

$
1,489


$
939


$
2,428Payments


(172
)


(150
)


(322
)Currency adjustments


177







177Balance 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


$
15,274        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)                         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)    (e) Pro Forma Financial Information
      2008


2007(unaudited)Pro forma net revenue

$
1,783,801


$
1,362,196Pro forma net loss available to common shareholders

$
(47,793
)

$
(131,732
)Pro forma net loss per common sharebasic and diluted(1)

$
(0.61
)

$
(2.34
)     (1)
    
    Net loss per common share amounts are computed as described in
    Note 15.  F-37




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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    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


151,245



27,612



123,633



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


1,416,427



247,097



1,169,330Total intangible assets with finite lives

$
1,964,243


$
335,606


$
1,628,637Intangible assets with indefinite lives:Goodwill

$
3,046,083


$



$
3,046,083Other intangible assets


42,984







42,984Total intangible assets with indefinite lives

$
3,089,067


$



$
3,089,067  F-38




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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 LifeAmortized intangible assets:Core technology and patents

$
476,609


$
44,026


$
432,583



1-20 yearsOther intangible assets:Supplier relationships


18,307



9,101



9,206



1.8-15 yearsTrademarks and trade names


137,352



11,964



125,388



5-25 yearsLicense agreements


10,105



8,167



1,938



5-8.5 yearsCustomer relationships


770,230



46,516



723,714



1.5-26 yearsManufacturing know-how


3,616



3,558



58



1-15 yearsOther


10,938



1,598



9,340



0.5-10 yearsTotal other intangible assets


950,548



80,904



869,644Total intangible assets with finite lives

$
1,427,157


$
124,930


$
1,302,227Intangible assets with indefinite lives:Goodwill

$
2,148,850


$



$
2,148,850Other intangible assets


43,097







43,097Total intangible assets with indefinite lives

$
2,191,947


$



$
2,191,947       2009

$
233,3992010

$
207,0122011

$
182,7412012

$
159,1172013

$
139,607    F-39




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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)      Professional


Health


ConsumerDiagnostics


Management


Diagnostics


TotalGoodwill at December 31, 2006

$
353,361


$



$
86,008


$
439,369Acquisitions(1)


1,267,985



463,066



8,940



1,739,991Other(2)(3)


13,254







(43,764
)


(30,510
)Goodwill at December 31, 2007


1,634,600



463,066



51,184



2,148,850Acquisitions(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


$
52,681


$
3,046,083     (1)
    
    Includes 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.(3)
    
    Includes amounts written off in connection with the formation of
    our 50/50 joint venture with P&G.   F-40




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term
    Debt    December 31,2008


2007First Lien Credit Agreement  Term loan

$
960,750


$
970,500First Lien Credit Agreement  Revolving line-of-credit


142,000



Second Lien Credit Agreement


250,000



250,0003% Senior subordinated convertible notes


150,000



150,000Lines-of-credit


3,503



3,730Other


13,362



12,4851,519,615



1,386,715Less: Current portion


(19,058
)


(20,320
)$
1,500,557


$
1,366,395     (a)
    First Lien Credit Agreement and Second Lien Credit
    Agreement         F-41




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)      (b)
    3% Senior Subordinated Convertible Notes, Principal
    Amount $150.0 million    No. 00-19, Accounting for Derivative Financial Instruments Indexed
    to, and Potentially Settled in, a Companys Own
    Stock No. 05-4, The Effect of a Liquidated Damages Clause on a
    Freestanding Financial Instrument Subject to Issue
    No. 00-19
  (c)
    Prior Senior Credit Facility   F-42




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (6)
    Long-term Debt (Continued)      (d)
    Senior Subordinated Notes, 8.75%, Principal Amount
    $150.0 million    (e)
    Lines-of-credit    (f)
    Other Debt    (g)
    Maturities of Long-term Debt    2009

$
19,0582010


15,3722011


11,1582012


10,1772013


9,850Thereafter


1,454,000$
1,519,615    (7)
    Fair
    Value Measurements  Fair Value Measurement No. FAS 157-2, Effective Date of FASB Statement No. 157,
 F-43




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (7)
    Fair Value Measurements (Continued)      Level 1
  Level 2
  
    Quoted prices for identical or similar assets or liabilities in
    non-active markets (examples include corporate and municipal
    bonds which trade infrequently);
    Inputs other than quoted prices that are observable for
    substantially the full term of the asset or liability (examples
    include interest rate and currency swaps); and
    Inputs that are derived principally from or corroborated by
    observable market data for substantially the full term of the
    asset or liability (examples include certain securities and
    derivatives).  Level 3
    Quoted Prices in


Significant OtherDecember 31,


Active Markets


Observable InputsDescription

2008


(Level 1)


(Level 2)Assets:Marketable securities

$
2,354


$
2,354


$
Strategic investments(1)


229



229



Total assets

$
2,583


$
2,583


$
Liabilities:Interest rate swap liability(2)

$
21,132


$



$
21,132Total liabilities

$
21,132


$



$
21,132     (1)
    
    Represents our investment in StatSure which is included in
    investments in unconsolidated entities on our accompanying
    consolidated balance sheets.(2)
    
    Included in other long-term liabilities in our accompanying
    consolidated balances sheets.  F-44




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (8)
    Capital
    Leases    2009

$
4952010


3622011


842012


102013


22Total future minimum lease payments


973Less: Imputed interest


(54
)Present value of future minimum lease payments


919Less: Current portion


(451
)$
468     Machinery, laboratory equipment and tooling

$
1,077Computer equipment


269Furniture and fixtures


1411,487Less: Accumulated amortization


(514
)$
973      (9)
    Postretirement
    Benefit Plans  (a) Employee Savings Plans
  U.S.-based
 F-45




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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
    2008


2007Change in projected benefit obligationBenefit obligation at beginning of year

$
12,627


$
12,370Interest cost


677



660Actuarial loss (gain)


534



(470
)Benefits paid


(182
)


(140
)Curtailment gain


(1,113
)


Foreign exchange impact


(3,465
)


207Benefit obligation at end of year

$
9,078


$
12,627Change in accumulated benefit obligationBenefit obligation at beginning of year

$
9,159


$
8,959Interest cost


677



660Actuarial loss (gain)


534



(470
)Benefits paid


(182
)


(140
)Curtailment gain


(1,113
)


Foreign exchange impact


(2,508
)


150Benefit obligation at end of year

$
6,567


$
9,159Change in plan assetsFair value of plan assets at beginning of year

$
9,143


$
8,189Actual return on plan assets


(1,543
)


220Employer contribution


835



750Benefits paid


(182
)


(150
)Foreign exchange impact


(2,325
)


134Fair value of plan assets at end of year

$
5,928


$
9,143Funded status at end of year

$
(3,150
)

$
(3,484
)     2008


2007Accrued benefit asset (liability)

$
(603
)

$
34Long-term benefit liability


(5,498
)


(4,594
)Intangible asset


2,951



1,076Net amount recognized

$
(3,150
)

$
(3,484
)    F-46




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (9)
    Postretirement Benefit Plans (Continued)    2008


2007Assumptions used to determine benefit obligations:Discount rate


6.10%



5.80%Rate of compensation increase


3.85%



4.15%Assumptions used to determine net periodic benefit cost:Discount rate


5.80%



5.25%Expected return on plan assets


7.20%



7.30%Rate of compensation increase


4.15%



3.80%       2008


2007


2006Interest cost

$
677


$
660


$
586Expected return on plan assets


(634
)


(620
)


(461
)Amortization of net loss


(80
)


(90
)


(26
)Curtailment gain


(1,113
)






Net periodic benefit cost (benefit)

$
(1,150
)

$
(50
)

$
99        (10)
    Derivative
    Financial Instruments    Accounting for Derivative
    Instruments and Hedging Activities
 F-47




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (10)
    Derivative Financial Instruments (Continued)       (11)
    Commitments
    and Contingencies  (a) Operating Leases
    2009

$
25,3772010


19,1592011


15,3802012


11,0112013


9,985Thereafter


13,470$
94,382     (b) Capital Expenditure Commitments
    (c) Contingent Consideration Obligations
     F-48




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)                   F-49




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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  Estate of Melissa Prince Quisenberry v. Alere Medical,
    Inc., TA Associates, Inc., Covington Associates, et al.
  and/or and/or
 F-50




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (11)
    Commitments and Contingencies (Continued)    Healthways, Inc. and Robert Bosch North America Corp, v.
    Alere Medical, Inc.
    Claims in the Ordinary Course and Other Matters
             (12)
    Co-development
    Agreement with ITI Scotland Limited   F-51




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##### 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)
    Investment
    in Unconsolidated Entities and Marketable Securities  (a)
    Equity Method Investments             F-52




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (13)
    Investment in Unconsolidated Entities and Marketable
    Securities (Continued)  The Equity Method of Accounting for
    Investments in Common Stock.
    The Equity Method
    of Accounting for Investments in Common Stock
      (b) Investment in Chembio
   F-53




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (13)
    Investment in Unconsolidated Entities and Marketable
    Securities (Continued)    (c) Investment in BBI
    (d) Investment in StatSure
  Accounting for Derivative Instruments and Hedging
    Activities
   (14)
    In-Process
    Research and Development   F-54




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (14)
    In-Process Research and Development (Continued)      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$
169,000Clondiag/2006

$
24,000


$
1,800


CHF (Congestive Heart Failure)


37
%


2008-20092,500


ACS (Acute Coronary Syndrome)


37
%


2009-2010660


HIV (Human Immuno-deficiency Virus)


37
%


2008-2009$
4,960     (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.   (15)
    Net Loss
    Per Common Share    2008


2007


2006Net loss per common sharebasic and diluted:Numerator:Net loss

$
(21,768
)

$
(244,753
)

$
(16,842
)Less: Preferred stock dividends


(13,989
)






Net loss available to common stockholders

$
(35,757
)

$
(244,753
)

$
(16,842
)Denominator:Weighted average shares outstanding


77,778



51,510



34,109Net loss per common sharebasic and diluted

$
(0.46
)

$
(4.75
)

$
(0.49
)  F-55




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (15)
    Net Loss Per Common Share (Continued)         (16)
    Stockholders
    Equity  (a) Common Stock
       F-56




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (16)
    Stockholders Equity (Continued)  (b) Preferred Stock
           F-57




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (16)
    Stockholders Equity (Continued)      Accounting
    for Derivative Instruments and Hedging Activities
  (c) Stock Options and Awards
       F-58




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (16)
    Stockholders Equity (Continued)      2008


2007


2006Weighted





Weighted





WeightedAverage





Average





AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceOutstanding at January 1


7,836


$
31.42



3,775


$
21.11



3,902


$
18.82Exchanged


1,820


$
30.52



3,606


$
23.48






$
Granted


1,787


$
34.13



2,807


$
49.53



666


$
31.88Exercised


(836
)

$
16.84



(2,204
)

$
23.70



(510
)

$
17.30Canceled/expired/forfeited


(452
)

$
37.75



(148
)

$
33.33



(283
)

$
21.81Outstanding at December 31


10,155


$
32.65



7,836


$
31.42



3,775


$
21.11Exercisable at December 31


5,866


$
27.08



3,887


$
20.03



2,408


$
17.16    F-59




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (16)
    Stockholders Equity (Continued)  (d) Warrants
    WeightedNumber of





AverageShares


Exercise Price


Exercise Price(in thousands)Warrants outstanding and exercisable, December 31, 2005


758


$
3.81-$24.00


$
16.47Exercised


(452
)

$
3.88-$18.12


$
16.51Warrants 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


$
20.83     Outstanding and ExercisableWeightedAverage


WeightedNumber of


Remaining


AverageExercise Price

Shares


Contract Life


Exercise Price(in thousands)


(in years)$3.81-$3.93


4



1.48


$
3.87$4.48-$4.57


1



1.54


$
4.54$5.44-$5.57


4



1.58


$
5.53$7.37-$7.55


2



1.66


$
7.48$13.54-$18.12


219



2.97-3.72


$
14.41$20.06-$29.78


152



6.78


$
29.66$24.00


75



6.25


$
24.00457



5.03


$
20.83   No. 00-19.
 F-60




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (16)
    Stockholders Equity (Continued)  (e) Employee Stock Purchase Plan
     (17)
    Stock-based
    Compensation  SFAS No. 123-R,
  2008


2007


2006Cost of net revenue

$
1,504


$
608


$
391Research and development


4,627



2,215



1,390Sales and marketing


4,264



1,699



682General and administrative


16,010



52,958



2,992$
26,405


$
57,480


$
5,455     SFAS No. 123-R,
    2008

2007

2006Risk-free interest rate

2.39-3.14%

3.15-5.00%

4.00-4.67%Expected dividend yield





Expected life

5.19 years

6.25 years

6.25 yearsExpected volatility

37-43%

44%

41%     SFAS 123-R,
 F-61




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (17)
    Stock-based Compensation (Continued)    SFAS 123-R,
  SFAS 123-R,
   (18)
    Other
    Comprehensive Income  Reporting Comprehensive Income
  Cumulative


Pension





AccumulatedTranslation


Liability





OtherAdjustment


Adjustment





Comprehensive(Note 2(b))


(Note 9(b))


Other(1)


Income (loss)(2)Balance at December 31, 2005

$
7,052


$



$



$
7,052Period change


10,823



(3,738
)


44



7,129Balance 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
)


21,269Period change


(32,889
)


(562
)


(16,663
)


(50,114
)Balance at December 31, 2008

$
(2,256
)

$
(3,959
)

$
(22,630
)

$
(28,845
)     (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, as we intend to permanently invest in our
    foreign subsidiaries in the foreseeable future.   (19)
    Income
    Taxes   F-62




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (19)
    Income Taxes (Continued)    2008


2007


2006United States

$
(52,935
)

$
(235,862
)

$
(5,089
)Foreign


13,431



(14,242
)


(6,362
)$
(39,504
)

$
(250,104
)

$
(11,451
)     2008


2007NOL and capital loss carryforwards

$
102,484


$
141,620Tax credit carryforwards


15,884



18,236Nondeductible reserves


9,488



5,327Nondeductible accruals


67,142



41,318Difference between book and tax bases of tangible assets


3,133



2,328Difference between book and tax bases of intangible assets


35,986



35,042Gain on joint venture


33,264



37,300All other


1,162



26Gross deferred tax asset


268,543



281,197Less: Valuation allowance


(12,740
)


(18,899
)Total deferred tax assets


255,803



262,298Deferred tax liabilities:Difference between book and tax bases of tangible assets


10,824



6,249Difference between book and tax bases of intangible assets


588,766



524,603Other


366



23,973Total deferred tax liability


599,956



554,825Net deferred tax liability

$
344,153


$
292,527Reported as:Deferred tax assets, current portion

$
104,311


$
18,170Deferred tax assets, long-term


14,323



15,799Deferred tax liabilities, current portion






(368
)Deferred tax liabilities, long-term


(462,787
)


(326,128
)Net deferred tax liability

$
(344,153
)

$
(292,527
)    F-63




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (19)
    Income Taxes (Continued)      SFAS No. 141-R, Business Combinations
     F-64




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (19)
    Income Taxes (Continued)    2008


2007


2006Current:Federal

$
7,433


$
2,434


$
State


7,250



2,073



423Foreign


10,387



22,406



5,31525,070



26,913



5,738Deferred:Federal


(5,897
)


(4,961
)


3,152State


(4,237
)


(1,523
)


289Foreign


(31,622
)


(21,408
)


(3,452
)(41,756
)


(27,892
)


(11
)Total tax (benefit) provision

$
(16,686
)

$
(979
)

$
5,727     2008


2007


2006Statutory 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










(28
)Stock-based compensation


(10
)






Rate differential on foreign earnings


3







(2
)Research and development benefit


6



1



14State income taxes, net of federal benefit


2



(1
)


(4
)Deferred tax on indefinite-lived assets










(31
)Accrual to return reconciliation










(9
)Other permanent items and FIN 48


(4
)


1



Change in valuation allowance


11



(4
)


(27
)Effective tax rate


43
%


1
%


(52
)%   Accounting for Uncertainty in Income
    Taxes  an Interpretation of FASB Statement 109 SFAS No. 141-R, Business Combinations
 F-65




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (19)
    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
)Balance as of December 31, 2008

$
11,133     non-U.S. income
   (20)
    Financial
    Information by Segment  Disclosures about Segments of
    an Enterprise and Related Information
     F-66




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (20)
    Financial Information by Segment (Continued)        Vitamins and


CorporateProfessional


Health


Consumer


Nutritional


and2008

Diagnostics


Management


Diagnostics


Supplements


Other


TotalNet revenue to external customers

$
1,051,301


$
392,399


$
138,853


$
88,873


$



$
1,671,426Operating income (loss)

$
97,994


$
11,241


$
9,505


$
(840
)

$
(54,048
)

$
63,852Depreciation and amortization

$
171,980


$
85,990


$
6,809


$
2,286


$
862


$
267,927Restructuring charge

$
36,196


$



$
238


$



$



$
36,434Stock-based compensation

$



$



$



$



$
26,405


$
26,405Assets

$
3,687,685


$
1,850,236


$
223,383


$
65.263


$
128,793


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

$
46,859


$
7,935


$
1,917


$
362


$
8,988


$
66,061   Vitamins and


CorporateProfessional


Health


Consumer


Nutritional


and2007

Diagnostics


Management


Diagnostics


Supplements


Other


TotalNet revenue to external customers

$
582,250


$
23,374


$
161,092


$
72,824


$



$
839,540Operating income (loss)

$
61,067


$
(498
)

$
15,332


$
(1,061
)

$
(250,693
)

$
(175,853
)Depreciation and amortization

$
82,797


$
4,487


$
9,106


$
2,917


$
1,806


$
101,113Restructuring charge

$
3,965


$



$
2,737


$



$



$
6,702Stock-based compensation

$



$



$



$



$
57,480


$
57,480Assets

$
3,748,931


$
635,415


$
309,175


$
49,655


$
137,583


$
4,880,759Expenditures for property, plant and equipment

$
30,581


$
2,257


$
1,366


$
872


$
1,559


$
36,635   F-67




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (20)
    Financial Information by Segment (Continued)  Vitamins and


CorporateProfessional


Health


Consumer


Nutritional


and2006

Diagnostics


Management


Diagnostics


Supplements


Other


TotalNet revenue to external customers

$
310,632


$



$
176,771


$
82,051


$



$
569,454Operating income (loss)

$
42,554


$



$
26,975


$
(3,013
)

$
(60,145
)

$
6,371Depreciation and amortization

$
27,030


$



$
5,062


$
3,270


$
4,000


$
39,362Restructuring charge

$
7,625


$



$
2,921


$



$
2,587


$
13,133Stock-based compensation

$



$



$



$



$
5,455


$
5,455Assets

$
625,560


$



$
314,815


$
49,896


$
95,500


$
1,085,771Expenditures for property, plant and equipment

$
9,905


$



$
1,807


$
475


$
7,530


$
19,717   2008


2007


2006Revenue by Geographic Area:United States

$
1,209,166


$
529,870


$
335,405Europe


285,696



198,525



136,971Other


176,564



111,145



97,078$
1,671,426


$
839,540


$
569,454   2008


2007Long-lived Tangible Assets by Geographic Area:United States

$
222,450


$
198,225United Kingdom


12,113



36,204China


19,491



17,975Other


30,429



15,476$
284,483


$
267,880    (21)
    Related
    Party Transactions     F-68




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (21)
    Related Party Transactions (Continued)               (22)
    Valuation
    and Qualifying Accounts   F-69




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (22)
    Valuation and Qualifying Accounts (Continued)    AmountsBalance at





Charged


Balance atBeginning of





Against


End ofPeriod


Provision


Reserves


PeriodYear ended December 31, 2006

$
9,748


$
22,914


$
(24,261
)

$
8,401Year ended December 31, 2007

$
8,401


$
28,352


$
(24,586
)

$
12,167Year ended December 31, 2008

$
12,167


$
20,810


$
(20,142
)

$
12,835     AmountsBalance at





Charged


Balance atBeginning of





Against


End ofPeriod


Provision


Reserves


PeriodYear ended December 31, 2006

$
7,742


$
6,661


$
(6,184
)

$
8,219Year ended December 31, 2007

$
8,219


$
8,067


$
(8,164
)

$
8,122Year ended December 31, 2008

$
8,122


$
9,194


$
(6,478
)

$
10,838    (23)
    Restructuring
    Activities    2008


2007


2006Fixed asset and inventory write-off

$
18,837


$
3,870


$
6,989Severance


8,357



1,989



2,886Intangible asset write-off


5,103







2,722Facility and other exit costs


4,137



843



536$
36,434


$
6,702


$
13,133   (a) 2008 Restructuring Plans
   F-70




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (23)
    Restructuring Activities (Continued) 
   
       F-71




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (23)
    Restructuring Activities (Continued)          (b) 2007 Restructuring Plans
   F-72




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (23)
    Restructuring Activities (Continued)      (c) 2006 Restructuring Plans
      (d) 2005 Restructuring Plan
   F-73




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (23)
    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, 2006

$
949


$
3,422


$
(2,820
)

$
14


$
1,565Year 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
)

$
14,794     (1)
    
    Represents foreign currency translation adjustment.   (24)
    Supplemental
    Cash Flow Information  Cash Paid for Interest and Income Taxes:
     F-74




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (24)
    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


SharesMatria 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






$
ABON BioPharm (Hangzhou) Co. Ltd. and ACON Laboratories

May 15, 2006


1,871,250


$
53,052






$
CLONDIAG chip technologies GmbH

February 28, 2006


467,715


$
12,457






$
     (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, or NOL, carryforwards related to stock options
    issued to Biosite Incorporated employees.  Non-cash
    Financing Activities:
     (25) Loss
    on Dispositions, Net
   F-75




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  (26)
    Guarantor
    Financial Information  Form S-3
   F-76




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATING STATEMENT OF OPERATIONS
    For the Year Ended December 31, 2008
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet product sales

$



$
869,774


$
486,275


$
(115,911
)

$
1,240,138Services revenue






402,758



2,704







405,462Net product sales and services revenue






1,272,532



488,979



(115,911
)


1,645,600License and royalty revenue






15,536



10,290







25,826Net revenue






1,288,068



499,269



(115,911
)


1,671,426Cost of net product sales


2,541



447,914



286,739



(112,540
)


624,654Cost of services revenue


77



176,421



600







177,098Cost of license and royalty revenue






4,978



6,438



(2,301
)


9,115Cost of net revenue


2,618



629,313



293,777



(114,841
)


810,867Gross profit


(2,618
)


658,755



205,492



(1,070
)


860,559Operating expenses:Research and development


27,709



50,631



33,488







111,828Sales and marketing


37,183



258,580



90,389



132



386,284General and administrative


59,784



170,401



68,410







298,595Total operating expenses


124,676



479,612



192,287



132



796,707Operating (loss) income


(127,294
)


179,143



13,205



(1,202
)


63,852Interest expense, including amortization of deferred financing
    costs


(90,328
)


(72,447
)


(15,986
)


77,617



(101,144
)Other income (expense), net


78,604



(15,854
)


12,655



(77,617
)


(2,212
)(Loss) income before (benefit) provision for income taxes


(139,018
)


90,842



9,874



(1,202
)


(39,504
)(Benefit) provision for income taxes


(63,152
)


46,759



(293
)






(16,686
)Equity in earnings of subsidiaries, net of tax


52,576











(52,576
)


Equity earnings of unconsolidated entities, net of tax


1,522



(23
)


(379
)


(70
)


1,050Net (loss) income


(21,768
)


44,060



9,788



(53,848
)


(21,768
)Preferred stock dividends


(13,989
)














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

$
(35,757
)

$
44,060


$
9,788


$
(53,848
)

$
(35,757
)  F-77




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATING STATEMENT OF OPERATIONS
    For the Year Ended December 31, 2007
    (in thousands)
 
 
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet product sales

$
10,494


$
552,754


$
320,831


$
(83,164
)

$
800,915Services revenue






14,164



2,482







16,646Net product sales and services revenue


10,494



566,918



323,313



(83,164
)


817,561License and royalty revenue






14,047



17,962



(10,030
)


21,979Net revenue


10,494



580,965



341,275



(93,194
)


839,540Cost of net product sales


27,208



294,317



203,196



(93,318
)


431,403Cost of services revenue






5,261











5,261Cost of license and royalty revenue






1,380



7,769







9,149Cost of net revenue


27,208



300,958



210,965



(93,318
)


445,813Gross profit


(16,714
)


280,007



130,310



124



393,727Operating 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



98,116



44,259







167,770General and administrative


78,499



42,518



37,421







158,438Total operating expenses


279,508



168,544



121,528







569,580Operating (loss) income


(296,222
)


111,463



8,782



124



(175,853
)Interest expense, including amortization and write-off of
    deferred financing costs


(77,201
)


(49,960
)


(21,069
)


65,205



(83,025
)Other income (expense), net


71,426



4,461



(695
)


(66,418
)


8,774(Loss) income before (benefit) provision for income taxes


(301,997
)


65,964



(12,982
)


(1,089
)


(250,104
)(Benefit) provision for income taxes


(12,949
)


9,701



2,269







(979
)Equity in earnings of subsidiaries, net of tax


43,226











(43,226
)


Equity earnings of unconsolidated entities, net of tax


1,069







3,348



(45
)


4,372Net (loss) income

$
(244,753
)

$
56,263


$
(11,903
)

$
(44,360
)

$
(244,753
)  F-78




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATING STATEMENT OF OPERATIONS
    For the Year Ended December 31, 2006
    (in thousands)
 
 
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet product sales

$
23,100


$
334,471


$
272,028


$
(77,469
)

$
552,130Services revenue


















Net product sales and services revenue


23,100



334,471



272,028



(77,469
)


552,130License and royalty revenue






306



17,018







17,324Net revenue


23,100



334,777



289,046



(77,469
)


569,454Cost of net product sales


22,395



231,948



160,564



(80,108
)


334,799Cost of license and royalty revenue






481



4,951







5,432Cost of net revenue


22,395



232,429



165,515



(80,108
)


340,231Gross profit


705



102,348



123,531



2,639



229,223Operating expenses:Research and development


1,750



7,705



39,251







48,706Purchase of in-process research and development










4,960







4,960Sales and marketing


4,096



48,684



41,665







94,445General and administrative


21,345



18,999



30,899







71,243Loss on dispositions, net










3,498







3,498Operating (loss) income


(26,486
)


26,960



3,258



2,639



6,371Interest expense, including amortization of original issue
    discounts and write-off of deferred financing costs


(16,895
)


(6,206
)


(20,461
)


16,992



(26,570
)Other income (expense), net


12,852



4,686



8,323



(17,113
)


8,748(Loss) income before provision for income taxes


(30,529
)


25,440



(8,880
)


2,518



(11,451
)Provision for income taxes


1,390



2,012



1,935



390



5,727Equity in earnings of subsidiaries, net of tax


14,716











(14,716
)


Equity earnings of unconsolidated entities, net of tax


361







(25
)






336Net (loss) income

$
(16,842
)

$
23,428


$
(10,840
)

$
(12,588
)

$
(16,842
)  F-79




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    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






199,385



97,459



(16,236
)


280,608Inventories, net






131,918



71,478



(4,265
)


199,131Deferred 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



20,181



26,930



16,236



74,234Intercompany receivables


455,746



248,177



75,686



(779,609
)


Total current assets


549,302



697,092



363,232



(787,083
)


822,543Property, plant and equipment, net


2,395



221,345



62,422



(1,679
)


284,483Goodwill


2,020,528



599,517



427,251



(1,213
)


3,046,083Other intangible assets with indefinite lives






21,195



21,789







42,984Core technology and patents, net


43,700



331,892



83,715







459,307Other intangible assets, net


277,389



772,457



119,484







1,169,330Deferred financing costs, net, and other non-current assets


36,876



6,872



3,136







46,884Investments 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



72,627



35,904







112,704Accrued expenses and other current liabilities


(120,656
)


263,380



93,617



(3,209
)


233,132Intercompany payables


155,443



198,939



425,229



(779,611
)


Total current liabilities


48,710



538,081



561,374



(782,820
)


365,345Long-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



17,864



15,641







60,335Intercompany notes payable


607,772



853,470



119,594



(1,580,836
)


Total long-term liabilities


2,107,513



1,333,203



451,297



(1,580,836
)


2,311,177Stockholders equity


3,278,838



729,177



144,558



(873,735
)


3,278,838Total liabilities and stockholders equity

$
5,435,061


$
2,600,461


$
1,157,229


$
(3,237,391
)

$
5,955,360  F-80




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATING BALANCE SHEET
    December 31, 2007
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
228,178


$
127,626


$
58,928


$



$
414,732Restricted cash






15



141,854







141,869Marketable securities






2,551











2,551Accounts receivable, net of allowances






123,951



68,880



(29,451
)


163,380Inventories, net


59



96,046



55,629



(3,503
)


148,231Deferred tax assets


7,725



4,496



5,949







18,170Income tax receivable






2,302



2,954







5,256Receivable from joint venture, net










1,856



(1,856
)


Prepaid expenses and other current assets


4,864



11,046



13,424



29,451



58,785Intercompany receivables


170,353



22,815



64,500



(257,668
)


Total current assets


411,179



390,848



413,974



(263,027
)


952,974Property, plant and equipment, net


2,028



197,237



68,615







267,880Goodwill


1,721,706



132,849



298,943



(4,648
)


2,148,850Other intangible assets with indefinite lives






21,120



21,977







43,097Core technology and patents, net


356,355



19,531



56,697







432,583Other intangible assets, net


747,300



63,211



59,133







869,644Deferred financing costs, net, and other non-current assets


40,111



6,850



4,786







51,747Investments in unconsolidated entities


(327,854
)


(615
)


53,070



353,152



77,753Marketable securities


1,389







19,043







20,432Deferred tax assets


509



(546
)


15,836







15,799Intercompany notes receivable


2,096,757



(286,692
)






(1,810,065
)


Total assets

$
5,049,480


$
543,793


$
1,012,074


$
(1,724,588
)

$
4,880,759LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
9,750


$
6,526


$
4,044


$



$
20,320Current portion of capital lease obligations






680



96







776Accounts payable


4,257



33,316



31,991



2,497



72,061Accrued expenses and other current liabilities


37,196



74,455



65,781



(2,497
)


174,935Payable to joint venture, net






6,476



6,196



(1,856
)


10,816Intercompany payables


46,647



82,455



128,567



(257,669
)


Total current liabilities


97,850



203,908



236,675



(259,525
)


278,908Long-term liabilities:Long-term debt, net of current portion


1,360,750



5,175



470







1,366,395Capital lease obligations, net of current portion






184



174







358Deferred tax liabilities


287,015



23,524



15,589







326,128Deferred gain on joint venture


16,311







276,767







293,078Other long-term liabilities


10,057



6,439



12,729







29,225Intercompany notes payable


690,830



794,968



324,264



(1,810,062
)


Total long-term liabilities


2,364,963



830,290



629,993



(1,810,062
)


2,015,184Stockholders equity


2,586,667



(490,405
)


145,406



344,999



2,586,667Total liabilities and stockholders equity

$
5,049,480


$
543,793


$
1,012,074


$
(1,724,588
)

$
4,880,759  F-81




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    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

$
(21,768
)

$
89,569


$
9,755


$
(99,324
)

$
(21,768
)Adjustments to reconcile net (loss) income to net cash provided
    by (used in) operating activities:Equity in earnings of subsidiaries, net of tax


(53,576
)










53,576



Interest expense related to amortization of deferred financing
    costs


5,930















5,930Non-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
)Interest in minority investments










167







167Depreciation and amortization


48,754



176,236



42,937







267,927Deferred and other non-cash income taxes


(957
)


(25,497
)


(15,302
)






(41,756
)Other non-cash items


2,714



1,680



(16
)






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


1,000



(37,182
)


(12,468
)






(48,650
)Inventories, net






(80,371
)


(12,854
)


43,999



(49,226
)Prepaid expenses and other current assets


616



11,659



(24,759
)


5,111



(7,373
)Accounts payable


(84
)


18,958



(2,407
)






16,467Accrued expenses and other current liabilities


(154,680
)


112,386



15,397



(5,111
)


(32,008
)Other non-current liabilities


(1,104
)


139



4,365







3,400Intercompany payable (receivable)


224,207



(282,185
)


54,037



3,941



Net cash provided by (used in) operating activities


75,934



(5,913
)


75,561



2,262



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


(1,009
)


(42,511
)


(24,220
)


1,679



(66,061
)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
)


(5,007
)


(4,568
)






(10,575
)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
)Dividends to preferred stockholders


(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






(704
)


(596
)






(1,300
)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


(226,436
)


(53,335
)


6,363







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


228,178



123,133



63,421







414,732Cash and cash equivalents, end of period

$
1,742


$
69,798


$
69,784


$



$
141,324  F-82




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    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

$
(244,753
)

$
58,237


$
(12,222
)

$
(46,015
)

$
(244,753
)Adjustments to reconcile net (loss) income to net cash provided
    by (used in) operating activities:Equity in earnings of subsidiaries, net of tax


(44,881
)










44,881



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


6,884



2,122



1,957







10,963Non-cash stock-based compensation expense


52,210















52,210Charge for in-process research and development


4,825



169,000











173,825Impairment of long-lived assets






108



3,764







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






116



(57
)






59Equity earnings of unconsolidated entities, net of tax


(1,069
)






(3,348
)


45



(4,372
)Interest in minority investments


(243
)






476



1,168



1,401Depreciation and amortization


43,718



31,305



26,090







101,113Deferred and other non-cash income taxes


(34,636
)


3,050



3,694







(27,892
)Other non-cash items


197















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






23,988



(6,421
)


29,451



47,018Inventories, net






7,588



(8,972
)


(79
)


(1,463
)Prepaid expenses and other current assets


(2,669
)


45,520



176



(27,595
)


15,432Accounts payable


2,198



(13,290
)


4,347







(6,745
)Accrued expenses and other current liabilities


16,714



(34,805
)


(13,946
)


(1,856
)


(33,893
)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) operating activities


1,184,156



(1,092,219
)


2,085



(5,267
)


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


(1,538
)


(12,845
)


(22,015
)






(36,398
)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
)


3,416



(5,327
)






(28,273
)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






(554
)


(82
)






(636
)Intercompany notes (receivable) payable


(1,245,000
)


1,245,000











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


43,147



276,552



23,929







343,628Cash and cash equivalents, beginning of period


16,031



20,074



34,999







71,104Cash and cash equivalents, end of period

$
59,178


$
296,626


$
58,928


$



$
414,732  F-83




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the Year Ended December 31, 2006
    (in thousands)
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedCash Flows from Operating Activities:Net (loss) income

$
(16,842
)

$
23,428


$
(10,840
)

$
(12,588
)

$
(16,842
)Adjustments to reconcile net (loss) income to net cash (used in)
    provided by operating activities:Equity in earnings of subsidiaries, net of tax


(14,716
)










14,716



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


1,937



1,213



1,008







4,158Non-cash income related to currency hedge


(217
)














(217
)Non-cash stock-based compensation expense


5,455















5,455Charge for in-process research and development










4,960







4,960Impairment of inventory






707











707Impairment of long-lived assets






4,939



3,927







8,866Loss (gain) on sale of fixed assets






9



(1,537
)






(1,528
)Equity earnings of unconsolidated entities, net of tax


(361
)






25







(336
)Interest in minority investments


(274
)






(25
)






(299
)Depreciation and amortization


4,989



13,378



20,995







39,362Deferred and other non-cash income taxes


84



2,186



(2,551
)


(128
)


(409
)Other non-cash items


159







555







714Changes in assets and liabilities, net of acquisitions:Accounts receivable, net


(194
)


(8,931
)


(4,721
)






(13,846
)Inventories, net


1,534



5,533



(4,382
)


(2,518
)


167Prepaid expenses and other current assets


(10
)


740



(816
)






(86
)Accounts payable


3,757



(5,652
)


2,105







210Accrued expenses and other current liabilities


2,510



(4,962
)


5,228



518



3,294Other non-current liabilities






28



(88
)






(60
)Intercompany (receivable) payable


(12,998
)


(15,288
)


28,409



(123
)


Net cash (used in) provided by operating activities


(25,187
)


17,328



42,252



(123
)


34,270Cash Flows from Investing Activities:Purchases of property, plant and equipment


(558
)


(3,332
)


(15,827
)






(19,717
)Proceeds from sale of property, plant and equipment






15



2,229







2,244Cash paid for acquisitions and transactional costs, net of cash
    acquired


(70,603
)


(109
)


(60,753
)






(131,465
)Cash paid for investments in minority interests and marketable
    securities


(14,455
)






(11,362
)






(25,817
)Increase in other assets


(933
)


(133
)


(3,011
)






(4,077
)Net cash used in investing activities


(86,549
)


(3,559
)


(88,724
)






(178,832
)Cash Flows from Financing Activities:Cash paid for financing costs


(79
)


(1,358
)


(1,350
)






(2,787
)Proceeds from issuance of common stock, net of issuance costs


234,961















234,961Net repayments on long-term debt


(20,000
)














(20,000
)Net repayments from revolving
    lines-of-credit






(15,225
)


(32,654
)






(47,879
)Repayments of notes receivable


14,691















14,691Tax benefit on exercised stock options


567















567Principal payments of capital lease obligations






(511
)


(35
)






(546
)Intercompany notes (receivable) payable


(103,247
)


15,000



88,247







Net cash provided by (used in) financing activities


126,893



(2,094
)


54,208







179,007Foreign exchange effect on cash and cash equivalents


(3
)






2,269



123



2,389Net increase in cash and cash equivalents


15,154



11,675



10,005







36,834Cash and cash equivalents, beginning of period


1,196



8,080



24,994







34,270Cash and cash equivalents, end of period

$
16,350


$
19,755


$
34,999


$



$
71,104  F-84