<PAGE>


                                                                    Exhibit 13.1



                       INVERNESS MEDICAL TECHNOLOGY, INC.
                                AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                       CONSOLIDATED FINANCIAL INFORMATION

                                      2000



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                         PAGE
<S>                                                                                                      <C>
  Selected Financial Data..............................................................................    1

  Management's Discussion and Analysis of Financial Condition and Results of Operations................    1

  Report of Independent Public Accountants.............................................................   16

  Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998...........   17

  Consolidated Balance Sheets as of December 31, 2000 and 1999.........................................   18

  Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998.   19

  Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998...........   21

  Notes to Consolidated Financial Statements...........................................................   23
</TABLE>

<PAGE>


SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA:                                     YEARS ENDED DECEMBER 31,
                                                                  ------------------------
 (IN THOUSANDS, EXCEPT PER SHARE DATA)              2000         1999         1998         1997        1996
                                                    ----         ----         ----         ----        ----
<S>                                                <C>          <C>         <C>           <C>         <C>
 Net revenue..................................     $170,344     $125,874    $117,984      $ 52,250    $ 19,063
 Gross profit.................................       70,621       42,627      40,903        25,973       8,105
 Operating income (loss)......................       19,398          331     (10,309)      (18,768)    (17,648)
 Extraordinary loss...........................       (2,362)        (306)         --          (579)         --
 Net income (loss)............................       10,640       (9,072)    (18,778)      (24,710)    (28,578)
 Net income (loss) per common share - basic...     $   0.43     $  (0.66)   $  (1.55)     $  (3.36)   $  (6.00)
 Net income (loss) per common share - diluted.     $   0.37     $  (0.66)   $  (1.55)     $  (3.36)   $  (6.00)
</TABLE>


<TABLE>
<CAPTION>

BALANCE SHEET DATA:                                                     DECEMBER 31,
-------------------                                                     ------------
  (IN THOUSANDS)                                    2000          1999        1998         1997        1996
                                                    ----          ----        ----         ----        ----
<S>                                                <C>          <C>          <C>         <C>          <C>
 Total assets.................................     $213,303     $114,837     $115,077    $ 95,372     $ 41,089
 Debt obligations (1).........................       49,066       60,375       62,481      59,903        8,833
 Mandatorily redeemable preferred stock.......        4,375        3,944        3,718       1,868        1,754
 Total stockholders' equity ..................     $121,384     $ 18,120     $ 15,009    $  5,441     $ 12,079
</TABLE>

SEE DISCUSSION OF BUSINESS ACQUISITION MATERIALLY AFFECTING THE COMPARABILITY OF
THE INFORMATION ABOVE AT NOTE 4 OF THE "NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS".

------------
(1) See discussion of debt obligations at Note 10 of the "Notes to Consolidated
    Financial Statements".

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

NET REVENUES. Net revenues in 2000 increased $44.5 million or 35% to $170.3
million from $125.9 million in 1999. The primary reason for the increase in
revenues was the increased sales of products and supplies for diabetes
self-management, particularly our first-generation blood glucose monitoring
system, which is distributed by LifeScan, Inc. (LifeScan), a Johnson &
Johnson company, under their trademark ONE TOUCH(R) FastTAKE(R).
Additionally, in the fourth quarter of 2000, we commenced shipments of our
second-generation electrochemical blood glucose monitoring system, which
LifeScan distributes under their trademark ONE TOUCH(R) Ultra. Our low-cost
alternative electrochemical blood glucose monitoring test strip, Excel(R) G,
which was introduced in the fourth quarter of 1999 for use with Glucometer(R)
Elite(R) meters sold by Bayer Diagnostics, also contributed to the increased
sales of our diabetes self-management products in 2000. Net sales from our
diabetes self-management segment were $115.5 million in 2000, an increase of
$44.3 million or 62% as compared to net sales of $71.2 million in 1999. The
net sales of products for diabetes self-management accounted for 68% of our
net revenues in 2000 compared to 57% of net revenues in 1999. Net sales from
our women's health segment were $43.7 million in 2000, an increase of
$885,000 or 2% as compared to $42.8 million in 1999. Due to the fast growth
in our diabetes segment, net sales of women's health products accounted for
only 26% of our net revenues in 2000 compared to 34% of net revenues in 1999.
Net sales of our clinical diagnostics products in 2000 decreased $399,000 or
4% to $10.7 million from $11.1 million in 1999. Grant and other revenue in
2000 decreased $266,000 or 36% to $476,000 from $742,000 in 1999. Grant and
other revenue is mostly attributable to the amortization of deferred revenue
associated with certain development and capital grants we received for our
manufacturing facility in Inverness, Scotland.

GROSS PROFIT. Total gross profit for 2000 increased $28.0 million or 66% to
$70.6 million from $42.6 million in 1999. Gross margin of net product sales
increased to 41% in 2000 from 33% in 1999. The significant improvements in gross
profit and gross margin of net product sales primarily resulted from the
increase in sales of ONE TOUCH(R) FastTAKE(R) blood glucose monitoring systems
and reductions in per unit manufacturing costs attributed to lower material
costs, improved yields and volume related efficiency related to the production
of such systems.


                                       1
<PAGE>


RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for 2000
increased $5.6 million or 81% to $12.5 million from $6.9 million in 1999. We
have increased spending on research and development programs directed towards
glucose monitoring systems and expect to continue to spend significant amounts
on research and development in the areas of diabetes self-management.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense increased $3.3 million or 9% to $38.7 million from $35.4 million in
1999. The increase in selling, general and administrative expense resulted from
higher marketing expenditures related to our Excel(R) G strips, increased legal
fees related to the defense of the lawsuits against us (see Note 13c of the
"Notes to Consolidated Financial Statements") and a one-time noncash
compensation charge of $429,000 related to stock options granted to consultants.
Selling, general and administrative expense as a percentage of net revenues
decreased to 23% for 2000 from 28% for 1999.

INTEREST EXPENSE. Interest expense decreased $509,000 to $7.6 million in 2000
from $8.1 million in 1999. The decrease in interest expense primarily resulted
from a lower total average outstanding debt balance during 2000.

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest income in 2000 increased by
$322,000 to $685,000 from $363,000 in 1999, primarily due to the increase in our
cash balance. In 2000, we recorded other income of $1.1 million as compared to
other expense of $896,000 in 1999. Included in the $1.1 million other income in
2000 is a gain of $1.8 million from the sale of our holding of 8.6 million
shares in Theratase plc (formerly Enviromed plc) in June 2000 (see Note 6 of the
"Notes to Consolidated Financial Statements"). The other portions of other
income and expense generally represent foreign currency exchange gains and
losses. In 2000, we recognized $624,000 in realized and unrealized foreign
exchange transaction losses as compared to $853,000 of such losses in 1999.

DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK OF A
SUBSIDIARY. In 2000, our subsidiary, Inverness Medical Ltd. (Inverness
Scotland), recorded $203,000 representing a 6% dividend payable on its
outstanding cumulative redeemable preference shares, as compared to $226,000 in
1999. Additionally, in June 2000, we recorded a one-time 15% accretion of
150,000 British Pounds Sterling (approximately $227,000) because we elected not
to redeem the first issue of such preference shares within five years of its
original issue date, or June 23, 2000 (see Note 5 of the "Notes to Consolidated
Financial Statements").

EXTRAORDINARY LOSS. In the second quarter of 2000, we recorded an extraordinary
loss of $800,000 ($485,000 of which was noncash) for the refinancing of our
subordinated revenue royalty notes (see Note 11 of the "Notes to Consolidated
Financial Statements"). In the fourth quarter of 2000, we recorded an
extraordinary loss of $1.6 million (of which $857,000 was noncash) as a result
of our commitment to extinguish our outstanding subordinated promissory notes
early (see Note 11 of the "Notes to Consolidated Financial Statements"). In the
first quarter of 1999, we recorded an extraordinary loss of approximately
$306,000 ($228,000 of which was noncash) for the modification of the terms of
our then outstanding senior subordinated convertible notes (see Note 2k of the
"Notes to Consolidated Financial Statements").

INCOME TAXES. In 2000, we recorded provisions of $169,000 for income taxes
compared to $245,000 in 1999. The provisions predominately reflect certain state
income taxes relating to our subsidiaries, Inverness Medical, Inc. (IMI) and
Can-Am Care Corporation (Can-Am). In 1999, we also recognized a $300,000 benefit
related to the establishment of a state deferred tax asset, which was utilized
during 2000 (see Note 16 of the "Notes to Consolidated Financial Statements").

NET INCOME. Net income for 2000 was $10.6 million as compared to a net loss of
$9.1 million for 1999. The basic and diluted earnings per common share for 2000
were $0.43 and $0.37, respectively, compared to a basic and diluted loss per
common share of $0.66 for 1999 (see Note 15 of the "Notes to Consolidated
Financial Statements"). The net income in 2000 and net loss in 1999 included
non-recurring, noncash charges and income as described above. Excluding those
non-recurring, noncash charges and income results in earnings of $11.6 million
or $0.47 per basic share and $0.40 per diluted share in 2000. Excluding the
non-recurring, noncash charges and income results in a loss of $8.4 million or
$0.62 per common share in 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

NET REVENUES. Net revenues in 1999 increased $7.9 million or 7% to $125.9
million from $118.0 million in 1998. The primary reason for the increase in
revenues was the increased sales of products for diabetes self-management,
especially the ONE TOUCH(R) FastTAKE(R) blood glucose monitoring system. Net
sales from our diabetes self-management segment were $71.2 million in 1999, an
increase of $14.0 million or 25% as compared to net sales of


                                       2
<PAGE>


$57.2 million in 1998. The net sales of products for diabetes self-management
accounted for 57% of our net revenues in 1999 compared to 48% of the net
revenues in 1998. Net sales from our women's health segment were $42.8 million
in 1999, an increase of $2.3 million or 6%, as compared to $40.5 million in
1998. Although the net sales of women's health products increased from 1998,
they accounted for the same percentage (34%) of our net revenues due to the
faster growth in the diabetes segment. The increase in the women's health
segment is attributed primarily to two factors. We experienced a full year of
sales of SoyCare(TM), a line of nutritional supplements for menopause and bone
health introduced in July 1998. The second factor in the increased net sales of
the women's health segment was an increase in sales of branded and private label
pregnancy and ovulation tests. Other revenues were derived from the net sales of
clinical diagnostics products and the recognition of deferred revenue. Net sales
of the clinical diagnostic products for 1999 were $11.1 million, a decrease of
$4.8 million or 30% from net sales of $15.9 million in 1998. The decrease in
diagnostic product sales is primarily due to our sale of the diagnostics
business line of our wholly owned subsidiary in Ireland, Cambridge Diagnostics
Ireland, Ltd. (Cambridge Diagnostics), in September 1998. Additionally, a
decline in sales of our wholly owned subsidiary in Israel, Orgenics Ltd.
(Orgenics), accounted for $2.1 million of the decline in diagnostic product
revenues. This was due primarily to a one-time non-recurring sale of HIV test
kits for $1.6 million during 1998. Grant and other revenue was approximately
$742,000 in 1999, a decrease of $3.2 million or 81% from grant and other revenue
of $3.9 million in 1998. In 1999, we recognized $316,000 of revenue related to a
$7.0 million success fee received from LifeScan in October 1996, versus $2.7
million in 1998. The amortization of this success fee was complete in March
1999. Approximately $398,000 of the revenues for 1999 was attributable to the
amortization of deferred revenue associated with certain development and capital
grants relating to our manufacturing facility in Inverness, Scotland. In 1998,
we recognized $1.2 million revenue in connection with development and capital
grants, most of which related also to the Inverness facility.

GROSS PROFIT. Total gross profit for 1999 increased $1.7 million or 4% to $42.6
million from $40.9 million in 1998. However, gross profit on net product sales
for 1999 increased $4.9 million or 13% to $41.9 million from $37.0 million in
1998. The increase in gross profit was primarily attributable to the increase in
sales of the ONE TOUCH(R) FastTAKE(R) blood glucose monitoring systems. Gross
margin of net product sales increased to 33% in 1999 from 32% in 1998. Gross
profit on net sales of the diabetes self-management segment was $14.8 million or
21% of the net sales of the diabetes self-management segment for 1999 compared
to $7.8 million or 14% of the net sales of the diabetes self-management segment
for 1998. Gross profit on the women's health segment was $20.9 million or 49% of
the net sales of women's health products in 1999 compared to $20.2 million or
50% of the net sales of women's health products in 1998. The profit increase was
primarily due to higher sales of pregnancy and ovulation tests. Gross profit
from net sales of clinical diagnostics and other products and the recognition of
deferred revenue was $6.9 million in 1999 compared to $12.8 million in 1998. The
decrease was primarily attributable to the decrease in revenue recognized on the
aforementioned LifeScan success fee received in 1996 and the sale of Cambridge
Diagnostics' diagnostics business in September 1998.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for 1999
decreased $474,000 or 6% to $6.9 million from $7.4 million in 1998. The decrease
was primarily due to our sale of the diagnostics business line of Cambridge
Diagnostics in September 1998. Research and development expenses related to
diabetes products at Inverness Scotland increased by $1.0 million but were more
than offset by a reduction in research and development expenses of the clinical
diagnostics business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense decreased $900,000 or 2% to $35.4 million from $36.3 million in 1998.
The decrease was primarily attributable to a reduction in expenses associated
with the clinical diagnostics business. Selling, general and administrative
expense as a percentage of net revenues decreased to 28% of net revenues for
1999 from 31% of net revenues for 1998.

NET CHARGE FOR BUSINESS DISPOSITION, ASSET IMPAIRMENT AND RESTRUCTURING
ACTIVITIES. There were no charges for business disposition, asset impairment or
restructuring activities in 1999. On September 30, 1998, we sold the clinical
diagnostics business of Cambridge Diagnostics to Trinity Biotech plc (Trinity)
for consideration of 555,731 shares of our common stock, which was then owned by
Trinity, $230,000 in cash and other consideration valued at approximately
$43,000. We recorded a gain of approximately $1.2 million as a result of the
sale of the assets. In the fourth quarter of 1998, we recorded impairment
charges totaling $7.8 million reflecting the change in the fair value of certain
assets that were no longer expected to contribute to our profitability. In 1998,
we also recorded a $810,000 restructuring charge related to the discontinuance
of development and manufacture of diabetes self-management products at Cambridge
Diagnostics.


                                       3
<PAGE>


INTEREST EXPENSE. Interest expense decreased $1.5 million to $8.1 million in
1999 from $9.6 million in 1998. In 1999, we recognized $327,000 of noncash
interest expense for the amortization of the original issue discount on
convertible notes and warrants compared to $1.8 million of noncash interest
expense recognized in 1998 for the amortization of the original issue discount
on convertible notes and warrants.

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest income decreased by $222,000
to $363,000 in 1999 from $585,000 in 1998, primarily due to the decrease in cash
balances. In addition, we incurred realized and unrealized losses totaling
$853,000 in 1999 due to foreign currency fluctuation. In 1998, we recognized
$1.5 million of noncash income related to 155,724 shares of our common stock
received into treasury in connection with our settlement agreement dated March
6, 1998 with Trinity, Flambelle Limited and Eastcourt Limited. We also
recognized a $237,000 gain in 1998 related to our 29.9% equity in the net profit
of Theratase plc.

DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK OF A
SUBSIDIARY. In 1999, Inverness Scotland recorded $226,000 representing a 6%
dividend payable on its outstanding cumulative redeemable preference shares, as
compared to $146,000 for 1998. In October 1998, an additional 1,000,000 shares
of 6% cumulative redeemable preference stock of Inverness Scotland were issued
to Inverness & Nairn Local Enterprise Company (INLEC), a development agency
funded by the government of the United Kingdom, for approximately $1.7 million.
EXTRAORDINARY LOSS. In the first quarter of 1999, we recorded an extraordinary
loss of approximately $306,000 ($228,000 of which was noncash) for the
modification of the terms of the then outstanding senior subordinated
convertible notes issued during October 1997 (see Note 2k of the "Notes to
Consolidated Financial Statements").

INCOME TAXES. In 1999, we recorded provisions of $245,000 for income taxes
compared to $544,000 in 1998. The provisions predominately reflect certain state
income taxes relating to our subsidiaries, IMI and Can-Am, as well as capital
gains taxes in Ireland relating to the business disposition of Cambridge
Diagnostics. In 1999, we also recognized a $300,000 benefit related to the
establishment of a state deferred tax asset.

NET LOSS. Net loss for 1999 was $9.1 million or $0.66 per common share as
compared to $18.8 million or $1.55 per common share for 1998. The net loss in
1999 and 1998 included non-recurring, noncash charges and income as described
above. Excluding the non-recurring, noncash charges and income results in a loss
of $8.4 million or $0.62 per common share in 1999 as compared to $10.9 million
or $0.91 per common share in 1998.


                                       4
<PAGE>


SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

The following table sets forth our unaudited quarterly consolidated operating
results for each of the eight quarters ending December 31, 2000. We have
prepared this information on a basis consistent with our audited consolidated
financial statements. These quarterly results are not necessarily indicative of
future results of our operations. This information should be read in conjunction
with our consolidated financial statements and notes included in this financial
information section of this Annual Report to Shareholders.

<TABLE>
<CAPTION>

                                            2000                                        1999
                          ------------------------------------------ -------------------------------------------
(IN THOUSANDS, EXCEPT       FIRST     SECOND     THIRD     FOURTH      FIRST     SECOND      THIRD     FOURTH
 PER SHARE DATA)           QUARTER   QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER
                           -------   -------    -------    -------    -------    -------    -------    -------
<S>                        <C>        <C>       <C>        <C>        <C>        <C>        <C>        <C>
Net revenue...........     $37,697    $40,607   $43,014    $49,026    $29,198    $27,303    $33,146    $36,227
Gross profit..........      15,796     17,073    17,853     19,899      9,129      8,219     11,341     13,938
Income (loss) before
 extraordinary
 loss (2).............       1,235      3,727     3,078      4,962     (3,616)    (3,407)    (1,834)        92
Extraordinary loss (3)          --       (800)       --     (1,562)      (306)        --         --         --
Net income (loss).....       1,235      2,927     3,078      3,400     (3,922)    (3,407)    (1,834)        92

Earnings (loss) per
 share - basic (1):
Income (loss) before
 extraordinary loss...     $  0.05    $  0.16   $  0.12    $  0.19    $ (0.30)   $ (0.22)   $ (0.11)   $ (0.03)
Extraordinary loss....          --      (0.04)       --      (0.06)     (0.02)        --         --         --
Net income (loss).....        0.05       0.12      0.12       0.13      (0.32)     (0.22)     (0.11)     (0.03)

Earnings (loss) per
 share - diluted (1):
Income (loss) before
 extraordinary loss...     $  0.04    $  0.14   $  0.11    $  0.16    $ (0.30)   $ (0.22)   $ (0.11)   $ (0.03)
Extraordinary loss....          --      (0.03)       --      (0.05)     (0.02)        --         --         --
Net income (loss).....        0.04       0.11      0.11       0.11      (0.32)     (0.22)     (0.11)     (0.03)
</TABLE>

-------------
(1)  Basic and diluted earnings (loss) per share are computed as described in
     Note 15 of the "Notes to Consolidated Financial Statements".
(2)  In the second quarter of 2000, we recorded a gain of $1.8 million on the
     sale of our holdings of shares in Theratase plc and a one-time noncash
     compensation charge of $323,000 related to issuance of and modifications
     made to common stock options. The net effect of these nonrecurring items in
     the second quarter of 2000 was an increase of $0.06 per basic share and
     $0.05 per diluted share.
(3)  In the second quarter of 2000, we recorded an extraordinary loss of
     $800,000 ($485,000 of which was noncash) for the refinancing of our
     subordinated revenue royalty notes (see Note 11 of the "Notes to
     Consolidated Financial Statements"). In the fourth quarter of 2000, we
     recorded an extraordinary loss of $1.6 million (of which $857,000 was
     noncash) as a result of our commitment to extinguish our outstanding
     subordinated promissory notes early (see Note 11 of the "Notes to
     Consolidated Financial Statements"). In the first quarter of 1999, we
     recorded an extraordinary loss of approximately $306,000 ($228,000 of which
     was noncash) for the modification of the terms of our then outstanding
     senior subordinated convertible notes (see Note 2k of the "Notes to
     Consolidated Financial Statements").

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, we had cash and cash equivalents of $82.3 million, a $77.0
million increase from December 31, 1999. We have historically funded our
business through operating cash flows, proceeds from borrowings and the issuance
of equity securities. Cash generated from our operating activities in 2000 was
$13.3 million due largely to net income of $10.6 million. However, net income
for 2000 included a total of $7.1 million in noncash expense. During 2000, we
used cash of $14.0 million for our investing activities, consisting of a $10.1
million license fee for the exclusive right to commercialize products using
Debiotech, S.A.'s technology (as described below) and capital expenditures of
$6.8 million, primarily at our manufacturing facilities in Scotland, offset by
$3.3 million received from the sale of our shares in Theratase plc. During 2000,
we generated net cash of $78.2 million from financing activities primarily from
a follow-on public offering, which generated cash of $82.1 million (as described
below), and $4.0 million in proceeds from the exercise of common stock options
and warrants. In addition, we received $2.9 million in additional loans from
LifeScan (as described below). Offsetting cash generated from financing
activities, we made $9.2 million in principal repayments on loans from Chase
Manhattan Bank and for the refinancing of certain subordinated notes. Working
capital was $55.6 million at December 31, 2000 compared to a deficit of $8.7
million at December 31, 1999.


                                       5
<PAGE>


In February 1998, we acquired Can-Am, a leading supplier of diabetes care
products, for a combination of cash, notes and shares of common stock. At the
time, we entered into a $42 million credit agreement with Chase Manhattan Bank
to fund the cash portion of the purchase price and to repay outstanding
indebtedness under a prior credit facility. The Chase credit agreement consists
of a $37 million term loan and a $5 million revolving line of credit. Borrowings
under the Chase credit agreement are secured by the capital stock of one of our
subsidiaries, our assets and the assets of our subsidiaries. Our subsidiary is
required to make quarterly principal payments on the term portion of the loan
ranging from $1.2 million to $1.7 million through December 31, 2003. Our
subsidiary must also make mandatory prepayments on the term loan if it meets
certain cash flow thresholds, sells assets outside of the ordinary course of
business, issues or sells indebtedness or issues stock. During 2000, our
subsidiary made quarterly principal payments and mandatory prepayments totaling
$5.5 million. At December 31, 2000, the entire balance of the revolving line of
credit was unused.

We entered into amendments of our agreements with LifeScan in June 1999 (the
1999 Amended Agreements), which were further amended in February 2001, effective
January 1, 2001 (the 2001 Amendment). Under the 1999 Amended Agreements, we
develop and supply to LifeScan additional products for monitoring blood glucose
in humans. Under the 2001 Amendment, LifeScan will increase its purchase of
glucose monitoring meters from us during 2001 and we will reduce the price of
such meters purchased by LifeScan in 2001. Under the terms of the amended
agreements, LifeScan is not prohibited from selling other glucose monitoring
systems, including electrochemical systems. However, if LifeScan either (i)
introduces such a system not sourced from us prior to December 31, 2002, or (ii)
fails to purchase specified minimum annual levels of test strips, we are
released from a restriction under the agreement prohibiting us from selling
complete electrochemical glucose measurement systems to parties other than
LifeScan. Upon the execution of the 1999 Amended Agreements, LifeScan provided
us with an initial loan of 6,250,000 British Pound Sterling (approximately
$9,900,000) to fund the increased costs related to the anticipated production
levels. LifeScan has also committed to make additional loans of up to 8,125,000
British Pound Sterling (approximately $12,131,000) to us upon the accomplishment
of certain milestones relating to new products we are to develop for LifeScan.
Through December 31, 2000, we have received 2,031,250 British Pound Sterling
(approximately $2,900,000) in additional loans from LifeScan. Interest on the
initial and additional loans accrues at 11% and is payable quarterly. The
aggregate principal amount of the initial and additional loans is to be repaid
by deducting 0.0125 British Pound Sterling (approximately $0.02) from the
invoice price of each strip we sell to LifeScan commencing on the date of the
initial loan. On December 31, 2000, the balance of the outstanding initial and
additional LifeScan loans was approximately $5.1 million.

During June, July and August 2000, we sold units having an aggregate purchase
price of $19.3 million for the purpose of retiring certain outstanding
subordinated revenue royalty notes and subordinated promissory notes that were
issued in 1997 and 1998, respectively. Each unit consists of (i) $25,000 in
principal amount of a new subordinated promissory note and (ii) a warrant to
acquire 123 shares of our common stock. In the aggregate, we issued warrants to
purchase 119,350 shares of our common stock with exercise prices ranging from
$7.94 to $15.38, calculated based upon the average closing prices of our common
stock for the 10 days prior to each closing. The warrants may be exercised at
any time on or prior to the tenth anniversary of their date of issuance. On
January 29, 2001, we prepaid the new subordinated promissory notes pursuant to
an irrevocable notice of prepayment given to the noteholders on December 29,
2000, as permitted in the securities purchase agreement. As a result, we
incurred a prepayment penalty of $705,000, which was included as part of the
extraordinary loss of $1.6 million recorded in 2000 for the early extinguishment
of these new subordinated promissory notes.

On October 14, 2000, we entered into a development and license agreement with
Debiotech, S.A. (Debiotech), a privately-owned Swiss company. Under the
agreement with Debiotech, Debiotech will seek to develop an externally-worn
insulin pump using its patented Micro Electro-Mechanical Systems (MEMS)
technology and we paid a one-time $10,000,000 license fee for the exclusive
right to commercialize diabetes products using Debiotech's MEMS technology. In
addition, we will pay a royalty ranging from 6.5% to 10.0% of sales of such
products depending upon various factors. We also received an option, exercisable
in certain circumstances for an additional fee, for the exclusive right to
commercialize an implantable insulin pump, which Debiotech may seek to develop
using its technology.

In November 2000, we sold an aggregate of 3.5 million shares in a follow-on
public offering (the Offering). Total net proceeds from the Offering were
approximately $82.1 million after deducting underwriters' commissions and other
offering costs totaling $5.4 million.

On January 23, 2001, we acquired Integ Incorporated (Integ), a publicly-traded
development stage company based in Minnesota. Integ has developed a proprietary
sampling technology to extract interstitial fluid from the top


                                       6
<PAGE>


layers of the skin, eliminating the need to draw blood for the continuous blood
glucose monitoring self-management system. The purchase price consisted of
1,900,000 shares of our common stock having a fair value of approximately $60.1
million in exchange for all of Integ's common equity, approximately $5.1 million
in cash for the redemption of shares of Integ's preferred stock, and additional
direct acquisition costs. We expect to incur a significant charge in the first
quarter of 2001 to write off a portion of the purchase price as in-process
research and development.

ACQUISITION OF LXN CORPORATION

On March 28, 2001, we acquired LXN Corporation (LXN), a privately-held
company that is developing and commercializing fructosamine monitoring
technology for people with diabetes. The purchase price for LXN consists of
795,110 shares of our common stock, approximately $5.0 million paid in cash
for certain expenses and employee benefits and $1.0 million which was
previously advanced to LXN. We expect to record a significant amount of
intangible assets in connection with this acquisition and to incur a
significant charge in the quarter ended March 31, 2001 to write off a portion
of the purchase price as in-process research and development costs.

We may be able to use Integ's and LXN's technologies, supplemented by our
additional research and development efforts, to develop products that are
complementary to our current product offerings in the areas of diabetes
self-management and medical diagnostics.

As of December 31, 2000, we had approximately $30.9 million and $27.6 million of
domestic and foreign net operating loss carryforwards, respectively, and
approximately $91,000 of research and development tax credit carryforwards,
which expire at various dates through 2020. These losses and tax credits are
available to reduce federal taxable income and federal income taxes,
respectively, in future years, if any. These losses and tax credits are subject
to review and possible adjustment by the Internal Revenue Service and may be
limited in the event of certain cumulative changes in ownership interests of
significant shareholders over a three-year period in excess of 50%. We have
recorded a valuation allowance against substantially all of the deferred tax
asset to reflect uncertainties that might affect the realization of the deferred
tax asset.

Based upon our operating plans, we believe that our existing capital resources
will be adequate to fund our operations and scheduled debt obligations for at
least the next 12 months. We believe that we will be able to fund our research
and development activities related to products being designed and developed for
LifeScan out of existing funds. In addition, we may expand our research and
development of new technologies (beyond the aforementioned activities related to
LifeScan) and may pursue the acquisition of new products and technologies,
whether through licensing arrangements, business acquisitions, including the
aforementioned transactions with Integ, LXN and Debiotech, or otherwise. We
cannot assure you that additional capital will be available, or, if available,
that it will be available on acceptable terms. If additional funds are raised by
issuing equity securities, further dilution to then existing stockholders will
result.

CERTAIN FACTORS AFFECTING FUTURE RESULTS

There are various risks, including those described below, which 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 consider carefully 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
page 15.

WE DEPEND ON OUR RELATIONSHIP WITH LIFESCAN TO DISTRIBUTE CERTAIN OF OUR
EXISTING PRODUCTS, AS WELL AS FUTURE PRODUCTS.

We depend on our relationship with LifeScan to distribute certain of our
existing products, as well as future products. In 1995, we entered into a
worldwide distribution agreement with LifeScan, which was amended in June
1999 and February 2001, effective January 1, 2001. Under the terms of our
agreements with LifeScan, we develop and manufacture and LifeScan distributes
our electrochemical blood glucose monitoring systems. Our first and second
generation electrochemical systems are being marketed by LifeScan under its
brands, ONE TOUCH(R) FastTAKE(R) and ONE TOUCH(R) Ultra. We commenced
shipments of the ONE TOUCH(R) FastTAKE(R) system in early 1998. The ONE
TOUCH(R) FastTAKE(R) system is currently the most successful product in our
diabetes line of business. Additionally, we commenced shipments of the ONE
TOUCH(R) Ultra system in late 2000. LifeScan has exclusive rights to market
these, as well as any new electrochemical blood glucose monitoring systems
that we develop. However, LifeScan is not restricted from selling other
systems, including electrochemical systems, for

                                       7
<PAGE>


blood glucose monitoring. Unless LifeScan (i) introduces an electrochemical
blood glucose monitoring system not sourced from us prior to December 31,
2002, or (ii) fails to purchase specified minimum annual levels of test
strips, our agreements with LifeScan prohibit us from marketing any new
electrochemical blood glucose monitoring system other than through LifeScan.
Accordingly, our future results of operations depend to a substantial degree
on LifeScan's continued marketing of our electrochemical systems. Although
the ONE TOUCH(R) FastTAKE(R) system appears to have gained market acceptance,
we cannot assure you that such acceptance will continue. Additionally, under
the terms of the agreement with LifeScan, LifeScan has made and may continue
to make additional funding available to us when we reach certain milestones
with our development of future products for LifeScan. As we cannot assure the
success of reaching such milestones in the development of future products, we
cannot guarantee that LifeScan will make such additional funding available to
us. Any failure by us to produce, or failure by LifeScan to market and
distribute our electrochemical systems successfully, could have a material
adverse effect on our business, financial condition and results of operations.

WE RELY UPON OUR MANUFACTURING FACILITIES AS WELL AS FOREIGN CONTRACT
MANUFACTURING ARRANGEMENTS, AND MANUFACTURING PROBLEMS OR DELAYS COULD SEVERELY
AFFECT OUR BUSINESS.

TEST STRIPS

Our electrochemical blood glucose test strips are produced exclusively in our
manufacturing facility in Inverness, Scotland. Sales of these test strips
accounted for a significant portion of our net revenues for the year ended
December 31, 2000. Sales of test strips are expected to be our largest source of
revenues for the forseeable future. Our Inverness facility contains highly
specialized equipment and utilizes complicated manufacturing processes developed
over a number of years that would be difficult and time-consuming to duplicate.
Our ability to manufacture test strips could be disrupted wholly or in part by
technical problems, labor or raw material shortages, labor relations problems,
natural disasters, fire, sabotage or business accidents, among other factors.
Any prolonged disruption in the operations of our Inverness manufacturing
facility would seriously harm our ability to satisfy customer orders for test
strips. If we cannot deliver our test strips in a timely manner or in sufficient
quantities, our revenues will suffer and our reputation may be harmed. In
addition, LifeScan, under certain circumstances, would automatically become
entitled to produce the electrochemical test strips itself. Even though we carry
manufacturing interruption insurance policies, we may suffer losses as a result
of business interruptions that exceed the coverage available under our insurance
policies. In addition, our test strip revenues depend in part upon our
manufacturing yields. We believe that we currently have sufficient test strip
manufacturing capacity to satisfy our existing contractual obligations although
we anticipate that actual demand will exceed these obligations. We are currently
expanding our production capacity to meet projected demand. If we fail to
complete these expansion efforts in a timely manner, our relationships with our
customers or our reputation in the marketplace could be severely harmed.

BLOOD GLUCOSE METERS

We purchase all of the meters for our electrochemical blood glucose systems from
a contract manufacturer in the People's Republic of China. Our business would
likely be harmed if production at, or deliveries by, our contract manufacturer
were disrupted for a material amount of time or if the cost of meters were
significantly increased. Such disruptions or cost increases could occur as the
result of social or political strife, unforeseen economic or production
regulations, import, licensing or trade restrictions, natural disasters or war
or other unforeseen circumstances. If this supply relationship were disrupted,
we would need to identify other third-party contract manufacturers and verify
and validate the production processes used in the manufacture of our
electrochemical blood glucose meters. We cannot assure you that we will be able
to identify adequate substitute manufacturers to replace the meters matching our
specifications affected by such a disruption in a timely manner or at comparable
prices, if at all.

PREGNANCY AND OVULATION TESTS

We produce our pregnancy detection and ovulation prediction tests in our
manufacturing facilities located in Galway, Ireland. To produce these tests, we
rely significantly on our manufacturing facility in Galway, Ireland. Our
production processes are complex and require specialized and expensive
equipment. Even though we carry business interruption insurance policies, we may
suffer losses as a result of business interruptions that exceed the coverage
available under our insurance policies. Any event impacting our Galway facility
could have a significant negative impact on our operations and our revenues from
pregnancy detection and ovulation prediction tests would decline until such time
as we are able to put in place alternative contract manufacturers.


                                       8
<PAGE>


IF WE FAIL TO MEET STRICT REGULATORY REQUIREMENTS, WE COULD BE REQUIRED TO PAY
FINES OR EVEN CLOSE OUR FACILITIES.

Our facilities and manufacturing techniques generally must conform to standards
that are established by government agencies, including those of European
governments, as well as the United States Food and Drug Administration (FDA).
These regulatory agencies may conduct periodic inspections of our facilities to
monitor our compliance with applicable regulatory standards. If a regulatory
agency finds that we fail to comply with the appropriate regulatory standards,
it may impose fines on us or if such a regulatory agency determines that our
noncompliance is severe, it may close our facilities. Any adverse action by an
applicable regulatory agency would have a negative impact on our operations.

WE RECENTLY INTRODUCED A NEW PRODUCT AND CANNOT BE CERTAIN THAT IT WILL GAIN
MARKET ACCEPTANCE.

In August 2000, we announced that we had received notification of FDA
clearance for our second-generation electrochemical blood glucose monitoring
system, to be marketed by LifeScan as the ONE TOUCH(R) Ultra system. We
commenced shipment of the ONE TOUCH(R) Ultra system to LifeScan in December
2000 and we cannot be assured that the market will accept this new system. In
addition, if the ONE TOUCH(R) Ultra system gains market acceptance, we expect
that over time this new system will reduce, if not replace, the sales of the
ONE TOUCH(R) FastTAKE(R) system.

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 manufacturing and marketing of medical diagnostic devices, such as our blood
glucose monitoring systems, involve an inherent risk of product liability
claims. In addition, our product development and production are extremely
complex and could expose our products to defects. Any such defects could harm
our credibility and decrease market acceptance of our products. LifeScan has
found through a limited number of customer comments that meters programmed for
millimole measurement of blood glucose concentration occasionally exhibit a
display error. Millimole is the measurement used in Canada and most European
countries. We are currently working with LifeScan in implementing the
appropriate corrective action for this occurrence, including public
notification. We do not believe that it will be necessary to engage in any
general recalls of these meters, but we may choose to exchange some or all of
them, and we cannot assure you that corrective action with respect to this
product, or any of our other products, will not result in material cost to us or
loss or damage to the reputation of our products. In addition, our marketing of
nutritional supplements may cause us to be subjected to various product
liability claims, including, among others, claims that the nutritional
supplements have inadequate warnings concerning side effects and interactions
with other substances. Potential product liability claims may exceed the amount
of our insurance coverage or may be excluded from coverage under the terms of
the policy. In the event that we are held liable for a claim for which we are
not indemnified, or for damages exceeding the limits of our insurance coverage,
such a claim could materially damage our business and our financial condition.

WE HAVE HAD OPERATING LOSSES FOR MOST OF OUR HISTORY AND HAVE ONLY RECENTLY
GENERATED A PROFIT.

We had an accumulated deficit of approximately $89.9 million as of December 31,
2000. We incurred losses from our inception until the year ended December 31,
1999. We will in the future incur significant sales and marketing, research and
development and general and administrative expenses, and may not have sufficient
revenues to generate net income in light of these expenditures. Further,
although we generated net income throughout 2000, we may not be able to sustain
or increase profitability in the future.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

We expect to continue to experience significant growth in demand for our
products, the number of our employees and customers and the scope of our
operations. This growth may continue to place a significant strain on our
management and operations. Our ability to manage this growth will depend upon
our ability to attract, hire and retain skilled employees. Our success will also
depend on the ability of our officers and key employees to continue to implement
and improve our operational and other systems, to manage multiple, concurrent
customer relationships and to hire, train and manage our employees. Our future
success is heavily dependent upon growth and acceptance of new products. If we
cannot scale our business appropriately or otherwise adapt to anticipated growth
and new product introductions, a key part of our strategy may not be successful.


                                       9
<PAGE>


OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY
INTERNATIONAL BUSINESS RISKS.

A significant number of our employees, including sales, support and research and
development personnel, are located outside of the United States. Conducting
business outside of the United States is subject to numerous risks, including:

    o   decreased liquidity resulting from longer accounts receivable collection
        cycles typical of foreign countries;

    o   decreased revenues on foreign sales resulting from possible foreign
        currency exchange and conversion issues;

    o   lower productivity resulting from difficulties managing our sales,
        support and research and development operations in many countries;

    o   lost revenues resulting from difficulties associated with enforcing
        agreements and collecting receivables through foreign legal systems;

    o   lost revenues resulting from the imposition by foreign governments of
        trade protection measures; and

    o   higher cost of sales resulting from import or export licensing
        requirements.

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.

The medical products industry is rapidly evolving and developments are expected
to continue at a rapid pace. Competition in this industry is intense and
expected to increase as new products and technologies become available and new
competitors enter the market. Our competitors in the United States and abroad
are numerous and include, among others, diagnostic testing and medical products
companies, universities and other research institutions. Our future success
depends upon our maintaining a competitive position in the development of
products and technologies in our areas of focus. Competitors may be more
successful in: (i) developing technologies and products that are more effective
than our products or that render our technologies or products obsolete or
noncompetitive; (ii) obtaining patent protection or other intellectual property
rights that would prevent us from developing our potential products; or (iii)
obtaining regulatory approval for the commercialization of their products more
rapidly or effectively than we are in doing so. Also, many of our existing or
potential competitors have or may have substantially greater research and
development capabilities, clinical, manufacturing, regulatory and marketing
experience and financial and managerial resources.

In addition, the market for the sale of nutritional supplements is highly
competitive. This competition is based principally upon price, quality of
products, customer service and marketing support. There are numerous companies
in the nutritional supplement industry selling products to retailers such as
mass merchandisers, drug store chains, independent drug stores, supermarkets and
health food stores. As most of these companies are privately held, we are unable
to obtain the information necessary to assess precisely the size and success of
these competitors. However, we believe that a number of our competitors,
particularly manufacturers of nationally advertised brand name products, are
substantially larger than we are and have greater financial resources.

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.

Our success will depend in part on our ability to obtain commercially valuable
patent claims and to protect our intellectual property. Our patent position is
generally uncertain and involves complex legal and factual questions. The degree
of future protection for our proprietary rights is uncertain.

The risks and uncertainties that we face with respect to our patents and other
proprietary rights include the following:

    o   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;


                                       10
<PAGE>


    o   the claims of any patents that are issued may not provide meaningful
        protection;

    o   we may not be able to develop additional proprietary technologies that
        are patentable;

    o   the patents licensed or issued to us or our customers may not provide a
        competitive advantage;

    o   other companies may challenge patents licensed or issued to us or our
        customers;

    o   patents issued to other companies may harm our ability to do business;
        and

    o   other companies may design around technologies we have licensed or
        developed.

In addition to patents, we rely on a combination of trade secrets, nondisclosure
agreements and other contractual provisions and technical measures to protect
our intellectual property rights. Nevertheless, these measures may not be
adequate to safeguard the technology underlying our products. If they do not
protect our rights, third parties could use our technology, and our ability to
compete in the market would be reduced. In addition, employees, consultants and
others who participate in the development of our products may breach their
agreements with us regarding our intellectual property, and we may not have
adequate remedies for the breach. We also may not be able to effectively protect
our intellectual property rights in some foreign countries. For a variety of
reasons, we may decide not to file for patent, copyright or trademark protection
or prosecute potential infringements of our patents. We also realize that our
trade secrets may become known through other means not currently foreseen by us.
Despite our efforts to protect our intellectual property, our competitors or
customers may independently develop similar or alternative technologies or
products that are equal or superior to our technology and products without
infringing on any of our intellectual property rights or design around our
proprietary technologies.

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE ON THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR COSTS.

Substantial litigation over intellectual property rights exists in our industry.
Our products are currently the subjects of litigation alleging that we are
infringing on the intellectual property rights of others. We expect that our
products and other products in our industry may be increasingly subject to
third-party infringement claims as the number of competitors grows and the
functionality of products and technology in different industry segments
overlaps. Third parties may currently have, or may eventually be issued, patents
on which our products or technology may infringe. Any of these third parties
might make a claim of infringement against us. Any litigation could result in
the expenditure of significant financial resources and the diversion of
management's time and resources. In addition, litigation in which we are accused
of infringement may cause negative publicity, have an impact on prospective
customers, cause product shipment delays, require us to develop non-infringing
technology or enter into royalty or license agreements, which may not be
available on acceptable terms, if at all. If a successful claim of infringement
were made against us and we could not either develop non-infringing technology
or license the infringed or similar technology on a timely and cost-effective
basis, our business could be significantly harmed and we could be exposed to
legal actions by our customers.

WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS AND OTHER
INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD BE EXPENSIVE AND, IF UNSUCCESSFUL,
COULD CAUSE US TO LOSE SOME OF OUR INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD
REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

We rely on patents to protect a large part of our intellectual property and our
competitive position. In order to protect or enforce our patent rights, we may
initiate patent litigation against third parties, such as infringement suits or
interference proceedings. Litigation may be necessary to:

    o   assert claims of infringement;

    o   enforce our patents;

    o   protect our trade secrets or know-how; or

    o   determine the enforceability, scope and validity of the proprietary
        rights of others.


                                       11
<PAGE>


Lawsuits could be expensive, take significant time and divert management's
attention from other business concerns. Litigation would put our patents at risk
of being invalidated or interpreted narrowly and our patent applications at risk
of not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. We cannot assure you that we will prevail in any of
these suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, our stock price could decline.

OUR ACQUISITION OF INTEG, OUR PENDING ACQUISITION OF LXN AND OUR DEVELOPMENT AND
LICENSING ARRANGEMENTS WITH DEBIOTECH MAY NOT YIELD PRODUCTS OR TECHNOLOGY THAT
CAN BE COMMERCIALIZED.

On January 23, 2001, we acquired Integ. On October 14, 2000, we entered into
a development and license agreement with Debiotech. On March 28, 2001, we
acquired LXN. The value of Integ and LXN to us may not be greater than or
equal to their purchase prices. Similarly, the amounts that we paid and will
have to pay to Debiotech may not be equal to the ultimate value of the rights
that we have under our agreement with it. If we are unable to effectively
integrate the technologies of Integ, LXN and Debiotech into our research and
development efforts, our research and development efforts may suffer.
Furthermore, we cannot assure you that we will realize any of the benefits or
strategic objectives we are seeking to obtain by acquiring Integ or LXN or by
licensing technology from Debiotech. In that regard, Integ has granted to a
third party certain rights in its intellectual property that survive our
acquisition, which permit this third party to utilize the technology that we
acquired to further its future development efforts. In connection with
accounting for the acquisition of Integ and LXN, we will record a significant
amount of intangible assets, the amortization of which will adversely affect
our results of operations in future periods. In addition, we will also record
a significant charge for the write-off of a portion of the purchase price as
in-process research and development costs.

IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR
TECHNOLOGIES INSTEAD OF DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE
THESE ACQUISITIONS OR TO SUCCESSFULLY INTEGRATE AN ACQUIRED BUSINESS OR
TECHNOLOGY IN A COST-EFFECTIVE AND NONDISRUPTIVE MANNER.

Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. Accordingly, from time to time we have acquired
complementary businesses, products, or technologies instead of internally
developing them and may choose to do so in the future. We do not know if we will
be able to complete any acquisitions, or whether we will be able to successfully
integrate any acquired business, operate it profitably or retain its key
employees. Integrating any business, product or technology we acquire could be
expensive and time consuming, disrupt our ongoing business and distract our
management. In addition, in order to finance any acquisitions, we might need to
raise additional funds through public or private equity or debt financings. In
that event, we could be forced to obtain financing on terms that are not
favorable to us and, in the case of equity financing, that may result in
dilution to our shareholders. Dilution to our shareholders will also result if,
in connection with any acquisition, we issue equity directly to the sellers. If
we are unable to integrate any acquired entities, products or technologies
effectively, our business will suffer. In addition, any amortization of goodwill
or other assets or charges resulting from the costs of acquisitions could harm
our business and operating results.

DEVELOPMENT OF A CURE FOR DIABETES COULD MAKE OUR PRODUCTS OBSOLETE.

The medical devices industry, including the self-test industry, is subject to
rapid and substantial technological development and product innovations. To be
successful, we must be responsive to new products and technologies as well as
new applications of existing technologies in diabetes self-management. The
National Institute for Health and other supporters of diabetes research are
sponsoring significant programs to better understand the disease and to find
methods to prevent or cure it. If discovered and widely available, any of these
methods would minimize or eliminate the need for our diabetes self-management
products and would require us to focus on other areas of our business, which
would have a material adverse effect on our financial condition and
profitability.


                                       12
<PAGE>


WE MAY BE UNABLE TO HIRE, RETAIN OR MOTIVATE KEY PERSONNEL, UPON WHOM THE
SUCCESS OF OUR BUSINESS WILL DEPEND.

We are highly dependent upon certain members of our management and scientific
staff. We believe that our future success will depend in large part upon our
ability to attract and retain highly skilled scientific, managerial and
marketing personnel. We face significant competition for such personnel from
other companies, research and academic institutions, government entities and
other organizations. We cannot assure you that we will be able to retain our key
employees or attract, assimilate, retain or train other needed qualified
employees in the future. We do not have employment agreements with all of our
key employees. The loss of any of our key employees, including our scientists,
may have an adverse effect on our business.

WE MAY BE LIABLE FOR CONTAMINATION OR OTHER HARM CAUSED BY HAZARDOUS MATERIALS
THAT WE USE.

Our research and development processes involve the use of hazardous materials.
We are subject to federal, state and local regulation governing the use,
manufacture, handling, storage and disposal of hazardous materials. We cannot
completely eliminate the risk of contamination or injury resulting from
hazardous materials and we may incur liability as a result of any contamination
or injury. We may also incur expenses relating to compliance with environmental
laws. Such expenses or liability could have a significant negative impact on our
financial condition.

VARIOUS FACTORS MAY CAUSE OUR OPERATING RESULTS TO FLUCTUATE.

Factors relating to our business make our future operating results uncertain and
may cause them to fluctuate from period to period. Such factors include: (i) the
timing of new product announcements and introductions by us and our competitors;
(ii) market acceptance of new or enhanced versions of our products; (iii)
changes in manufacturing costs or other expenses; (iv) competitive pricing
pressures; (v) the gain or loss of significant distribution outlets or
customers; (vi) the availability and extent of reimbursement for our products;
(vii) increased research and development expenses; or (viii) general economic
conditions.

OUR SHARE PRICE MAY BE VOLATILE DUE TO OUR OPERATING RESULTS, AS WELL AS FACTORS
BEYOND OUR CONTROL.

Our share price may be volatile due to our operating results, as well as factors
beyond our control. In addition, it is possible that in some future periods the
results of our operations will be below the expectations of the public market.
In any such event, the market price of our common stock could be materially and
adversely affected. Furthermore, the stock market may experience significant
price and volume fluctuations, which may affect the market price of our common
stock for reasons unrelated to our operating performance. The market price of
our common stock, which ranged from less than $4 to more than $40 during 2000,
may be highly volatile and may be affected by factors such as: (i) our quarterly
and annual operating results; (ii) changes in general conditions in the economy,
the financial markets, or the health care industry; (iii) government regulation
in the health care industry; (iv) changes in other areas such as tax laws; (v)
sales of substantial amounts of common stock or the perception that such sales
could occur; or (vi) other developments affecting us or our competitors.

THE MARKET PRICE OF OUR COMMON STOCK WILL LIKELY FLUCTUATE IN RESPONSE TO A
NUMBER OF FACTORS, INCLUDING THE FOLLOWING:

    o   our failure to meet the performance estimates of securities analysts;

    o   changes in financial estimates of our revenues and operating results or
        buy/sell recommendations by securities analysts;

    o   the timing of announcements by us, our competitors or other
        organizations regarding significant products, contracts or acquisitions
        or publicity regarding actual or potential results or performance
        thereof; and

    o   general stock market conditions and other economic or external factors.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
discussed in the forward-looking statements. We are exposed to market risk


                                       13
<PAGE>


related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.

INTEREST RATE RISK

We are exposed to market risk from changes in interest rates primarily through
our investing and borrowing activities. In addition, our ability to finance
future acquisition transactions may be impacted if we are not able to obtain
appropriate financing at acceptable rates. Our investing strategy, to manage
interest rate exposure, is to invest in short-term, highly liquid investments.
Currently, our short-term investments are in money market funds with original
maturities of 90 days or less. At December 31, 2000, the fair value of our
short-term investments approximated market value. In February 1998, our
subsidiary, IMI, entered into a $42 million credit agreement with Chase
Manhattan Bank. The Chase credit agreement consists of a $37 million term loan
and a $5 million revolving line of credit. The term loan and revolving line of
credit allow IMI to borrow funds at varying rates, including options to borrow
at an alternate base rate plus a spread from 0.50% to 2.00% or the London
Interbank Offered Rate (LIBOR) rate plus a spread from 2.00% to 3.50%. The
spreads depend on IMI's ratio of senior funded debt to EBITDA. IMI entered into
an interest-rate-swap agreement with an effective date of March 31, 1998. This
agreement protects approximately 50% of IMI's term loan against LIBOR interest
rates rising over 7.5%. This agreement is effective through March 30, 2001. If
the LIBOR rate increases one percentage point, as compared to the rate at
December 31, 2000, we estimate an increase in our interest expense of
approximately $164,000 in the next 12 months. If the LIBOR rate increases two
percentage points, as compared to the rate at December 31, 2000, we estimate an
increase in our interest expense of approximately $307,000 in the next 12
months.

FOREIGN CURRENCY RISK

We face exposure to movements in foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse effect on our business, financial condition and results of
operation. In 2000, the net impact of foreign currency changes was a loss of
$624,000. We do not use derivative financial instruments or other financial
instruments to hedge economic exposures or for trading. Historically, our
primary exposures have been related to the operations of our European
subsidiaries. However, the sales of ONE TOUCH(R) FastTAKE(R), our lead diabetes
management product, are denominated in the currency in which the manufacturing
costs are incurred. The loans received from LifeScan in June 1999 and September
2000 are denominated in British Pound Sterling and, therefore, we are exposed to
fluctuations between the British Pound Sterling and U.S. Dollar. The Euro was
introduced as a common currency for members of the European Monetary Union in
1999. We believe that in the near term the Euro will have minimal impact on
foreign exposure. We intend to hedge against fluctuations in the Euro if this
exposure becomes material. At December 31, 2000, our assets related to
non-dollar-denominated currencies amounted to approximately $50.4 million.

RECENTLY ISSUED ACCOUNTING STANDARDS

The Securities and Exchange Commission issued Staff Accounting Bulletin (SAB)
No. 101, REVENUE RECOGNITION, in December 1999, which sets forth provisions for
revenue recognition on multiple element arrangements and acceptance and delivery
criteria, among other items. The adoption of SAB No. 101 did not have a material
impact on our operating results.

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. As amended by SFAS No. 137 in June 1999, the
statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which is a
significant amendment to SFAS No. 133. SFAS No. 133 and its amendments establish
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively, the
derivatives) and for hedging activities. The Emerging Issues Task Force (EITF)
has also issued a number of derivative-related tentative and final consensuses.
We do not expect the adoption of these statements to have a material impact on
our consolidated financial position or results of operations.

In May 2000, the EITF reached a consensus on Issue No. 00-14, ACCOUNTING FOR
CERTAIN SALES INCENTIVES, which is effective for the quarter ended June 30,
2001. EITF Issue No. 00-14 establishes accounting and reporting standards for
the cost of certain sales incentives. We offer certain sales incentives that
fall within the scope of EITF Issue No. 00-14, such as coupons and free
products, to some of our customers. The adoption of the consensus will require
us


                                       14
<PAGE>


to reclassify approximately $3,250,000, $3,086,000 and $1,762,000 in 2000,
1999 and 1998, respectively, from selling, general and administrative
expenses to net product sales.

CAUTIONARY STATEMENT PURSUANT TO PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 - "SAFE HARBOR" FOR FORWARD-LOOKING STATEMENTS

We may from time to time make certain forward-looking statements in publicly
released materials, both written and oral. You can identify these statements by
forward-looking words such as "may", "will", "expect", "anticipate", "believe",
"estimates", "continue" or other words. You should read 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 believe that it is important to
communicate our future expectations to our investors. However, there may be
events in the future that we are not able to accurately predict or control and
that may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, and actual results
may differ materially from those discussed as a result of various factors,
including those factors described in the "Certain Factors Affecting Future
Results" section of this Annual Report. Some important additional factors that
could cause our actual results to differ materially from those projected in any
such forward-looking statements are as follows:

    o   economic factors, including inflation and fluctuations in interest rates
        and foreign currency exchange rates and the potential effect of such
        fluctuations on revenues, expenses and resulting margins;

    o   competitive factors, including technological advances achieved and
        patents attained by competitors and generic competition;

    o   domestic and foreign healthcare changes resulting in pricing pressures,
        including the continued consolidation among healthcare providers, trends
        toward managed care and healthcare cost containment and government laws
        and regulations relating to sales and promotion, reimbursement and
        pricing generally;

    o   government laws and regulations, affecting domestic and foreign
        operations, including those relating to trade, monetary and fiscal
        policies, taxes, price controls, regulatory approval of new products and
        licensing;

    o   manufacturing interruptions or delays, or capacity constraints, or lack
        of availability of alternative sources for components for our products,
        that we may experience;

    o   difficulties inherent in product development, including the potential
        inability to successfully continue technological innovation, complete
        clinical trials, obtain regulatory approvals in the United States and
        abroad, gain and maintain market approval of products and the
        possibility of encountering infringement claims by competitors with
        respect to patent or other intellectual property rights which can
        preclude or delay commercialization of a product;

    o   significant litigation adverse to us including product liability claims,
        patent infringement claims, and antitrust claims;

    o   product efficacy or safety concerns resulting in product recalls or
        declining sales;

    o   the impact of business combinations, including acquisitions and
        divestitures, and organizational restructuring consistent with evolving
        business strategies; and

    o   issuance of new or revised accounting standards by the American
        Institute of Certified Public Accountants, the Financial Accounting
        Standards Board or the Securities and Exchange Commission.

The foregoing list sets forth many, but not all, of the factors that could
impact upon our ability to achieve results described in any forward-looking
statements. Readers should not place undue reliance on our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in the "Certain Factors Affecting Future
Results" section and elsewhere in this Annual Report could harm our business,
prospects, operating results and financial condition. We do not undertake any
obligation to update any forward-looking statements as a result of future events
or developments.


                                       15
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Inverness Medical Technology, Inc.:

We have audited the accompanying consolidated balance sheets of Inverness
Medical Technology, Inc., formerly Selfcare, Inc., (a Delaware corporation) and
subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Inverness Medical
Technology, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

                                                  ARTHUR ANDERSEN LLP


Boston, Massachusetts
February 7, 2001 (except for
  the last sentence of Note 1 and Note 18(b), as to which
  the date is March 28, 2001)


                                       16
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                              YEAR ENDED DECEMBER 31,
                                                                                              -----------------------
                                                                                        2000              1999             1998
                                                                                        ----              ----             ----
<S>                                                                                 <C>              <C>              <C>
NET PRODUCT SALES..............................................................     $169,867,829     $125,131,088     $114,081,599
GRANTS AND OTHER REVENUE.......................................................          476,443          742,415        3,902,019
                                                                                    ------------     ------------     ------------
       Net revenue.............................................................      170,344,272      125,873,503      117,983,618

COST OF SALES..................................................................       99,723,395       83,246,433       77,080,920
                                                                                    ------------     ------------     ------------
       Gross profit............................................................       70,620,877       42,627,070       40,902,698
                                                                                    ------------     ------------     ------------

OPERATING EXPENSES:
  Research and development.....................................................       12,489,032        6,905,900        7,379,796
  Selling, general and administrative..........................................       38,733,682       35,390,211       36,289,959
  Net charge for business  dispositions, asset impairments and restructuring
     activities (see Note 9)...................................................               --               --        7,542,083
                                                                                    ------------     ------------     ------------
                                                                                      51,222,714       42,296,111       51,211,838
                                                                                    ------------     ------------     ------------
       Operating income (loss).................................................       19,398,163          330,959      (10,309,140)

INTEREST EXPENSE, INCLUDING AMORTIZATION OF ORIGINAL ISSUE DISCOUNT (SEE
  NOTE 11).....................................................................       (7,583,273)      (8,092,611)      (9,565,235)
INTEREST AND OTHER INCOME (EXPENSE), NET.......................................        1,785,259         (532,470)       1,786,807
                                                                                    ------------     ------------     ------------
       Income (loss) before dividends and accretion on mandatorily redeemable
         preferred stock of a subsidiary.......................................       13,600,149       (8,294,122)     (18,087,568)

DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK OF A
  SUBSIDIARY...................................................................         (430,375)        (225,996)        (145,924)
                                                                                    ------------     ------------     ------------
       Income (loss) before extraordinary loss and income taxes................       13,169,774       (8,520,118)     (18,233,492)
EXTRAORDINARY LOSS ON MODIFICATION AND EARLY EXTINGUISHMENT OF DEBT (SEE
  NOTES 2k AND 11).............................................................       (2,361,518)        (306,092)              --
                                                                                    ------------     ------------     ------------
       Income (loss) before income taxes.......................................       10,808,256       (8,826,210)     (18,233,492)
PROVISION FOR INCOME TAXES.....................................................          168,633          245,342          544,232
                                                                                    ------------     ------------     ------------
       Net income (loss).......................................................     $ 10,639,623     $ (9,071,552)    $(18,777,724)
                                                                                    ============     ============     ============

NET INCOME (LOSS) PER COMMON SHARE - BASIC.....................................     $       0.43     $      (0.66)    $      (1.55)
                                                                                    ============     ============     ============
NET INCOME (LOSS) PER COMMON SHARE - DILUTED...................................     $       0.37     $      (0.66)    $      (1.55)
                                                                                    ============     ============     ============

WEIGHTED AVERAGE SHARES - BASIC ...............................................       23,631,949       16,819,731       12,214,986
                                                                                    ============     ============     ============

WEIGHTED AVERAGE SHARES - DILUTED..............................................       28,328,388       16,819,731       12,214,986
                                                                                    ============     ============     ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       17
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                              DECEMBER 31,
                                                                                              ------------
                                                                                         2000              1999
                                                                                         ----              ----
<S>                                                                                   <C>               <C>
                                      ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.......................................................    $ 82,271,911      $  5,233,594
  Accounts receivable, net of reserves of approximately $2,802,000 and
    $2,623,000 in 2000 and 1999, respectively.....................................      30,967,763        20,557,573
  Inventories.....................................................................      14,968,566        12,367,265
  Prepaid expenses and other current assets.......................................         857,281         1,573,509
                                                                                           -------         ---------
       Total current assets.......................................................     129,065,521        39,731,941

PROPERTY, PLANT AND EQUIPMENT, NET................................................      13,795,109         9,779,498
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET.............................      69,330,005        63,281,897
DEFERRED FINANCING COSTS AND OTHER ASSETS, NET....................................       1,112,826         2,043,218
                                                                                         ---------         ---------
                                                                                      $213,303,461      $114,836,554
                                                                                      ============      ============

                       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of notes payable................................................    $ 35,346,087      $ 21,483,140
  Accounts payable................................................................      20,751,341        16,550,984
  Accrued expenses and other current liabilities..................................      17,008,364        10,119,326
  Current portion of deferred revenue.............................................         360,960           251,447
                                                                                           -------           -------
       Total current liabilities..................................................      73,466,752        48,404,897
                                                                                        ----------        ----------

LONG-TERM LIABILITIES:
  Deferred revenue, net of current portion........................................         187,508           204,770
  Other long-term liabilities.....................................................         170,000           161,000
  Notes payable, net of current portion...........................................      13,720,156        38,892,273
                                                                                        ----------        ----------
       Total long-term liabilities................................................      14,077,664        39,258,043
                                                                                        ----------        ----------

COMMITMENTS AND CONTINGENCIES (SEE NOTE 13)

MANDATORILY REDEEMABLE PREFERRED STOCK OF A SUBSIDIARY............................       4,374,622         3,944,247
                                                                                         ---------         ---------
SERIES B CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE:
     Authorized and issued--8,000 shares
     Outstanding--3,580 shares in 1999 ...........................................              --         5,109,841

STOCKHOLDERS' EQUITY:
   Series C, D and E preferred stock, $0.001 par value--
     Authorized--88,500 shares
     Issued and outstanding--74,041 shares in 1999................................              --         7,912,447
  Common stock, $0.001 par value--
     Authorized--40,000,000 shares
     Issued--29,882,254 and 18,952,960 shares in 2000 and 1999, respectively......          29,882            18,953
  Additional paid-in capital......................................................     214,918,074       113,794,227
  Less--treasury stock, at cost, 743,678 shares...................................      (3,724,900)       (3,724,900)
  Accumulated deficit.............................................................     (89,939,460)     (100,205,500)
  Accumulated other comprehensive income..........................................         100,827           324,299
                                                                                           -------           -------
       Total stockholders' equity.................................................     121,384,423        18,119,526
                                                                                       -----------        ----------
                                                                                      $213,303,461      $114,836,554
                                                                                      ============      ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       18
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                         PREFERRED STOCK     COMMON STOCK                      TREASURY STOCK
                                                         ---------------     ------------                      --------------
                                                        NUMBER                        $0.001   ADDITIONAL    NUMBER
                                                          OF     $0.001    NUMBER OF   PAR      PAID-IN        OF
                                                        SHARES  PAR VALUE   SHARES    VALUE     CAPITAL      SHARES       COST
                                                        ------  ---------  ---------  ------    -------      ------       ----
<S>                                                     <C>     <C>       <C>        <C>      <C>            <C>        <C>
BALANCE, DECEMBER 31, 1997.............................    400  $     --   9,681,389  $9,681  $ 75,753,699    (32,197)  $ (211,460)
Issuance of common stock...............................     --        --     737,156     738     1,341,205         --           --
Conversion of preferred stock and notes to common
  stock................................................   (400)       --   3,838,424   3,838    14,641,043         --           --
Issuance of common stock for the acquisition of Can-Am
  Care Corporation.....................................     --        --   1,108,333   1,108    10,597,326         --           --
Issuance of common stock for Core Immuno-Assay
  technology...........................................     --        --     487,017     487     4,565,291         --           --
Warrants issued with subordinated debt.................     --        --          --      --       825,820         --           --
Common stock received in legal settlement..............     --        --          --      --            --   (155,724)  (1,498,844)
Common stock received in business disposition (see
  Note 9(b))...........................................     --        --          --      --            --   (555,731)  (2,014,525)
Common stock repurchased from related party............     --        --          --      --            --        (26)         (71)
Change in cumulative translation adjustment............     --        --          --      --            --         --           --
Net loss...............................................     --        --          --      --            --         --           --
                                                        ------  --------   ---------  ------  ------------   --------   ----------
   Total comprehensive loss


BALANCE, DECEMBER 31, 1998.............................     --        --  15,852,319  15,852   107,724,384   (743,678)  (3,724,900)
Issuance of common stock...............................     --        --     561,646     563       868,931         --           --
Issuance of Series C, D, & E convertible preferred
  stock, net of issuance costs of $73,711.............. 74,041 7,404,100          --      --       (73,711)        --           --
Dividends accrued on Series C, D, & E convertible
  preferred stock......................................     --   508,347          --      --            --         --           --
Accretion on Series E preferred stock pertaining to
  guaranteed discount upon conversion..................     --        --          --      --       212,550         --           --
Conversion of senior subordinated convertible notes
  into common stock, net of unamortized financing
  costs................................................     --        --   1,715,328   1,715     3,195,686         --           --
Conversion of Series B convertible preferred stock to
  common stock.........................................     --        --     823,667     823     1,866,387         --           --
Premium accrued upon terms amendment of Series B
  convertible preferred stock..........................     --        --          --      --            --         --           --
Changes in cumulative translation adjustment...........     --        --          --      --            --         --           --
Net loss...............................................     --        --          --      --            --         --           --
                                                        ------  --------   ---------  ------  ------------   --------   ----------
   Total comprehensive loss



BALANCE, DECEMBER 31, 1999............................. 74,041 $7,912,447 18,952,960 $18,953  $113,794,227   (743,678) $(3,724,900)
                                                        ------ ---------- ---------- -------  ------------   --------  -----------
</TABLE>

<TABLE>
<CAPTION>

                                                                       ACCUMULATED
                                                                          OTHER          TOTAL
                                                        ACCUMULATED    COMPREHENSIVE   STOCKHOLDERS'    COMPREHENSIVE
                                                          DEFICIT         INCOME         EQUITY            LOSS
                                                          -------         ------         ------            ----
<S>                                                     <C>             <C>          <C>                 <C>
BALANCE, DECEMBER 31, 1997............................. $ (70,183,506)  $ 72,271     $  5,440,685        $        --
Issuance of common stock...............................            --         --        1,341,943                 --
Conversion of preferred stock and notes to common
  stock................................................      (127,985)        --       14,516,896                 --
Issuance of common stock for the acquisition of Can-Am
  Care Corporation.....................................            --         --       10,598,434                 --
Issuance of common stock for Core Immuno-Assay
  technology...........................................            --         --        4,565,778                 --
Warrants issued with subordinated debt.................            --         --          825,820                 --
Common stock received in legal settlement..............            --         --       (1,498,844)                --
Common stock received in business disposition (see
  Note 9(b))...........................................            --         --       (2,014,525)                --
Common stock repurchased from related party............            --         --              (71)                --
Change in cumulative translation adjustment............            --     10,471           10,471             10,471
Net loss...............................................   (18,777,724)        --      (18,777,724)       (18,777,724)
                                                        -------------   --------     ------------       ------------
   Total comprehensive loss                                                                             (18,767,253)
                                                                                                        ------------

BALANCE, DECEMBER 31, 1998.............................   (89,089,215)    82,742       15,008,863
Issuance of common stock...............................            --         --          869,494                 --
Issuance of Series C, D, & E convertible preferred
  stock, net of issuance costs of $73,711..............            --         --        7,330,389                 --
Dividends accrued on Series C, D, & E convertible
  preferred stock......................................      (508,347)        --               --                 --
Accretion on Series E preferred stock pertaining to
  guaranteed discount upon conversion..................      (212,550)        --               --                 --
Conversion of senior subordinated convertible notes
  into common stock, net of unamortized financing
  costs................................................            --         --        3,197,401                 --
Conversion of Series B convertible preferred stock to
  common stock.........................................            --         --        1,867,210                 --
Premium accrued upon terms amendment of Series B
  convertible preferred stock..........................    (1,323,836)        --       (1,323,836)                --
Changes in cumulative translation adjustment...........            --    241,557          241,557            241,557
Net loss...............................................    (9,071,552)        --       (9,071,552)        (9,071,552)
                                                        -------------   --------     ------------       ------------
   Total comprehensive loss                                                                              $(8,829,995)
                                                                                                        ------------
BALANCE, DECEMBER 31, 1999............................. $(100,205,500)  $324,299      $18,119,526
                                                        -------------- --------       -----------
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       19
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                        PREFERRED STOCK        COMMON STOCK                   TREASURY STOCK
                                                        ---------------    -------------------                --------------

                                                       NUMBER    $0.001                 $0.001  ADDITIONAL     NUMBER
                                                         OF       PAR       NUMBER OF    PAR     PAID-IN        OF
                                                       SHARES    VALUE       SHARES     VALUE    CAPITAL       SHARES     COST
                                                       ------    -----       ------     -----    -------       ------     ----
<S>                                                   <C>      <C>         <C>         <C>     <C>           <C>       <C>
BALANCE, DECEMBER 31, 1999............................ 74,041  $7,912,447  18,952,960  $18,953 $113,794,227  (743,678) $(3,724,900)
Issuance of common stock, net of issuance costs of
  approximately $5,371,000............................     --          --   3,500,000    3,500   82,125,829        --           --
Exercise of common stock options and warrants.........     --          --     943,006      943    3,972,071        --           --
Premium accrued on Series B convertible preferred
  stock...............................................     --          --          --       --           --        --           --
Conversion of Series B convertible preferred stock to
  common stock........................................     --          --   2,359,177    2,359    5,304,309        --           --
Dividends accrued on Series C, D, & E convertible
  preferred stock.....................................     --     176,756          --       --           --        --           --
Conversion of Series C, D & E convertible preferred
  stock to common stock...............................(74,041) (8,089,203)  4,127,111    4,127    8,085,076        --           --
Warrants issued with subordinated debt................     --          --          --       --    1,207,132        --           --
Compensation related to grants of common stock
  options.............................................     --          --          --       --      429,430        --           --
Change in cumulative translation adjustment...........     --          --          --       --           --        --           --
Net income............................................     --          --          --       --           --        --           --
                                                      -------  ----------  ----------  ------- ------------  --------  -----------
   Total comprehensive income

BALANCE, DECEMBER 31, 2000............................     --  $       --  29,882,254  $29,882 $214,918,074  (743,678) $(3,724,900)
                                                      =======  ==========  ==========  ======= ============  ========  ===========
<CAPTION>

                                                                        ACCUMULATED
                                                                           OTHER         TOTAL
                                                        ACCUMULATED    COMPREHENSIVE  STOCKHOLDERS  COMPREHENSIVE
                                                          DEFICIT         INCOME        EQUITY         INCOME
                                                          -------         ------        ------         ------
<S>                                                     <C>              <C>         <C>             <C>
BALANCE, DECEMBER 31, 1999............................. $(100,205,500)   $ 324,299   $18,119,526     $        --
Issuance of common stock, net of issuance costs of
  approximately $5,371,000.............................            --           --    82,129,329              --
Exercise of common stock options and warrants..........            --           --     3,973,014              --
Premium accrued on Series B convertible preferred
  stock................................................      (196,827)          --      (196,827)             --
Conversion of Series B convertible preferred stock to
  common stock.........................................            --           --     5,306,668              --
Dividends accrued on Series C, D, & E convertible
  preferred stock......................................      (176,756)          --            --              --
Conversion of Series C, D & E convertible preferred
  stock to common stock................................            --           --            --              --
Warrants issued with subordinated debt.................            --           --     1,207,132              --
Compensation related to grants of common stock
  options..............................................            --           --       429,430              --
Change in cumulative translation adjustment............            --     (223,472)     (223,472)       (223,472)
Net income.............................................    10,639,623           --    10,639,623      10,639,623
                                                        -------------    ---------  ------------     -----------
   Total comprehensive income                                                                        $10,416,151
                                                                                                     ===========

BALANCE, DECEMBER 31, 2000............................. $ (89,939,460)   $ 100,827  $121,384,423
                                                        =============    =========  ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       20
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED DECEMBER 31,
                                                                                          -----------------------
                                                                                    2000            1999            1998
                                                                                    ----            ----            ----
<S>                                                                             <C>              <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss).........................................................     $ 10,639,623     $ (9,071,552)  $(18,777,724)
 Adjustments to reconcile net income (loss) to net cash used in operating
   activities:
   Accretion on preferred stock of a subsidiary............................          430,375          225,996        145,924
   Gain on sale of investment in Theratase plc (see Note 6) ...............       (1,757,229)              --             --
   Noncash portion of net charge on business dispositions, asset
    impairments and restructuring activities...............................               --               --      7,289,459
   Loss on disposal of fixed assets........................................               --           20,218        838,000
   Noncash interest expense related to amortization of original issue
    discount...............................................................          630,134          327,124      1,788,116
   Noncash income related to legal settlement..............................               --               --     (1,498,844)
   Noncash compensation expense related to issuance of common stock options          429,430               --             --
   Noncash portion of extraordinary loss on  modification/extinguishment of
    debt...................................................................        1,341,862          227,997             --
   Amortization of deferred revenue........................................         (363,612)        (714,872)    (3,902,019)
   Depreciation and amortization...........................................        6,101,099        6,255,080      8,779,108
   Deferred income taxes...................................................          300,000         (300,000)            --
   Other noncash gains.....................................................               --             (538)      (337,473)
   Changes in assets and liabilities, net of acquisitions:
    Accounts receivable....................................................      (16,787,183)      (6,477,700)    (6,344,661)
    Inventories............................................................       (2,883,554)      (2,695,807)      (665,745)
    Prepaid expenses and other current assets..............................          719,934          186,328        168,622
    Accounts payable.......................................................        4,795,865        4,980,483        817,370
    Deferred revenue.......................................................          541,644              --         703,876
    Accrued expenses and other current liabilities.........................        9,144,986          263,239       (166,788)
                                                                                ------------     ------------   ------------
  Net cash provided by (used in) operating activities......................       13,283,374       (6,774,004)   (11,162,779)
                                                                                ------------     ------------   ------------
 CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment.......................................       (6,802,578)      (3,794,874)    (1,442,480)
 Increase in other assets..................................................         (414,177)         (24,650)      (332,723)
 Cash received from sale of investment in Theratase plc (see Note 6) ......        3,328,464               --             --
 Cash paid for license agreement with Debiotech, S.A. (see Note 8) ........      (10,105,362)              --             --
 Cash received from affiliate as repayment of loan.........................               --          740,077        163,625
 Cash received from business disposition...................................               --               --        230,000
 Cash paid for Core Immuno-Assay technology................................               --               --       (471,354)
 Cash paid for purchase of Can-Am Care Corporation.........................               --               --    (15,317,628)
                                                                                ------------     ------------   ------------
  Net cash used in investing activities....................................      (13,993,653)      (3,079,447)   (17,170,560)
                                                                                ------------     ------------   ------------
 CASH FLOWS FROM FINANCING ACTIVITIES:
 Cash paid for deferred financing cost......................................        (571,924)         (74,647)    (1,934,835)
 Net proceeds from sale of common stock and preferred stock and exercise of
   options and warrants to purchase common stock............................      86,102,343        3,293,254      7,073,474
 Proceeds from borrowings under notes payable...............................       6,821,124       11,094,679     50,598,402
 Repayments of notes payable................................................     (14,132,303)      (8,987,983)   (35,489,810)
 Purchase of treasury stock.................................................              --               --            (71)
 Proceeds from sale of preferred stock of a subsidiary......................              --               --      1,680,400
                                                                                ------------     ------------   ------------
   Net cash provided by financing activities................................      78,219,240        5,325,303     21,927,560
                                                                                ------------     ------------   ------------
 FOREIGN EXCHANGE EFFECT ON CASH AND CASH EQUIVALENTS.......................        (470,644)         562,112        (64,489)
                                                                                ------------     ------------   ------------
 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................      77,038,317       (3,966,036)    (6,470,268)
 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...............................       5,233,594        9,199,630     15,669,898
                                                                                ------------     ------------   ------------
 CASH AND CASH EQUIVALENTS, END OF YEAR.....................................    $ 82,271,911     $  5,233,594   $  9,199,630
                                                                                ============     ============   ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       21
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                                           YEAR ENDED DECEMBER 31,
                                                                                           -----------------------
                                                                                      2000          1999            1998
                                                                                      ----          ----            ----
<S>                                                                                <C>            <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid For:
  Interest.......................................................................  $ 6,273,697    $5,893,826    $  7,591,165
                                                                                   ===========    ==========    ============
  Income taxes...................................................................  $   579,551    $  417,426    $    506,134
                                                                                   ===========    ==========    ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
       On February 18, 1998, the Company acquired Can-Am Care Corporation--
         Accounts receivable.....................................................  $        --    $       --    $  2,812,000
         Inventories.............................................................           --            --       3,766,000
         Other current assets....................................................           --            --         313,000
         Fixed assets............................................................           --            --          32,000
         Goodwill................................................................           --            --      26,916,062
          Cash paid for acquisition of Can-Am Care Corporation...................           --            --     (15,317,628)
                                                                                            --            --    ------------
                                                                                            --            --      18,521,434
         Assumed accounts payable................................................           --            --      (5,923,000)
         Note payable to Can-Am shareholders.....................................           --            --      (2,000,000)
                                                                                            --            --    ------------
         Issuance of common stock................................................           --            --     (10,598,434)
                                                                                   -----------    ----------    ------------
       Accretion, Premiums and Dividends on Preferred Stock......................  $   373,583    $2,044,733    $    127,985
                                                                                   ===========    ==========    ============
       Shares Issued in Connection with Purchase of Core Immuno-Assay Technology.  $        --    $       --    $  4,565,778
                                                                                   ===========    ==========    ============
       Conversion of Preferred Stock and Notes to Common Stock...................  $13,395,871    $5,064,611    $ 14,516,896
                                                                                   ===========    ==========    ============
       Repayment of LifeScan Note via Product Discounts (see Note 12)............  $ 5,791,987    $1,610,872    $         --
                                                                                   ============   ==========    ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       22
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

(1) DESCRIPTION OF BUSINESS

Inverness Medical Technology, Inc. (a Delaware corporation, formerly known as
Selfcare, Inc.) and its subsidiaries (collectively, the Company) are engaged in
the development, manufacturing and marketing of self-test diagnostic products
for the diabetes, women's health and, to a lesser extent, infectious disease
markets. The Company also markets nutritional supplement products, several of
which are targeted primarily at the women's health market. The Company's
existing and planned products are targeted at the two largest existing self-care
diagnostics markets, diabetes management and women's health, in the United
States and Europe.

The Company's subsidiary in Scotland, Inverness Medical Limited (Inverness
Scotland), manufactures test strips for use in blood glucose monitoring meters.
Inverness Scotland develops and distributes such meters and test strips through
its alliance with LifeScan, Inc. (LifeScan), an affiliate of Johnson and Johnson
Development Corporation (JJDC), primarily in the United States, Canada and
Europe. The Company also sells various diabetes-related home health care
products in the United States through its subsidiary Can-Am Care Corporation
(Can-Am). The Company manufactures its pregnancy detection and ovulation
prediction self-test products at its subsidiary in Ireland, Cambridge
Diagnostics Ireland, Ltd. (Cambridge Diagnostics). Inverness Medical, Inc.
(IMI), the Company's primary operating subsidiary in the United States,
distributes these women's health products, along with certain nutritional
supplement products.

In January 2001, the Company acquired Integ Incorporated (Integ), a publicly
traded development stage company based in Minnesota. Integ has developed a
proprietary sampling technology to extract interstitial fluid from the top
layers of the skin, eliminating the need to draw blood (see Note 18(a)). In
March 2001, the Company acquired LXN Corporation (LXN), a privately-held
company that is in the development and commercialization of fructosamine
monitoring technology for diabetes self-management (see Note 18(b)).

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the results of the
Company and its wholly owned subsidiaries, the most significant of which include
Inverness Scotland (a Scottish corporation), Cambridge Diagnostics (an Irish
corporation), IMI (a Delaware corporation) and Orgenics Ltd. (Orgenics, an
Israeli corporation) and its subsidiaries. All material intercompany balances
and transactions have been eliminated in consolidation.

(b) USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

(c) FOREIGN CURRENCIES

The Company follows the provisions of Statement of Financial Accounting Standard
(SFAS) No. 52, FOREIGN CURRENCY TRANSLATION. All assets and liabilities of the
Company's foreign subsidiaries are translated into U.S. dollars using the
exchange rate at each balance sheet date while income and expense accounts are
translated using the average rates of exchange during each period. Cumulative
translation gains or losses on deemed permanent intercompany investments are
reflected as a separate component of stockholders' equity. Foreign currency
exchange transaction losses of $624,000, $853,000 and $33,000 in 2000, 1999 and
1998, respectively, are reflected as a component of interest and other income
(expense), net, in the accompanying consolidated statements of operations.


                                       23
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash equivalents consisted of money market funds as of December 31,
2000 and 1999.

(e) INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market.

(f) DEPRECIATION AND AMORTIZATION

The Company records property, plant and equipment at historical cost.
Depreciation and amortization are computed using the straight-line method based
on the following estimated useful lives of the related assets: machinery,
laboratory equipment and tooling (2-16 years), buildings (20-50 years),
leasehold improvements (lesser of term of lease or useful life of asset),
furniture and fixtures (3-10 years) and computer equipment (1-6 years).

(g) GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

The Company is amortizing its goodwill and trademarks related to the
acquisitions of certain nutritional supplement lines and Can-Am using the
straight-line method over their estimated useful lives of 25 years. The
intangible assets pertaining to the Company's acquired core immuno-assay
technology and rights to the externally-worn insulin pump technology (see Note
8) are being amortized over 15 years. The Company recorded amortization expense
of approximately $3,025,000, $3,216,000 and $4,415,000 in 2000, 1999 and 1998,
respectively, related to goodwill, trademarks and other intangible assets.

The Company examines the carrying value of its long-lived and intangible assets
to determine whether there are any impairment losses. If indicators of
impairment were present in long-lived and intangible assets used in operations
and future cash flows were not expected to be sufficient to recover the assets'
carrying amount, an impairment loss would be charged to expense in the period
identified. During 1998, the Company recorded an impairment charge associated
with certain goodwill and trademarks pertaining to a specific nutritional
supplement, the goodwill associated with Orgenics, the goodwill associated with
the Company's investment in Theratase plc (Theratase, formerly known as
Enviromed plc) and certain other long-lived assets held by Cambridge Diagnostics
(see Note 9). The Company believes that the remaining carrying value of these
assets were realizable as of December 31, 2000 and 1999.

(h) INCOME TAXES

The Company follows the provisions of SFAS No. 109, ACCOUNTING FOR INCOME TAXES,
under which deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities.
Deferred tax assets and liabilities are measured using the enacted tax rates and
laws that are expected to be in effect when the differences are expected to
reverse.

(i) REVENUE RECOGNITION

The majority of the Company's revenues are derived from product sales. Product
revenue is recognized upon shipment to customers, at which time title is
transferred, less a reserve for estimated product returns. The Company has
recorded deferred revenue in the accompanying consolidated balance sheets
representing amounts received in advance on certain contracts and grants (see
Notes 5 and 13 (b)). The Company records the related revenue from funded grants
relating to facilities and equipment over the obligation period of such grant.


                                       24
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Securities and Exchange Commission issued Staff Accounting Bulletin (SAB)
No. 101, REVENUE RECOGNITION, in December 1999, which sets forth provisions for
revenue recognition on multiple element arrangements and acceptance and delivery
criteria, among other items. The adoption of SAB No. 101 did not have a material
impact on the Company's operating results.

(j) EMPLOYEE STOCK COMPENSATION ARRANGEMENTS

The Company accounts for its employee stock compensation arrangements under the
provisions of Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, and Financial Accounting Standards Board (FASB)
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION, and intends to continue doing so. The Company uses the
disclosure-only provisions of SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION.

(k) EXTRAORDINARY ITEMS

During 2000, the Company accounted for the refinancing and repayment of its
$7,500,000 subordinated revenue royalty notes under the provisions of Emerging
Issues Task Force (EITF) Issue No. 96-19, DEBTOR'S ACCOUNTING FOR A MODIFICATION
OR EXCHANGE OF DEBT INSTRUMENTS, and recognized approximately $800,000 as an
extraordinary loss (see Note 11). Additionally, on December 29, 2000, the
Company notified the holders of its outstanding subordinated promissory notes of
its election to prepay such notes on January 29, 2001. Accordingly, the Company
accounted for this transaction as an early extinguishment of debt and recorded
an extraordinary loss of approximately $1,562,000 in 2000 (see Note 11).

During 1999, the Company amended the terms of its then outstanding senior
subordinated convertible notes by changing the maturity date and conversion
terms, which resulted in an extraordinary loss of approximately $306,000 under
the provisions of EITF Issue No. 96-19.

(l) NET EARNINGS (LOSS) PER COMMON SHARE

Net earnings (loss) per common share, computed in accordance with SFAS No. 128,
EARNINGS PER SHARE, is based upon the weighted average number of outstanding
common shares and the dilutive effect of common share equivalents, such as
options and warrants to purchase common stock, convertible preferred stock and
convertible notes, if applicable, that are outstanding each year (see Note 15).

(m) POSTRETIREMENT BENEFITS

The Company does not have any obligations for postretirement or postemployment
benefits, as defined by SFAS No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS, as it does not currently offer such benefits.
However, its subsidiary, Orgenics, does provide certain severance benefits (see
Note 13(h)).


                                       25
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of
credit risk primarily consist of cash and cash equivalents and accounts
receivable. The Company invests its excess cash primarily in high quality
securities and limits the amount of credit exposure to any one financial
institution. The Company does not require collateral or other securities to
support customer receivables; however, it performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses. The Company
had one significant customer during 2000, 1999 and 1998 representing 45.2%,
31.7% and 28.3%, respectively, of net revenue. This customer represents 46.7%
and 27.7% of the accounts receivable balance at December 31, 2000 and 1999,
respectively. The Company has no significant off-balance-sheet or concentration
of credit risks such as foreign exchange contracts, option contracts or other
foreign hedging arrangements. See Note 17 for financial information by
geographic area and business segment.

(o) DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash equivalents, accounts
receivable and debt. The estimated fair value of these financial instruments
approximates their carrying value at December 31, 2000 and 1999. The estimated
fair values have been determined through information obtained from market
sources and management estimates. The Company does not have any material
derivative or other financial instruments.

(p) RECLASSIFICATIONS

Certain prior-year account balances have been reclassified to be consistent with
the current year's presentation.

(q) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. As amended by SFAS No. 137 in June 1999, the
statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which is a
significant amendment to SFAS No. 133. SFAS No. 133 and its amendments establish
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively, the
derivatives) and for hedging activities. The EITF has also issued a number of
derivative-related tentative and final consensuses. The Company does not expect
the adoption of these statements to have a material impact on its consolidated
financial position or results of operations.

In May 2000, the EITF reached a consensus on Issue No. 00-14, ACCOUNTING FOR
CERTAIN SALES INCENTIVES, which is effective for the quarter ended June 30,
2001. EITF Issue No. 00-14 establishes accounting and reporting standards for
the cost of certain sales incentives. The Company offers certain sales
incentives that fall within the scope of EITF Issue No. 00-14, such as coupons
and free products, to some of its customers. The adoption of the consensus will
require the Company to reclassify approximately $3,250,000, $3,086,000 and
$1,762,000 in 2000, 1999 and 1998, respectively, from selling, general and
administrative expenses to net product sales.


                                       26
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(3) OTHER BALANCE SHEET INFORMATION

Components of other selected captions in the Consolidated Balance Sheets at
December 31 consisted of:

<TABLE>
<CAPTION>

                                                                                  2000             1999
                                                                                  ----             ----
     <S>                                                                      <C>              <C>
     INVENTORIES:
     Raw materials.........................................................   $ 3,910,135      $ 3,223,461
     Work-in-process.......................................................     1,797,644        1,675,700
     Finished goods........................................................     9,260,787        7,468,104
                                                                              -----------      -----------
                                                                              $14,968,566      $12,367,265
                                                                              ===========      ===========
     PROPERTY, PLANT AND EQUIPMENT, AT COST:
     Machinery, laboratory equipment and tooling...........................   $17,109,130      $12,461,074
     Buildings.............................................................     1,078,982        1,159,074
     Leasehold improvements................................................       879,743          820,631
     Furniture and fixtures................................................       961,990          549,703
     Computer equipment....................................................     2,405,024        1,797,283
                                                                              -----------      -----------
                                                                               22,434,869       16,787,765
     Less: Accumulated depreciation and amortization.......................     8,639,760        7,008,267
                                                                              -----------      -----------
                                                                              $13,795,109      $ 9,779,498
                                                                              ===========      ===========
     INTANGIBLES:
     Goodwill..............................................................   $45,636,516      $47,086,262
     Trademarks............................................................    21,059,405       21,059,405
     Other intangible assets...............................................    16,280,575        5,757,465
                                                                              -----------      -----------
                                                                               82,976,496       73,903,132
     Less: Accumulated amortization........................................    13,646,491       10,621,235
                                                                              -----------      -----------
                                                                              $69,330,005      $63,281,897
                                                                              ===========      ===========
     ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
     Compensation and compensation-related.................................   $ 4,380,141      $ 1,807,562
     Professional fees.....................................................     1,821,335          794,882
     Advertising and marketing.............................................     2,770,433        1,828,928
     Interest payable......................................................       887,085        1,100,689
     Accrued royalties.....................................................     4,093,446          742,699
     Other.................................................................     3,055,924        3,844,566
                                                                              -----------      -----------
                                                                              $17,008,364      $10,119,326
                                                                              ===========      ===========
</TABLE>

(4) ACQUISITION AND FINANCING OF CAN-AM

(a) CAN-AM ACQUISITION

On February 18, 1998, IMI purchased all of Can-Am's outstanding stock and
entered into a bank lending agreement (see Note 4(b)). The aggregate purchase
price of approximately $27,900,000 consisted of $13,600,000 in cash, 1,108,333
shares of the Company's common stock with a fair value of $10,600,000, a
$2,000,000 subordinated note payable to former Can-Am shareholders and closing
costs of approximately $1,700,000. The aggregate purchase price was allocated to
the acquired assets and assumed liabilities approximately as follows:

<TABLE>
<S>                                                              <C>
Accounts receivable...........................................   $ 2,812,000
Inventory.....................................................     3,766,000
Other current assets..........................................       313,000
Fixed assets..................................................        32,000
Goodwill......................................................    26,900,000
Liabilities assumed...........................................    (5,923,000)
                                                                 -----------
                                                                 $27,900,000
                                                                 ===========
</TABLE>


                                       27
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(4) ACQUISITION AND FINANCING OF CAN-AM (CONTINUED)

In connection with the purchase of Can-Am, Can-Am's shareholders granted a right
of first refusal to the Company to purchase the assets or stock of an entity
under common control, A.M.G. Medical, Inc. (AMG). AMG historically performed
certain administrative, management and manufacturing functions for Can-Am and,
concurrent with the purchase of Can-Am, Can-Am and AMG entered into formal
management services and supply agreements. Under the terms of the management
services agreement, AMG will continue to provide such administrative and
management services to Can-Am on an arm's-length basis. The management services
agreement provides a mechanism to adjust charges for services based on the needs
of Can-Am and an arbitration provision in the event the parties cannot agree on
such charges. Under the terms of the supply agreement, Can-Am must purchase 100%
of its requirements for monolet compatible lancets from AMG, unless AMG is
unable to meet Can-Am's requirements. Further, Can-Am's president entered into
an employment agreement with the Company to continue serving the Company for
three years at an annual salary of $150,000, which expired in February 2001.

The principal amount of the promissory note issued by the Company was subject to
adjustment based on the performance of the Company's common stock within 90
trading days prior to the maturity of such note. Subsequent to year-end, the
Company computed the value of this contingent payment to be $2,000,000 which has
been recorded as additional goodwill. The entire $4,000,000 balance of the
promissory note was paid in February 2001.

(b) FINANCING

Concurrent with the acquisition of Can-Am, IMI entered into a $42,000,000 credit
agreement (IMI Credit Agreement) with a bank; the Company is the guarantor of
all obligations due under the IMI Credit Agreement. The IMI Credit Agreement
consists of a $37,000,000 term loan and a $5,000,000 revolving line of credit.
Of the proceeds from this term loan, IMI used $32,000,000 to finance the cash
portion of the Can-Am purchase price and refinance the then existing bank debt
which resulted from the earlier acquisition of certain nutritional supplement
lines. The remaining $5,000,000 was used for working capital purposes.

The term loan and revolving line of credit allow IMI to borrow funds at varying
rates, including options to borrow at an alternate base rate, as defined, plus a
spread from 0.50% to 2.00%, or the London Interbank Offered Rate (LIBOR) (6.71%
at December 31, 2000) plus a spread from 2.00% to 3.50%. The spreads depend on
IMI's ratio of senior-funded debt to earnings before interest expense, taxes,
depreciation and amortization (EBITDA). Borrowings are secured by IMI's stock
and the assets of IMI and Can-Am. The Company's guarantee is secured by certain
of the Company and its other subsidiaries' assets. Borrowings under the
revolving line of credit are based on certain percentages of eligible assets, as
defined. IMI is required to pay an annual fee of 0.375% for the unused portion
of the revolving line of credit. At December 31, 2000, there was no outstanding
balance under the revolving line of credit. The revolving line of credit expires
on February 18, 2002. IMI is required to make quarterly principal payments
against the term loan ranging from $1,200,000 to $1,700,000 through December 31,
2003, with payments of $1,433,333 that began on June 30, 1998. IMI must also
make mandatory prepayments on the term loan if it meets certain cash flow
thresholds, sells assets not in the ordinary course of business, issues or sells
indebtedness or issues stock, as defined. At December 31, 2000, IMI estimates
that it will make such mandatory prepayments in the amount of approximately
$1,056,000 in 2001.

The IMI Credit Agreement requires compliance with various financial and
nonfinancial covenants for both IMI and the Company. The primary financial
covenants pertain to, among other things, interest coverage, debt services
coverage, leverage and EBITDA. Both IMI and the Company were in compliance with
such covenants at December 31, 2000.


                                       28
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(5) INVESTMENT IN INVERNESS SCOTLAND

In June 1995, Inverness Scotland received approximately $1,588,000 as an
investment by Inverness & Nairn Local Enterprise Company (INLEC) in 1,000,000
shares of its 6% cumulative redeemable preference shares (the Original
Preference Shares) and to finance a portion of the start-up costs relating to
its manufacturing facility. In October 1998, INLEC invested approximately
$1,680,000 in additional 1,000,000 shares of Inverness Scotland's 6% cumulative
redeemable preference shares (the 1998 Preference Shares). The holder of the
Original and 1998 Preference Shares (collectively, the Preference Shares) does
not hold any voting rights except when the dividend is more than six months in
arrears.

At the option of Inverness Scotland and subject to certain limitations, the
Original Preference Shares may be redeemed at a price of 1.05 British Pound
Sterling (approximately $1.57) per share, plus any accrued and unpaid dividends
prior to June 23, 2000. Since Inverness Scotland did not redeem the Original
Preference Shares by June 23, 2000, INLEC has the option to demand redemption at
any time after such date, as long as legally permissible, at a price of 1.20
British Pound Sterling (approximately $1.79) per share plus any accrued and
unpaid dividends. Accordingly, in June 2000, Inverness Scotland recorded the
one-time additional accretion to the Original Preference Shares of 150,000
British Pound Sterling (approximately $227,000). The 1998 Preference Shares may
be redeemed at Inverness Scotland's option prior to October 27, 2003 and INLEC
may demand redemption on or after such date. The 1998 Preference Shares
otherwise contain the same terms as the Original Preference Shares. Upon
liquidation of Inverness Scotland, INLEC is entitled to receive the sum of the
amounts it paid to purchase such Preference Shares, plus any accrued and unpaid
dividends, out of funds legally available. Thereafter, the Company shall equally
share with INLEC in the remaining capital to be distributed. The Preference
Shares held by INLEC (including cumulative dividend) are reflected in the
accompanying consolidated balance sheets as mandatorily redeemable preferred
stock of a subsidiary.

Under a related agreement, Highlands and Islands Enterprise (HIE), a party
related to INLEC, constructed a facility for Inverness Scotland to use for its
manufacturing activities. Inverness Scotland has entered into a 20-year facility
lease commencing in April 1999, with an option to purchase the facility and the
extension at the higher of fair market value or 5,500,000 British Pound Sterling
(approximately $8,212,000 at December 31, 2000). Total rent due under the lease
of the facility and the extension is 700,000 British Pound Sterling
(approximately $1,045,000 at December 31, 2000) per year, subject to increases
every five years, dependent upon then current market rates, as defined. The
Company has recorded this facility lease as an operating lease pursuant to SFAS
No. 13, ACCOUNTING FOR LEASES.

In addition, INLEC has committed to provide Inverness Scotland with 3,100,000
British Pound Sterling, of which 2,857,000 British Pound Sterling (approximately
$4,601,000) has been received through December 31, 2000, for the purpose of
outfitting the facility with required equipment, providing training for the
Inverness Scotland's work force and certain other defined costs. These funds
shall be permanently invested in Inverness Scotland, so long as no events of
default by Inverness Scotland occur within three (for training funds) or five
(for equipment funds) years of the funding (the Obligation Period). Events of
default are defined as the insolvency of Inverness Scotland, defined changes in
ownership of Inverness Scotland and certain other similar related criteria.
Should an event of default occur within the Obligation Period of the funding,
the Company will be liable to INLEC for a declining portion, as defined, of the
amounts paid by INLEC. Inverness Scotland recognizes as revenue such funded
amounts over the respective Obligation Period. Inverness Scotland recorded grant
revenue of approximately $364,000, $396,000 and $1,555,000 during the years
ended December 31, 2000, 1999 and 1998, respectively, which are included in
grants and other revenue in the accompanying consolidated statements of
operations. Unearned amounts of approximately $548,000 and $428,000 at December
31, 2000 and 1999, respectively, are included in deferred revenue in the
accompanying consolidated balance sheets.


                                       29
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(6) TRANSACTIONS WITH THERATASE

In a series of transactions from 1996 through 1998, the Company acquired a 33%
interest in Theratase, a manufacturer of diagnostic enzymes based in the United
Kingdom. The Company accounted for its investment in Theratase under the equity
method of accounting. Pursuant to APB Opinion No. 18, THE EQUITY METHOD OF
ACCOUNTING FOR INVESTMENTS IN COMMON STOCK, the Company accounted for the excess
of its investment over its pro rata share of Theratase's net assets as goodwill;
the Company was amortizing such goodwill over 15 years, its estimated useful
life. During 1998, the Company determined that its investment in Theratase
suffered a permanent impairment and wrote down its investment by approximately
$1,958,000 (see Note 9(d)).

On June 28, 2000, the Company sold all of its holdings in Theratase shares for
approximately $3,328,000 resulting in a gain of approximately $1,757,000, which
is included in other income in the accompanying consolidated statements of
operations in 2000.

(7) TRANSACTIONS BETWEEN CAMBRIDGE DIAGNOSTICS AND CAMBRIDGE AFFILIATE
CORPORATION

Concurrent with the Company's 1994 acquisition of Cambridge Diagnostics,
Cambridge Diagnostics entered into a series of agreements with Cambridge
Affiliate Corporation (Cambridge Affiliate). Cambridge Affiliate is 49%-owned by
the Company and 51%-owned by the successor corporation of the company that sold
Cambridge Diagnostics to the Company in 1994. Cambridge Affiliate was formed to
allow Cambridge Diagnostics access to certain nonassignable technologies,
pursuant to the terms of the 1994 acquisition. Cambridge Diagnostics accounts
for its investment in Cambridge Affiliate under the equity method. Under the
terms of the agreements mentioned above, Cambridge Diagnostics manufactured and
sold products on behalf of and managed the affairs of Cambridge Affiliate.
During 1998, Cambridge Diagnostics paid royalties of $62,000 and earned total
sales, manufacturing and management fees of $2,211,000 under the terms of these
agreements. Following the disposition of certain assets pertaining to its
disease diagnostic business and subsequent reorganizations in 1998 (see Note
9(b)), Cambridge Diagnostics has not conducted and will not conduct any
significant business with Cambridge Affiliate.

(8) DEVELOPMENT AND LICENSE AGREEMENT WITH DEBIOTECH, S.A.

On October 14, 2000, the Company and Debiotech, S.A. (Debiotech), a privately
owned Swiss company, entered into a development and license agreement (the
Debiotech Agreement). Under the Debiotech Agreement, Debiotech will seek to
develop an externally-worn insulin pump using its patented Micro
Electro-Mechanical Systems (MEMS) technology and the Company paid a one-time
$10,000,000 license fee for the exclusive right to commercialize products using
Debiotech's MEMS technology. The one-time license fee is included in goodwill,
trademarks and other intangible assets, net, in the accompanying consolidated
balance sheet at December 31, 2000. In addition, the Company will pay a royalty
ranging from 6.5% to 10.0% of sales of such products depending upon various
factors. The Company also received an option, exercisable in certain
circumstances for an additional fee, for the exclusive right to commercialize an
implantable insulin pump which Debiotech may seek to develop using its
technology.


                                       30
<PAGE>


              IINVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(9) NET CHARGE FOR BUSINESS DISPOSITIONS, ASSET IMPAIRMENTS AND RESTRUCTURING
ACTIVITIES

The components of the net charge for business dispositions, asset impairments
and restructuring activities in 1998 are as follows:

<TABLE>
<S>                                                                                         <C>
Bankruptcy of majority-owned subsidiary................................................     $   147,614
Gain on sale of Cambridge Diagnostics product line.....................................      (1,232,492)
Asset impairments and restructuring activities at Cambridge Diagnostics................         810,486
Impairment of Orgenics' goodwill.......................................................       5,000,000
Impairment of investment in Theratase..................................................       1,957,724
Impairment of intangible assets relating to certain nutritional supplement lines.......         858,751
                                                                                            -----------
                                                                                            $ 7,542,083
                                                                                            ===========
</TABLE>

(a) BANKRUPTCY OF MAJORITY-OWNED SUBSIDIARY

As of December 31, 1998, the Company owned a 61.7% interest in Jmar Ames, Inc.
(Jmar), a distributor of certain consumer products. In December 1998, the Jmar
Board of Directors (with the Company's approval) voted to file for Chapter 7
bankruptcy. In February 1999, the bankruptcy petition was filed. The Company
recorded as an expense approximately $148,000 in 1998, representing its share of
the write-down of the Jmar assets and expenses relating to the assumption of
certain Jmar liabilities that the Company had guaranteed.

(b) SALE OF CAMBRIDGE DIAGNOSTICS PRODUCT LINE

On September 30, 1998, Cambridge Diagnostics signed an agreement with Trinity
Biotech, Ltd. (Trinity) whereby Cambridge Diagnostics agreed to sell certain
assets pertaining to its infectious disease diagnostic business, primarily
inventories, equipment and its ongoing business. In return for these assets
Cambridge Diagnostics received consideration of approximately $2,300,000
consisting of 555,731 shares of the Company's stock, 300,000 shares of Theratase
stock (a 33%-owned investee of the Company (see Note 6)) and $230,000 in cash.
The Company recorded a gain on the sale of the business of approximately
$1,232,000 in 1998.

After the sale of these assets, the Company reorganized the remaining business
conducted by Cambridge Diagnostics during the fourth quarter of 1998. As a
result of this strategic reorganization, Cambridge Diagnostics' activities
consist of manufacturing certain consumer products for other Company
subsidiaries, primarily IMI. Cambridge Diagnostics' activities no longer include
the manufacture of disease diagnostic products for unrelated customers. In
connection with this strategic reorganization, Cambridge Diagnostics incurred
expenses of approximately $268,000 pertaining to severance, outplacement and
related obligations, of which $199,000 and $69,000 were paid during 1999 and
1998, respectively. Cambridge Diagnostics also wrote off the net book value of
certain fixed assets and leasehold improvements relating to the discontinued
activities for which it has no alternative future use. The total asset
impairment charge was approximately $437,000. The balance of this charge relates
to legal and advisory fees related to the reorganization.

(c) IMPAIRMENT OF ORGENICS' GOODWILL

During the fourth quarter of 1998, the Company determined that Orgenics'
goodwill had suffered an impairment of value (see Note 2(g)). Orgenics'
declining financial performance and short-term outlook (both earnings and gross
cash flows) suggested that impairment had occurred. The Company performed an
impairment test using a discounted future cash flow model and recorded an
impairment charge of $5,000,000 in 1998, which fully eliminated the Orgenics'
goodwill balance.


                                       31
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(9) NET CHARGE FOR BUSINESS DISPOSITIONS, ASSET IMPAIRMENTS AND RESTRUCTURING
ACTIVITIES (CONTINUED)

(d) IMPAIRMENT OF INVESTMENT IN THERATASE

During the fourth quarter of 1998, the Company determined that its investment in
Theratase had suffered an impairment (see Note 6). The then protracted decline
in Theratase's market price and the absence of qualitative factors that would
indicate a recovery suggested that such an impairment had occurred. The Company
recorded a loss of approximately $1,958,000 to write down the Company's
investment to its estimated fair value in 1998. The Company's estimate of fair
value was determined by reviewing the market value of Theratase's stock.

(e) IMPAIRMENT OF INTANGIBLE ASSETS RELATED TO CERTAIN NUTRITIONAL SUPPLEMENT
LINES

Goodwill and trademarks acquired in connection with the purchase of the
nutritional supplement lines are being amortized over 25 years. During 1998, the
Company recorded an impairment charge of approximately $859,000 relating to the
intangible assets of one discontinued nutritional supplement line (see Note
2(g)). The impairment charge represents the remaining net book value of the
goodwill and trademark values assigned to this product line.

(10) NOTES PAYABLE

The Company has the following debt outstanding as of December 31:

<TABLE>
<CAPTION>

                                                                                2000            1999
                                                                                ----            ----
<S>                                                                         <C>             <C>
Term loan--IMI (Note 4(b)).............................................     $21,023,862     $26,500,000
Revolving line of credit--IMI (Note 4(b))..............................              --       3,226,050
Note payable to former Can-Am shareholders (Note 4(a)).................       2,000,000       2,000,000
Subordinated revenue royalty notes (Note 11)...........................              --       7,500,000
Two-year subordinated promissory notes (Note 11).......................              --      10,032,801
One-year subordinated promissory notes (Note 11) ......................      19,349,195              --
Promissory note payable to LifeScan (Note 12) .........................       5,114,340       8,483,121
Bank debt--Orgenics....................................................         868,000       1,716,000
Mortgage loans.........................................................         675,718         864,593
Other miscellaneous notes payable......................................          35,128          52,848
                                                                            -----------     -----------
                                                                             49,066,243      60,375,413
Less: Current portion..................................................      35,346,087      21,483,140
                                                                            -----------     -----------
                                                                            $13,720,156     $38,892,273
                                                                            ===========     ===========
</TABLE>

Each of the debt instruments listed is discussed in the notes to the
consolidated financial statements as referenced, except for the following:

(a) BANK DEBT - ORGENICS

Orgenics has approximately $868,000 of notes payable to certain financial
institutions outstanding at December 31, 2000. The outstanding balance is
collateralized by certain of Orgenics' assets. The notes bear interest at rates
ranging from 5.6% to 8.6% and are payable monthly through 2002.


                                       32
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(10) NOTES PAYABLE (CONTINUED)

 (b) MORTGAGE LOANS

During 1999, Cambridge Diagnostics financed the purchase of one of its
manufacturing buildings through a mortgage loan (Cambridge Diagnostic Loan) with
the seller. The outstanding balance is $365,201 at December 31, 2000 and is
collateralized by the building. The Cambridge Diagnostic Loan bears interest at
6% and is payable semiannually through 2003. During 1999, Inverness Scotland
purchased homes for two of its officers, which serve as their residences during
their employment period in Scotland. Inverness Scotland financed the purchases
of the residences through two mortgage loans (Inverness Scotland Loans) with a
Scottish bank. The total outstanding balance of the Inverness Scotland Loans at
December 31, 2000 is $310,517 and is collateralized by the two homes. The
Inverness Scotland Loans bear interest at the bank's prime rate (6% at December
31, 2000) plus 1.75% and are payable quarterly through 2015.

 (C) MATURITIES OF LONG-TERM DEBT

Maturities of long-term debt and obligation at December 31, 2000 are as follows:

         2001............................................        $35,346,087
         2002............................................          6,345,599
         2003............................................          7,123,905
         2004............................................             29,321
         2005............................................             22,296
         Thereafter......................................            199,035
                                                                 -----------
                                                                 $49,066,243
                                                                 ===========

(11) SUBORDINATED NOTES

During June 2000, the Company entered into a securities purchase agreement
pursuant to which it sold units (the Units) having an aggregate purchase price
of $19,349,195 primarily for the purpose of retiring its then outstanding
$10,200,000 two-year subordinated promissory notes (Two-year Subordinated Notes)
and $7,500,000 subordinated revenue royalty notes (Revenue Royalty Notes). Each
Unit consists of (i) $25,000 in principal amount of a new subordinated
promissory note (One-year Subordinated Promissory Note) and (ii) a warrant
(Warrant) to acquire 123 shares of the Company's common stock. In the aggregate,
the Company issued Warrants to purchase 119,350 shares of its common stock with
exercise prices ranging from $7.94 to $15.38. The One-year Subordinated
Promissory Notes were sold on various closing dates in accordance with the
maturity dates and prepayment dates of the securities being retired and were due
on the first anniversary of their date of issuance. The Warrants are fully
vested and may be exercised at any time on or prior to the tenth anniversary of
their date of issuance. Upon issuance of the One-year Subordinated Promissory
Notes and Warrants the Company allocated a total of $971,000 of the proceeds to
the Warrants and was amortizing such original issuance discount and the related
deferred financing costs (as described below) over the life of the One-year
Subordinated Promissory Notes.

The One-year Subordinated Promissory Notes bore interest at a rate equal to
12.5% per year, payable quarterly on the first day of each quarter beginning on
October 1, 2000. Interest expense amounted to approximately $1,509,000 in 2000.
In January 2001, the Company prepaid the One-year Subordinated Promissory Notes
in whole together with a prepayment premium, as discussed below.

                                       33
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(11) SUBORDINATED NOTES (CONTINUED)

U.S. Boston Capital Corporation (U.S. Boston), the majority shareholder of which
is a director of the Company, acted as the placement agent for the offering of
the One-year Subordinated Promissory Notes. As compensation for its services as
placement agent, U.S. Boston received cash commissions and a non-accountable
expense allowance totaling $356,000, which the Company recorded as deferred
financing costs. On June 26, 2000, the first closing date, U.S. Boston received
a Warrant to acquire 10,000 shares of the Company's common stock on terms
identical to those of the Warrants issued to the subscribers in that closing.
The value of this Warrant was $82,500 and was recorded as a deferred financing
cost.

Pear Tree Royalty Company, Inc. (Pear Tree), as the authorized representative of
the holders of the One-year Subordinated Promissory Notes, received Warrants to
purchase an aggregate of 14,262 shares of the Company's common stock on terms
identical to those of the Warrants issued to the subscribers. A director of the
Company is also a director and shareholder of Pear Tree. The value of these
Warrants was $154,000 and was recorded as deferred financing costs.

Among the holders of the One-year Subordinated Promissory Notes and Warrants
were three directors of the Company who purchased Units with an aggregate
purchase price of $781,000.

In connection with the issuance of the One-year Subordinated Promissory Notes,
the Company elected to prepay the Revenue Royalty Notes according to their
applicable terms and conditions on July 31, 2000. As a result, the Company
followed the provisions of EITF Issue No. 96-19 and recorded an extraordinary
loss of $800,000 in 2000 since the refinancing resulted in a "substantial
modification" to the Company's indebtedness, as this term is defined in EITF
96-19 (see Note 2(k)). The extraordinary loss includes $485,000 of unamortized
deferred financing costs related to the Revenue Royalty Notes and $315,000 in
additional premium incurred as a result of prepaying the Revenue Royalty Notes.

On December 29, 2000, the Company notified the holders of the One-year
Subordinated Promissory Notes of its irrevocable election to prepay such notes
according to their applicable terms and conditions on January 29, 2001.
Accordingly, the Company accounted for this transaction as an early
extinguishment of debt and recorded an extraordinary loss of $1,562,000 in 2000
(see Note 2(k)). The extraordinary loss includes $349,000 of unamortized
deferred financing costs, $508,000 of unamortized original issuance discount
related to the One-year Subordinated Promissory Notes and $705,000 in additional
premium incurred as a result of prepaying the One-year Subordinated Promissory
Notes.

(12) LIFESCAN AGREEMENTS

On June 7, 1999, the Company entered into an amended and restated agreement (the
Amended Master Agreement) with JJDC and LifeScan and an amended glucose sales
distribution agreement which was further amended in February 2001, effective
January 1, 2001 (collectively, the Amended Agreements). Under the Amended
Agreements, the Company is to develop and supply to LifeScan additional products
for monitoring blood glucose in humans. Also under the terms of the Amended
Agreements, LifeScan is not prohibited from selling other glucose monitoring
systems, including electrochemical systems. However, if LifeScan either (i)
introduces such a system not sourced from the Company prior to December 31, 2002
or (ii) fails to purchase specified minimum annual levels of test strips, the
Company is released from a restriction under the agreement prohibiting it from
selling complete electrochemical glucose measurement systems other than to
LifeScan. The Amended Agreements restated the corresponding original agreements
(the Original Agreements) that the Company had entered into with JJDC and
LifeScan in 1995 and 1996.

                                       34
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(12) LIFESCAN AGREEMENTS (CONTINUED)

The Company has also agreed to share with LifeScan certain licensing costs
incurred by LifeScan associated with the first product launch. Originally, the
Company agreed to fund its share of such costs, approximately $3,750,000, via
product discounts granted on future product sales to LifeScan. However,
subsequently the Company and LifeScan agreed to a funding schedule whereby the
Company made fixed quarterly payments through December 31, 2000. The Company
recorded such amounts as cost of sales in the period incurred, as the Company
did not have an obligation to pay the balance of its share of the costs if its
relationship with LifeScan were to cease. As of December 31, 2000, the Company
has provided for all of such funding.

As part of the Amended Agreements, the Company and LifeScan entered into a
promissory note (LifeScan Note) on June 7, 1999, whereby LifeScan provided the
Company with an initial loan (Initial Loan) of 6,250,000 British Pound Sterling
(approximately $9,900,000) to fund the increased costs related to anticipated
production levels. Under the LifeScan Note, LifeScan also committed to make
additional loans (Additional Loans) of up to 8,125,000 British Pound Sterling
(approximately $12,131,000) to the Company upon the accomplishment of certain
milestones relating to new products the Company is to develop for LifeScan.
Through December 31, 2000, the Company has received 2,031,250 British Pound
Sterling (approximately $2,900,000) in Additional Loans. Interest on the
outstanding principal balance of the LifeScan Note accrues at 11% per year and
is payable on the last day of each calendar quarter starting after the date of
the Initial Loan. Any amounts overdue under the LifeScan Note will bear interest
of 13.5% per year from the due date until paid. The aggregate principal amount
of the LifeScan Note is being repaid by deducting 0.0125 British Pound Sterling
(approximately $0.02) from the invoice price of each test strip the Company
sells to LifeScan commencing on the date of the Initial Loan. At December 31,
2000, $5,114,340 remains outstanding under this credit arrangement. Based on
estimated future product sales, the Company estimates that it will repay the
entire balance in 2001, and has therefore classified such balance as a
short-term obligation.

(13) COMMITMENTS AND CONTINGENCIES

(a) OPERATING LEASES

The Company has operating lease commitments for certain of its facilities and
equipment that expire through 2026. The following schedule outlines future
minimum annual rental payments under these leases at December 31, 2000:

         2001....................................    $  1,716,000
         2002....................................       1,690,000
         2003....................................       1,508,000
         2004....................................       1,388,000
         2005....................................       1,375,000
         Thereafter..............................      15,831,000
                                                      -----------
                                                      $23,508,000
                                                      ===========

Rent expense relating to these operating leases was approximately $1,828,000,
$1,508,000 and $1,406,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

(b) INDUSTRIAL DEVELOPMENT AUTHORITY OF IRELAND GRANTS

Prior to the Company's acquisition of Cambridge Diagnostics, Cambridge
Diagnostics received certain capital expenditure and revenue grants from the
Industrial Development Authority of Ireland (the IDA). Cambridge Diagnostics
recognizes revenue on the capital expenditure grants over the estimated useful
lives of the related assets and on revenue grants as the related costs are
incurred.

                                       35
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)

As a condition to retaining the grants, the IDA requires Cambridge Diagnostics
to maintain a certain number of employees in Ireland. The IDA also prohibits
Cambridge Diagnostics from disposing of assets or terminating business
activities that were funded by the grants within 10 years of such grants. Due to
the sale of its infectious disease diagnostic business (see Note 9(b)),
Cambridge Diagnostics may not be in compliance with the IDA requirements. As a
result, the IDA could require Cambridge Diagnostics to repay capital expenditure
and revenue grants totaling 307,770 Irish pounds (approximately $368,000 at
December 31, 2000). The IDA historically has not pursued its right to recoup
these grants from Cambridge Diagnostics and, as of December 31, 2000, Cambridge
Diagnostics management believes that the IDA is unlikely to do so, provided that
Cambridge Diagnostics does not terminate its operations in Ireland. Accordingly,
as management believes that repayment is not probable, Cambridge Diagnostics has
not provided for a potential liability for the repayment of these grants. If the
IDA did pursue its rights to recoup these grants, it would not have a material
adverse effect on the Company or Cambridge Diagnostics.

(c) LEGAL PROCEEDINGS

Because of the nature of its business, the Company may from time to time be
subject to consumer product claims or various other lawsuits arising in the
ordinary course of its business and expects that this will continue to be the
case in the future. These lawsuits generally seek damages, sometimes in
substantial amounts, for personal injuries or other commercial claims.

In August 2000, the Company brought a claim before arbitration against NOVA
Biomedical Corporation (NOVA), the former manufacturer of the Company's
electrochemical blood glucose monitoring meters, whereby the Company is seeking
reimbursement for overcharges by NOVA under a former manufacturing agreement.
NOVA has brought a counterclaim for unpaid invoices in the amount of
approximately $732,000 and is seeking additional relief and sums concerning
future activities. The amount of overcharges the Company is seeking to recover
from NOVA has yet to be determined, but is expected to be in excess of NOVA's
counterclaim. Discovery is currently in progress. The Company does not believe
that a final ruling against it would have a material adverse impact on its
sales, operations or financial performance.

On June 6, 2000, Roche Diagnostics Corporation (Roche) filed suit against the
Company alleging that the Company's Excel(R) G blood glucose test strips (Excel
G strips) designed for use with Bayer Glucometer Elite(R) meters (Bayer meters)
marketed by Bayer Corporation (Bayer) infringe a patent owned by Roche. The
Company denies the material allegations of the complaint and asserted a number
of affirmative defenses, including a defense that the Roche patent is invalid.
Both parties are engaged in discovery. The Company intends to vigorously defend
the action. Although the Company believes it has meritorious defenses to Roche's
claims, a final ruling against the Company could have a material adverse impact
on its sales, operations or financial performance.

On March 2, 2000, Matsushita Electric Industrial Co., Ltd. (Matsushita) filed
suit against the Company and two of its subsidiaries alleging infringement of a
patent used in connection with the manufacture and distribution of the Company's
Excel G strips for use with the Bayer meters. The Company intends to defend the
action vigorously. Although a final ruling against the Company could have a
material adverse impact on the Company's sales, operations or financial
performance, based on a review of the Matsushita patent by the Company's outside
patent counsel, the Company believes that its Excel G strips do not infringe the
Matsushita Patent and that Matsushita's claims will be proven to be without
merit.

                                       36
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)

On January 3, 2000, Becton, Dickinson and Company (Becton Dickinson) (see Note
13(e)) filed suit against the Company alleging that certain pregnancy and
ovulation test kits sold by the Company infringe two U.S. patents. Because both
patents are currently involved in proceedings before the patent office, the
Company has moved to stay the litigation until those proceedings are complete.
While a final ruling against the Company could have a material adverse impact on
its sales, operations or financial performance, the Company believes that it has
strong defenses and intends to defend this litigation vigorously.

During 1998 and 1999, Abbott Laboratories (Abbott) commenced several patent
infringement lawsuits against the Company and certain of the Company's business
partners, including LifeScan and Princeton BioMeditech Corporation (PBM, see
Note 13(d)). Abbott claims that certain of the Company's products, including its
disposable test strips for use in the ONE TOUCH(R) FastTAKE(R) blood glucose
monitoring system marketed by LifeScan and certain of the Company's pregnancy
detection and ovulation prediction products, infringe patents that Abbott claims
to have rights to in the United States and Canada. In all cases, Abbott is
seeking to enjoin the Company and its business partners from the manufacture,
import, use and sale of such products in the respective countries and
reimbursement of certain damages. The Company intends to defend these lawsuits
vigorously. Although the Company believes that Abbott's claims will be proven to
be without merit, a final ruling of these suits against the Company could have a
material adverse impact on the Company's sales, operations or financial
performance.

In November 1999, Abbott commenced a lawsuit against the Company's Australian
subsidiary, Selfcare Pty Ltd., and its Australian distributor, Corbridge
Group Pty, alleging that the Company's Selfcare Excel(R) ET disposable test
strips (Excel ET strips) infringe an Australian patent issued to Abbott's
predecessor in title. The Excel ET strips are marketed in Australia for use
with Abbott's ExacTech(R) brand sensor device. Abbott is seeking damages and
an injunction against supply of the Excel ET strips in Australia. On November
24, 2000, the court dismissed Abbott's lawsuit, but Abbott filed an appeal
and also applied to amend its patent so as to claim products that fit the
description of the Excel ET strips. The court ordered a timetable for Abbott
to give discovery on the amendment application before the appeal is heard. It
is unlikely that any ruling against the Company could have a material adverse
impact on its sales, operations or financial performance elsewhere in the
world. The Company continues to believe that the Excel ET strips do not
infringe Abbott's patent and that the dismissal of Abbott's claims will be
upheld on appeal.

In May 1999, Intervention, Inc., a California corporation, filed separate suits
against the Company and certain of the Company's private label customers and
competitors alleging that the defendants' labeling on their home pregnancy tests
is misleading as to the level of accuracy under certain conditions. The
plaintiff seeks restitution of profits on behalf of the general public,
injunctive relief and attorneys' fees. The Company is defending its private
label customers under its agreements with these customers, believes that the
actions are without merit and intends to defend them vigorously. If a judgment
were to be issued against the Company or its private label customers, it would
only affect products sold in California. The Company does not believe that an
adverse ruling against the Company would have a material adverse impact on its
sales, operations or financial performance.

On January 22, 1999, in connection with Cambridge Diagnostic's sale of its
infectious disease business (see Note 9(b)), Cambridge Biotech Corporation (CBC)
and Cambridge Affiliate (see Note 7) filed suit against the Company, the
Company's chief executive officer, Cambridge Diagnostics, Trinity and Pasteur
Sanofi Diagnostic (Pasteur) alleging that the sale of the business was not
properly authorized and, as a result, CBC would lose the benefit of certain
patented licenses from Pasteur. CBC is requesting that the sale agreement be
declared null and void, the license between Pasteur and CBC be declared in full
force and that it be allowed to recover damages caused by the actions of the
Company, its chief executive officer and Pasteur. On January 25, 1999, the Court
denied CBC's motion. The parties are currently conducting discovery. The Company
believes that CBC's claim is without merit and intends to defend the action
vigorously. The Company does not believe that an adverse ruling against the
Company would have a material adverse impact on its sales, operations or
financial performance.

                                       37
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)

(d) AGREEMENT WITH PBM

On August 6, 1997, the Company and PBM, along with wholly owned subsidiaries of
each, formed a limited liability company, PBM-Selfcare LLC (the LLC), in which
each party owns a 50% interest, and entered into a joint venture and a series of
related technology transfer and licensing agreements to develop a comprehensive
strategy to commercially exploit products and related intellectual property in
the area of pregnancy detection and ovulation prediction (collectively, the
Joint Venture Agreement). Under the Joint Venture Agreement, PBM contributed
intellectual property and the Company agreed to fund up to $2,000,000 on an
as-needed basis to cover expenses incurred by the LLC in enforcing the rights of
the LLC in the intellectual property. To date, the Company has not incurred
material costs pursuant to the Joint Venture Agreement.

(e) LICENSE AGREEMENTS WITH BECTON DICKINSON

The Company entered into two patent license agreements with Becton Dickinson,
effective from April 1, 1998 until the date on which the last of the patents
expire. The agreements grant the Company the right to manufacture and sell
products incorporating certain patented technology as set forth in the
agreement. The Company is to pay royalties on the net sales of products
incorporating the licensed technology at a rate of 6% until December 31, 1998,
6.25% on the first $108,000,000 of net sales beginning January 1, 1999, and
5.25% thereafter, extending through the expiration of the patents. During 2000
and 1999, the Company paid royalties of approximately $576,000 and $1,001,000,
respectively, under this agreement and had approximately $416,000 accrued at
December 31, 2000. In December 1999, the Company gave Becton Dickinson a written
notice to terminate these license agreements effective January 1, 2000, prior to
the expiration of the patents. As a result of this early termination, Becton
Dickinson has filed suit against the Company (see Note 13(c)).

(f) INVERNESS SCOTLAND CAPITAL COMMITMENTS

At December 31, 2000, Inverness Scotland has outstanding non-cancelable
equipment purchase commitments of approximately 3,147,000 British Pound Sterling
(approximately $4,699,000).

(g) ORGENICS ROYALTY COMMITMENT

Orgenics has received funding under programs sponsored by the Chief Scientist of
the Ministry of Industry and Commerce of Israel (the Chief Scientist) for the
support of its research and development projects. In the event that development
of the products in which the Chief Scientist participates is successful,
Orgenics will be obligated to pay royalties at the rate of 2.0% to 3.5% of the
sales of products developed with funds provided by the Chief Scientist, up to an
amount equal to 100% of the Chief Scientist's research and development grants to
such projects. The balance of the maximum contingent royalty as of December 31,
2000 was approximately $2,200,000. Orgenics does not have any liability to the
State of Israel for amounts received in support of unsuccessful programs or
unsaleable products. During 2000, 1999 and 1998, Orgenics paid $206,000,
$196,000 and $170,000, respectively, in royalties to the Chief Scientist.

(h) ORGENICS SEVERANCE OBLIGATIONS

Israeli law provides that employers have certain severance obligations to
employees in Israel. Orgenics' liability for severance pay pursuant to such law
is provided by managers' insurance policies and by severance pay funds.
Severance expenses were $68,000, $156,000 and $166,000 in 2000, 1999 and 1998,
respectively. The related liability is not material at December 31, 2000.

                                       38
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)

France has a government-run mandatory pension plan to which contributions are
made monthly by both the employee and employer based on the employee's gross
monthly salary. Orgenics' liability for its employees in France is fully covered
by these contributions. In addition, pursuant to industry employment agreements,
a lump-sum severance is payable upon retirement to employees still in the
service of Orgenics' French subsidiary at the date of retirement. There were no
such obligations outstanding as of December 31, 2000.

(14) STOCKHOLDERS' EQUITY

(a) COMMON STOCK

As of December 31, 2000, the Company had 40,000,000 shares of common stock,
$0.001 par value, authorized, of which 29,138,576 shares were outstanding,
743,678 shares were in treasury, 5,480,402 shares were reserved for issuance
upon exercise of stock options and 702,583 shares were reserved for issuance
upon exercise of warrants.

(b) STOCK OPTIONS

In May 2000, the Company adopted the 2000 Stock Option and Grant Plan (the 2000
Plan) to supplement its Amended and Restated 1996 Stock Option and Grant Plan
(the 1996 Plan). The 1996 Plan replaced both the Company's 1994 Incentive and
Non-Qualified Stock Option Plan and 1992 Stock Plan when it was first adopted in
1996. Both the 1996 Plan and the 2000 Plan (collectively, the Option Plans) are
administered by a Compensation Committee, as defined in each Option Plan, in
order to grant incentive stock options, nonqualified stock options, restricted
stock awards, unrestricted stock awards, stock appreciation rights, performance
share awards and dividend equivalent rights. The Company has reserved 2,250,000
and 750,000 shares of common stock for grants under the 1996 Plan and the 2000
Plan, respectively. At December 31, 2000, the Company has authority to issue
options to purchase up to 299,638 and 750,000 shares of common stock under the
1996 Plan and the 2000 Plan, respectively. The key terms of the Option Plans
permit the granting of incentive stock options or nonqualified stock options
with a term of up to ten years and the granting of stock appreciation rights,
restricted stock awards, unrestricted stock awards, performance share awards and
dividend equivalent rights. The Option Plans also provide for option grants to
nonemployee directors and automatic vesting acceleration of all options and
stock appreciation rights upon a change in control, as defined.

The following is a summary of all stock option activity during the three years
ended December 31, 2000:

<TABLE>
<CAPTION>
                                           2000                    1999                   1998
                                  ------------------------------------------------------------------------
                                              WEIGHTED                 WEIGHTED                WEIGHTED
                                              AVERAGE                  AVERAGE                 AVERAGE
                                              EXERCISE                 EXERCISE                EXERCISE
                                    OPTIONS    PRICE      OPTIONS       PRICE      OPTIONS      PRICE
  <S>                              <C>        <C>         <C>          <C>         <C>         <C>
  Outstanding at January 1.....    5,242,169     $3.96    4,548,831      $  5.10   4,144,938     $  .75
    Granted....................      231,675      8.91    1,725,180         4.23     664,691       6.64
    Exercised..................     (778,347)     3.05     (217,946)        1.51    (192,406)      2.22
    Terminated.................     (264,733)     5.92     (813,896)       11.60     (68,392)      7.30
                                    ---------     ----     ---------       -----     --------      ----
  Outstanding at December 31...    4,430,764     $4.23    5,242,169      $  3.96   4,548,831      $5.10
                                   =========     =====    =========      =======   =========      =====
  Exercisable at December 31...    3,739,373     $3.98    3,096,181      $  3.21   3,066,748      $3.13
                                   =========     =====    =========      =======   =========      =====
</TABLE>

                                       39
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(14) STOCKHOLDERS' EQUITY (CONTINUED)

The following represents additional information related to stock options
outstanding and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                                 OUTSTANDING                               EXERCISABLE
                               ------------------------------------------------------------------------------------
                                                   WEIGHTED
                                                   AVERAGE        WEIGHTED                           WEIGHTED
                                  NUMBER OF       REMAINING        AVERAGE         NUMBER OF          AVERAGE
             EXERCISE PRICE         SHARES      CONTRACT LIFE  EXERCISE PRICE       SHARES        EXERCISE PRICE
          <S>                     <C>           <C>             <C>                <C>             <C>
          $1.15-1.54..........       294,435          3.26         $  1.45            294,435        $  1.45
            2.27-3.31.........     1,813,748          5.45            2.57          1,557,423           2.52
            3.44-5.00.........     1,763,401          7.82            4.51          1,521,776           4.64
            5.50-7.69.........        91,149          9.23            6.49             46,483           5.90
            8.50-12.63........       371,031          6.58            9.58            289,256           9.56
            13.60-18.56.......        85,000          4.86           14.76             30,000          13.88
            26.00-32.25.......        12,000          9.85           26.69                 --             --
                                   ---------          ----         -------          ---------        -------
                                   4,430,764          6.42         $  4.23          3,739,373        $  3.98
                                   =========          ====         =======          =========        =======
</TABLE>

The weighted average fair value under the Black-Scholes option pricing model of
options granted during 2000, 1999 and 1998 is $6.77, $1.63 and $3.67,
respectively.

The Company has computed the pro forma disclosures required under SFAS No. 123
for stock options and warrants granted after January 1, 1995 using the
Black-Scholes option pricing model prescribed by SFAS No. 123. The assumptions
used during each of the three years ended December 31, 2000 were as follows:

<TABLE>
<CAPTION>
                                                                               2000        1999        1998
                                                                               ----        ----        ----
          <S>                                                                <C>         <C>          <C>
          Risk-free interest rate.......................................       5.7%        5.9%        5.0%
          Expected dividend yield.......................................        --          --          --
          Expected lives................................................     5 years      6 years     5 years
          Expected volatility...........................................       82%          78%         64%
</TABLE>

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                    2000             1999            1998
                                                                    ----             ----            ----
          <S>                                                     <C>            <C>              <C>
          Net income (loss) -
            As reported....................................       $10,639,623    $ (9,071,552)    $(18,777,724)
            Pro forma......................................         8,319,160     (10,521,109)     (21,380,111)
          Basic net income (loss) per share -
            As reported....................................       $      0.43    $      (0.66)           (1.55)
            Pro forma......................................       $      0.34           (0.75)           (1.76)
          Diluted net income (loss) per share -
            As reported....................................       $      0.37           (0.66)           (1.55)
            Pro forma......................................       $      0.29           (0.75)           (1.76)
</TABLE>

                                       40
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(14) STOCKHOLDERS' EQUITY (CONTINUED)

(c) WARRANTS

The following is a summary of all warrant activity during the three years ended
December 31, 2000:

<TABLE>
<CAPTION>
                                                                     NUMBER OF                  WEIGHTED AVERAGE
                                                                       SHARES    EXERCISE PRICE  EXERCISE PRICE
           <S>                                                       <C>            <C>           <C>
           Warrants outstanding and exercisable, December 31, 1997     1,211,295    $1.54-13.96      $  2.26
             Granted..............................................       242,308     6.21-10.13         8.42
             Exercised............................................       438,841      1.54-2.53         1.54
                                                                       ---------    -----------      -------
           Warrants outstanding and exercisable, December 31, 1998     1,014,762     1.54-13.96         4.03
             Exercised............................................       148,889           2.53         2.53
             Cancelled............................................       128,696     2.53-10.13         8.83
                                                                         -------    -----------      -------
           Warrants outstanding and exercisable, December 31, 1999       737,177     1.54-13.96         7.16
             Granted..............................................       119,350     7.94-15.38        10.79
             Exercised............................................       112,764     6.21-13.96        13.38
             Cancelled............................................        41,180    10.13-13.96        11.33
                                                                          ------    -----------      -------
           Warrants outstanding and exercisable, December 31, 2000       702,583    $1.54-15.38      $  6.54
                                                                         =======    ===========      =======
</TABLE>

The following represents additional information related to warrants outstanding
and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                                           OUTSTANDING AND EXERCISABLE
                                                 ------------------------------------------------
                                                                     WEIGHTED
                                                                     AVERAGE        WEIGHTED
                                                    NUMBER OF       REMAINING        AVERAGE
                      EXERCISE PRICE                  SHARES      CONTRACT LIFE  EXERCISE PRICE
           <S>                                      <C>             <C>            <C>
           $1.54................................       279,500         12.88         $  1.54
            6.21-9.11...........................       175,057          3.01            7.44
            9.35-12.88..........................       226,204          2.59           11.17
            15.38...............................        21,822          4.67           15.38
                                                       -------          ----         -------
                                                       702,583          6.86         $  6.54
                                                       =======          ====         =======
</TABLE>

The majority of the warrants included in the table above were issued in
connection with debt and equity financings, or amendments thereto, of which
103,694 were issued to officers and directors of the Company and were
outstanding at December 31, 2000. The value of warrants issued in connection
with debt financings and amendments have yielded original issue discounts and
additional interest expense of $630,134, $327,124 and $1,788,116 in 2000, 1999
and 1998, respectively. The Company believes that its equity classification is
appropriate for all outstanding warrants, pursuant to the provisions of EITF
Issue No. 00-19, DETERMINATION OF WHETHER SHARE SETTLEMENT IS WITHIN THE CONTROL
OF THE ISSUER FOR PURPOSES OF APPLYING EITF ISSUE NO. 96-13, ACCOUNTING FOR
DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND POTENTIALLY SETTLED IN, A
COMPANY'S OWN STOCK.

                                       41
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(14) STOCKHOLDERS' EQUITY (CONTINUED)

(D) EMPLOYEE STOCK PURCHASE PLAN

The Company adopted an Employee Stock Purchase Plan (the Stock Purchase Plan) in
1996, pursuant to which it has reserved 850,000 shares of common stock for
issuance thereunder. Under the Stock Purchase Plan, eligible employees may
purchase shares of the Company's common stock at 85% of fair market value, as
defined, subject to certain limitations. During 2000, 1999 and 1998, the Company
issued 36,329, 160,267 and 29,447 shares, respectively, under the Stock Purchase
Plan. Through December 31, 2000, the Company has issued a total of 249,752
shares under the Stock Purchase Plan.

(e) SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK

On August 26, 1997, the Company sold to private investors 8,000 shares of series
B redeemable convertible preferred stock (Series B Preferred Stock) and warrants
to purchase an aggregate of 114,628 shares of its common stock for gross
proceeds of $8,000,000. The terms of the Series B Preferred Stock provided for a
formula-based conversion price, as defined, and were amended on January 22,
1999. During 2000, 1999 and 1998, the Series B Preferred Stock converted into
2,359,177, 823,667 and 809,809 shares of common stock, respectively. At December
31, 2000, all shares of the Series B Preferred Stock, plus accrued premium
thereon, and the related warrants have been converted into common stock. Due to
a redemption provision, the Company classified the then outstanding Series B
Preferred Stock outside of stockholders' equity in the accompanying consolidated
balance sheet at December 31, 1999.

The Series B Preferred Stock accrued premium of 6% per annum under both its
original and amended terms. During 2000, 1999 and 1998, the Company recorded
approximately $197,000, $530,000 and $128,000, respectively, as a charge to
retained earnings, representing the 6% premium on Series B Preferred Stock
converted into common stock. In addition, upon amendment of the terms of the
Series B Preferred Stock in January 1999, the Company recorded as a charge to
retained earnings approximately $794,000, which represented a one-time 15%
premium to increase the face value of the Series B Preferred Stock.

(f) SERIES C, D AND E CONVERTIBLE PREFERRED STOCK

On January 8, 1999, the Company sold in a private placement 57,842 shares of
series C convertible preferred stock (Series C Preferred Stock), 3,030 shares of
series D convertible preferred stock (Series D Preferred Stock) and 13,169
shares of series E convertible preferred stock (Series E Preferred Stock)
(collectively, the Preferred Shares) to private investors (Preferred C, D and E
Investors) at an aggregate purchases price of $7,404,100. The Preferred C, D and
E Investors included certain officers and directors of the Company. Each
Preferred Share accrued a dividend of 7% per annum. As a result, the Company
recorded approximately $177,000 and $508,000 in dividends during 2000 and 1999,
respectively.

The actual number of shares of common stock issued upon conversion of a
Preferred Share was equal to the aggregate stated value per share (i.e., $100),
plus any accrued and unpaid dividend through the date of such conversion,
divided by a conversion price equal to $1.8125 per share for the Series C
Preferred Stock, $2.00 per share for the Series D Preferred Stock and $3.028 per
share for the Series E Preferred Stock. The conversion prices for the Series C
and Series D Preferred Stock represented the closing prices of the Company's
common stock on the dates that the parties agreed to the terms of the
investment. The conversion price for the Series E Preferred Stock represented a
15% discount to the fair value of the common stock on the day prior to the
applicable agreement. The Company accounted for this discount of approximately
$213,000 in January 1999 and has amortized such amount through April 30, 1999,
the earliest date on which the Preferred Shares were allowed to be converted.

During 2000, all of the Series C, D and E Preferred Stock, plus accrued and
unpaid dividends, were converted into an aggregate of 4,127,111 shares of the
Company's common stock.

                                       42
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(15) EARNINGS (LOSS) PER SHARE

During 2000, the Company recorded approximately $197,000 and $177,000
representing the 6% premium on the Series B Preferred Stock and 7% dividends on
the Series C, D and E Preferred Stock, respectively. During 1999, the Company
recorded approximately $213,000 and $508,000 representing the 15% guaranteed
conversion discount on the Series E Preferred Stock and the 7% dividends on the
Series C, D and E Preferred Stock, respectively. Additionally, in 1999, the
Company recorded approximately $794,000 and $530,000 representing the 15% and 6%
premium, respectively, on the Series B Preferred Stock. During 1998, the Company
recorded approximately $128,000 representing the 6% premium on the Series B
Preferred Stock. The following table sets forth the computation of basic and
diluted earnings (loss) per share:

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                              2000          1999            1998
                                                                              ----          ----            ----
           <S>                                                             <C>          <C>             <C>
           NUMERATOR:
           Income (loss) before extraordinary item......................   $13,001,141  $ (8,765,460)   $(18,777,724)
           Premium on Series B Preferred Stock..........................      (196,827)   (1,323,836)       (127,985)
           Accretion and dividends on Series C, D and E Preferred Stock.      (176,756)     (720,897)             --
                                                                           ------------     --------    ------------
             Numerator for basic earnings (loss) per share - income
               (loss) before extraordinary item available to common
               shareholders.............................................    12,627,558   (10,810,193)    (18,905,709)
           Effect of dilutive securities:
             Dividends on Series C, D and E Preferred Stock.............       176,756            --              --
                                                                           -----------    ----------     -----------
             Numerator for diluted earnings (loss) per share - income
               (loss) before extraordinary item available to common
               shareholders after assuming conversion...................   $12,804,314  $(10,810,193)   $(18,905,709)
                                                                           ===========  ============    ============
           DENOMINATOR:
           Denominator for basic earnings (loss) per share - weighted
             average shares.............................................   $23,631,949   $16,819,731      $12,214,986
           Effect of dilutive securities:
             Employee stock options.....................................     2,962,182            --              --
             Warrants...................................................       350,815            --              --
             Series C, D and E Preferred Stock..........................     1,383,442            --              --
                                                                           -----------            --              --
           Dilutive potential common shares.............................     4,696,439            --              --
                                                                           -----------    ----------       -----------
             Denominator for diluted earnings (loss) per share -
               adjusted weighted-average shares and assumed conversions.   $28,328,388    $16,819,731      $12,214,986
                                                                           ===========    ===========      ===========
           EARNINGS (LOSS) PER SHARE - BASIC:
             Income (loss) before extraordinary item....................   $      0.53    $    (0.64)      $   (1.55)
             Extraordinary loss.........................................         (0.10)        (0.02)             --
                                                                           -----------    ----------       ---------
             Income (loss) per share....................................   $      0.43    $    (0.66)      $   (1.55)
                                                                           ===========    ===========      =========
           EARNINGS (LOSS) PER SHARE - DILUTED:
             Income (loss) before extraordinary item....................   $      0.45    $    (0.64)      $   (1.55)
             Extraordinary loss.........................................         (0.08)        (0.02)             --
                                                                           -----------    ----------       ---------
             Income (loss) per share....................................   $      0.37    $    (0.66)      $   (1.55)
                                                                           ===========    ==========       =========
</TABLE>

During 2000, the Company had Series B Preferred Stock outstanding that could
have resulted in an incremental 248,559 shares of the Company's common stock,
assuming conversion at the beginning of the year according to SFAS No. 128.
However, the Series B Preferred Stock was not included in the computation of
diluted earnings per share because the effect of the inclusion of such potential
common stock and related dividends of $196,827 would have been antidilutive.

Diluted net loss per share is the same as basic net loss per share for the years
ended December 31, 1999 and 1998, as the effects of the Company's potential
common stock (7,221,219 and 7,283,387 shares in 1999 and 1998, respectively) are
antidilutive.

                                       43
<PAGE>


               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(16) INCOME TAXES

The 2000 tax provision of $169,000 consists of current state taxes of $150,000
and foreign taxes of $19,000. The 1999 tax provision of $245,000 consisted of
current state taxes of $642,000, foreign tax refunds of $(97,000) and a deferred
tax benefit of $(300,000) relating to the Company's deferred state tax asset.
The 1998 tax provision of approximately $544,000 represented current state taxes
of $283,000, foreign taxes of $47,000 and capital gains taxes of $214,000 due in
Ireland upon the business disposition described in Note 9(b).

The Company provides deferred income taxes for temporary differences between
assets and liabilities recognized for financial reporting and income tax
purposes. The income tax effects of these temporary differences at December 31,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                                           2000            1999
                                                                                           ----            ----
          <S>                                                                         <C>             <C>
          Deferred tax assets-
            Nondeductible reserves.................................................   $   2,358,000   $    858,000
            Depreciation...........................................................          47,000             --
            Net domestic and foreign operating loss and tax credit carryforwards...      15,342,000     10,445,000
                                                                                      -------------   ------------
                                                                                         17,747,000     11,303,000
          Deferred tax liabilities-
            Depreciation...........................................................              --        (10,000)
                                                                                                 --   ------------
                                                                                                 --        (10,000)

          Valuation allowance......................................................     (17,747,000)   (10,993,000)
                                                                                      -------------   ------------
          Net deferred tax asset...................................................   $          --   $    300,000
                                                                                      =============   ============
</TABLE>

As of December 31, 2000, the Company has available domestic and foreign net
operating loss carryforwards of approximately $30,911,000 and $27,577,000,
respectively, and federal research and development credit carryforwards of
approximately $91,000 to reduce future income taxes, if any. These carryforwards
expire on various dates through 2020 and are subject to review and possible
adjustment by the appropriate taxing authorities. Pursuant to the Tax Reform Act
of 1986, the utilization of net operating loss carryforwards for tax purposes
may be subject to an annual limitation if a cumulative change of ownership of
more than 50% occurs over a three-year period. As a result of the Company's
recent equity financings, such a change in ownership has occurred. As a result
of this ownership change, the utilization of substantially all of the Company's
domestic net operating loss carryforwards generated prior to 1999 will be
limited to approximately $4,500,000 per year. The Company has recorded a
valuation allowance against substantially all of the deferred tax asset to
reflect uncertainties that might affect the realization of this deferred tax
asset.

The Company's net operating loss deferred tax asset includes approximately
$4,314,000 pertaining to the benefit associated with the exercise and subsequent
disqualifying disposition of incentive stock options by the Company's employees.
When and if the Company realizes this asset, the resulting change in the
valuation allowance will be credited directly to additional paid-in capital,
pursuant to the provisions of SFAS No. 109.

(17) FINANCIAL INFORMATION BY SEGMENT

Under SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision making group is composed of the chief executive officer and members of
senior management. The Company's reportable operating segments are Diabetes,
Women's Health, Clinical Diagnostics and Other.

                                       44
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(17) FINANCIAL INFORMATION BY SEGMENT (CONTINUED)

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on earnings before interest expense, taxes, depreciation, amortization and
other noncash items (EBITDA). Revenues are attributed to geographic areas based
on where the customer is located. Segment information for the years ended
December 31, 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                              WOMEN'S      CLINICAL       CORPORATE
          2000                               DIABETES         HEALTH       DIAGNOSTICS     AND OTHER     TOTAL
          <S>                              <C>              <C>            <C>            <C>          <C>
          Net product sales from
            external customers..........   $115,488,293     $43,698,536    $10,681,000   $       --    $169,867,829
          Grant and other revenue.......             --              --             --      476,443         476,443
                                           ------------     -----------    -----------   ----------    ------------
            Total net revenue...........    115,488,293      43,698,536     10,681,000      476,443     170,344,272

          EBITDA........................     19,911,567       9,897,542      1,239,000   (5,455,001)     25,593,108

          Depreciation and amortization.      2,529,829       2,078,403        398,000    1,094,867       6,101,099
          Interest income -
            External....................        170,563          12,750         15,000      486,493         684,806
            Intersegment................             --              --             --    2,684,200       2,684,200
                                           ------------     -----------    -----------   ----------    ------------
            Total interest income.......        170,563          12,750         15,000    3,170,693       3,369,006
          Interest expense -
            External....................         20,139       2,428,459        265,000    4,869,675       7,583,273
            Intersegment................      2,390,494         262,510             --       31,196       2,684,200
                                           ------------     -----------    -----------   ----------    ------------
            Total interest expense......      2,410,633       2,690,969        265,000    4,900,871      10,267,473
          Other items -
            Extraordinary loss..........             --              --             --   (2,361,518)     (2,361,518)
          Income taxes..................        160,001       2,732,807         18,000   (2,742,175)        168,633
          Assets........................     72,020,440      45,513,400      6,423,591   89,346,030     213,303,461
          Expenditures for property,
            plant and equipment.........      5,990,024         489,040        246,000       77,514       6,802,578
</TABLE>

                                       45
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(17) FINANCIAL INFORMATION BY SEGMENT (CONTINUED)

<TABLE>
<CAPTION>
                                                           WOMEN'S       CLINICAL      CORPORATE
        1999                                DIABETES       HEALTH       DIAGNOSTICS    AND OTHER       TOTAL
        <S>                                <C>            <C>           <C>           <C>            <C>
        Net product sales from external
          customers.....................   $71,237,423    $42,813,963    $11,079,702  $        --    $125,131,088
        Grant and other revenue.........       316,441             --             --      425,974         742,415
                                           -----------    -----------    -----------  -----------    ------------
          Total net revenue.............    71,553,864     42,813,963     11,079,702      425,974     125,873,503

        EBITDA..........................     2,677,551      6,564,983        773,442   (4,677,815)      5,338,161

        Depreciation and amortization...     2,414,978      2,118,625        507,635    1,213,842       6,255,080
        Interest income -
          External......................       162,963         10,452         15,000      174,324         362,739
          Intersegment..................        81,772          4,743             --    1,582,515       1,669,030
                                           -----------    -----------    -----------  -----------    ------------
          Total interest income.........       244,735         15,195         15,000    1,756,839       2,031,769
        Interest expense -
          External......................         4,326      2,653,449        252,000    5,182,836       8,092,611
          Intersegment..................     1,339,528        270,002             --       59,500       1,669,030
                                           -----------    -----------    -----------  -----------    ------------

          Total interest expense........     1,343,854      2,923,451        252,000    5,242,336       9,761,641
        Other items -
          Extraordinary loss............            --             --             --     (306,092)       (306,092)
        Income taxes....................       421,925      2,322,165         50,000   (2,548,748)        245,342
        Assets..........................    55,257,241     44,397,523      5,698,264    9,483,526     114,836,554
        Expenditures for property, plant
          and equipment.................     2,315,324      1,321,161        127,000       31,389       3,794,874
        1998
        Net product sales from external
          customers.....................   $57,215,716    $40,451,437    $15,852,391  $    562,055   $114,081,599
        Grant and other revenue.........     2,689,609             --             --    1,212,410       3,902,019
                                           -----------    -----------    -----------  -----------    ------------
          Total net revenue.............    59,905,325     40,451,437     15,852,391    1,774,465     117,983,618

        EBITDA..........................    (3,949,964)     8,373,838        934,913   (3,047,265)      2,311,522

        Depreciation and amortization...     2,426,135      2,058,805      3,498,170      795,998       8,779,108
        Interest income -
          External......................        89,165         43,025        103,238      349,351         584,779
          Intersegment..................            --         80,453             --    1,607,514       1,687,967
                                           -----------    -----------    -----------  -----------    ------------
          Total interest income.........        89,165        123,478        103,238    1,956,865       2,272,746
        Interest expense -
          External......................         6,667      2,975,774        241,000    6,341,794       9,565,235
          Intersegment..................     1,370,828        317,139             --           --       1,687,967
                                             ---------        -------    -----------  -----------    ------------
          Total interest expense........     1,377,495      3,292,913        241,000    6,341,794      11,253,202
        Other items -
          Net charge on business
          dispositions, asset
          impairments and restructuring
          activities....................            --        858,751      4,577,994    2,105,338       7,542,083
          Equity in net income of
          affiliate.....................            --             --             --      237,366         237,366
        Income taxes....................        37,841        156,000        260,841       89,550         544,232
        Assets..........................    47,483,580     45,992,593      6,301,200   15,300,104     115,077,477
        Expenditures for property, plant
          and equipment.................       814,061        136,718        256,931      234,770       1,442,480
</TABLE>

                                       46
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(17) FINANCIAL INFORMATION BY SEGMENT (CONTINUED)

<TABLE>
<CAPTION>
                                                                         2000            1999           1998
                                                                         ----            ----           ----
        <S>                                                         <C>              <C>           <C>
        RECONCILIATION OF EBITDA TO NET INCOME (LOSS)
        EBITDA...................................................   $  25,593,108    $  5,338,161  $   2,311,522
        Depreciation and amortization expense....................      (6,101,099)     (6,255,080)    (8,779,108)
        Amortization of deferred revenue.........................         363,612         714,872      3,902,019
        Interest expense.........................................      (7,583,273)     (8,092,611)    (9,565,235)
        Income taxes.............................................        (168,633)       (245,342)      (544,232)
        Other noncash items......................................      (1,464,092)       (531,552)    (6,102,690)
                                                                       ----------        ---------    ----------
          Net income (loss)......................................   $  10,639,623    $ (9,071,552) $ (18,777,724)
                                                                    =============    ============= =============
</TABLE>

<TABLE>
<CAPTION>
                                                                         2000            1999           1998
                                                                         ----            ----           ----
        <S>                                                          <C>             <C>           <C>
        REVENUE BY GEOGRAPHIC AREA
        United States............................................    $128,355,350    $ 96,611,586  $   95,649,297
        France...................................................      10,463,333       4,979,313       4,362,890
        Germany..................................................       9,853,865       5,978,353       2,302,177
        Italy....................................................       5,505,438       4,299,597       1,129,247
        Other....................................................      16,166,286      14,004,654      14,540,007
                                                                       ----------      ----------      ----------
                                                                     $170,344,272    $125,873,503  $  117,983,618
                                                                     ============    ============  ==============
</TABLE>

<TABLE>
<CAPTION>
                                                                                            DECEMBER 31,
                                                                                       2000            1999
                                                                                       ----            ----
        <S>                                                                          <C>           <C>
        LONG-LIVED TANGIBLE ASSETS BY GEOGRAPHIC AREA
        United Kingdom........................................................       $10,586,840   $ 6,438,202
        Ireland...............................................................         1,568,506     1,396,123
        Israel................................................................         1,135,000     1,164,000
        United States.........................................................           345,332       480,300
        Other.................................................................           159,431       300,873
                                                                                         -------       -------
                                                                                     $13,795,109   $ 9,779,498
                                                                                     =========== ==============
</TABLE>

(18) OTHER EVENTS

(a) ACQUISITION OF INTEG

On January 23, 2001, the Company acquired Integ by merging a wholly-owned
subsidiary with and into Integ. The purchase price consisted of 1,900,000 shares
of the Company's common stock, having a fair value on the closing date of
approximately $60,064,000, in exchange for all of Integ's common equity,
approximately $5,109,000 in cash for the redemption of shares of Integ's
preferred stock, and additional direct acquisition costs. The Company will
account for this acquisition as a purchase. The Company expects to record a
significant amount of intangible assets in connection with this acquisition and
incur a significant charge in the first quarter of 2001 to write-off a portion
of the purchase price as in-process research and development costs.

                                       47
<PAGE>

               INVERNESS MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
                            (FORMERLY SELFCARE, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000
                                   (CONTINUED)

(18) OTHER EVENTS (CONTINUED)

(b) ACQUISITION OF LXN CORPORATION

On March 28, 2001, we acquired LXN Corporation (LXN), a privately-held
company that is developing and commercializing fructosamine monitoring
technology for people with diabetes. The purchase price for LXN consists of
795,110 shares of our common stock, approximately $5.0 million paid in cash
for certain expenses and employee benefits and $1.0 million which was
previously advanced to LXN. We expect to record a significant amount of
intangible assets in connection with this acquisition and to incur a
significant charge in the quarter ended March 31, 2001 to write off a portion
of the purchase price as in-process research and development costs.

We may be able to use Integ's and LXN's technologies, supplemented by our
additional research and development efforts, to develop products that are
complementary to our current product offerings in the areas of diabetes
self-management and medical diagnostics.

(19) VALUATION AND QUALIFYING ACCOUNTS

The following table sets forth activity in the Company's accounts receivable
reserve account:

<TABLE>
<CAPTION>
                                               BALANCE AT   PROVISION   UNCOLLECTIBLE  BALANCE AT
                                              BEGINNING OF     FOR        ACCOUNTS       END OF
                                                 PERIOD      BAD DEBT    WRITTEN OFF     PERIOD
        <S>                                   <C>            <C>         <C>           <C>
        Year Ended December 31,
          2000............................     $2,622,515      354,218      (174,550)   2,802,183
          1999............................      1,936,858      895,272      (209,615)   2,622,515
          1998............................      1,550,469      418,055       (31,666)   1,936,858
</TABLE>











                                       48