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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, 2007oro

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

American 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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TABLE OF CONTENTS  PART IITEM 1. BUSINESSGENERALITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED CONSOLIDATED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESSIGNATURESINVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMINVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETSINVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS (in thousands, except per share amounts)INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS (Continued) (in thousands, except per share amounts)INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS (Continued) (in thousands, except per share amounts)INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTSEX-23.1 Consent of BDO Seidman, LLPEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEO & CFO    Table of Contents   EXPLANATORY
    NOTE
 
 
   
 
   
 
   
 
  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 carefully 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 12
    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
   2




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(781) 647-3900. Form 10-K, Form 10-Q, Form 8-K,
  RECENT
    DEVELOPMENTS
  November
    2007 Public Offering
    Agreement
    to Acquire Matria Healthcare
    Hart-Scott-Rodino
  Segments
   3




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Products
  Professional Diagnostic.
      Infectious Disease.
  ®
  Cardiology.
 4




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
    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 syndromes and heart failure.
    Triage Cardiac Panel.  An immunoassay for the
    quantitative determination of CK-MB, myoglobin and troponin I in
    whole blood or plasma, as an aid in the diagnosis of acute
    myocardial infarction.
    Triage CardioProfilER.  An immunoassay for use
    as an aid in the diagnosis of acute myocardial infarction, the
    diagnosis and assessment of severity of congestive heart failure
    and the risk stratification of patients with acute coronary
    syndromes. This panel combines troponin I, CK-MB, myoglobin
    and BNP to provide rapid, accurate results in whole blood and
    plasma.
    Triage Profiler S.O.B.  An immunoassay for use
    as an aid in the diagnosis of myocardial infarction, the
    diagnosis and assessment of severity of congestive heart
    failure, the assessment and evaluation of patients suspected of
    having disseminated intravascular coagulation and thromboembolic
    events, including pulmonary embolism and deep vein thrombosis,
    and the risk stratification of patients with acute coronary
    syndromes.
    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.      Oncology. ® NMP-22
 5




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Drugs of Abuse.
        Womens Health.
   
  Health Management.
 
  Consumer Diagnostic.
 6




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Vitamins and Nutritional Supplements.
    B-complex B-complex B-complex
  Methods
    of Distribution
   7




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Manufacturing
      Research
    and Development
     8




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Foreign
    Operations
    Competition
  Professional Diagnostic.
         9




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Consumer Diagnostic Products.
  Vitamins and Nutritional Supplements.
    Patents
    and Proprietary Technology; Trademarks
   10




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Government
    Regulation
       11




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Employees
   
  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 34 of this
    report.
 
  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; 12




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
    require us to use a large portion of our cash flow from
    operations to pay principal and interest on our indebtedness,
    which would reduce the amount of cash available to finance our
    operations and service obligations, to delay or reduce capital
    expenditures or the introduction of new products
    and/or
    forego business opportunities, including acquisitions, research
    and development projects or product design enhancements;
    limit our flexibility to adjust to market conditions, leaving us
    vulnerable in a downturn in general economic conditions or in
    our business and less able to plan for, or react to, changes in
    our business and the industries in which we operate;
    impair our ability to obtain additional financing;
    place us at a competitive disadvantage compared to our
    competitors that have less debt; and
    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 its 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.   13




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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.
    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.
   14




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
    consolidating manufacturing and research and development
    operations, 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 with those of Matria;
    establishing or expanding manufacturing, sales, distribution and
    marketing functions in order to accommodate newly acquired
    businesses or product lines or rationalizing these functions to
    take advantage of synergies;
    preserving the important licensing, research and development,
    manufacturing and supply, distribution, marketing, customer and
    other relationships;
    minimizing the diversion of managements attention from
    ongoing business concerns; and
    coordinating geographically separate organizations.    If we
    choose to acquire or invest in new and complementary businesses,
    products or technologies rather than developing them internally,
    such acquisitions or investments could disrupt our business and,
    depending on how we finance these acquisitions or investments,
    could result in the use of significant amounts of
    cash.
    
    the inability to complete the acquisition or investment;
    disruption of our ongoing businesses and diversion of management
    attention;
    difficulties in integrating the acquired entities, products or
    technologies;
    difficulties in operating the acquired business profitably;
    difficulties in transitioning key customer, distributor and
    supplier relationships;
    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; 15




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
    the incurrence of debt;
    the assumption of significant liabilities;
    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 the our corporate culture and
    business objectives with that of P&G into the joint venture;
    difficulties or delays in transitioning clinical studies;
    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.
   16




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We may
    experience difficulties that may delay or prevent our
    development, introduction or marketing of new or enhanced
    products.
    
    any of the products under development will prove to be effective
    in clinical trials;
    we will be able to obtain, in a timely manner or at all,
    regulatory approval to market any of our products that are in
    development or contemplated;
    the products we develop can be manufactured at acceptable cost
    and with appropriate quality; or
    these products, 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.
     17




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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.
        We are
    also subject to applicable regulatory approval requirements of
    the foreign countries in which we sell products, which are
    costly and may prevent or delay us from marketing our products
    in those countries.
    Failure
    to comply with ongoing regulation applicable to our businesses
    may result in significant costs or, in certain circumstances,
    the suspension or withdrawal of previously obtained clearances
    or approvals.
   18




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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 Biosite Triage BNP tests.
     19




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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 efforts;
    our ability to sell and implement new and additional services
    beneficial to health plans and employers;
    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.    Our
    health management business may be adversely affected by cost
    reduction pressures among health care providers.
    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.
    Our data
    management and information technology systems are critical to
    maintaining and growing our business.
   20




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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 of those products.
    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.
   21




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
    increased costs or reduced revenue as a result of movements in
    foreign currency exchange rates;
    decreased liquidity resulting from longer accounts receivable
    collection cycles typical of foreign countries;
    lower productivity resulting from difficulties managing sales,
    support and research and development operations across many
    countries;
    lost revenues resulting from difficulties associated with
    enforcing agreements and collecting receivables through foreign
    legal systems;
    lost revenues resulting from the imposition by foreign
    governments of trade protection measures;
    higher cost of sales resulting from import or export licensing
    requirements;
    lost revenues or other adverse affects 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. 22




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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.   23




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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.     24




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In
    December 2005, we learned that the SEC had issued a formal order
    of investigation in connection with the previously disclosed
    revenue recognition matter at one of our diagnostic divisions.
    We cannot predict what the outcome of this investigation will
    be.
    In March
    2006, the FTC opened a preliminary, non-public investigation
    into our acquisition of the Innovacon business to determine
    whether this acquisition may be anticompetitive. We cannot
    predict what the outcome of this investigation will
    be.
    Non-competition
    obligations and other restrictions will limit our ability to
    take full advantage of our management team, the technology we
    own or license and our research and development
    capabilities.
    Our
    operating results may fluctuate due to various factors and as a
    result period-to-period comparisons of our results of operations
    will not necessarily be meaningful.
    
    the timing of new product announcements and introductions by us
    and our competitors;
    market acceptance of new or enhanced versions of our products;
    the extent to which our current and future products rely on
    rights belonging to third parties;
    changes in manufacturing costs or other expenses;
    competitive pricing pressures;
    changes in healthcare reimbursement policies and amounts;
    regulatory changes;
    the gain or loss of significant distribution outlets or
    customers;
    increased research and development expenses;
    length of sales cycle and implementation process for new health
    management customers; 25




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
    the 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 senior
    subordinated convertible notes may adversely affect the market
    price of our common stock.
    The
    conversion rate of our senior subordinated convertible notes may
    be adjusted based upon the daily volume weighted average price
    per share of our common stock for the thirty consecutive trading
    days ending on May 9, 2008, and any such adjustment will be
    dilutive to the holders of our common stock and could have an
    adverse effect on the price of our common stock.
    The
    holders of the Series B Convertible Perpetual Preferred
    Stock that we may issue in connection with the Matria
    acquisition shall be entitled to receive liquidation payments in
    preference to the holders of our common stock.
   26




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The terms
    of the Series B Preferred Stock, if issued, may limit our
    ability to raise additional capital through subsequent issuances
    of preferred stock.
    Future
    sales of our common stock issuable upon conversion the proposed
    Series B Preferred Stock may adversely affect the market
    price of our common 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. 27




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   
  ITEM 2.
    PROPERTIES               
  ITEM 3.
    LEGAL
    PROCEEDINGS     28




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

For


Against


WithheldProposal to increase maximum number of shares of common stock
    available for issuance under option plan:


36,953,006



3,473,471



30,922  29




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PART II
 
  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    High


LowFiscal 2007Fourth Quarter

$
65.00


$
52.38Third Quarter

$
55.79


$
44.17Second Quarter

$
53.85


$
38.00First Quarter

$
44.72


$
36.90Fiscal 2006Fourth Quarter

$
41.50


$
34.01Third Quarter

$
36.02


$
25.99Second Quarter

$
32.00


$
24.60First Quarter

$
29.00


$
23.63     Dividend
    Policy
   30




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Stock
    Performance Graph
      
  Current
    Indices
  AMEXHealth Products &AMEX US Total


ServicesDate

IMA


Return Index


Total Return Index12/31/02

$
100.00


$
100.00


$
100.0012/31/03

$
165.63


$
135.35


$
175.1812/31/04

$
190.87


$
156.39


$
180.1412/30/05

$
180.30


$
169.24


$
155.8112/29/06

$
294.30


$
196.39


$
201.0112/31/07

$
427.22


$
203.61


$
192.97    31




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ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA  Form 10-K.
  Form 10-K
 
   
  
 For the Year Ended December 31,2007


2006


2005


2004


2003(restated)(in thousands, except per share data)Statement of Operations Data:Net product sales

$
794,187


$
552,130


$
406,457


$
365,432


$
285,430Services revenue


23,374















Net product and services revenue


817,561



552,130



406,457



365,432



285,430License and royalty revenue


21,979



17,324



15,393



8,559



9,728Net revenue


839,540



569,454



421,850



373,991



295,158Cost of revenues


445,813



340,231



269,538



226,987



167,641Gross profit


393,727



229,223



152,312



147,004



127,517Operating expenses:Research and development


69,547



48,706



30,992



31,954



24,367Purchase of in-process research and development


173,825



4,960











Sales and marketing


167,770



94,445



72,103



57,957



52,504General and administrative


158,438



71,243



59,990



52,707



35,812Loss on dispositions, net






3,498











Operating (loss) income


(175,853
)


6,371



(10,773
)


4,386



14,834Interest expense and other expenses, net, including amortization
    of original issue discounts and write-off of deferred financing
    costs


(74,251
)


(17,822
)


(1,617
)


(18,707
)


(3,270
)(Loss) income from continuing operations before provision for
    income taxes


(250,104
)


(11,451
)


(12,390
)


(14,321
)


11,564(Benefit) provision for income taxes


(979
)


5,727



6,819



2,275



2,911Equity earnings of unconsolidated entities, net of tax


4,372



336











(Loss) income from continuing operations

$
(244,753
)

$
(16,842
)

$
(19,209
)

$
(16,596
)

$
8,653 
 32




---



##### Table of Contents



For the Year Ended December 31,2007


2006


2005


2004


2003(restated)(in thousands, except per share data)(Loss) income from continuing operations available to common
    stockholdersbasic and diluted(1)

$
(244,753
)

$
(16,842
)

$
(19,209
)

$
(17,345
)

$
7,695(Loss) income per common sharebasic and diluted(1)

$
(4.75
)

$
(0.49
)

$
(0.79
)

$
(0.87
)

$
0.49  
  
 December 31,2007


2006


2005


2004


2003(restated)(in thousands)Balance Sheet Data:Cash and cash equivalents

$
414,732


$
71,104


$
34,270


$
16,756


$
24,622Working capital

$
674,066


$
133,313


$
84,523


$
62,615


$
44,693Total assets

$
4,880,759


$
1,085,771


$
791,166


$
568,269


$
540,529Total debt

$
1,387,849


$
202,976


$
262,504


$
191,224


$
176,181Redeemable convertible preferred stock

$



$



$



$



$
6,185Total stockholders equity

$
2,586,667


$
714,138


$
397,308


$
271,416


$
265,173  
    (1)
    
    (Loss) income available to common stockholders and basic and
    diluted (loss) income per common share are computed as described
    in Notes 2(n) and 14 of our consolidated financial
    statements included elsewhere in this Annual Report on
    Form 10-K. 33




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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
  ® point-of-care
     34




---



##### Table of Contents



2007
    Financial Highlights
  The Equity Method of Accounting for Investments
    in Common Stock.
  50/50 joint
   35




---



##### Table of Contents



50/50 joint
 
  Restatement
    of 2007 Financial Statements
 
 
   
 
  Form 10-K, Form 10-K
 
  
 2007As restated


As reportedSales and marketing

$
167,770


$
165,328Operating loss

$
(175,853
)

$
(173,411
)Loss before (benefit) provision for income taxes

$
(250,104
)

$
(247,662
)(Benefit) provision for income taxes

$
(979
)

$
(1,799
)Net loss

$
(244,753
)

$
(241,491
)Net loss per common share  basic and diluted

$
(4.75
)

$
(4.69
)Total assets

$
4,880,759


$
4,883,201Total stockholders equity

$
2,586,667


$
2,589,929  
  Results
    of Operations
  Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
 
  Net Product Sales. 50/50 joint
 
 36




---



##### Table of Contents



Net Product Sales by Business Segment.
  % Increase2007


2006


(decrease)Professional diagnostic products

$
565,265


$
298,472



89
%Consumer diagnostic products


156,098



171,607



(9
)%Vitamins and nutritional supplements


72,824



82,051



(11
)%Net product sales

$
794,187


$
552,130



44
%   Professional
    Diagnostic Products
    Consumer
    Diagnostic Products
  50/50 joint
  Vitamins
    and Nutritional Supplements
    Services Revenue.
 37




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##### Table of Contents



Net Product 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 and services revenue

$
817,561


$
552,130



48
%   50/50 joint
  License and Royalty Revenue.
  Gross Profit and Margin. 50/50 joint
    Gross Profit from Net Product Sales by Business
    Segment.
 % Increase2007


2006


(decrease)Professional diagnostic products

$
306,710


$
129,636



137
%Consumer diagnostic products


55,242



82,658



(33
)%Vitamins and nutritional supplements


6,966



5,037



38
%Gross profit from net product sales

$
368,918


$
217,331



70
%  38




---



##### Table of Contents



Professional
    Diagnostic Products
      Consumer
    Diagnostic Products
  50/50 joint
    Vitamins
    and Nutritional Supplements
      Gross Profit from Services Revenue.
  Research and Development Expense.
 39




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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












$
6,000Clondiag/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.
 
 
   
 40




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##### Table of Contents



General and Administrative Expense.
 
   
  Interest Expense.
  Other Income (Expense), Net.
  2007


2006Interest income

$
11,486


$
1,693Foreign exchange gains (losses), net


(1,609
)


2,643Other


(1,103
)


4,748Other income (expense), net

$
8,774


$
9,084      
  (Benefit) Provision for Income
    Taxes.
 
   41




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##### Table of Contents



Net Loss. Form 10-K
 
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Net Product Sales.
  Net Product Sales by Business Segment.
  % Increase2006


2005


(decrease)Professional diagnostic products

$
298,472


$
169,351



76
%Consumer diagnostic products


171,607



161,695



6
%Vitamins and nutritional supplements


82,051



75,411



9
%Net product sales

$
552,130


$
406,457



36
%   Professional
    Diagnostic Products
    Consumer
    Diagnostic Products
    Vitamins
    and Nutritional Supplements
   42




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##### Table of Contents



Net Product Sales by Geographic Location.
  % Increase2006


2005


(decrease)United States

$
323,046


$
234,229



38
%Europe


134,528



108,981



23
%Other


94,556



63,247



50
%Net product sales

$
552,130


$
406,457



36
%     License and Royalty Revenue.
  Gross Profit and Margin. (SFAS) No. 123-R, Share-Based Payment
     43




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##### Table of Contents



Gross Profit from Net Product Sales by Business
    Segment.
  % Increase2006


2005


(decrease)Professional diagnostic products

$
129,636


$
62,252



108
%Consumer diagnostic products


82,658



76,515



8
%Vitamins and nutritional supplements


5,037



2,738



84
%Gross profit from net product sales

$
217,331


$
141,505



54
%   Professional
    Diagnostic Products
      Consumer
    Diagnostic Products
      Vitamins
    and Nutritional Supplements
      Research and Development Expense. SFAS No. 123-R.
 44




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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


CompleteClondiag/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. SFAS No. 123-R.
    General and Administrative Expense.
 45




---



##### Table of Contents



SFAS No. 123-R.
    Loss on Dispositions, Net.
  Interest Expense.
  Other Income (Expense), Net.
  2006


2005Interest income

$
1,693


$
1,035Foreign exchange gains (losses), net


2,643



(340
)Other


4,748



19,483Other income (expense), net

$
9,084


$
20,178       Provision for Income Taxes.
 46




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##### Table of Contents



Net Loss Income. Form 10-K
  Liquidity
    and Capital Resources
    and/or
  Summary
    of Changes in Cash Position
  50/50 joint
 47




---



##### Table of Contents



50/50 joint
  Operating
    Cash Flows
 
   
  Investing
    Cash Flows
              50/50 joint
 48




---



##### Table of Contents



Financing
    Cash Flows
             49




---



##### Table of Contents



Income
    Taxes
 
  Business Combinations SFAS No. 141-R, Business Combinations
 
   50




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due by PeriodContractual Obligations

Total


2008


2009-2010


2011-2012


ThereafterLong-term debt obligations(1)

$
1,386,716


$
10,353


$
5,721


$
81


$
1,370,561Capital lease obligations(2)


1,195



809



341



45



Operating lease obligations(3)


108,057



22,617



23,777



18,726



42,937Long-term and other liabilities(4)


7,278



3,427



1,296



2,101



454Minimum royalty obligations


240



220



20







Purchase obligationscapital expenditure


12,215



12,215











Purchase obligationsother(5)


69,821



68,257



1,564







Remaining obligationsInnovacon business(6)


6,000



6,000











Interest on debt(7)


37,677



4,500



9,000



9,000



15,177Total

$
1,629,199


$
128,398


$
41,719


$
29,953


$
1,429,129     (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 7 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(3)
    
    See Note 10(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
    $0.8 million in technology license payment obligations and
    $6.5 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 109has not been included
    in the table above, as we estimate payments annually.(5)
    
    Other purchase obligations relate to inventory purchases and
    other operating expense commitments.(6)
    
    In connection with our acquisition of the Innovacon business, we
    are obligated to make a $6.0 million payment for the
    remaining first territory business.(7)
    
    Amounts are based on our senior credit facilities. See
    Note 6 of our consolidated financial statements included
    elsewhere in this Annual Report on
    Form 10-K.    6-month 6-month 6-month
 51




---



##### Table of Contents



6-month
                    Critical
    Accounting Policies
  Form 10-K
 52




---



##### Table of Contents



Form 10-K
  Revenue
    Recognition
            Use of
    Estimates for Sales Returns and Other Allowances and Allowance
    for Doubtful Accounts
   53




---



##### Table of Contents



Valuation
    of Inventories
    Valuation
    of Goodwill and Other Long-Lived and Intangible Assets
     54




---



##### 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
   55




---



##### Table of Contents



SFAS No. 123-R SFAS No. 123-R,
  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
 56




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Recently
    Issued Standards
  No. 07-01, Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent 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
 57




---



##### Table of Contents



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
  Recently
    Adopted Standards
  Accounting for Uncertainty in Income
    Taxesan Interpretation of FASB Statement 109
  No. EITF 00-19-2, Accounting for Registration Payment Arrangements Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity and FIN 45, Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others EITF 00-19-2,
 58




---



##### Table of Contents



EITF 00-19-2
  No. 06-03, How Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement No. 06-03 No. 06-03 06-03, 06-03
  Accounting for Certain Hybrid Financial Instruments
 
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
       59




---



##### Table of Contents



Interest ExpenseIncreaseInterest rates increase by 1 basis point

$
12,205Interest rates increase by 2 basis points

$
24,410   Foreign
    Currency Risk
     60




---



##### Table of Contents



Approximate


ApproximateDecrease in


Increase inNet Revenue


Net LossIf, during 2007, the U.S. dollar was stronger by:1%

$
1,931


$
775%

$
9,654


$
38410%

$
19,307


$
767  
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   
  Form 10-K,
 
 
   
  
 2007First


Second


Third


Fourth


FourthQuarter(2)


Quarter(3)


Quarter(4)


Quarter(5)


Quarter(5)As restated


As reportedNet revenue

$
158,979


$
154,965


$
237,636


$
287,960


$
287,960Gross profit

$
78,338


$
66,340


$
110,298


$
138,751


$
138,751Net (loss) income

$
6,305


$
(54,674
)

$
(180,612
)

$
(15,772
)

$
(12,510
)Net (loss) income per common share  basic and
    diluted(1)

$
0.14


$
(1.17
)

$
(3.74
)

$
(0.24
)

$
(0.19
)  
  2006First


Second


Third


FourthQuarter(6)


Quarter(7)


Quarter(8)


Quarter(9)Net revenue

$
127,821


$
139,713


$
144,912


$
157,008Gross profit

$
52,254


$
48,496


$
61,145


$
67,328Net (loss) income

$
(2,630
)

$
(10,556
)

$
(9,683
)

$
6,027Net (loss) income per common sharebasic and diluted(1)

$
(0.09
)

$
(0.33
)

$
(0.27
)

$
0.15  61




---



##### Table of Contents



(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 14 of our consolidated financial statements
    included elsewhere in this Annual Report on
    Form 10-K.(2)
    
    Included in net income for the first quarter of 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.(3)
    
    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 charge related
    to an inventory adjustment 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.(4)
    
    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 charge related
    to an inventory adjustment in connection with the Biosite and
    Cholestech acquisitions, a write-off of $169.0 million
    associated with the value of purchased in-process R&D
    incurred in connection with the Biosite acquisition, and
    $3.3 million in non-cash stock-based compensation expense.(5)
    
    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 charge related to an
    inventory adjustment in connection with the Cholestech and
    HemoSense acquisitions, a write-off of $4.8 million
    associated with the value of purchased in-process R&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.(6)
    
    Included in net loss in the first quarter of 2006 is a
    $0.9 million charge related to the closure of our
    manufacturing facility in Galway, Ireland, a $1.2 million
    unrealized foreign exchange loss associated with the closure our
    Galway, Ireland facility and $1.3 million of non-cash
    stock-based compensation expense.(7)
    
    Included in net loss in the second quarter of 2006 is a
    $4.4 million restructuring charge, including
    $9.9 million primarily related to the closure of our ABI
    operation in San Diego, California, offset by income of
    $5.5 million related to a foreign exchange gain associated
    with the final closure of our manufacturing facility in Galway,
    Ireland, a $3.2 million net loss on disposition resulting
    from a $4.6 million loss associated with managements
    decision to dispose of our Scandinavian research operation,
    offset by a $1.4 million gain on the sale of an idle
    manufacturing facility and $1.2 million of non-cash
    stock-based compensation expense.(8)
    
    Included in net loss in the third quarter of 2006 is a
    $5.0 million charge for the write-off of in-process
    research and development acquired in connection with the
    Clondiag acquisition, a $1.2 million restructuring charge
    related to the closure of our ABI operation, along with the
    write-off of fixed assets at other facilities impacted by our
    restructuring plans and $1.3 million of non-cash
    stock-based compensation expense.(9)
    
    Included in net income in the fourth quarter of 2006 is a
    $1.2 million restructuring charge associated with the
    closure of our ABI operation, a $0.3 million net loss on
    disposition resulting from the finalization of our disposition
    of our Scandinavian research operation and $1.6 million of
    non-cash stock-based compensation expense. 
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   62




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##### Table of Contents



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)
          Internal
    ControlIntegrated Framework
 
   
 63




---



##### Table of Contents



Changes
    in internal control over financial reporting
   64




---



##### Table of Contents



REPORT OF
    THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
  
 
 
   
 
   
 
   
 
   
 
   
 65




---



##### Table of Contents



/s/  BDO
    Seidman, LLP
 
 
   
 
  
 66




---



##### Table of Contents



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

F-2Consolidated Statements of Operations for the Years Ended
    December 31, 2007 (restated), 2006 and 2005

F-3Consolidated Balance Sheets as of December 31, 2007
    (restated) and 2006

F-4Consolidated Statements of Stockholders Equity and
    Comprehensive Loss for the Years Ended December 31, 2007
    (restated), 2006 and 2005

F-5Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2007 (restated), 2006 and 2005

F-8Notes to Consolidated Financial Statements (restated)

F-10  
  2.
    Financial Statement Schedules.   67




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##### Table of Contents



3.
    Exhibits.  2
.1

Sale Agreement, dated December 20, 2001, between Inverness
    Medical Innovations, Inc. (the Company) and Unilever
    U.K. Holdings Limited (incorporated by reference to
    Exhibit 2.1 to the Companys Current Report on
    Form 8-K
    dated December 20, 2001)2
.2

Share Purchase Agreement, dated February 28, 2006, by and
    between Inverness Medical Switzerland Gmbh, Inverness Medical
    Innovations, Inc., CLONDIAG Beteiligungs-Gesellschaft GmbH,
    Eugen Ermantraut, Dr. Stefan Wölfl, Dr. Torsten
    Schulz, Prof. Dr. Albert Hinnen, Karl Fusseis,
    Prof. Dr. Michael Köhler and Thomas Ellinger
    (incorporated by reference to Exhibit 2.9 to the
    Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 30, 2006)2
.3

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
.4

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)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

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
.3

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)*3
.4

First Amendment to the Amended and Restated Certificate of
    Incorporation of the Company3
.5

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)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

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
.2

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
.3

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
.4

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
.5

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
.6

Lease between WE 10 Southgate LLC and Binax, Inc. dated as of
    August 26, 2004 (incorporated by reference to
    Exhibit 10.7 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005) 68




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+10
.7

Research and Development Agreement, dated February 25,
    2005, among ITI Scotland Limited and Inverness Medical
    Innovations, Inc., Stirling Medical Innovations Limited and
    Inverness Medical Switzerland GmbH (incorporated by reference to
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended March 31, 2005)10
.8

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
.9

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
.10

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
.11

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
.12

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)10
.13

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 September 20, 2002)10
.14

Lease Agreement between Cholestech Corporation and the BIV Group
    dated July 23, 2001 (incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2007)10
.15

Lease Agreement Addendum No. One by and between Cholestech
    Corporation and BIV Group dated November 19, 2004
    (incorporated by reference to Exhibit 10.2 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2007)10
.16

$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
.17

$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
.18

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
.19

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)10
.20

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) 69




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+10
.21

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
.22

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
.23

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
.24

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
.25

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
.26

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
.27

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
.28

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
.29

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
.30

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
.31

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)10
.32

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)10
.33

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)10
.34

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)+10
.35

Reagent Supply Agreement, dated June 30, 2005, by and
    between Abbott Laboratories, Inverness Medical Innovations, Inc.
    and Inverness Medical Japan, Ltd (incorporated by reference to
    Exhibit 10.9 to Companys Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005) 70




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##### Table of Contents



10
.36

Second Territory Letter Agreement, dated March 31, 2006, by
    and among Inverness Medical Innovations, Inc., ACON
    Laboratories, Inc., AZURE Institute, Inc., LBI, Inc., Oakville
    Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co., Ltd., Karsson
    Overseas Ltd., Jixun Lin and Feng Lin (incorporated by reference
    to Exhibit 10.1 to the Companys Current Report on
    Form 8-K,
    event date September 29, 2005, filed on October 4,
    2005)10
.37

Subunderlease, dated February 15, 2007, between the Landlord,
    Unilever U.K. Central Resources Limited, the Tenant, Unipath
    Limited, and the Surety, Inverness Medical Innovations, Inc.
    (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, 2006)10
.38

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
.39

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
.40

Amendment No. 6 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan*10
.41

Amendment No. 7 to Inverness Medical Innovations, Inc. 2001
    Stock Option and Incentive Plan10
.42

Inverness Medical Innovations, Inc. 2001 Stock Option and
    Incentive Plan (previously attached as Appendix A to the
    Companys Proxy Statement filed on Schedule 14A as
    filed with the SEC on November 20, 2007)10
.43

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
.44

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)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 29, 2008**23
.1

Consent of BDO Seidman, LLP**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  
   
  *
    
    Previously filed. 
 
  **
    
    Filed herewith. 
  +
    
    We have omitted portions of this exhibit which have been granted
    confidential treatment. 71




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##### Table of Contents



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




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##### Table of Contents



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, 2007 (restated), 2006 and 2005

F-3Consolidated Balance Sheets as of
    December 31, 2007 (restated) and 2006

F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Loss for the Years Ended
    December 31, 2007 (restated), 2006 and 2005

F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007 (restated), 2006 and 2005

F-8Notes to Consolidated Financial Statements
    (restated)

F-10  
 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)
  
 2007


2006


2005(restated)Net product sales

$
794,187


$
552,130


$
406,457Services revenue


23,374







Net product and services revenue


817,561



552,130



406,457License and royalty revenue


21,979



17,324



15,393Net revenue


839,540



569,454



421,850Cost of revenues


445,813



340,231



269,538Gross profit


393,727



229,223



152,312Operating expenses:Research and development (Note 11)


69,547



48,706



30,992Purchase of in-process research and development (Note 13)


173,825



4,960



Sales and marketing


167,770



94,445



72,103General and administrative


158,438



71,243



59,990Loss on dispositions, net (Note 23)






3,498



Operating (loss) income


(175,853
)


6,371



(10,773
)Interest expense, including amortization of original issue
    discounts and write-off of deferred financing costs (Note 6)


(83,025
)


(26,570
)


(21,795
)Other income (expense), net


8,774



8,748



20,178Loss before (benefit) provision for income taxes


(250,104
)


(11,451
)


(12,390
)(Benefit) provision for income taxes


(979
)


5,727



6,819Equity earnings of unconsolidated entities, net of tax
    (Note 12)


4,372



336



Net loss

$
(244,753
)

$
(16,842
)

$
(19,209
)Net loss per common sharebasic and diluted
    (Notes 2(n) and 14)

$
(4.75
)

$
(0.49
)

$
(0.79
)Weighted average sharesbasic and diluted


51,510



34,109



24,358  
   F-3




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  (in thousands, except per share amounts)
  
 December 31,2007


2006(restated)ASSETSCurrent assets:Cash and cash equivalents

$
414,732


$
71,104Restricted cash


141,869



Marketable securities


2,551



Accounts receivable, net of allowances of $12,167 and $8,401 at
    December 31, 2007 and 2006, respectively


163,380



100,388Inventories, net


148,231



78,322Deferred tax assets


18,170



5,332Income tax receivable


5,256



3,014Prepaid expenses and other current assets


58,785



17,384Total current assets


952,974



275,544Property, plant and equipment, net


267,880



82,312Goodwill


2,148,850



439,369Other intangible assets with indefinite lives


43,097



68,107Core technology and patents, net


432,583



87,732Other intangible assets, net


869,644



83,794Deferred financing costs, net, and other non-current assets


51,747



13,218Investments in unconsolidated entities


77,753



22,936Marketable securities


20,432



12,681Deferred tax assets


15,799



78Total assets

$
4,880,759


$
1,085,771LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
20,320


$
7,504Current portion of capital lease obligations


776



584Accounts payable


72,061



46,342Accrued expenses and other current liabilities


174,935



87,801Payable to joint venture


10,816



Total current liabilities


278,908



142,231Long-term liabilities:Long-term debt, net of current portion


1,366,395



194,473Capital lease obligations, net of current portion


358



415Deferred tax liabilities


326,128



23,984Deferred gain on joint venture


293,078



Other long-term liabilities


29,225



10,530Total long-term liabilities


2,015,184



229,402Commitments and contingencies (Notes 7, 8 and 10)Series A redeemable convertible preferred stock,
    $0.001 par value:Authorized: 2,667 sharesIssued: 2,527 shares at December 31, 2007 and 2006Outstanding: none at December 31, 2007 and 2006






Stockholders equity:Preferred stock, $0.001 par valueAuthorized: 2,333 sharesIssued: none






Common stock, $0.001 par valueAuthorized: 100,000 sharesIssued and outstanding: 76,784 shares at December 31,
    2007 and 39,215 shares at December 31, 2006


77



39Additional paid-in capital


2,937,143



826,987Accumulated deficit


(371,822
)


(127,069
)Accumulated other comprehensive income


21,269



14,181Total stockholders equity


2,586,667



714,138Total liabilities and stockholders equity

$
4,880,759


$
1,085,771  
   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 per share amounts)
  Common Stock





Notes





Accumulated$0.001


Additional


Receivable





Other


Total


TotalNumber of


Par


Paid-in


From


Accumulated


Comprehensive


Stockholders


ComprehensiveShares


Value


Capital


Stockholders


Deficit


Income


Equity


LossBALANCE, DECEMBER 31, 2004


20,711


$
21


$
359,583


$
(14,691
)

$
(91,018
)

$
17,521


$
271,416Issuance of common stock in connection with acquisitions and
    equity offering, net of issuance costs of $2,481


6,391



6



150,210















150,216Exercise of common stock options and warrants and shares issued
    under employee stock purchase plan


395







5,185















5,185Stock-based compensation related to grants of common stock
    options










169















169Changes in cumulative translation adjustment






















(10,300
)


(10,300
)

$
(10,300
)Reclassification of gain related to sale of marketable securities






















(169
)


(169
)


(169
)Net loss


















(19,209
)






(19,209
)


(19,209
)Total comprehensive loss





























$
(29,678
)BALANCE, DECEMBER 31, 2005


27,497


$
27


$
515,147


$
(14,691
)

$
(110,227
)

$
7,052


$
397,308    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 per share amounts)
  Common Stock





Notes





Accumulated$0.001


Additional


Receivable





Other


Total


TotalNumber of


Par


Paid-in


From


Accumulated


Comprehensive


Stockholders


ComprehensiveShares


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 marketable 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-6




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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 per share amounts)
  
 Common Stock








Accumulated$0.001


Additional





Other


Total


TotalNumber of


Par


Paid-in


Accumulated


Comprehensive


Stockholders


ComprehensiveShares


Value


Capital


Deficit


Income


Equity


Loss(restated)





(restated)


(restated)BALANCE, 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


2,365



3



55,095











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










57,480











57,480Fair value of vested stock 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 9)


















(9,518
)


(9,518
)


(9,518
)Unrealized gain on marketable securities


















3,507



3,507



3,507Net loss














(244,753
)






(244,753
)


(244,753
)Total comprehensive loss

























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


76,784


$
77


$
2,937,143


$
(371,822
)

$
21,269


$
2,586,667  
   F-7




---



##### Table of Contents





INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENT OF CASH FLOWS
  (in
    thousands)
  
 2007


2006


2005(restated)Cash Flows from Operating Activities:Net loss

$
(244,753
)

$
(16,842
)

$
(19,209
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Interest expense related to amortization and write-off of
    non-cash original issue discount and deferred financing costs


10,963



4,158



2,345Non-cash loss (income) related to currency hedge






(217
)


217Non-cash stock-based compensation expense


52,210



5,455



169Charge for purchased in-process research and development


173,825



4,960



Non-cash value on settlement of litigation










(2,593
)Impairment of long-lived assets


3,872



9,573



1,740Loss (gain) on sale of fixed assets


59



(1,528
)


263Equity earnings of unconsolidated entities


(4,372
)


(336
)


Interest in minority investments


1,401



(299
)


Depreciation and amortization


101,113



39,362



27,756Deferred and other non-cash income taxes


(27,892
)


(409
)


5,969Other non-cash items


197



714



141Changes in assets and liabilities, net of acquisitions:Accounts receivable, net


47,018



(13,846
)


10,404Inventories, net


(1,463
)


167



(4,047
)Prepaid expenses and other current assets


15,432



(86
)


(7,598
)Accounts payable


(6,745
)


210



6,201Accrued expenses and other current liabilities


(33,893
)


3,294



4,496Other non-current liabilities


1,783



(60
)


339Net cash provided by operating activities


88,755



34,270



26,593Cash Flows from Investing Activities:Purchases of property, plant and equipment


(36,398
)


(19,717
)


(20,233
)Proceeds from sale of property, plant and equipment


264



2,244



241Cash paid for acquisitions and transactional costs, net of cash
    acquired


(2,036,116
)


(131,465
)


(148,982
)Cash received, net of cash paid, from formation of joint venture


324,170







Cash paid for investments in minority interests and marketable
    securities


(10,177
)


(25,817
)


Increase in other assets


(28,273
)


(4,077
)


(1,787
)Net cash used in investing activities


(1,786,530
)


(178,832
)


(170,761
)Cash Flows from Financing Activities:Increase in restricted cash


(141,869
)






Cash paid for financing costs


(40,675
)


(2,787
)


(2,873
)Proceeds from issuance of common stock, net of issuance costs


1,122,852



234,961



97,440Net (payments) proceeds under revolving line of credit


1,114,171



(47,879
)


69,442Proceeds from borrowings under notes payable










269Repayments of notes payable


(22,326
)


(20,000
)


Repayments of notes receivable






14,691



Tax benefit on exercised stock options


867



567



Principal payments of capital lease obligations


(636
)


(546
)


(501
)Net cash provided by financing activities


2,032,384



179,007



163,777Foreign exchange effect on cash and cash equivalents


9,019



2,389



(2,095
)Net increase in cash and cash equivalents


343,628



36,834



17,514Cash and cash equivalents, beginning of year


71,104



34,270



16,756Cash and cash equivalents, end of year

$
414,732


$
71,104


$
34,270  
   F-8




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS (Continued)
  (in
    thousands)
  Supplemental
    Cash Flow Information
  Cash
    Paid for Interest and Income Taxes:
      Non-cash
    Investing Activities:
    
 Employee Stock Options/Common Stock Issued


Restricted Stock Awards ExchangedNumber of


Fair Value of


Number of


Fair Value ofCompany Acquired

Date of Acquisition


Shares


Shares


Shares


SharesMatritech, Inc.


December 12, 2007



616,671


$
35,592






$
Biosystems S.A.


December 11, 2007



33,373


$
1,948






$
Alere Medical, Inc.


November 16, 2007



2,654,590


$
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



40,186


$
1,605






$
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



299,477


$
7,958






$
Binax, Inc.


March 31, 2005



1,422,400


$
35,213






$
  
    (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:
     F-9




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    Description
    of Business and Basis of Presentation      and/or
  60-day
   F-10




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (1)
    Description of Business and Basis of Presentation
    (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-11




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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  20-40 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-12




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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)    (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.
 F-13




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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)  (k)
    Income Taxes  Accounting for Income Taxes,
  Accounting for
    Uncertainty in Income Taxesan Interpretation of FASB
    Statement No. 109
  (l)
    Revenue Recognition         F-14




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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)   (m)
    Employee Stock-Based Compensation Arrangements  SFAS No. 123-R, Share-Based Payment Accounting for Stock
    Issued to Employees, SFAS No. 123-R, SFAS 123-R.
  SFAS No. 123-R,
  2005Net lossas reported

$
(19,209
)Stock-based employee compensationas reported


139Pro forma stock-based employee compensation


(6,366
)Net losspro forma

$
(25,436
)Net loss per common sharebasic and dilutedNet loss per common shareas reported

$
(0.79
)Stock-based employee compensationas reported


0.01Pro forma stock-based employee compensation


(0.26
)Net loss per common sharepro forma

$
(1.04
)    F-15




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (2)
    Summary of Significant Accounting Policies (Continued)  (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        (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.
 F-16




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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)  (r)
    Recent Accounting Pronouncements  Recently
    Issued Standards
  No. 07-01, Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent 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
  No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or
    Services to Be Used in Future Research and Development
    Activities EITF 07-03
 F-17




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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)  The
    Fair Value Option for Financial Assets and Financial
    LiabilitiesIncluding an Amendment of FASB No 115
  Fair Value Measurements
  Recently
    Adopted Standards
  Accounting for Uncertainty in Income
    Taxesan Interpretation of FASB Statement 109
  No. EITF 00-19-2, Accounting for Registration Payment Arrangements Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity and FIN 45, Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others EITF 00-19-2, EITF 00-19-2
  No. 06-03, How Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement No. 06-03
 F-18




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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. 06-03 06-03, 06-03
  Accounting for Certain Hybrid Financial Instruments
 
 
 
  (s)
    Restatement
    of 2007 Financial Statements 
 
   
 
   
  
 2007As restated


As reportedSales and marketing

$
167,770


$
165,328Operating loss

$
(175,853
)

$
(173,411
)Loss before (benefit) provision for income taxes

$
(250,104
)

$
(247,662
)(Benefit) provision for income taxes

$
(979
)

$
(1,799
)Net loss

$
(244,753
)

$
(241,491
)Net loss per common share  basic and diluted

$
(4.75
)

$
(4.69
)Other intangible assets, net

$
869,644


$
872,086Total assets

$
4,880,759


$
4,883,201Deferred tax liabilities  long-term

$
326,128


$
325,308Total long-term liabilities

$
2,015,184


$
2,014,364Accumulated deficit

$
371,822


$
368,560Total stockholders equity

$
2,586,667


$
2,589,929Total liabilities and stockholders equity

$
4,880,759


$
4,883,201  
   F-19




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (3)
    Other
    Balance Sheet Information    December 31,2007


2006Inventories, net:Raw materials

$
45,111


$
29,372Work-in-process


40,184



19,080Finished goods


62,936



29,870$
148,231


$
78,322Property, plant and equipment, net:Machinery, laboratory equipment and tooling

$
134,776


$
81,198Land and buildings


132,512



18,582Leasehold improvements


29,032



20,870Computer software and equipment


34,857



11,063Furniture and fixtures


16,301



4,515347,478



136,228Less: Accumulated depreciation and amortization


(79,598
)


(53,916
)$
267,880


$
82,312Accrued expenses and other current liabilities:Compensation and compensation-related

$
55,397


$
13,395Advertising and marketing


6,308



9,743Professional fees


23,436



5,291Interest payable


2,436



6,234Royalty obligations


8,221



4,923Deferred revenue


5,337



6,685Taxes payable


39,778



8,864Acquisition-related obligations


22,375



17,655Other


11,647



15,011$
174,935


$
87,801   (4)
    Business
    Combinations  (a)
    Acquisitions in 2007(i)
    Acquisition of ParadigmHealth   F-20




---



##### Table of Contents



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

$
26,813Property, plant and equipment


2,685Goodwill


184,425Intangible assets


37,700Other non-current assets


34,662Total assets acquired


286,285Current liabilities


18,265Non-current liabilities


37,664Total liabilities assumed


55,929Net assets acquired


230,356Less:Acquisition costs


356Cash consideration

$
230,000       Amount


Amortizable LifeCore technology

$
3,200



1-6 yearsTrademarks


1,000



10 yearsCustomer relationships


33,500



10 yearsTotal intangible assets with finite lives

$
37,700   (ii)
    Acquisition of Redwood   F-21




---



##### 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


74,364Intangible assets


30,600Other non-current assets


49Total assets acquired


121,900Current liabilities


2,947Non-current liabilities


65,182Total liabilities assumed


68,129Net assets acquired


53,771Less:Acquisition costs


510Cash consideration

$
53,261       Amount


Amortizable LifeTrademarks

$
5,800



10 yearsCustomer relationships


24,800



10 yearsTotal intangible assets with finite lives

$
30,600   (iii)
    Acquisition of Alere    6-month 6-month 6-month 6-month
 F-22




---



##### Table of Contents



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

$
13,118Property, plant and equipment


11,953Goodwill


255,783Intangible assets


55,500Other non-current assets


5,535Total assets acquired


341,889Current liabilities


9,082Non-current liabilities


23,312Total liabilities assumed


32,394Net assets acquired


309,495Less:Acquisition costs


443Fair value of common stock issued (2,654,590 shares)


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


20,614Cash consideration

$
127,352       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   (iv)
    Acquisition of HemoSense 
   
 F-23




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##### Table of Contents



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

$
23,484Property, plant and equipment


1,936Goodwill


152,409Intangible assets


100,670Other non-current assets


232Total assets acquired


278,731Current liabilities


14,244Non-current liabilities


20,853Total liabilities assumed


35,097Net assets acquired


243,634Less:Acquisition costs


524Fair 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



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   (v)
    Acquisition of Cholestech   F-24




---



##### Table of Contents



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

$
84,572Property, plant and equipment


6,643Goodwill


140,584Intangible assets


203,850Other non-current assets


378Total assets acquired


436,027Current liabilities


12,361Non-current liabilities


69,092Total liabilities assumed


81,453Net assets acquired


354,574Less:Acquisition costs


4,469Fair 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

$
83,810



13 yearsTrademarks


20,590



10 yearsCustomer relationships


99,250



26 yearsInternally-developed software


200



7 yearsTotal intangible assets with finite lives

$
203,850   (vi)
    Acquisition of Biosite   F-25




---



##### Table of Contents



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

$
325,227Property, plant and equipment


145,704Goodwill


785,304Intangible assets


665,280In-process research and development


169,000Other non-current assets


106,693Total assets acquired


2,197,208Current liabilities


126,063Non-current liabilities


281,943Total liabilities assumed


408,006Net assets acquired


1,789,202Less:Acquisition costs


68,775Cash 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

$
239,080



5-19.5 yearsTrademarks


78,100



10.5 yearsCustomer relationships


348,100



1.5-22.5 yearsTotal intangible assets with finite lives

$
665,280   (vii)
    Acquisition of Instant   F-26




---



##### 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


43,715Intangible assets


28,520Total assets acquired


81,388Current liabilities


4,273Non-current liabilities


16,334Total liabilities assumed


20,607Net assets acquired


60,781Less:Acquisition costs


355Fair 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   (viii)
    Other acquisitions in 2007    
    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
    Aska Diagnostic, Inc., or Aska, located in Tokyo, Japan, a
    distributor of professional diagnostic products in Japan F-27




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (4)
    Business Combinations (Continued)   
    the assets of Akubio, a research company located in Cambridge,
    England 
  
    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 
  
    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
    Spectral Diagnostics Private Limited and its affiliate Source
    Diagnostics (India) Private Limited, or Spectral/Source, located
    in New Delhi and Shimla, India, distributes professional
    diagnostic products in India
    52.45% share in Diamics, Inc., or Diamics, located in Novato,
    California, a developer of molecular-based cancer screening and
    diagnostic systems 
  
    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 
  
    Orange Medical, or Orange, located in Tilburg, The Netherlands,
    a manufacturer and marketer of rapid diagnostic products to the
    Benelux marketplace
    Promesan S.r.l., or Promesan, located in Milan, Italy, a
    distributor of point-of-care diagnostic testing products to the
    Italian marketplace
    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
    the assets of Nihon Schering K.K., or NSKK, located in Japan, a
    diagnostic distribution business
    Gabmed GmbH, or Gabmed, located in Nettetal, Germany, a
    distributor of point-of-care diagnostic testing products in the
    German marketplace
    Med-Ox Chemicals Limited, or
    Med-Ox,
    located in Ottawa, Canada, a distributor of professional
    diagnostic testing products in the Canadian marketplace F-28




---



##### Table of Contents



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

$
37,187Property, plant and equipment


4,328Goodwill


106,323Intangible assets


62,966In-process research and development


4,826Other non-current assets


1,960Total assets acquired


217,590Current liabilities


26,083Non-current liabilities


15,721Total liabilities assumed


41,804Net assets acquired


175,786Less:Acquisition costs


4,025Accrued earned milestones


9,922Fair value of common stock issued (963,872 shares)


51,979Cash consideration

$
109,860      F-29




---



##### Table of Contents



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


Amortizable LifeCore technology

$
734



13.5 yearsSupplier relationships


3,882



15 yearsTrademarks


7,827



5-10 yearsLicense agreements


920



15 yearsCustomer relationships


46,654



5-20 yearsNon-compete agreements


801



3-4 yearsInternally-developed software


1,910



7 yearsTotal intangible assets with finite lives


62,728Trademark


238



N/ATotal intangible assets with indefinite lives


238Total intangible assets

$
62,966   (b)
    Acquisitions in 2006  (i)
    Acquisition of the Innovacon business, including the ABON
    Facility       F-30




---



##### 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


114,912Intangible assets


48,000Total assets acquired


199,100Current liabilities


4,081Non-current liabilities


8,125Total liabilities assumed


12,206Net assets acquired


186,894Less:Acquisition costs


12,954Fair value of common stock issued (1,871,250 shares)


53,052Cash consideration

$
120,888       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     (ii)
    Acquisition of Clondiag   F-31




---



##### 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


8,588Intangible assets


11,310In-process research and development


4,960Other non-current assets


20Total assets acquired


27,852Current liabilities


1,045Total liabilities assumed


1,045Net assets acquired


26,807Less:Acquisition costs


92Earned milestone paid in cash


917Accrued obligation cost


100Fair value of common stock issued (299,477 shares)


7,958Cash consideration

$
17,740    F-32




---



##### 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   (c)
    Acquisitions in 2005  (i)
    Acquisition of BioStar      Current assets

$
7,902Property, plant and equipment


1,695Goodwill


30,836Intangible assets


18,240Total assets acquired


58,673Current liabilities


5,023Total liabilities assumed


5,023Net assets acquired


53,650Less:Acquisition costs


550Cash consideration

$
53,100      F-33




---



##### Table of Contents



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


Amortizable LifeCore technology

$
4,550



10 yearsTrademark


2,730



10 yearsCustomer relationships


6,760



5 yearsTotal intangible assets with finite lives


14,040Trademark


4,200



N/ATotal intangible assets with indefinite lives


4,200Total intangible assets

$
18,240   (ii)
    Acquisition of IDT      Current assets

$
11,636Property, plant and equipment


771Goodwill


7,991Intangible assets


4,100Other non-current assets


61Total assets acquired


24,559Current liabilities


3,165Non-current liabilities


1,050Total liabilities assumed


4,215Net assets acquired


20,344Less:Acquisition costs


237Cash consideration

$
20,107      F-34




---



##### Table of Contents



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

Amortizable LifeCustomer relationships

$
4,100



8 yearsTotal intangible assets with finite lives

$
4,100   (iii)
    Acquisition of the Determine Business  1 2
    Current assets

$
2,912Property, plant and equipment


1,500Goodwill


32,113Intangible assets


25,300Total assets acquired


61,825Current liabilities


3,723Total liabilities assumed


3,723Net assets acquired


58,102Less:Acquisition costs


1,602Cash consideration

$
56,500      F-35




---



##### Table of Contents



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


Amortizable LifeCustomer relationships

$
12,000



10 yearsManufacturing know-how


4,300



11 yearsTotal intangible assets with finite lives


16,300Core technology


500



N/ATrademarks


8,500



N/ATotal intangible assets with indefinite lives


9,000Total intangible assets

$
25,300   (iv)
    Acquisition of Binax   F-36




---



##### Table of Contents



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

$
11,335Property, plant and equipment


2,421Goodwill


18,535Intangible assets


20,130Other non-current assets


6,169Total assets acquired


58,590Current liabilities


2,076Non-current liabilities


8,106Total liabilities assumed


10,182Net assets acquired


48,408Less:Acquisition costs


557Earned milestone paid in cash


3,667Fair value of common stock issued (1,422,400 shares)


35,213Cash consideration

$
8,971       Amount


Amortizable LifeCore technology

$
3,900



7 yearsCustomer relationships


11,700



13 yearsNon-compete agreements


30



7 yearsTotal intangible assets with finite lives


15,630Trademark


4,500



N/ATotal intangible assets with indefinite lives


4,500Total intangible assets

$
20,130   (v)
    Acquisition of Ischemia   F-37




---



##### Table of Contents



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

$
282Property, plant and equipment


288Goodwill


7,532Intangible assets


19,400Other non-current assets


7,790Total assets acquired


35,292Current liabilities


2,426Non-current liabilities


7,760Total liabilities assumed


10,186Net assets acquired


25,106Less:Acquisition costs


2,357Fair value of common stock issued (968,000 shares)


22,749Cash consideration

$
       Amount


Amortizable LifeCore technology and patents

$
19,200



9-15 yearsCustomer relationships


200



11 yearsTotal intangible assets with finite lives

$
19,400   (d)
    Restructuring Plans Related to Business Combinations  No. 95-3
 F-38




---



##### Table of Contents



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


Facility


Total ExitRelated


And Other


ActivitiesBalance at December 31, 2004

$
1,454


$
1,172


$
2,626Acquisitions


1,673



135



1,808Payments


(1,491
)


(368
)


(1,859
)Currency adjustments


(147
)






(147
)Balance 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


$
16,477   (i)
    2007 Acquisitions             F-39




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (4)
    Business Combinations (Continued)  (ii)
    Other Acquisitions          (e)
    Recent and Pending Acquisitions      five-day
 F-40




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##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (4)
    Business Combinations (Continued)    Hart-Scott-Rodino
  (f)
    Pro Forma Financial Information    
 2007


2006(restated)(unaudited)Pro forma net revenue

$
1,009,961


$
888,960Pro forma net loss

$
(42,697
)

$
(357,381
)Pro forma net loss per common share  basic and
    diluted(1)

$
(0.76
)

$
(8.45
)  
    (1)
    
    Net loss per common share amounts are computed as described in
    Note 14.  F-41




---



##### 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 Life(restated)


(restated)Amortized 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  
 F-42




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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

$
111,550


$
23,818


$
87,732



1-20 yearsOther intangible assets:Supplier relationships


14,320



6,093



8,227



10 yearsTrademarks and trade names


18,440



7,867



10,573



5-25 yearsLicense agreements


10,105



6,725



3,380



5-8.5 yearsCustomer relationships


72,190



14,338



57,852



1.5-17.8 yearsManufacturing know-how


7,800



4,076



3,724



10-15 yearsOther


540



502



38



2-7 yearsTotal other intangible assets


123,395



39,601



83,794Total intangible assets with finite lives

$
234,945


$
63,419


$
171,526Intangible assets with indefinite lives:Goodwill

$
439,369


$



$
439,369Other intangible assets


68,107







68,107Total intangible assets with indefinite lives

$
507,476


$



$
507,476  
   
    2008

$
124,9382009

$
124,2612010

$
118,0152011

$
108,7672012

$
101,160    F-43




---



##### Table of Contents



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


ConsumerDiagnostic


DiagnosticProducts


Products


TotalGoodwill, at December 31, 2005

$
237,036


$
85,174


$
322,210Acquisitions(1)


113,849



304



114,153Other(2)


2,476



530



3,006Goodwill at December 31, 2006


353,361



86,008



439,369Acquisitions(1)


1,731,051



8,940



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


13,254



(43,764
)


(30,510
)Goodwill at December 31, 2007

$
2,097,666


$
51,184


$
2,148,850     (1)
    
    Includes purchase accounting adjustments.(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-44




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (6)
    Long-term
    Debt    December 31,2007


2006First Lien Credit Agreement

$
970,500


$
Second Lien Credit Agreement


250,000



3% Senior subordinated convertible notes


150,000



Senior credit facility






44,7758.75% Senior subordinated notes






150,000Lines-of-credit


3,730



6,785Other


12,485



4171,386,715



201,977Less: Current portion


(20,320
)


(7,504
)$
1,366,395


$
194,473     (a)
    First Lien Credit Agreement and Second Lien Credit
    Agreement       F-45




---



##### 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)
    Senior Credit Facility     F-46




---



##### 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)
    OtherDebt    (g)
    Maturities of Long-term Debt    2008

$
20,3202009


13,0052010


12,1352011


9,7552012


9,750Thereafter


1,321,750$
1,386,715   F-47




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (7)
    Capital
    Leases    2008

$
8092009


2652010


762011


382012


7Total future minimum lease payments


1,195Less: Imputed interest


(61
)Present value of future minimum lease payments


1,134Less: Current portion


(776
)$
358     Machinery, laboratory equipment and tooling

$
1,293Buildings


2,1863,479Less: Accumulated amortization


(2,273
)$
1,206      (8)
    Postretirement
    Benefit Plans  (a)
    Employee Savings Plans  U.S.-based
  (b)
    UK Pension Plans   F-48




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (8)
    Postretirement Benefit Plans (Continued)    Employers Accounting for
    Pensions Employers
    Accounting for Settlements and Curtailments of Defined Benefit
    Pension Plans and for Termination Benefits
          Prior to


Effect of


As Reported atApplication of


Adopting


December 31,SFAS No. 158


SFAS No. 158


2006Deferred tax asset, current portion

$
4,435


$
897


$
5,332Deferred tax asset, long-term

$
(29
)

$
107


$
78Other long-term liabilities

$
6,043


$
4,487


$
10,530Accumulated other comprehensive income

$
17,919


$
(3,738
)

$
14,181  F-49




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (8)
    Postretirement Benefit Plans (Continued)      2007


2006Change in projected benefit obligationBenefit obligation at beginning of year

$
12,370


$
11,144Interest cost


660



586Actuarial gain


(470
)


(726
)Benefits paid


(140
)


(129
)Foreign exchange impact


207



1,495Benefit obligation at end of year

$
12,627


$
12,370Change in accumulated benefit obligationBenefit obligation at beginning of year

$
8,959


$
8,141Interest cost


660



586Actuarial gain


(470
)


(726
)Benefits paid


(140
)


(129
)Foreign exchange impact


150



1,087Benefit obligation at end of year

$
9,159


$
8,959Change in plan assetsFair value of plan assets at beginning of year

$
8,189


$
6,436Actual return on plan assets


220



403Employer contribution


750



553Benefits paid


(150
)


(129
)Foreign exchange impact


134



926Fair value of plan assets at end of year

$
9,143


$
8,189Funded status at end of year

$
(3,484
)

$
(4,181
)     2007


2006Accrued benefit asset (liability)

$
34


$
(733
)Long-term benefit liability


(4,594
)


(4,487
)Intangible asset


1,076



1,039Net amount recognized

$
(3,484
)

$
(4,181
)    F-50




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (8)
    Postretirement Benefit Plans (Continued)    2007


2006Assumptions used to determine benefit obligations:Discount rate


5.80%



5.25%Rate of compensation increase


4.15%



3.80%Assumptions used to determine net periodic benefit cost:Discount rate


5.25%



4.80%Expected return on plan assets


7.30%



6.63%Rate of compensation increase


3.80%



3.55%       2007


2006Interest cost

$
660


$
586Expected return on plan assets


(620
)


(461
)Amortization of net loss


(90
)


(26
)Net periodic benefit cost

$
(50
)

$
99        (9)
    Derivative
    Financial Instruments     F-51




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (9)
    Derivative Financial Instruments (Continued)             (10)
    Commitments
    and Contingencies  (a)
    Operating Leases    2008

$
22,6172009


12,8062010


10,9712011


9,6822012


9,044Thereafter


42,937$
108,057     (b)
    Capital
    Expenditure Commitments   F-52




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (10)
    Commitments and Contingencies (Continued)  (c)
    Contingent
    Consideration Obligations    6-month 6-month 6-month
               F-53




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (10)
    Commitments and Contingencies (Continued)      (d)
    Legal Proceedings            (11)
    Co-development
    Agreement with ITI Scotland Limited   F-54




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (11)
    Co-development Agreement with ITI Scotland Limited
    (Continued)     (12)
    Investment
    in Unconsolidated Entities and Marketable Securities  (a)
    Equity Method Investments  (i)
    Joint Venture with The Procter & Gamble Company           F-55




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (12)
    Investment in Unconsolidated Entities and Marketable
    Securities (Continued)        The Equity Method of Accounting for
    Investments in Common Stock.
    (ii)
    Vedalab S.A.   F-56




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (12)
    Investment in Unconsolidated Entities and Marketable
    Securities (Continued)  The Equity Method of
    Accounting for Investments in Common Stock
  (iii)
    TechLab, Inc.    (b)
    Investment in Chembio    (c)
    Investment in BBI   F-57




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (12)
    Investment in Unconsolidated Entities and Marketable
    Securities (Continued)  (d)
    Investment in StatSure  Accounting for Derivative Instruments and Hedging
    Activities
   (13)
    In-Process
    Research and Development      Discount RateUsed inCompany/









EstimatingYear Assets









Cash


Year of ExpectedAcquired

Purchase Price


IPR&D(1)


Programs Acquired

Flows(1)


LaunchDiamics/2007

$
4,000


$
682


PapMap (Pap Screening Methods)


63
%


2009-20101,049


C-Map (Automated Pap Screening)


63
%


2009-20103,094


POC (Point of Care Systems)


63
%


2009-2010$
4,825Biosite/2007

$
1,800,000


$
13,000


Triage Sepsis Panel


15
%


2008-2010156,000


Triage NGAL


15
%


2008-2010$
169,000Clondiag/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  F-58




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (13)
    In-Process Research and Development (Continued)    (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.   (14)
    Loss per
    Share    
 2007


2006


2005(restated)Numerator:Net loss available to common stockholdersbasic and diluted

$
(244,753
)

$
(16,842
)

$
(19,209
)Denominator:Weighted average shares outstandingbasic and diluted


51,510



34,109



24,358Net loss per common sharebasic and diluted

$
(4.75
)

$
(0.49
)

$
(0.79
)  
         (15)
    Stockholders
    Equity  (a)
    Common Stock   F-59




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (15)
    Stockholders Equity (Continued)          (b)
    Preferred Stock    (c)
    Stock Options and Awards   F-60




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (15)
    Stockholders Equity (Continued)        2007


2006


2005Weighted





Weighted





WeightedAverage





Average





AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise PriceOutstanding at January 1


3,775


$
21.11



3,902


$
18.82



3,619


$
16.58Exchanged


3,606


$
23.48






$







$
Granted


2,807


$
49.53



666


$
31.88



809


$
26.67Exercised


(2,204
)

$
23.70



(510
)

$
17.30



(331
)

$
11.94Canceled/expired/forfeited


(148
)

$
33.33



(283
)

$
21.81



(195
)

$
21.48Outstanding at December 31


7,836


$
31.42



3,775


$
21.11



3,902


$
18.82Exercisable at December 31


3,887


$
20.03



2,408


$
17.16



2,424


$
16.19    F-61




---



##### Table of Contents



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





ExercisableAverage


Weighted





WeightedNumber of


Remaining


Average


Number of


AverageExercise Price

Shares


Contract Life


Exercise Price


Shares


Exercise Price(in thousands)


(in years)





(in thousands)$1.25-$14.92


864



4.13


$
8.86



705


$
8.55$14.99-$16.20


903



4.28


$
15.61



875


$
15.61$16.46-$21.00


808



4.53


$
18.60



748


$
18.58$21.15-$25.50


805



6.49


$
23.78



547


$
23.52$25.53-$29.80


935



6.74


$
27.80



594


$
27.78$29.97-$39.72


1,327



8.66


$
37.04



350


$
33.40$40.05-$48.14


945



9.21


$
46.50



38


$
41.70$49.06-$56.18


849



9.79


$
55.51



26


$
52.03$59.58-$70.93


399



9.77


$
60.13



3


$
65.43$106.39


1



0.67


$
106.39



1


$
106.39$1.25-$106.39


7,836



7.02


$
31.42



3,887


$
20.03   (d)
    Warrants    WeightedNumber of





AverageShares


Exercise Price


Exercise PriceWarrants outstanding and exercisable, December 31, 2004


699


$
3.81-$23.76


$
15.66Granted


75


$
24.00


$
24.00Exercised


(7
)

$
5.50-$13.54


$
13.47Expired


(9
)

$
14.15-$23.76


$
18.66Warrants 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


$
20.80  F-62




---



##### Table of Contents



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


WeightedNumber of


Remaining


AverageExercise Price

Shares


Contract Life


Exercise Price(in thousands)


(in years)$3.81-$3.93


4



2.48


$
3.87$4.48-$4.57


1



2.54


$
4.54$5.44-$5.57


4



2.58


$
5.53$7.37-$7.55


2



2.66


$
7.48$13.54-$18.12


220



3.97-4.72


$
14.40$14.52-$29.78


163



7.39


$
28.98$24.00


75



7.25


$
24.00469



5.94


$
20.80   No. 00-19.
  (e)
    Employee Stock Purchase Plan     (16)
    Stock-based
    Compensation  SFAS No. 123-R,
 F-63




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (16)
    Stock-based Compensation (Continued)    2007


2006Cost of revenues

$
608


$
391Research and development


2,215



1,390Sales and marketing


1,699



682General and administrative


52,958



2,992$
57,480


$
5,455     SFAS No. 123-R, SFAS No. 123-R,
    2007

2006

2005Risk-free interest rate

3.15-5.00%

4.00-4.67%

3.58-4.46%Expected dividend yield





Expected life

6.25 years

6.25 years

5 yearsExpected volatility

44%

41%

45%     SFAS 123-R,
  SFAS 123-R,
  F-64




---



##### Table of Contents



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


Pension





AccumulatedTranslation


Liability





OtherAdjustment


Adjustment





Comprehensive(Note 2(b))


(Note 8(b))


Other(i)


Income(ii)Balance at December 31, 2004

$
17,352


$



$
169


$
17,521Period change


(10,300
)






(169
)


(10,469
)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
)

$
21,269     (i)
    
    Other represents (realization of) unrealized gains on
    available-for-sale securities and interest rate swap.  (ii)
    
    All of the components of accumulated other comprehensive income
    relate to our foreign subsidiaries except item (i) 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.  Form 10-K/A
  Form 10-K
   (18)
    Income
    Taxes    
 2007


2006


2005(restated)United States

$
(235,862
)

$
(5,089
)

$
(40,582
)Foreign


(14,242
)


(6,362
)


28,192$
(250,104
)

$
(11,451
)

$
(12,390
)  
 F-65




---



##### Table of Contents



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


2006(restated)NOL and capital loss carryforwards

$
141,620


$
86,516Tax credit carryforwards


18,236



3,515Nondeductible reserves


5,327



7,385Nondeductible accruals


41,318



16,741Difference between book and tax bases of tangible assets


2,328



1,624Difference between book and tax bases of intangible assets


35,042



9,125Gain on joint venture


37,300



All other


26



Gross deferred tax asset


281,197



124,906Less: Valuation allowance


(18,899
)


(107,622
)Total deferred tax assets


262,298



17,284Deferred tax liabilities:Difference between book and tax bases of tangible assets


6,249



7,068Difference between book and tax bases of intangible assets


524,603



28,790Other


23,973



Total deferred tax liability


554,825



35,858Net deferred tax liability

$
292,527


$
18,574Reported as:Deferred tax assets, current portion

$
18,170


$
5,332Deferred tax assets, long-term


15,799



78Deferred tax liabilities, current portion


(368
)


Deferred tax liabilities, long-term


(326,128
)


(23,984
)Net deferred tax liability

$
(292,527
)

$
(18,574
)  
 
   
 F-66




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (18)
    Income Taxes (Continued)      SFAS No. 141-R, Business Combinations
     F-67




---



##### Table of Contents



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


2006


2005(restated)Current:Federal

$
2,434







State


2,073


$
423


$
256Foreign


22,406



5,315



57526,913



5,738



831Deferred:Federal


(4,961
)


3,152



2,650State


(1,523
)


289



247Foreign


(21,408
)


(3,452
)


3,091(27,892
)


(11
)


5,988Total tax provision

$
(979
)

$
5,727


$
6,819  
    
 2007


2006


2005(restated)Statutory 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
)


1Rate differential on foreign earnings






(2
)


55Research and development benefit


1



14



(12
)State income taxes, net of federal benefit


(1
)


(4
)


(2
)Deferred tax on indefinite-lived assets






(31
)


(24
)Accrual to return reconciliation






(9
)


Other


1







Change in valuation allowance


(4
)


(27
)


(108
)Effective tax rate


1
%


(52
)%


(55
)%  
  Accounting for Uncertainty in Income
    Taxesan Interpretation of FASB Statement 109
 F-68




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (18)
    Income Taxes (Continued)  No. 141-R, Business Combinations
    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


Balance as of December 31, 2007

$
8,765     non-U.S. income
   (19)
    Financial
    Information by Segment  Disclosures about Segments of
    an Enterprise and Related Information
     F-69




---



##### Table of Contents



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


Consumer


Vitamins and


CorporateDiagnostic


Diagnostic


Nutritional


and2007

Products


Products


Supplements


Other


Total(restated)











(restated)Net revenue to external customers

$
605,624


$
161,092


$
72,824


$



$
839,540Operating income (loss)

$
60,569


$
15,332


$
(1,061
)

$
(250,693
)

$
(175,853
)Depreciation and amortization

$
87,284


$
9,106


$
2,917


$
1,806


$
101,113Restructuring charge

$
3,965


$
2,737


$



$



$
6,702Stock-based compensation

$



$



$



$
57,480


$
57,480Assets

$
4,384,346


$
309,175


$
49,655


$
137,583


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

$
32,401


$
1,366


$
872


$
1,996


$
36,635  
  Professional


Consumer


Vitamins and


CorporateDiagnostic


Diagnostic


Nutritional


and2006

Products


Products


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   F-70




---



##### Table of Contents



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


Consumer


Vitamins and


CorporateDiagnostic


Diagnostic


Nutritional


and2005

Products


Products


Supplements


Other


TotalNet revenue to external customers

$
179,511


$
166,928


$
75,411


$



$
421,850Operating income (loss)

$
2,179


$
25,117


$
(7,010
)

$
(31,059
)

$
(10,773
)Depreciation and amortization

$
13,915


$
8,464


$
3,460


$
1,917


$
27,756Restructuring charge

$
303


$
4,797


$



$



$
5,100Stock-based compensation

$



$



$



$
169


$
169Assets

$
434,796


$
253,063


$
52,967


$
50,340


$
791,166Expenditures for property, plant and equipment

$
6,578


$
8,020


$
3,439


$
2,196


$
20,233   2007


2006


2005Revenue by Geographic Area:United States

$
529,870


$
335,405


$
244,719Europe


198,525



136,971



111,838Other


111,145



97,078



65,293$
839,540


$
569,454


$
421,850   2007


2006Long-lived Tangible Assets by Geographic Area:United States

$
198,225


$
27,039United Kingdom


36,204



31,470China


17,975



15,815Other


15,476



7,988$
267,880


$
82,312    (20)
    Related
    Party Transactions     F-71




---



##### Table of Contents



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





Charged


Balance atBeginning of





Against


End ofPeriod


Provision


Reserves


PeriodYear ended December 31, 2005

$
9,359


$
25,015


$
(24,626
)

$
9,748Year ended December 31, 2006

$
9,748


$
22,914


$
(24,261
)

$
8,401Year ended December 31, 2007

$
8,401


$
28,352


$
(24,586
)

$
12,167     AmountsBalance at





Charged


Balance atBeginning of





Against


End ofPeriod


Provision


Reserves


PeriodYear ended December 31, 2005

$
4,126


$
10,057


$
(6,441
)

$
7,742Year ended December 31, 2006

$
7,742


$
6,661


$
(6,184
)

$
8,219Year ended December 31, 2007

$
8,219


$
8,067


$
(8,164
)

$
8,122   F-72




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (22)
    Restructuring
    Activities    2007


2006


2005Severance

$
1,989


$
2,886


$
2,229Fixed asset and inventory write-off


3,870



6,989



2,259Intangible asset write-off






2,722



Facility and other exit costs


843



536



612$
6,702


$
13,133


$
5,100   (a)
    2007 Restructuring Plans      (b)
    2006 Restructuring Plans   F-73




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (22)
    Restructuring Activities (Continued)      (c)
    2005 Restructuring Plan      (d)
    Restructuring Reserves    Balance at


Additions








Balance atBeginning


to the


Amounts





End ofof Period


Reserve


Paid


Other (i)


PeriodYear ended December 31, 2005

$



$
2,841


$
(1,892
)

$



$
949Year ended December 31, 2006

$
949


$
3,422


$
(2,820
)

$
14


$
1,565Year ended December 31, 2007

$
1,565


$
2,828


$
(3,264
)

$
(6
)

$
1,123     (i)
    
    Represents foreign currency translation adjustment.  F-74




---



##### Table of Contents



INVERNESS
    MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
  (23)
    Loss on
    Dispositions, Net   F-75