SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549



                            FORM 10-K


    FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                               OF
               THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31, 1997
Commission File Number: 1-9741




                       INAMED CORPORATION


State of Incorporation:  Florida
I.R.S. Employer Identification No.:  59-0920629

 3800 Howard Hughes Parkway, Suite 900, Las Vegas, Nevada  89109

                Telephone Number:  (702) 791-3388


      Indicate by check mark whether the Registrant (1)  has
filed all reports required to be filed by Section 13 or 15(d)  of
the  Securities  Exchange  Act of 1934 during  the  preceding  12
months  (or  for  such  shorter period that  the  Registrant  was
required to file such reports), and (2) has been subject to  such
filing requirements for the past 90 days.  Yes   X    No

  The  aggregate market value of voting stock held by non-
  affiliates as of June 30, 1998, was $79,681,534.

On  June 10, 1998 there were 10,120,290 shares of Common Stock out
standing.


               This document contains 110 pages.


             Exhibit index located on pages 42-45.



This  Form  10-K is for the fiscal year ended December 31,  1997,
and  also  includes  updated  disclosure  and  audited  financial
statements  with  respect to the fiscal year ended  December  31,
1996.   The Company has chosen to adopt this presentation  format
because its Form 10-K for the fiscal year ended December 31, 1996
did  not  include  an auditor's report, and in the  approximately
fifteen month period since the late  filing of that  report there 
have been numerous material changes involving the Company and its
business which are disclosed in this Annual Report on Form  10-K.
The  Company believes that the most effective means of  providing
complete and updated disclosure is to present in one document all
of  the periods which would otherwise be covered in its 1996  and
1997 Forms 10-K.


                             PART I

ITEM 1.   BUSINESS.

      INAMED Corporation ("INAMED" or the "Company"), through its
subsidiaries,  is  one  of  the  leading  world-wide  developers,
manufacturers  and marketers of breast implants for  plastic  and
reconstructive surgery.  The Company produces both  saline-filled
and  silicone  gel-filled breast implants in a  wide  variety  of
models,  shapes  and  sizes.  The Company also  manufactures  and
markets  a  number  of  other  surgically  implantable  products,
including tissue expanders, facial implants and custom prostheses
for  plastic and reconstructive surgery, as well as products  for
treatment  of  obesity.   The  Company  owns,  or  has  exclusive
licenses  covering,  over 40 patents in  the  United  States  and
overseas  and manufactures its products in facilities located  in
the United States and Ireland.

      The  Company's common stock is publicly traded on  the  OTC
Bulletin Board under the under the symbol IMDC.

Recent Developments

      Beginning  in  January 1998, there have been  a  number  of
significant developments at the Company:

      Changes  in  Senior  Management. On January  23,  1998  the
Company  announced the hiring of Richard G. Babbitt as  President
and  Chief Executive Officer, and Ilan K. Reich as Executive Vice
President.   Those officers were also elected  to  the  Board  of
Directors.   On  February  11, 1998, the  Company  announced  the
resignation  of  Donald K. McGhan from his  executive  and  board
positions with the Company and the election of Richard G. Babbitt
as  Chairman.   In recognition of Mr. McGhan's past contributions
he  was  named Chairman Emeritus.  On March 25, 1998 the  Company
announced  the  hiring of Tom K. Larson, Jr.  as  its  new  Chief
Financial Officer.  On June 24, 1998, Jim J. McGhan's  employment
with the  Company  and  its  subsidiaries was terminated.  Jim J.
McGhan was  the Chief Operating Officer of the Company, and he is
Donald K.  McGhan's son.  Jim  J. McGhan continues as a member of
the Board of Directors.

      New Management's Focus. The new senior executive management
team  has been focused on three key priorities:  first, resolving
the  breast implant litigation on an expeditious basis;   second,
returning  the Company to profitability;  and third,  formulating
and  executing a long-term strategic plan for the Company.   This
strategic plan will entail the reorganization of certain  of  the
Company's businesses and personnel.  The Company anticipates that
further  changes  in  the composition of the Company's  board  of
directors and senior management staff (both at the parent company
level and at the subsidiary level) may arise during 1998.

      Proposed Settlement of Breast Implant Litigation.  In April
1998  the  Company entered into agreements with  the  Plaintiffs'
Class  Settlement  Counsel and Minnesota Mining  &  Manufacturing
Company  ("3M"),  under which it will pay an aggregate  of  $34.5
million  to settle all claims arising from breast implants  which
were  implanted before June 1, 1993 and to resolve a  significant
indemnity  claim  by  3M.   The  settlement  agreement  with  the
plaintiffs, which is subject to Court approval, is structured  as
a  mandatory  non-opt-out  class action settlement  covering  the
Company and its subsidiaries.  The provisional agreement with  3M
is  subject  to completion of the settlement with the plaintiffs.
The  payments under these agreements will not become  due  before
April  30, 1999 or 90 days after the Court's final order  becomes
non-appealable, whichever is later.  For a detailed discussion of
the  terms  of  the  proposed settlement, see  "Item  3  -  Legal
Proceedings - Breast Implant Litigation."

      Financing  the Settlement of the Breast Implant Litigation.
The  Company  contemplates financing the cost of  the  settlement
through  a  combination  of the issuance  of  additional   senior
secured debt, the issuance of $3 million of common stock, and the
application  of  approximately $13.9 million in  proceeds  to  be
received  upon exercise of the warrants to purchase common  stock
which  were  issued for this general purpose in July  1997.   The
Company   has  discussed  its  financing  plans  with   Appaloosa
Management  L.P. and its affiliates, who are jointly the  largest
holders  of  the  Company's  11%  senior  secured  notes.   Those
entities  have  indicated their willingness to  provide  the  new
financing,   subject   to  negotiation  of  satisfactory   terms,
covenants  and legal documentation, including amendments  to  the
existing  indenture  and a new maturity  date  for  the  existing
senior  debt.   Such  new financing may entail  the  issuance  of
warrants  or  convertible securities which could be  dilutive  to
existing holders of the Company's common stock.

      Substantial Charges to 1997 Results.  In order  to  reflect
the  costs  of  the  proposed settlement of  the  breast  implant
litigation and other items, the Company is incurring an aggregate
of  $32  million of charges for 1997.  In addition,  the  Company
believes  that it will incur approximately $5 million of  charges
in   1998  in  connection  with  a  proposed  restructuring  plan
currently  being  developed by the new  senior  management  team.
While  the Company believes that these charges adequately reflect
the  total costs of the proposed settlement and the restructuring
plan,  the  Company  may be required to incur additional  charges
(which could be substantial) as those matters are concluded.

      Change  of Independent Accountants; SEC Action.   In  March
1998   Coopers  &  Lybrand  L.L.P.  resigned  as  the   Company's
independent  accountant, and in April 1998 the  Company  retained
BDO  Seidman LLP  as its new independent accountant.   Due  to  a
variety  of  factors, the Company did not timely file its  Annual
Reports  on Form 10-K for 1996 and 1997; moreover, now  that  the
audits  for  those  years  are completed,  the  Company  will  be
restating its 1997 quarterly financial  statements.  In  December 
1997  the  Company  entered  into  a  consensual  settlement of a 
lawsuit by the Securities  and  Exchange Commission  (the "SEC"), 
whereby the Company agreed to file an amendment to its 1996  Form  
10-K by March  2, 1998 and to thereafter timely file its required  
public filings.  Due to a variety  of  factors,  the  Company was 
unable to meet  that  deadline.  The Company has held discussions
with the SEC regarding this matter; however, the Company does not  
know whether,  or to what  extent, the SEC  may seek sanctions or
other remedies  based on the Company's  failure to meet the terms 
of this settlement.  The  Company  understands  that  the  SEC is 
conducting a preliminary  inquiry with respect to certain matters
which were publicly  disclosed in  a  Form 8-K  filing  in  March  
1998 in  connection  with  the  resignation  of Coopers & Lybrand 
L.L.P.  The Company  has  been fully  cooperating  with the SEC's 
requests  for documents in connection with that inquiry.

Corporate History and Organization

     The   Company  (formerly  First  American  Corporation)  was 
incorporated  under  the laws of the state of Florida on February
6, 1961.  In 1985, First American Corporation acquired all of the
outstanding shares of McGhan  Medical  Corporation  ("MMC")  in a 
stock-for-stock, reverse merger transaction.  The Company changed
its name in  1986  from  First  American  Corporation  to  INAMED
Corporation in  order  to  better  reflect its involvement in the
medical field.  The name was chosen  to  promote  the recognition
of the concepts "Innovation  and  Medicine".   MMC  now  operates
as  a   wholly-owned   subsidiary   of  INAMED  Corporation.  MMC
entered  the  medical  device business on August 3, 1984, through
the   acquisition  of  assets related  to  Minnesota  Mining  and
Manufacturing company's ("3M") silicone implant product line.

     Specialty Silicone Fabricators, Inc. ("SSF") was  a  wholly-
owned subsidiary of McGhan Medical Corporation at the time McGhan 
Medical was acquired by First American Corporation.  As  a result 
of the acquisition, SSF became a wholly-owned subsidiary of First 
American Corporatino, and operated as such until it was  divested 
in August 1993.

     Unless  otherwise  indicated  by context, the term "Company"
as  used  herein  refers  to  INAMED  and  its subsidiaries.  The
purpose of this method of filing  as  one  company  is to reflect
consolidation for the sole purpose of reporting  in the  required
SEC method and is not intended  for  any  other  purpose.  INAMED
Corporation is the subsidiaries' parent through stock  ownership.
INAMED's   subsidiaries   operate   as   idividual   corporations 
corresopnding to their state corporate filings, and  under  their
own  daily  management,  to  assist  INAMED  in accomplishing its 
corporate objectives.

     Since 1985, the Company has incorporated or acquired  several 
companies,  which  it has  structured as subsidiaries, in order to 
strengthen  its  position as a leading medical  products  company.  
INAMED Development Company ("IDC") was incorporated in 1986  as  a
wholly-owned subsidiary to pursue research and development of  new 
medical devices primarily using silicone-based technology.

     In  May  1989,  the  Company acquired 100% of the outstanding 
shares of  Cox-Uphoff  Corporation  and  subsidiaries  ("CUC"),  a
competitor of MMC  in  the  silicone  implant  market.   Upon  the
acquisition,  the  company  name  was  changed  to CUI Corporation 
("CUI") which now operates as a wholly-owned subsidiary of the 
Company.

     In  October  1989,  INAMED   incorporated  its McGhan Limited 
subsidiary  which  designed  and  equipped a  new  medical  device
manufacturing   plant   in  Arklow,  County Wicklow,  Ireland,  to
supplement   production  of   the  Company's  current  and  future 
products. The location in Ireland  was selected because  it offers 
many  favorable  conditions  such  as  availability  of  labor  at  
reasonable rates,  availability  of  attractive  grants  from  the
Industrial Development  Authority  (IDA), geographic proximity  to
INAMED B.V., favorable local tax treatment and membership  in  the 
European Economic Community  or  EEC.  The  manufacturing plant in 
Ireland was fully operational in 1993, and is capable of supplying 
nearly  all of the products  sold  in  the  international  market.
Future new products  will  be produced  by McGhan Limited for sale 
internationally with limited support shipments from the  Company's   
U.S. manufacturing  plants.  In  support of anticipated increasing 
future   international   demand,  the   Company  incorporated  its 
Chamfield Limited subsidiary in  1993 to manufacture raw materials
to be used in McGhan Limited's  manufacturing  process.  Chamfield 
Limited's manufacturing facilities are located  adjacent to McGhan
Limited's facilities.

     In  November  1989,   INAMED   incorporated  its  INAMED B.V.
subsidiary in Breda, The Netherlands, to warehouse and  distribute 
the Company's products to the European  Community, Asia and  other
international locations.  INAMED B.V. also markets products  on  a 
direct  sales  basis  throughout  The Netherlands.  In conjunction 
with, and to further accomplish its long-range plans, the  Company 
incorporated INAMED GmbH in Germany and INAMED B.V.B.A. in Belgium 
as subsidiaires in December 1989, thereby establishing a base from 
which to initiate direct sales of its products  in two  additional
countries.

     In  1991, INAMED concentrated on continued expansion into the 
European and international  market,  increasing  production in its 
Irish manufacturing  facility, continued  efficiency  and  quality 
evaluation  of  its  manufacturing   facilities  in   Ireland  and 
continued sales growth. The Company expanded its marketing base in 
Europe  by  incorporating INAMED S.R.L. as a direct marketing  and  
distribution center for the  Company's  products  in  Italy in May 
1991.

     In  1991, the  Company  also  incorporated  its   BioEnterics
Corporation  subsidiary in  Carpinteria,  California.  BioEnterics
was incorporated in order to focus on the development, production, 
international and  ultimately global distribution of high-quality, 
proprietary implantable devices  and associated instrumentation to 
the bariatric  and general surgery  markets for  the  treatment of 
gastrointestinal disorders and serious obesity.

     In 1992, the Company incorporated  its Biodermis  Corporation
subsidiary  in  Las  Vegas,  Nevada,  in order  to  focus  on  the 
development,  production   and  global   distribution  of  premium
products for dermatology, wound care and burn treatment.

     In  1992,   the   Company   also   incorporated  its  Medisyn 
Technologies Corporation subsidiary in Las Vegas, Nevada, in order  
to focus on the development and promotion of the merits of the use
of  silicone  chemistry  in  the   fields   of  medical   devices,  
pharmaceuticals and biotechnology.

     The  Company also continued  development of its international 
market  base  in  1992 by incorporating INAMED Ltd. to market  and 
distribute the Company's products in the United Kingdom.

     In 1993, the  Company  incorporated  Bioplexus Corporation in  
Las Vegas, Nevada, a wholly-owned subsidiary which is  a  research 
and development company that develops, produces  and   distributes 
specialty  medical  products  for  use  by  the  general   surgery 
profession.

     In 1993, the Company also incorporated Flowmatrix Corporation 
in Las Vegas, Nevada, a wholly-owned subsidiary which manufactures 
high-quality silicone components and devices for  INAMED's wholly-
owned subsidiaries.

     The Company continued to expand  its  international marketing
base in 1993  by incorporating INAMED S.A.R.L. in Paris, France, a 
wholly-owned subsidiary of INAMED B.V.

     In 1993, the Company sold its Specialty Silicone  Fabricators 
("SSF")  subsidiary   and  SSF's  Innovative   Surgical   Products 
subsidiary  to   Innovative   Specialty    Silicone    Acquisition 
Corporation ("ISSAC"), a private investment  group which  included 
certain members of Specialty Silicone Fabricators' management. The 
transaction was valued at approximately $10.8  million,  including 
$2.7  million in cash, $5.9  million in  structured short-term and 
long-term   notes,  and   the  retirement  of  $2.2   million   in 
intercompany notes due to SSF by the Company's subsidiaries.

     Effective January  1994, the  Company  acquired the assets of 
Novamedic,  S.A. in  Barcelona, Spain.  Novamedic,S.A. was a well-
established distributor of medical products in Spain which further 
strengthened  the  Company's presence in the international market. 
The new  subsidiary  was  renamed INAMED, S.A. and operates  as  a  
wholly-owned subsidiary of the Company.

     The incorporation of  INAMED do Brasil in 1995, INAMED Mexico 
in 1996,  and  BioEnterics Latin America in 1997 has  strengthened  
the Company's presence in the Latin American area.

     In 1995, the Company incorporated its INAMED Japan subsidiary 
in  Las Vegas,  Nevada. INAMED  Japan subsequently acquired 95% of 
INAMED  Medical  Group,  a Japanese corporation.  In  1996, INAMED 
Japan  acquired  the   remaining  5%   of  INAMED  Medical  Group.  
Additionally, the Company's McGhan Medical Corporation  subsidiary  
incorporated its McGhan  Medical Asia  Pacific, Ltd. subsidiary in 
1995.  The  formation  of  INAMED  Japan  and  McGhan Medical Asia 
Pacific, Ltd.  has  enabled  the Company to continue its expansion 
into the Asia-Pacific Rim market.

Products and Markets

      Breast implants and related tissue expander products, which
comprise  approximately 90% of the Company's consolidated  sales,
are  used  for reconstruction following total or partial  removal
(mastectomy)  of tissue as the result of breast  cancer,  or  for
augmentation in cosmetic surgery.

     Implant Products.  All breast implants consist of a silicone
elastomer (rubber) shell filled with either saline solution (salt
water) or silicone gel.  In order to meet each woman's individual
needs,  most  breast implants are produced in a wide  variety  of
shapes  and  sizes.  The shape of breast implants can  be  either
round  or  anatomical.  Round breast implants  generally  give  a
woman  a  round  curve in the upper part of  her  breasts,  while
anatomical breast implants give the woman a gentle slope which is
shaped  more  like a natural breast.  Both types of implants  are
designed to increase breast size. The surface construction of the
finished implants provides the surgeon the opportunity to  select
from a smooth silicone, the patented BioCell textured surface  or
the patented MicroCell textured surface.

      In  January 1992, the Food and Drug Administration  ("FDA")
requested that all U.S. manufacturers stop selling their silicone
gel-filled  implants  as a voluntary action,  and  that  surgeons
refrain  from implanting the devices in patients pending  further
review  of  information relating to the safety of  the  products.
Furthermore, in April 1992, the FDA announced that silicone  gel-
filled  breast implants would be available only under  controlled
clinical studies. Accordingly, through 1997, the Company  markets
and  distributes  its  silicone gel-filled breast  implants  only
outside  the  United States, and markets and distributes  saline-
filled breast implants both in the United States and abroad.

      Breast  reconstructive surgery is the process  by  which  a
surgeon  recreates or reconstructs a woman's breast  following  a
mastectomy.   According  to  a study published  by  the  American
Society of Plastic and Reconstructive Surgeons ("ASPRS"), in 1997
approximately 50,000 reconstruction procedures were performed, as
compared with approximately 29,000 in 1992.  The Company believes
that  the aging U.S. population and the increased awareness among
middle-aged  and older women in the United States of the  dangers
and incidence of breast cancer will lead to increased numbers  of
mastectomies,  and  corresponding increases in opportunities  for
reconstructive  breast implants.  In addition, according  to  the
ASPRS,   26  states  now  have  legislation  requiring  insurance
carriers that reimburse female policyholders for part or  all  of
the  cost  of  radical  mastectomies to  offer  partial  or  full
reimbursement for reconstructive breast implant surgery as well.

      Breast augmentation is the process by which breast implants
are  used  to enhance the size or shape of a woman's  breast  for
cosmetic reasons.  According to the ASPRS, approximately  122,000
women   had   augmentation  surgery  in  1997,  as  compared   to
approximately  32,000  in  1992.  Typical  recipients  of  breast
implants for augmentation purposes are women aged 18 to  50  with
moderate  to  upper-moderate incomes.  The Company believes  that
the large proportion of the U.S. population currently aged 25  to
40  will  result  in  increased demand  for  augmentation  breast
implant surgery in the coming years.

      Breast  implants are placed either under a  woman's  breast
tissue  (subglandular  position) or under  a  woman's  pectoralis
muscle (sub-muscular position).  If the implant is saline-filled,
it  is usually inserted empty and then filled and positioned.  An
advantage  to  this  type of implant is that it  can  usually  be
placed  through  a  small  incision.  The  incision  is  made  as
inconspicuously as possible in either the fold of the breast  (an
inframammary   incision),  around  the  nipple   (a   periareolar
incision)  or under the arm (a transaxillary incision).   If  the
incision  is made under the arm, endoscopic techniques, involving
the  use  of  a probe fitted with a tiny camera, may be  used  to
visualize the creation of the surgical pocket.

      Breast  implant  surgery  is  performed  in  an  outpatient
operating  room, either in the surgeon's office or at a hospital.
If  done  for  augmentation purposes, the  surgery  is  typically
performed on an outpatient basis and general anesthesia  is  most
commonly  used,  although  local anesthesia  may  be  an  option.
Augmentation surgery usually lasts one to two hours during  which
the  surgeon  makes  an incision and creates  a  pocket  for  the
implant.  Finally, the incision is closed with stitches and tape.
Reconstructive  surgery generally occurs in a hospital,  and  can
often  require more than one operation over a period  of  several
months.

      Tissue Expanders and Other Products.  The Company develops,
manufactures and markets a line of implantable and intraoperative
tissue   expanders,   which   are   used   in   connection   with
reconstructive surgery as the result of breast cancer.  A typical
tissue  expander  is  implanted at a site  where  new  tissue  is
desired.   After the device is implanted, fluid can  be  injected
into  the  injection  port  which  then  flows  into  the  larger
expanding chamber.  This causes increased pressure under the skin
resulting  in tissue growth over a reduced period of  time.   The
expanded  tissue  can then be used to cover  defects,  burns  and
injury  sites or prepare a healthy site for an implant  with  the
extra tissue available without the trauma of skin grafting.   The
Company has further developed its tissue expander product line by
incorporating a patented integral valve injection  area  that  is
located  by a magnetic detection system to enable the  doctor  to
determine the location of the injection port.

      The  Company manufactures and markets its patented  BioSpan
tissue  expander product line that utilizes the patented  BioCell
textured  surface  which allows more precise surgical  placement.
Use of the BioSpan tissue expander surface decreases the risk  of
severe contraction of the tissue capsule around the implant.  The
Company   produces   the   BioDimensional   system   for   breast
reconstruction  following  radical  mastectomy  procedures.   The
BioSpan  tissue  expanders and BioCell breast implants  used  for
this  system  were designed using computer-assisted  modeling  to
determine  the ideal dimensions.  Computer imaging programs  were
also  used  to  evaluate  the expected  aesthetic  results.   The
BioDimensional  system matches the specific size tissue  expander
to   the  breast  implant  that  will  be  used  for  the  breast
reconstruction procedure.

      The  Company  also  manufactures and markets  silicone  gel
sheeting  intended  for  use  in the  treatment  and  control  of
scarring.   The  products are sold under the trade names  TopiGel
and  Epi-Derm.   The  Company has configurations  for  the   scar
management  of  long  incisional scars following  cardiac  or  C-
Section surgery, custom configurations for treating small and mid-
size  scars,  and a full-sized sheet for reduction  of  post-burn
scarring.   In  addition,  the  Company  has  developed  two  new
silicone gel sheeting configurations for treating post-mastoplexy
and areolar scars.  In 1997 the Company received 510(k) clearance
notification  of  substantial equivalency from the  FDA  for  the
CRYOSIL Silicone Gel Sheeting Patch, intended for the single  use
protection of tissue surrounding skin lesions, such as basal cell
carcinoma,   or   skin  tabs,  during  cryosurgery   with   spray
refrigerants like liquid nitrogen and nitrous oxide.

       Obesity   and  General  Surgery  Products.   Through   its
BioEnterics   Corporation  subsidiary,  the   Company   develops,
manufactures  and markets two patented devices for the  treatment
of  obesity:  the LAP-BAND Adjustable Gastric Banding System and
the   BioEnterics  Intragastric  Balloon  (BIB).    In   1997,
approximately  $9.3  million  of  these  products  were  sold  to
surgeons  and  hospitals, primarily in Europe and Australia.  The
LAP-BAND  System is currently undergoing clinical trials  in  the
United  States.   This  subsidiary  also  produces  the  patented
EndoLuminar  II  and  MicroLumina Transillumination  Systems  for
increasing visibility during laparoscopic procedures.

      People who are 100 pounds or more overweight are considered
severely  or  morbidly  obese.   This  extreme  obesity  is  life
threatening,  leading to cerebrovascular diseases, cardiovascular
diseases,  diabetes  and other health problems.   In  the  United
States  it is estimated that there are 3.1 million to 9.3 million
adults  who  are morbidly obese.  In Europe it is estimated  that
there  are  2.5  million to 7.4 million adults who  are  morbidly
obese.   On  a worldwide basis it is estimated that approximately
1% to 2% of the population is morbidly obese.

      The  failure of non-surgical weight loss programs to  treat
morbid  obesity  has led surgeons to devise a variety  of  weight
loss  operations  for the morbidly obese.   One  example  is  the
gastric  bypass  operation, whereby the surgeon  makes  a  direct
connection  from  the upper portion of the  stomach  to  a  lower
segment  of  the lower intestine.  By creating a  path  for  food
which  bypasses  part  of the stomach and the  small  bowel,  the
operation  causes  food to be poorly digested and  insufficiently
absorbed.  Long-term follow-up of bypass operations has  revealed
serious nutritional complications.

      Surgeons have also created alternate procedures for  weight
loss that only restrict passage of food through the stomach.  The
major one is a vertical banded gastroplasty, in which a band  and
staples are used to create a pouch at the top of the stomach that
holds  a small amount of food.  By delaying the emptying of  food
from  the  pouch,  the small outlet in the bottom  of  the  pouch
causes  a  feeling of fullness and restricts the amount  of  food
which can be eaten at one time.

      The  LAP-BAND System is an advanced form of gastric banding
used  to  treat morbid obesity.  During the operation, a silicone
elastomer  band is laparoscopically placed around the upper  part
of  the  stomach, thereby making a small pouch. Most importantly,
with  the  LAP-BAND  System the physician can easily  adjust  the
amount  of  food  which the patient can eat through  non-surgical
modification  of  the pouch and outlet size, thereby  fine-tuning
the  rate of individual weight loss.  There is no need for  large
incisions and open wounds.  No cutting or stapling of the stomach
is  required  and  there  is  no by-passing  of  the  stomach  or
intestines.   If  necessary, it can be removed  laparoscopically,
thereby completely reversing the procedure.

      The  BIB  System  is  a  short-term therapy,  designed  for
patients  who  must  shed pounds either:  a) in  preparation  for
surgery,  whether  for the LAP-BAND System or any  other  surgery
which  needs  to  be  performed on an obese patient,  or  b)  for
moderately  obese persons to be used in conjunction with  a  diet
and  behavior modification program. The BIB System is a  silicone
elastomer  balloon  which is filled with saline  after  insertion
into  the patient.  Placement in the stomach is non-surgical  and
usually requires only 20 to 30 minutes and is performed on an out-
patient basis by an endoscopist, using local anesthesia.  The BIB
contains  a  self-sealing  valve which  allows  for  personalized
adjustment  of the volume from 400 ml to 700 ml (the  size  of  a
large  grapefruit),  either at the time of  placement  or  later.
When   the   BIB   is   deflated,  it  can  easily   be   removed
endoscopically. The Company anticipates beginning clinical trials
for the BIB System in the United States in late 1998.

      The  EndoLumina  and  MicroLumina Systems  are  illuminated
medical  devices  used  to light internal organs  during  various
types of general surgery.  The primary uses are to aid in surgery
of   the  esophagus,  rectum  and  other  structures.   In   some
operations  it replaces an endoscope as a source of light  within
the body.  Unlike an endoscope, the EndoLumina emits a cool light
and  does not risk burning the tissue.  The EndoLumina System was
licensed  by  the Company and recently redesigned to improve  its
illumination  and  durability.  It includes a detachable  sterile
tip,  which is provided for one-time use.  In 1997 the EndoLumina
System received 510(k) approval from the FDA, and it is now being
marketed in the U.S. and internationally.

      During  the  past  four  years, the  Company's  proprietary
products accounted for approximately 98% of annual net sales.

Marketing

      In  the  United States, the Company's products are sold  to
plastic  and  reconstructive surgeons, cosmetic surgeons,  facial
and oral surgeons, dermatologists, outpatient surgery centers and
hospitals through the Company's own staff of direct sales  people
and  independent distributors.  The Company reinforces its  sales
and marketing program with telemarketing, which produces sales by
providing follow-up procedures on leads and distributing  product
information to potential customers.  The Company supplements  its
marketing   efforts   with  appearances  at   trade   shows   and
advertisements in trade journals and sales brochures.

       The  Company  sells  its  products  directly  and  through
independent  distributors  in  more  than  twenty-five  countries
worldwide, including Europe, Central and South America, Australia
and  Asia.  Those  sales are managed through regional  sales  and
marketing employees and, in certain countries, through  a  direct
sales force.

      During the past four years, no customer accounted for  more
than 5% of the Company's revenues.

Competition

      The  Company's sole significant competitor  in  the  United
States  is  Mentor  Corporation.   All  other  major  competitors
discontinued production of breast implants in 1992 largely  as  a
result  of regulatory action by the FDA and the ensuing  wave  of
litigation  by women alleging injury from their breast  implants.
Internationally,   the  Company  competes  with   several   other
manufacturers,    including    Mentor    Corporation,    Silimed,
Laboratories Sebbin, L.P.I., P.I.P., Nagor and LipoMatrix.

      The  Company believes that the principal factors permitting
its  products to compete effectively with its competitors are its
high-quality product consistency, its variety of product designs,
management's  knowledge  of and sensitivity  to  market  demands,
plastic  surgeons'  familiarity with the Company's  products  and
their  respective  brand  names, and  the  Company's  ability  to
identify,  develop and/or obtain license agreements for  patented
products embodying new technologies.  The Company seeks to  avoid
marketing  its  products  on the basis of  price,  although  when
necessary or appropriate it will do so on occasion.

Research and Product Development

      A  qualified  staff  of over fifty doctorates,  scientists,
engineers and technicians work in material technology and product
design as part of the Company's research and development efforts.
In addition, the Company is directing its research toward new and
improved products based on scientific advances in technology  and
medical knowledge together with qualified input from the surgical
profession. The Company incurred $8.9 million, $5.7 million, $4.4
million   and  $3.7  million  in  1997,  1996,  1995  and   1994,
respectively,  on  its  research and development  efforts.  These
expenditures  represented 8%, 6%, 5% and 5%  of  sales  in  1997,
1996,  1995  and  1994,  respectively.   Excluding  research  and
development  expenses  at  BioEnterics Corporation,  the  Company
anticipates  that  it will spend approximately  6%  of  sales  on
research and development in the next few years.

Patents and License Agreements

      The  Company  currently  owns  or  has  exclusive  licenses
covering more than 40 patents throughout the world.

       It  is  the  Company's  policy  to  actively  seek  patent
protection  for  its products and/or processes when  appropriate.
The  Company developed and currently owns patents and  trademarks
for  both the product and processes used to manufacture low-bleed
breast  implants  and  for  the  resulting  barrier  coat  breast
implants.   Intrashiel is the Company's registered trademark  for
the  products  using this technology.  Beginning  in  1984,  such
patents  were  granted in the United States and various  European
countries.   In addition, trademarks for this product  have  been
granted in the United States and France.  The Company has license
agreements allowing other companies to manufacture products using
the  Company's select technology, such as the Company's  patented
Intrashiel   process,   in  exchange  for   royalty   and   other
compensation or benefits.

      The  Company's other patents include those relating to  its
breast  implants, tissue expanders, textured surfaces,  injection
ports   and  valve  systems,  and  obesity  and  general  surgery
products.   The  Company also has various patent  assignments  or
license   agreements  which  grant  the  Company  the  right   to
manufacture and market certain products.

      Substantially all of the patents relating to products which
generate  significant revenue have at least seven years remaining
until expiration.

     Although the Company believes that its patents are valuable,
it   has  been  the  Company's  experience  that  the  knowledge,
experience   and  creativity  of  its  product  development   and
marketing  staffs, and trade secret information with  respect  to
its  manufacturing processes, materials and product design,  have
been equally important in maintaining proprietary product lines.

       As   a  condition  of  employment,  the  Company  and  its
subsidiaries  require all employees to execute a  confidentiality
agreement relating to proprietary information and patent rights.

Manufacturing; Raw Materials

      The  Company manufactures its silicone devices and products
under   controlled  conditions.  The  manufacturing  process   is
accomplished  in  conjunction  with  specialized  equipment   for
precision    measurement,   quality   control,   packaging    and
sterilization.   Quality  control  procedures  begin   with   the
Company's   suppliers   meeting  the   Company's   standards   of
compliance.   The  Company's in-house quality control  procedures
begin  upon  the  receipt  of raw components  and  materials  and
continue   throughout   production,   sterilization   and   final
packaging.   The Company maintains quality control and production
records of each product manufactured and encourages the return of
any  explanted units for analysis.  All of the Company's domestic
activities are subject to FDA regulations and guidelines, and the
Company's  products and manufacturing procedures are  continually
monitored  and/or reviewed by the FDA.  In 1997 the FDA conducted
a  review of the Company's main U.S. manufacturing facilities and
notified  the  Company that it was in compliance with  applicable
good manufacturing practices.

      Since  the  1992  moratorium  on silicone gel-filled breast 
implants and  the  ensuing  litigation,  traditional suppliers of  
silicone  raw   materials  have  ceased  to   supply  implant  or
medical  grade materials to the Company and other medical  device
manufacturers.   Under guidelines established  by  the  FDA,  the
Company  has  been successful in replacing those  suppliers  with
other companies, but at higher prices.  There can be no assurance
that  there  will not be periodic disruptions in  the  source  of
supply,  or  the  quantities needed, due to regulatory  or  other
factors.  The Company is seeking to expand its sources of supply,
including through a foreign subsidiary.

Limited Warranties

      The  Company  makes  every effort to  conduct  its  product
development,  manufacturing, marketing and  service  and  support
activities with careful regard for the consequences to  patients.
As with any medical device manufacturer, the Company occasionally
receives communications from surgeons or patients with respect to
various  products claiming the products were defective  and  have
resulted  in  injury  to  the patient.  The  Company  provides  a
limited  warranty to the effect that it will replace any  product
that  proves  defective  with a new product  of  comparable  type
without charge.

      In  certain  situations the Company also  provides  limited
financial  assistance to cover non-reimbursed operating  room  or
surgical  expenses.  The costs of this program  are  periodically
reviewed to ascertain whether adequate reserves for future claims
are  being  maintained.  The Company reserves the right  to  make
changes to this financial assistance policy from time to time.

Government Regulations

      All of the Company's silicone implant products manufactured
or  sold  in the United States are classified as medical  devices
subject  to  regulation  by  the FDA.  FDA  regulations  classify
medical  devices into three classes that determine the degree  of
regulatory  control to which the manufacturer of  the  device  is
subject.   In  general, Class I devices involve  compliance  with
labeling  and  record  keeping  requirements  and  other  general
controls.   Class II devices are subject to performance standards
in   addition  to  general  controls.   A  notification  must  be
submitted to the FDA prior to the commercial sale of some Class I
and  all  Class II products. Class III devices require the  FDA's
Pre-Market  Approval  (PMA)  or  an  FDA  Investigational  Device
Exemption  (IDE)  before  commercial  marketing  to  assure   the
products'  safety  and  effectiveness.   Class  II  products  are
subject  to fewer restrictions than Class III products  on  their
commercial distribution, such as compliance with general controls
and  performance standards relating to one or more aspects of the
design,   manufacturing,  testing  and   performance   or   other
characteristics  of the product. Tissue expanders  are  currently
proposed  to  be classified as Class II devices.   The  Company's
breast implant products are Class III devices.

      In  the ongoing process of compliance with applicable  laws
and  regulations, the Company has incurred, and will continue  to
incur,  substantial costs which relate to laboratory and clinical
testing of new products, data preparation and filing of documents
in  the  proper outline or format required by the FDA.   Further,
the  FDA has published a schedule which permits the data required
for  PMA  applications for saline-filled implants to be submitted
in  phases, beginning with preclinical data that was due in 1995,
and ending with final submission of prospective clinical data  in
1998. The Company has received from the FDA an understanding that
the  agency  will  not  call for final  PMA  applications  to  be
submitted  prior to September, 1998. The date for  submission  of
PMA   applications   may  be  further  extended   by   the   FDA.
Notwithstanding any such extension, the Company intends to submit
its  PMA  application  for saline-filled  implants  in  a  timely
fashion  and is collecting data which will be necessary for  this
application.  However, neither the timing of such PMA application
nor its acceptance by the FDA can be assured, irrespective of the
time  and  money  that  the  Company has  expended.   Should  the
Company's PMA application for saline-filled implants not be filed
timely  or be denied, it would have a material adverse effect  on
the  Company's  operations and financial position.   The  Company
will  decide on a product-by-product basis whether to respond  to
any  future calls for PMAs and regulatory requirements, requested
response  or Company action.  The cost of any such potential  PMA
filings  is  unknown  until the call for a  PMA  occurs  and  the
Company has an opportunity to review the filing requirements.

      There  can  be  no  assurance  that  other  products  under
development by the Company will be classified as Class I or Class
II  products or that additional regulations restricting the  sale
of  its  present or proposed products will not be promulgated  by
the FDA.  The Company is not aware of any changes required by the
FDA  that  would  be  so restrictive as to remove  the  Company's
primary products from the marketplace.

      Medical  device  laws  and  regulations  similar  to  those
described  above are also in effect in many of the  countries  to
which  the  Company exports or sells its products.   These  range
from  comprehensive device approval requirements for some or  all
of  the Company's medical device products to requests for product
data or certifications.

       As  a  manufacturer  of  medical  devices,  the  Company's
manufacturing processes and facilities are subject  to  continual
review  by the FDA, responsible state or local agencies  such  as
the  California  State Department of Health  Services  and  other
regulatory  agencies to ensure compliance with good manufacturing
practices   and   public   safety   compliance.   The   Company's
manufacturing  plants,  as users of certain  solvents,  are  also
subject to regulation by the local Air Pollution Control District
and by the Environmental Protection Agency.

Geographic Segment Data

      A  description of the Company's net sales, operating income
(loss)  and  identifiable assets within  the  United  States  and
International,  is  detailed in Note  11  of  the  Notes  to  the
consolidated financial statements, attached as Exhibit (a)(1).

Employees

      As of December 31, 1997, the Company had 938 employees,  of
which  646  were  in the United States and 292  were  at  foreign
subsidiaries.   Except for the Company's manufacturing  operation
in Ireland, none of the Company's employees are represented by  a
labor  union.   The  Company  offers  its  employees  competitive
benefits  and  wages comparable with employees for  the  type  of
business and the location/country in which the employment occurs.
The   Company  considers  its  employee  relations  to  be   good
throughout its operations.


ITEM 2.   PROPERTIES.

      The  Company  leases its headquarters office space  in  Las
Vegas,  Nevada (4,500 square feet and 5,000 square feet subleased
from  a  related  party).  The Company also leases manufacturing,
warehouse  and  office  buildings in Las  Vegas,  Nevada  (24,000
square  feet,  of  which 17,000 is subleased to a  third  party),
Carpinteria,  California  (61,000 square  feet),  Santa  Barbara,
California (187,000 square feet), Arklow County, Wicklow, Ireland
(53,000 square feet) and The Netherlands (18,000 square feet).

      The  Company's  international  sales  offices,  located  in
Belgium,  Germany, Italy, United Kingdom, France, Spain,  Russia,
Brazil, Mexico, Hong Kong, Singapore and Japan, lease office  and
warehouse  space ranging from 1,500 square feet to  8,900  square
feet.

      The  Company believes its facilities and the facilities  of
its   subsidiaries  are  generally  suitable  and   adequate   to
accote its current operations.

ITEM 3.   LEGAL PROCEEDINGS.

Breast Implant Litigation

      INAMED  and  its  McGhan Medical and CUI  subsidiaries  are
defendants in numerous state and federal court lawsuits involving
breast  implants.  The alleged factual basis for typical lawsuits
includes  allegations  that the plaintiffs'  silicone  gel-filled
breast  implants  caused  specified  ailments  including,   among
others,   auto-immune   disease,  lupus,  scleroderma,   systemic
disorders,  joint swelling and chronic fatigue.  The Company  has
opposed  plaintiffs' claims in these lawsuits and  other  similar
actions and continues to deny any wrongdoing or liability of  any
kind.  In addition, the Company believes that a substantial  body
of  medical  evidence exists which indicates that  silicone  gel-
filled  implants  are not causally related to any  of  the  above
ailments.   Numerous  studies in the past few  years  by  medical
researchers  in North America and Europe have failed  to  show  a
definitive  connection between breast implants and disease  (some
critics,  however,  have  assailed  the  methodologies  of  these
studies).   Nevertheless,  plaintiffs  continue  to  contest  the
findings  of  these  studies, and more than 15,000  lawsuits  and
claims alleging such ailments are pending against the Company and
its subsidiaries.  The volume of lawsuits has created substantial
ongoing  litigation and settlement expense, in  addition  to  the
inherent  risk of adverse jury verdicts in cases not resolved  by
dismissal or settlement.

Proposed Class Action Settlement

      As a result of the burdens imposed by the litigation on the
Company's  management  and operations,  the  substantial  ongoing
litigation  and  settlement  expense,  the continuing  litigation
risks, and the adverse perception held by the financial community
arising out of the litigation, the Company is seeking approval of
a   mandatory   ("non-opt-out")  class  action  settlement   (the
"Settlement") under Federal Rule of Civil Procedure  23(b)(1)(B).
As   described  below,  the  Company  is  seeking  through   this
settlement to resolve all claims arising from McGhan Medical  and
CUI  breast implants implanted before June 1, 1993, a cutoff date
which   encompasses   substantially  all   domestically-implanted
silicone gel-filled implants.

Background of Class Settlement Negotiations

     The Settlement has its genesis in negotiations begun in 1994
with  the  Plaintiffs' Negotiation Committee ("PNC"), a committee
of  the national Plaintiffs' Steering Committee ("PSC") appointed
by  Judge Sam C. Pointer, Jr. of the United States District Court
for  the  Northern District of Alabama (the "Court") to represent
the  interests  of  plaintiffs in multi-district  breast  implant
litigation  transferred  to the Court  for  pretrial  proceedings
under the federal multi-district transfer statute.  At that  time
the  Company  entered  into  an agreement  to  participate  in  a
proposed  industry-wide  class  action  settlement  (the  "Global
Settlement") of domestic breast implant litigation and petitioned
the  Court  to  certify  the  Company's  portion  of  the  Global
Settlement  as  a  mandatory class under Federal  Rule  of  Civil
Procedure 23(b)(1)(B), meaning that claimants could not elect  to
"opt  out" from the class in order to pursue individual  lawsuits
against  the  Company.  Negotiations with the PNC over  mandatory
class  treatment were tabled, however (and the Company's petition
consequently   not   ruled  upon),  when  an  unexpectedly   high
projection of current disease claims and the subsequent  election
of  Dow  Corning Corporation to file for protection under federal
bankruptcy laws necessitated a substantial restructuring  of  the
Global Settlement.

     In late 1995, the Company agreed to participate in a scaled-
back Revised Settlement Program ("RSP") providing for settlement,
on  a  non-mandatory basis, of claims by domestic  claimants  who
were  implanted  before January 1, 1992 with silicone  gel-filled
implants manufactured by the Company's McGhan Medical subsidiary,
and  who  met  specified disease and other criteria.   Under  the
terms  of  the RSP, 80% of the settlement costs relating  to  the
Company's McGhan Medical implants were to be paid by 3M and Union
Carbide  Corporation, with the remaining 20% to be  paid  by  the
Company.  However, because the RSP did not provide a vehicle  for
settling claims other than by persons who elected to participate,
and because of continuing uncertainty about the Company's ability
to fund its obligations under the RSP in the absence of a broader
settlement  also  resolving breast implant lawsuits  against  the
Company and its CUI subsidiary which would not be covered by  the
RSP,  the  Company continued through 1996 and 1997  to  negotiate
with the PNC in an effort to reach a broader resolution through a
mandatory  class.  The PNC was advised in these  negotiations  by
its  consultant,  Ernst & Young LLP, which at the  PNC's  request
conducted  reviews  of the Company's finances and  operations  in
1994 and again in 1996 and 1997.

      On  April  2,  1998, the Company and the  Settlement  Class
Counsel  executed a formal settlement agreement (the  "Settlement
Agreement"),  resolving, on a mandatory, non-opt-out  basis,  all
claims  arising  from  McGhan Medical  and  CUI  breast  implants
implanted  before  June  1, 1993.  The Settlement  Agreement  was
submitted to the Court for preliminary approval on May 21, 1998.

Terms and Conditions of the Settlement Agreement

       Under   the   Settlement  Agreement,  $31.5   million   of
consideration, consisting of $3 million of cash,  $3  million  of
common  stock  and  $25.5  million  principal  amount  of  a   6%
subordinated note will be deposited in a court supervised  escrow
account approximately 90 days after preliminary approval  by  the
Court.  The parties will then request the Court to authorize  the
mailing  of  a  notice of the proposed Settlement  to  all  class
members and schedule a fairness hearing, which would probably  be
held in the fourth quarter of 1998.

      In  the  event  the  Court grants  final  approval  of  the
Settlement,  the  consideration held in the escrow  account  will
then  be  released,  once the Court's final  order  becomes  non-
appealable,   to  the  court-appointed  settlement   office   for
distribution  to  the  plaintiff class,  and  the  $25.5  million
subordinated  note  will  mature  and  become  payable  in  cash.
However,  this payment will not become due before April 30,  1999
or  90 days after the Court's final order becomes non-appealable,
whichever is later.  In the event the subordinated note is  still
outstanding on September 1, 1999, the interest rate will increase
to 11%.

      The Settlement Agreement covers all domestic claims against
the  Company  and its subsidiaries by persons who were  implanted
with McGhan Medical or CUI silicone gel-filled or saline implants
before June 1, 1993, including claims for injuries not yet  known
and  claims by other persons asserting derivative recovery rights
by  reason  of personal, contractual or legal relationships  with
such  implantees.  The Settlement is structured as  a  mandatory,
non-opt-out  class settlement pursuant to Federal Rule  of  Civil
Procedure  23(b)(1)(B),  and is modeled  on  similarly-structured
mandatory   class  settlements  approved  in  the   1993   Mentor
Corporation breast implant litigation, and more recently  in  the
1997 Acromed Corporation pedicle screw litigation.

      On  June  2,  1998  the Court issued  a  preliminary  order
approving  the  Settlement.  The Court also issued an  injunction
staying all pending breast implant litigation against the Company
(and  its subsidiaries) in federal and state courts.  The Company
believes  that  this stay will alleviate a significant  financial
and  managerial  burden which these lawsuits had  placed  on  the
Company.

       The   application   for  preliminary   approval   included
evidentiary  submissions by both the Company and  the  plaintiffs
addressing  requisite  elements for certification  and  approval,
including  the existence, absent settlement, of a "limited  fund"
insufficient to respond to the volume of individual  claims,  and
the fairness, reasonableness and adequacy of the Settlement.

      The  Settlement  is  subject to  a  number  of  conditions,
including:

      1.    Extinguishment of the Company's Obligations under the
RSP.  The Settlement is conditioned on the entry by the Court  of
an  order,  pursuant  to  the  default  provisions  of  the  RSP,
extinguishing  the  Company's  obligations  under  the  RSP   and
restoring  RSP  participants' previously existing rights  in  the
litigation  system against the Company and its subsidiaries.   On
May 19, 1998, the Court issued such an order.

      2.   Certification of Settlement Class.  The Settlement  is
conditioned  on  the Court's certification of  a  new  settlement
class  pursuant  to Federal Rule of Civil Procedure  23(b)(1)(B).
The  parties  are requesting such certification  under  the  same
theory  applied in the Mentor Corporation and Acromed Corporation
settlements,  namely that the Company is a "limited  fund"  whose
resources,  absent a mandatory class settlement, are insufficient
to respond to the volume of claims pending against it.

     3.   Court Approval of Settlement. The Settlement is subject
to  judicial  approval  of  its terms  and  conditions  as  fair,
reasonable  and  adequate under Federal Rule of  Civil  Procedure
23(e),  a determination which takes into account such factors  as
the  nature of the claims, the arms' length negotiation  process,
the  recommendation of approval by experienced class counsel, and
the defendant's ability to pay.

      4.    Resolution of 3M Contractual Indemnity  Claims.   The
settlement is conditioned on resolution of claims asserted by  3M
under  a  contractual indemnity provision which was part  of  the
August  1984  transaction in which the Company's  McGhan  Medical
subsidiary  purchased 3M's plastic surgery business.  To  resolve
these claims, on April 16, 1998 the Company and 3M entered into a
provisional agreement (the "3M Agreement") pursuant  to which the
Company will seek to obtain  releases,  conditional  on  judicial
approval of the Company's settlement and favorable resolution  of
any  appeals, of claims asserted against 3M in lawsuits involving
breast  implants manufactured by the Company's McGhan subsidiary.
The  3M  Agreement provides for release of 3M's indemnity  claim,
again  conditional  on judicial approval of  the  Settlement  and
favorable  resolution  of any appeals,  upon  achievement  of  an
agreed  minimum number of conditional releases for  3M.   The  3M
Agreement  requires that this condition be met or  waived  before
notice of the Settlement is given to the class.

     Under the terms of the 3M Agreement, the Company will pay $3
million  to  3M  once  the Court grants  final  approval  of  the
Settlement;  except that no payment will become  due  any  sooner
than  April 30, 1999 or 90 days after the Court's final order  on
the Settlement becomes non-appealable, whichever is later.

      Under the terms of the 3M Agreement, after the indemnity to
3M   is   released,  the  Company  will  assume  certain  limited
indemnification  obligations to 3M beginning in  the  year  2000,
subject to a cap of $1 million annually and $3 million in total.

      5.    State  Law  Contribution and Indemnity  Claims.   The
Settlement  is  conditioned on entry by the  Court  of  an  order
finding  the  Settlement  to have been made  in  good  faith  and
barring  joint  tortfeasor claims for contribution and  indemnity
arising  under  state law (e.g., claims against  the  Company  by
other  manufacturers,  suppliers or physicians  also  sued  by  a
settling  class member).  As additional protection  against  such
claims  in  states  whose  laws do  not  provide  for  a  bar  of
contribution  and  indemnity claims upon  determination  of  good
faith  settlement, the Settlement also requires class members  to
reduce  any judgments they may obtain against such third  parties
by  the  amount necessary to eliminate such parties' contribution
or indemnity claims against the Company under state law.

     6.   U.S. Government and Private Carrier Claims.  The United
States  government  and private insurance  carriers  are  seeking
reimbursement of medical services provided to class members.  The
Company is presently in discussions with these parties concerning
the  terms  of  such  settlement.  While the  Settlement  is  not
conditioned   on   resolution  of  these  claims,   the   Company
anticipates  that it, together with Settlement Class Counsel  and
the  Court,  if appropriate, will be able to resolve  the  issues
raised  by the U.S. government and the private insurance carriers
before the mailing date of the class notice.

      7.    Favorable  Resolution of Appeals.  The Settlement  is
conditioned on favorable resolution of any appeals which  may  be
taken from the final judgment approving the Settlement or from an
interim  stay order.  In the event the Settlement is  disapproved
on  appeal,  all of the escrowed settlement funds,  plus  accrued
interest,  will  be returned to the Company, and  the  litigation
will  be restored to the status which existed prior to any  class
settlements.

      8.    Allocation  and Distribution of Settlement  Proceeds.
Following  the  procedures adopted in the Mentor Corporation  and
Acromed  Corporation mandatory class settlements, the  Settlement
leaves  allocation  and  distribution of the  proceeds  to  class
members  to  later proceedings to be conducted by the Court,  and
contemplates that the Court may appoint subclasses or adopt other
procedures  in  order to ensure that all relevant  interests  are
adequately   represented  in  the  allocation  and   distribution
process.

Class Settlement Approval Process and Timetable

      Following the issuance by the Court of a preliminary  order
on  June  2, 1998, the settlement approval process is anticipated
to proceed in several stages, as follows:

      1.    Satisfaction of the Condition under the 3M Agreement.
Within   60  days  after  the  date  of  the  preliminary   order
(extendable  to  90  days at the Company's option),  the  Company
needs  to obtain an agreed minimum number of conditional releases
for  3M  pursuant  to  the terms of the 3M  Agreement.   At  3M's
option,  that condition can be modified or waived.   The  Company
anticipates satisfying that condition by August 1, 1998.

      2.    Notice  to  the  Class.  Following conditional  class
certification and preliminary approval of the Settlement, as well
as satisfaction (or waiver) of the condition in the 3M Agreement,
the  parties  will  give notice to class members  advising  class
members  of  the Court's preliminary order and advising  them  of
their  opportunity  to be heard in support of  or  opposition  to
final  certification and approval.  The parties expect that class
notice will be given approximately 30 days after satisfaction  of
the condition in the 3M Agreement.  Prior to the distribution  of
the  class notice, the Company must deposit in a court supervised
escrow account $31.5 million of consideration, consisting  of  $3
million of cash, $3 million of common stock (to be  valued  based 
on the average closing bid price for the Company's  common  stock
during the  period of June 10,  1998  through July 8, 1998),  and  
$25.5 million principal  amount of  a 6% subordinated  note.  The 
Company  anticipates  that  this  deposit  will  occur  prior  to 
September 30, 1998.

      The  parties'  proposed form of notice  provides  a  60-day
deadline  for  class members to submit comments,  objections,  or
requests  to  intervene  and be heard, with  a  final  settlement
hearing scheduled approximately 20 days thereafter.  Assuming the
Court  adopts  this schedule, the final settlement hearing  would
occur  in the latter part of the fourth quarter of 1998,  barring
further unanticipated delays.

      3.    Hearing on Final Certification and Approval.  At  the
hearing  on  final  certification and approval,  the  Court  will
consider any comments and objections received from class  members
as  well as any further evidence and legal argument submitted  by
the   parties  or  interveners  concerning  issues  relevant   to
certification and approval, including the Company's status  as  a
"limited fund" and fairness, reasonableness and adequacy  of  the
Settlement.   Assuming  a  favorable  outcome,  the  Court   will
thereafter issue a final order and judgment certifying the  class
as  a  mandatory  class  under Federal Rule  of  Civil  Procedure
23(b)(1)(B),  approving the settlement, enjoining  class  members
from  litigation of settled claims, and barring contribution  and
indemnity claims to the extent permitted under state law.

Ongoing Litigation Risks

     Although the Company expects the Settlement, if approved, to
end  as  a  practical matter its involvement in the current  mass
product  liability  litigation in the United States  over  breast
implants,  there  remain  a number of ongoing  litigation  risks,
including:

      1.    Non-Approval of Settlement.  The Settlement Agreement
requires all parties to use their best efforts to obtain approval
of the Settlement by the Court and on appeal.  However, there can
be  no  assurance that the Court will approve the  Settlement  or
that  a  decision approving it will be affirmed on  appeal.   The
approval  decision turns on factual issues which may be contested
by  class  members  opposing  the  Settlement,  and  additionally
implicates  a  number  of legal issues that  neither  the  United
States  Supreme  Court  nor  the federal  appellate  courts  have
definitely  ruled  upon.   While courts have  approved  similarly
structured  mandatory class settlements in the Mentor Corporation
and  Acromed  Corporation cases, neither of those  decisions  was
subjecteultimate  outcome of the approval process or  the appeals  
process in the event any appeals of the Settlement are filed in a 
timely manner.

      2.    Collateral  Attack.   As in all  class  actions,  the
Company   may  be  called  upon  to  defend  individual  lawsuits
collaterally  attacking  the  Settlement  even  if  approved  and
affirmed  on appeal.  However, the typically permissible  grounds
for   such   attacks  (in  general,  lack  of   jurisdiction   or
constitutionally  inadequate class notice or representation)  are
significantly  narrower  than  the grounds  available  on  direct
appeal.

      3.    Non-Covered Claims.  The Settlement does not  include
several  categories of breast implants which the Company will  be
left  to  defend in the ordinary course through the tort  system.
These  include lawsuits relating to breast implants implanted  on
or  after  June  1, 1993, and lawsuits in foreign  jurisdictions.
The  Company  regards lawsuits involving post-June 1993  implants
(predominantly  saline-filled  implants)  as  routine  litigation
manageable  in  the ordinary course of business.  Breast  implant
litigation outside of the United States has to date been minimal,
and  the  Court  has  with minor exceptions rejected  efforts  by
foreign plaintiffs to file suit in the United States.

      The  Company does not currently have any product  liability
insurance.   Depending  on  the availability  and  cost  of  such
insurance,  the Company may in the future seek to obtain  product
liability insurance.

     The Company plans to obtain cash needed to fund the proposed
settlement  from a combination of new senior secured debt and the
proceeds to be  received upon the exercise of $13,900 of warrants
to  purchase  common  stock  (which  were  issued  to  the senior
Noteholders in  July 1997 in  anticipation of  this  event).  The 
Company  has  discussed   its   financing  plans  with  Appaloosa 
Management, L.P. and its affiliates, who  are jointly the largest 
holders of  the 11%  senior  secured  convertible  notes.   Those 
entities have indicated their  willingness  to  provide  the  new 
financing,  subject  to   negotiation   of  satisfactory   terms, 
covenants and legal documentation, including  amendments  to  the 
existing indenture  and  a  new  maturity  date  for the existing 
senior debt.  Such  new  financing  may  entail  the  issuance of 
warrants  or convertible securities which could  be  dilutive  to 
existing holders of the Company's common stock.

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

          Not applicable.

ITEM 5.   MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED
          STOCKHOLDERS MATTERS.

           The  Company's common stock trades on the OTC Bulletin
Board  under  the  symbol IMDC.  The Company's Common  Stock  was
delisted  rom the Nasdaq SmallCap Market effective June 11, 1997.
On June 30, 1998, the Company had 827 stockholders of record. The
Company's common stock price at the close of business of June 30,
1998 was $7.875 per share.

           The table below sets forth the high and low bid prices
of   the  Company's  common  stock  for  the  periods  indicated.
Quotations reflect prices between dealers, do not reflect  retail
markups,  markdowns  or  commissions,  and  may  not  necessarily
represent actual transactions.  No cash dividends have been  paid
by the Company during such periods.
                                    High         Low
          1995
          1st Quarter               $ 4-1/4      $ 3
          2nd Quarter               $ 4-1/8      $ 3
          3rd Quarter               $ 14         $ 3
          4th Quarter               $ 12-5/8     $ 8-1/4
          1996
          1st Quarter               $ 13-1/4     $ 8-3/4
          2nd Quarter               $ 12-5/8     $ 8
          3rd Quarter               $ 10-1/2     $ 7-1/8
          4th Quarter               $ 9-7/8      $ 6-3/8
          1997
          1st Quarter               $ 8-3/8      $ 5-1/8
          2nd Quarter               $ 7-3/8      $ 2-3/4
          3rd Quarter               $ 7-7/8      $ 4-1/4
          4th Quarter               $ 5-1/4      $ 3
          1998
          1st Quarter               $ 5-3/4      $ 3-1/8
          2nd Quarter               $ 9-7/16     $ 5
         

      The  Company  has never paid a cash dividend.   It  is  the
present  policy of the Company to retain earnings to finance  the
growth   and  development  of  its  business  and  to  fund   the
Settlement.  Therefore, the Company does  not  anticipate  paying
cash dividends on its common stock in the foreseeable future.

      On  June 10, 1997, the Company announced that its Board  of
Directors  unanimously  adopted a Stockholder  Rights  Plan  (the
"Plan")  and has declared a dividend granting to its stockholders
the  right  to  purchase  (the "Right") for  each  share  of  the
Company's  common  stock, $.01 par value,  one  Common  Share  (a
"Common Share") at an initial price of $80.  The record date  for
the  Rights  was June 13, 1997.  The Plan is designed to  protect
stockholders  from  various abusive takeover  tactics,  including
attempts to acquire control of the Company at an inadequate price
which   would   deny  stockholders  the  full  value   of   their
investments.  The Rights are attached to the Common Shares of the
Company  and are not exercisable.  They become detached from  the
Common Shares and become immediately exercisable after any person
or  group of persons becomes the beneficial owner of 15% or  more
of  the Common Shares (with certain exceptions) or 10 days  after
any  person  or group of persons publicly announces a  tender  or
exchange offer that would result in the same beneficial ownership
level.

ITEM 6.   SELECTED FINANCIAL DATA.

      The  following table summarizes certain selected  financial
data  of  the Company and should be read in conjunction with  the
related  Consolidated Financial Statements  of  the  Company  and
accompanying Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                      Years Ended December 31,
                              (In 000's except share and per share data)
<S>                             <C>         <C>          <C>           <C>       <C>       <C>
                                1997        1996         1995          1994      1993      1992
Income Statement Data:

Net sales                       $106,381    $93,372      $81,626       $80,385   $74,498   $64,343

Operating income(loss)            (4,322)    (4,419)      (9,190)        3,578     5,680      (612)(3)

Litigation settlement            (28,150)        --           --            --    (9,152)       --

Gain on sale of subsidiaries          --         --           --            --     4,159        --

Income (loss) before income
  tax expense (benefit)          (39,696)    (8,165)      (8,576)        5,007       449       436

Income tax expense (benefit)       1,881(2)   3,214(1)    (1,683)        2,261     4,533     1,807
                                 --------------------------------------------------------------------------------------------
Net income (loss)               $(41,577)  $(11,379)     $(6,893)       $2,746   $(4,084)  $(1,371)
                                 ============================================================================================
Net income (loss) per share
 of common stock basic
 and diluted(4)                  $ (4.97)   $ (1.46)     $ (0.91)       $ 0.37   $ (0.52)  $ (0.17)
                                 =======================================================================================
Weighted average common
 shares outstanding                8,371,399      7,811,073        7,544,335            7,410,591     7,850,853     7,873,504
                                 ============================================================================================
</TABLE>
(1) Includes a write-off of domestic deferred tax assets of $2,006.
(2) Includes a provision of $1,000 for the conversion of foreign
intercompany accounts to equity.
(3) Includes write-offs of assets for product inventory aggregating $1,974.
(4) The earnings per share amounts for all years presented have been restated  
to comply with the provisions of Statement of Financial Accounting Standards
No. 128, "Earnings per Share".

<TABLE>
<CAPTION>

                                    At December 31,
                          (in 000's except share and per share data)

<S>                           <C>       <C>        <C>            <C>        <C>         <C>
                              1997      1996       1995           1994       1993        1992
Balance Sheet Data:

Working capital (deficiency)  $ 6,460   $ 4,510    $(5,548)       $ 1,088    $(2,317)    $(1,922)  

Total assets                   58,842    65,912     50,385         47,810     37,857      29,093

Long term debt, net of
 current installments          23,574    34,607        583             51        235         454

Subordinated long term debt,
 related party                  8,813        --         --             --         --          --

Stockholders' (deficiency)
 equity                       (46,689)  (9,908)     (1,704)         4,479      1,347       6,546

Stockholders' (deficiency) equity
 per share of common stock    $ (5.58) $ (1.27)     $ (.23)        $ 0.60     $ 0.17      $ 0.83

Dividends paid                     --       --          --             --         --          --
                               =============================================================================================
</TABLE>



ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATION

This  Annual  Report contains certain forward-looking  statements
within the meaning of Section 27A of the Securities Act of  1933,
as  amended,  and Section 21E of the Securities Exchange  Act  of
1934,  as  amended, which are intended to be covered by the  safe
harbors  created  thereby.   Investors  are  cautioned  that  all
forward-loking   statements  involve   risks   and   uncertainty,
including  without  limitation, the ability  of  the  Company  to
continue  its  expansion  strategy,  changes  in  costs  of   raw
materials,  labor,  and employee benefits,  as  well  as  general
market conditions, competition and pricing.  Although the Company
believes  that  the  assumptions underlying  the  forward-looking
statements   contained  herein  are  reasonable,   any   of   the
assumptions could be inaccurate, and therefore, there can  be  no
assurance  that the forward-looking statements included  in  this
Annual  Report  will  prove  to be accurate.   In  light  of  the
significant   uncertainties  inherent  in   the   forward-looking
statements  included  herein, the inclusion of  such  information
should not be regarded as a representation by the Company or  any
other person that the objectives and plans of the Company will be
achieved.

Results of Operations

    The Company's financial performance in each of the four years
ended  December  31, 1997, 1996, 1995 and 1994 was  strongly  and
adversely  impacted  by: 1) the costs of improving  manufacturing
practices and policies in accordance with FDA regulations; 2) the
costs of addressing the breast implant litigation; 3) investments
made in international markets to increase the Company's sales and
marketing presence; and 4) the cost of investing in research  and
development,  particularly  in  new  products  and  technologies.
Based  on  these factors, although sales have grown during  those
periods,  expenses  have  grown at a significantly  higher  rate.
Consequently,    the   Company's   financial   performance    has
deteriorated in each of 1994 through 1997.

    Recent  developments.  In January 1998 a new management  team
was  selected, and in April 1998 a settlement agreement providing
for  a  mandatory,  non-opt-out class action  settlement  of  the
breast  implant  litigation  was  announced.   Consequently,  the
Company  has  taken a $28.2 million charge to the 1997 results of
operations  for  costs  directly   related  to   the   litigation 
settlement.   The  Company  believes  an  additional  charge   of 
approximately $5 million will be incurred in 1998 (to reflect the
costs of a proposed restructuring plan).

    Summary  financial table.  Set forth below is a  table  which
shows  the  individual  components of the  Company's  results  of
operations,  both in dollars (in thousands) and as a  percent  of
net  sales; and including the percentage increase (decrease) from
the prior year.

<TABLE>
<CAPTION>

<S>                    <C>               <C>               <C>                    <C>               
                       1997              1996              1995                   1994
(000s)                            %                 %                 %                      %
                                 Inc.              Inc.              Inc.                   Inc.

Sales                  106,318   14%      93,372   14%      81,626    2%            80,385   8%
                                                            
Cost of Goods Sold      37,643    7%      35,295   17%      30,156   15%            26,264   14%
                                     
Gross Profit            68,738   18%      58,077   13%       51,470   (5%)          54,121    5%
As a % of sales             65%               62%                63%                    67%

Marketing               30,349   19%      25,569    9%       23,434   19%           19,719   17%
As a % of sales             29%               27%                29%                    25%

G&A                     33,848    8%      31,234    (5%)      32,834  21%           27,099    5%
As a % of sales             32%               33%                40%                    34%

R&D                      8,863    56%      5,693   30%        4,392   18%            3,724   21%
As a % of sales              8%                6%                 5%                     5%

Operating expenses      73,060    17%     62,496    3%       60,660   20%           50,543   (8%)
As a % of sales             69%               67%                74%                    63%

Operating income/       (4,322)           (4,419)            (9,190)                 3,578
(loss)

Litigation settlement   28,150                --                 --                     --

</TABLE>

     Sales.    While  the  Company's  revenues  are  subject   to
adjustments  due  to changes in price or volume  of  units  sold,
revenue increases from 1994 through 1997 were primarily a  result
of increased volume.

   Sales in the United States accounted for 63%, 65%, 68% and 74%
of  total  net  sales in 1997, 1996, 1995 and 1994, respectively.
The low growth rate in sales in 1995 was due to a shortage of raw
materials and production capacity, because of cash flow  problems
in  paying suppliers and the diversion of manufacturing  time  to
satisfy FDA-mandated process validation procedures.  In all other
years,  the  increase  in sales was due to higher  sales  in  the
Company's various product lines.

    International sales accounted for 37%, 35%, 32%  and  26%  of
total  net  sales  in  1997, 1996, 1995 and  1994,  respectively.
These increases were due to market expansion in various countries
around  the  world,  as the Company invested  in  new  sales  and
distribution infrastructure in Europe, Central and South  America
and Asia/Pacific.

   Cost of goods sold.  The largest factors in the variation from
year  to year in cost of goods sold as a percentage of net  sales
is the cost of raw materials and the yield of finished goods from
the  Company's manufacturing facilities.  The yield  of  finished
goods has fluctuated by approximately 20 percentage points during
1994  through  1997.  Given the limited number  of  suppliers  of
medical-grade   silicone  raw  materials  and   components,   the
Company's ability to control raw materials cost is often limited.
The  Company's  use of internationally-manufactured raw materials
from one of its foreign subsidiaries may  also help  to stabilize 
and reduce cost of goods sold in the future.  While  the  Company 
seeks  to  manufacture  its  finished  goods  as  efficiently  as 
possible,  its  products are  subject  to  stringent quality  and
control  standards  (including those  agreed upon  with the FDA), 
which  can periodically have a significant impact on the yield of 
finished  goods.  The new  management  team  has  set targets  to 
improve the gross profit margin.

    Marketing expenses.  The largest factor in the variation from
year  to  year  in  marketing expenses  is  the  success  of  the
Company's  start-up  businesses  in  various  foreign  countries.
Depending on the country and the potential market demand for  the
Company's products, the Company may choose to begin operations in
a  new  territory  through either a third party medical  products
distribution partner or through its own sales force.   In  either
situation,  extra financial support may be necessary for  several
years  while the Company establishes itself in a new  market  and
generates  sufficient  sales  to  earn  a  profit  in  that   new
territory.  However, in the future the new management team  plans
to  control  the introduction of new products and the entry  into
new  markets  so as to minimize negative impacts  on  results  of
operations.

     General  and  administrative  expenses.   G&A  expenses  are
affected   by   overall   headcount  in  various   administrative
functions,  and the legal, accounting and other outside  services
which  were necessary to defend the Company in the breast implant
litigation and negotiate a settlement. Also, in 1997 G&A expenses
were affected  by  the  legal  and  accounting costs necessary to 
complete the audits for 1996 and 1997. The  number  and cost  for 
employees engaged in  general  and  administrative  positions has 
increased in each of 1994 through 1997, at  a  rate  greater than 
the increase in  gross  profit  dollars.  The legal, warranty and 
administrative costs relating  to  the breast  implant litigation 
was $4.7 million, $3.5 million,  $2.5 million and $3.9 million in 
1997, 1996, 1995 and 1994, respectively.  The new management team 
has set targets  to control and reduce general and administrative 
expenses throughout the Company.

     Research  and  development  expenses.   R&D  expenses   have
increased  from  1994  through  1997  to  reflect  the  Company's
commitment to develop new and advanced medical products. In prior
years increased costs were due to the Company's efforts to obtain
FDA  PMA  approvals.  The increase in  1996  and  1997  was   due 
primarily to R&D expenses at the Company's BioEnterics subsidiary 
in connection with the development of obesity products.  Research 
and development expenses at Bioenterics were $1.5 million in 1996
and $2.4 million in 1997.  In 1998 the new management team  began
considering various options to sell a portion of its interest  in
this  business. Accordingly, it is anticipated that R&D  expenses
for  the rest of the Company's operations will not exceed  6%  of
sales in the coming few years.

    Interest  expense.  In 1994 and 1995, the Company funded  its
operations   primarily   through   operating   cash   flow   and,
accordingly,  did  not incur significant net  interest  expenses.
Net  interest expense of approximately $4.3 million in  1996  was
due  to  the net carrying costs on the $35 million of 11%  senior
secured convertible notes issued in January 1996, as well  as  an
accounting charge of $1.4 million associated with the issuance of
common  stock  under  an  agreement  to  waive  certain  covenant
defaults.  Net interest expense of approximately $6.2 million  in
1997  was  impacted by the incurrence of penalty charges totaling
$1.6 million due to the Company's failure to provide an effective
registration  statement  to the holders  of  the  4%  convertible
debentures  issued earlier that year, offset by  a  reduction  in
interest expense due to the retirement of $15 million of the  11%
senior secured convertible notes with the proceeds that had  been
held  in  an  escrow account.  Additionally, in 1997 the  Company
accrued  (but did not pay) interest on approximately $9.9 million
of  10.5% subordinated notes which were incurred primarily in the
later half of the year to fund its working capital needs.

   Foreign currency translation loss.  Historically the Company's
subsidiaries   have   incurred  significant  intercompany   debts
(totaling  more  than  $44 million for  non-U.S.  subsidiaries),
which  are  eliminated in the consolidated financial  statements.
However,  those  intercompany debts,  which  are  denominated  in
various foreign currencies, give rise to translation adjustments.
In  1998  the  new management team evaluated various alternatives
for   reducing  the  Company's  foreign  currency  exposure,  and
concluded  to  convert  the non-U.S. intercompany  debts  to  the
capital  of  the respective subsidiaries.  The fourth quarter  of
1997  includes a provision of $1 million for income tax  expense,
which will be incurred as those conversions occur.

    Operating  Loss.   Excluding the expenses  arising  from  the
settlement  of the breast implant litigation, the Company  had  a
loss from operations in each of 1995 through 1997.  The aggregate
operating  loss for those periods was approximately $18  million.
In  1998  the  new management team has undertaken a restructuring
program which is designed to reverse the Company's poor operating
performance  and  significantly improve the  Company's  operating
margin.   Included  in  this program is a  planned  reduction  in
headcount, discontinuance or sale of unprofitable product  lines,
improved asset management (especially receivables and inventory),
and  reduced  general and administrative expenses.  There  is  no
assurance that the Company will be successful in these efforts.

Financial Condition

     Liquidity.    The   Company's  liquidity  has   deteriorated
significantly  in  each  of  the last  four  years  resulting  in
substantial  doubt about the Company's ability to continue  as  a
going  concern.   Pre-tax losses aggregated $19.4 million  during
1994 through 1997, excluding the effect of the $32 million charge
to  1997  results of operations arising primarily from the  $28.2
proposed  settlement of the breast implant litigation.  Net  cash
used  for operating activities totaled $23.6 million during  1994
through  1997.  Beginning in 1998, after the appointment  of  new
management, steps were taken to reverse these trends, and for the
first  five  months of 1998 the Company succeeded in achieving  a
small, positive cash flow from operations.  As the reductions  in
cost  of  goods, G&A and R&D outlined above begin to take effect,
the   Company  believes  it  can  improve  its  cash  flow   from
operations.

   Among the primary factors which contributed to the significant
negative cash flow from operations during 1994 through 1997 were:
1)  operating losses; 2) the increase in inventory ($4.5  million
in  1997, $3.9 million in 1996, and $2.5 million in 1995),  which
was  necessary  to support anticipated higher sales (particularly
in  new  international  markets), to overcome  negative  customer
perceptions due to past product shortages, and to supply  certain
customers with consignment inventory in order to meet competitive
practices; and 3) capital expenditures aggregating $16.7  million
from   1994   through  1997  which  exceeded   depreciation   and
amortization  by $9.5 million during that period.   Consequently,
at  various  times  during 1995, 1996 and 1997  the  Company  had
serious  liquidity problems, resulting in delayed  payments  with
respect  to  vendors, licensors  and  accrued payroll ie. payroll 
taxes. The Company is presently current in the payment of payroll
taxes and has reached an agreement  with  the  IRS during 1997 to 
settle all prior unpaid taxes.

    The Company's working capital improved from 1995 through 1997 
due  to cash  retained  from  outside  financings.  The Company's 
working  capital  as of  December 31, 1997 was approximately $6.5
million.    The    Company's    accumulated   deficit   increased 
significantly in  1997 due  to the  charge  for  the  anticipated 
breast implant litigation settlement. In reducing the accumulated 
deficit, the  Company is  developing a  restructuring  plan which 
will  reduce  excess personnel as  well  as facilities  and other 
contractual obligations. These actions together with the plans to 
reduce inventory will enable the Company  to  improve its working
capital in the future.

   The Company has funded its cash needs through a series of debt
and equity transactions, including:

    $35  million  of  proceeds  received  upon  the  issuance  of
    11% senior secured convertible notes, due March 31, 1999,  in
    a  private  placement transaction in January 1996.   Interest 
    is payable quarterly  as  of March 31, June 30, September 30, 
    and December 31.  Of  that  amount, $14.8  million was placed 
    in an  escrow  account  to  be  released   within  one  year, 
    following  court  approval  of  a mandatory non-opt-out class 
    settlement of the breast implant litigation. Inasmuch as that 
    condition  was  not  met,  in  July 1997 the Company returned 
    those escrowed funds to  the  senior Noteholders, in exchange 
    for warrants to purchase  $13.9  million  of  common stock at 
    $8.00 per share (subsequently  adjusted  to $7.50 per share). 
    The conversion price of the 11%  senior  secured  convertible 
    notes was originally $10 per share. In  July 1997 the Company 
    and the senior Noteholders agreed  to change  the  conversion 
    price to $5.50 per share at 103%  of the principal balance as
    part of an  overall restructuring  plan  which  included  the  
    waiver of past defaults. At June  5, 1998, $19.6  million  of 
    the 11%  senior notes was outstanding.

    $3 million of proceeds received in June 1996 upon the sale of 
    344,333 shares of common stock in a Regulation  S transaction 
    to non-U.S. investors, at a price of $8.7125  per share.

    $5.7 million  of proceeds received in January  1997 upon  the  
    issuance of $6.2 million principal amount  of  4% convertible
    debentures,   due   January  30,   2000.  Interest is payable
    quarterly  as  of  March  30,  June  29,   September  29  and  
    December 30. These debentures were convertible at 85%  of the 
    market price of the common stock less  an additional discount 
    of 6%. As of April 6, 1998, all of such debentures  had  been 
    converted into an aggregate of  1,724,017  shares  of  common 
    stock at prices ranging from $2.60 to  $4.44  per  share.  No 
    debentures are currently outstanding.

    $9.9  million  of  proceeds received  periodically from  April 
    1997 until January 1998  from  an  entity  affiliated with the  
    Company's former chairman. That indebtedness is denoted as the 
    Company's 10.5% subordinated notes.  By  the terms  of the 11% 
    senior secured convertible notes, the 10.5% subordinated notes
    are   junior  in  right  of  payment   and   liquidation  and, 
    accordingly, no interest or  principal payments  can  be  made  
    with  respect  thereto  without  the  consent  of  the  senior 
    Noteholders.  The Company plans to negotiate the conversion of 
    the 10.5% subordinated notes into common stock sometime during 
    1998,   although  there  can  be  no  assurance  that  such  a 
    transaction will occur or  that the  price  or  timeframe  for 
    any  such  conversion  will  be  favorable  to  the  Company's 
    existing stockholders.

      The  Company   is seeking to establish a domestic  revolving
line  of  credit.  Under  the  terms of  the  11%  senior  secured
convertible notes,  the Company has leeway for up to $5 million of
such financing. The Company's  Dutch  subsidiary  has  a l ine  of 
credit with a major  Dutch  bank, currently totaling $860,000. The
line  of  credit  is  collateralized  by  the accounts receivable,
inventories and certain other assets of that subsidiary.

      The   Company  currently  has a  net  operating  loss  (NOL)
carryforward for  financial  statement  purposes  of approximately 
$55 million.  NOL  carryforwards for  federal  income tax purposes  
of  approximately $14.0 million are available  to  offset  federal 
taxable income through the year 2012 . The cost of the  litigation  
settlement  discussed  in  Note  14  to  the financial  statements 
for  1996  and  1997 will  be  deductible  for federal income  tax 
purposes at such time as the consideration is deposited in a court 
supervised escrow account and  accordingly will  increase the  NOL 
carryforward  for  federal income tax purposes by the same amount.

      The  difference  between  the NOL for  financial  reporting
purposes and federal income tax purposes results from differences
in  accounting  for  allowance  for returns,  accrued  litigation
settlements  and  other accrued liabilities  and  allowances  not
currently deductible for tax purposes. The Company has provided a
100%  valuation  allowance on deferred tax  assets  substantially
resulting from the NOL carryforwards discussed above.

     Currently, the Company is not repatriating funds to the U.S.
operations.  Payments by the foreign subsidiaries to the domestic
subsidiaries are only for the payment of purchases of product.

     The  Company   does   not   currently  enter  into   hedging 
transactions to control foreign currency exchange rate risk.  New 
management is investigating this with plans to have a program  in 
place by year end.

      Breast Implant Settlement.  Under the terms of the proposed
settlement of the breast implant litigation, the Company will  be
obligated  to pay an aggregate of $34.5 million to the plaintiffs
and  3M  at the later of (x) April 30, 1999 or (y) 90 days  after
the  Court's  final order becomes non-appealable.   That  payment
will  consist  of $31.5 million of cash (which will  be  used  to
retire  the  $25.5 million note to the plaintiffs which  will  be
placed  in escrow prior to the mailing of notice of the  proposed
settlement) and $3 million of common stock, to be valued based on
the  average  closing  bid  price of  the  Company's common stock
during the period of June 10, 1998 through July 8, 1998.

      The  Company plans to obtain the cash needed  to  fund  the
proposed settlement from a combination of new senior secured debt
and  the  proceeds  to  be received upon the  exercise  of  $13.9
million  of warrants to purchase common stock (which were  issued
to  the  senior Noteholders in July 1997 in anticipation of  this
event).   The  Company  has discussed its  financing  plans  with
Appaloosa  Management, L.P. and its affiliates, who  are  jointly
the  largest holders of the 11% senior secured convertible notes.
Those  entities have indicated their willingness to  provide  the
new  financing,  subject  to negotiation of  satisfactory  terms,
covenants  and legal documentation, including amendments  to  the
existing  indenture  and a new maturity  date  for  the  existing
senior  debt.   Such  new financing may entail  the  issuance  of
warrants  or  convertible securities which could be  dilutive  to
existing holders of the Company's common stock.

      The  costs  of defending the breast implant litigation-both
past  and future-vastly exceed the Company's financial resources.
Absent  the  successful  completion of  the  settlement  of  this
litigation through the vehicle of a mandatory non-opt-out  class,
management  believes  that  the Company  would  not  be  able  to
continue  as a going concern.  Although the Company is optimistic
that  the proposed settlement agreement can be completed  on  the
terms  and within the timetable negotiated and announced in April
1998, there can be no assurance in this regard.

      The  Company's continuation as a going concern is dependent
upon   its  ability  to  obtain  financing  for  the  non-opt-out
settlement agreement and its ability to generate sufficient  cash
flows to meet its obligations on a timely basis.  The Company  is
actively  seeking financing and anticipates doing a restructuring
which  the  Management  believes  will ultimately  enable them to 
attain profitability.

Capital Expenditures

     Expenditures on  property  and equipment  approximated  $5.1 
million in  1997  compared to $4 million in 1996 and $4.7 million
in 1995.  The majority of the  expenditures in each year were for
building  improvements  and  equipment   to  increase  production
capacity  and efficiency.   Working  capital is  expected to fund
capital expenditures in 1998.

Significant Fourth Quarter Adjustments

     During  the  fourth  quarter  of the  year ended December 31, 
1997,  the  Company  recorded   significant   adjustments   which 
decreased   income  by  $29.7 million.  The  adjustments  were to 
recognize the latest developments in the Company's breast implant 
litigation  and  the anticipated settlement as well as income tax
expense for the foreign subsidiaries.

     During  the  fourth  quarter  of the  year ended December 31, 
1996, the Company recorded significant adjustments which decreased
income by $3.8 million. The adjustments were to increase the write
off  of  the  deferred  tax  assets of  $2  million, to   increase 
provision for product  returns by  $0.9  million  and  to increase 
provision for product liability and record  royalty expenses under 
international royalty agreements.

     Significant  adjustments  to the  fourth quarter for the year
ended December 31, 1995 included a reduction of income tax expense
by $4.2 million, an increase in the provision for returns by  $1.4
million and an increase to compensation expense of  $0.9 milion to
record bonuses and compensation payments declared after year end.

     Significant  adjustments to  the fourth  quarter for the year
ended December 31, 1994 included a reduction of income tax expense
by  $3.4  million, increases  in  various  reserves  for  returns,
inventory  obsolescence  and  product  liability  of $1.9 million,
decrease  in  rent expense  of  $0.8 million, increase  in royalty 
income of $0.3 million and an increase in compensatio n expense of
$0.2 million.

     The Company's  new  management  has  installed procedures to 
monitor  quarterly  financial  statements  to  ensure  there  are 
minimal significant fourth quarter adjustments.

Impact of Inflation

      The  Company  believes that inflation has had a  negligible
effect  on  operations  over the past four  years.   The  Company
believes that it can offset inflationary increases in the cost of
materials  and  labor  by increasing sales prices  and  improving
operating efficiencies.

Impact of Year 2000

     Management  has initiated a company-wide program to  prepare
the  Company's  computer systems and applications  for  the  year
2000,  as  well  as  identify critical third  parties  which  the
Company  relies  upon  to operate its business  to  assess  their
readiness for the year 2000.  The year 2000 issue arises from the
widespread  use of computer programs that rely on two-digit  date
codes to perform computations for decision-making functions.   At
this time, management expects that all such modifications will be
completed  on  a  timely  basis  and  that  the  costs  of  these
modifications  will  not have a material adverse  effect  on  the
Company's results of operations, financial position or liquidity.
There  can  be  no assurance that the systems of other  companies
which  the  Company's systems rely upon will be timely converted,
or that such failure to convert by another company would not have
a material adverse effect on the Company's systems and results of
operations.

New Accounting Pronouncements

     In  June  1997,  the  Financial Accounting  Standards  Board
issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and  Related Information", ("SFAS No. 131") which supersedes SFAS
No.   14,   Financial  Reporting  for  Segments  of  a   Business
Enterprise.   SFAS  No.  131 establishes standards  for  the  way
public  companies report information about operating segments  in
annual  financial statements and requires reporting  of  selected
information   about  operating  segments  in  interim   financial
statements  issued to the public.  It also establishes  standards
for disclosures regarding products and services, geographic areas
and major customers.  SFAS No. 131 defines operating segments  as
components   of   a   company  about  which  separate   financial
information is available that is evaluated regularly by the chief
operating  decision  maker in deciding how to allocate  resources
and in assessing performance.

     Statement  of  Financial  Accounting  Standards   No.   130,
"Reporting  Comprehensive Income," ("SFAS No.  130")  established
standards for reporting and display of comprehensive income,  its
components  and  accumulated balances.  Comprehensive  income  is
defined  to include all changes in equity except those  resulting
from  investments by owners and distributions to  owners.   Among
other disclosures, SFAS No. 130 requires that all items that  are
required  to be recognized under current accounting standards  as
components  of  comprehensive income be reported in  a  financial
statement  that  is displayed with the same prominence  as  other
financial statements.

     Both  SFAS  Nos.  130  and 131 are effective  for  financial
statements  for  periods beginning after December  15,  1997  and
require comparative information for earlier years to be restated.
The  adoption  of  these  standards is not  expected  to  have  a
material  effect on the Company's financial position, results  of
operations or financial statement disclosures.

ITEM 8(a).     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          See Exhibit (a)(1)

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND DISCLOSURE.

      On March 11, 1998, the Company announced the resignation of
its  outside  auditor, Coopers & Lybrand, L.L.P. as of  March  6,
1998.  All developments and related issues in connection with the
resignation  of  Coopers & Lybrand, L.L.P. are contained  in  the
Form  8-K Current Report of the Company, as filed with the S.E.C.
on  March 16, 1997, and amended by the Form 8-K/A filed with  the
S.E.C.  on  March  27,  1998, which are  incorporated  herein  by
reference.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The  following  table  sets forth  the  names  of  the
directors  and  executive officers of the Company, together  with
their  ages  and  positions.  There are no  family  relationships
among these directors and officers.

     Name                     Age  Position

     Richard G. Babbitt       72   Chairman of the Board,
                                   President and Chief Executive Officer

     Ilan K. Reich            43   Executive Vice President, Director

     Tom K. Larson, Jr.       62   Vice President, Finance and Administration
                                   Chief Financial Officer

     Jeffrey J. Barber        38   Executive Vice President

     Harrison E. Bull, Esq.   57   Director

     Jim J. McGhan            45   Director

     Richard Wm. Talley       54   Director

     John E. Williams, M.D.   76   Director


     Richard G. Babbitt

           Mr. Babbitt has been the President and Chief Executive
     Officer of INAMED since January 22, 1998, and Chairman since
     February  6,  1998.  Mr. Babbitt also serves as Chairman  of
     DNA Technologies, Inc. since June 1997 and President of B.I.
     Advisors.   He  has been associated with Ben Hogan  Company,
     B.I.  Industries,  American  Safety  Equipment  Corporation,
     Welsh Manufacturing and Medical Supply Company in C.E.O. and
     Board positions.

     Ilan K. Reich

           Mr.  Reich  has  been Executive Vice President  and  a
     director of INAMED since January 22, 1998.  Until that  time
     he  was  a  partner  with the New York law  firm  of  Olshan
     Grundman  Frome & Rosenzweig LLP, specializing in  corporate
     and securities law. From 1988 to June 1996, Mr. Reich served
     in  various  senior  executive  positions  with  public  and
     private   companies   controlled  by  a  private   investor,
     including  Western Publishing Group, Inc., the largest  U.S.
     publisher  of  children's books, and Rabco Health  Services,
     Inc.,  a  distributor  of medical/surgical  products  and  a
     wholesale  pharmaceutical company.  Mr. Reich is a  graduate
     of Columbia College and Columbia Law School, and a member of
     various bar associations.

     Tom K. Larson, Jr.

           Tom  K.  Larson, Jr. joined INAMED as Chief  Financial
     Officer  effective  April 1, 1998.   Mr.  Larson  has  broad
     experience in financial and operating management in  a  wide
     range  of  industries.   He is a 16-year  veteran  of  Xerox
     Corporation,  with  financial and  administrative  roles  in
     their telecommunications business, research laboratories and
     special  products  division, which  included  aerospace  and
     medical  diagnostic products.  He has also been the  CFO  of
     Revell Corporation (a Rothchilds company), a maker of  scale
     model  kits, and for the past eight years was the CFO  of  a
     privately held specialty bed manufacturer.  Mr. Larson has a
     B.A.  degree  from Allegheny College, a Masters degree  from
     the  University of Pittsburgh and has attended  programs  at
     Harvard Business School.

     Jeffrey J. Barber

          Mr. Barber has served as an Executive Vice President of
     INAMED  since March 31, 1997.   Mr. Barber originally joined
     the  Company  in  1992  as Worldwide Marketing  Manager  for
     McGhan  Medical Corporation.  He later became Vice President
     of Business Development and Marketing.  In 1996 he became  a
     vice  president  of the Company responsible  for  marketing,
     business  development and international development.   Prior
     to   his  employment  with  the  Company,  Mr.  Barber  held
     positions  with  Chiron Corporation and  Baxter  Healthcare,
     Inc.

     Harrison E. Bull, Esq.

          Mr. Bull has served as a Director of INAMED since March
     31, 1997.  Mr. Bull is the senior partner of the law firm of
     Bull,  Cohn  and Associates and its predecessor since  1974.
     The  firm is primarily a general practice law firm in  Santa
     Barbara,   California,  with  general  emphasis   on   civil
     litigation.   Mr. Bull has been a member of the Florida  Bar
     since 1973, the California Bar since 1974 and is a member of
     the  American  Bar Association.  Mr. Bull  was  admitted  to
     practice  before the Supreme Court of the United  States  in
     1984.

     Jim J. McGhan

          Mr. McGhan has been  a  Director of INAMED  since March
     31, 1997.  Mr. McGhan  previously  served  INAMED  as  Chief
     Operating Officer from  January  22,  1998  through June 24,
     1998 and as President from  March 31,  1997  to  January 22,
     1998.  Mr. McGhan also served  McGhan Medical Corporation as
     Chief Executive Officer from  April 1996 until June 24, 1998
     and as President from August 1992 to April 1996.

     Richard Wm. Talley

           Mr.  Talley  has served as a Director of INAMED  since
     March  31,  1997.  Mr. Talley is currently a principal  with
     Talley,  King & Co., a NASD broker-dealer based  in  Irvine,
     California,  specializing in private placement transactions,
     which  he founded in 1993.  Prior to that he founded Talley,
     McNeil & Tormey, Inc., a regionally focused investment bank,
     which  merged in 1990 into a larger investment banking  firm
     in  Irvine, California.  Prior to that he opened  the  Santa
     Barbara office of Shearson Lehman Brothers and managed  that
     location until the merger with American Express Corporation.
     Mr.  Talley  is also the founder and Director  of  CentraCan
     Inc.,  the previous MRI division of HealthCare Merger Corp.,
     providing  cancer-related diagnostic and treatment  services
     in  Central America.  He is a graduate of the University  of
     California  Santa  Barbara  and  holds  an  MBA from Cornell 
     University.

     John E. Williams, M.D.

           Dr.  Williams has served as a Director of INAMED since
     March   31,  1997.   Dr.  Williams  is  a  plastic   surgeon
     specializing  in  aesthetic surgery.  He  is  currently  not
     practicing.   He  is  a Diplomate of the American  Board  of
     Plastic  Surgery and is a Fellow of the American College  of
     Surgeons.  He is a member of the American Society of Plastic
     and  Reconstructive  Surgeons and the  American  Society  of
     Aesthetic  Plastic Surgeons. He holds memberships in  state,
     national and international plastic surgery societies and  is
     a  member  of the American Medical Association and  the  Los
     Angeles County Medical Association.

     ITEM 11.  EXECUTIVE COMPENSATION.

           The  Company  established a Compensation Committee  of
     the Board of Directors in March 1997 consisting of the three
     non-management  directors: Messrs. Bull and Talley  and  Dr.
     Williams.

          The Company believes that executive compensation should
     be  closely  related to the value delivered to shareholders.
     This belief has been adhered to by developing incentive  pay
     programs which provide competitive compensation and  reflect
     Company   performance.    Both  short-term   and   long-term
     incentive compensation are based on Company performance  and
     the value received by shareholders.

     Compensation Make-Up and Measurement

           The Company's executive compensation is based on three
     components, base salary, short-term incentives and long-term
     incentives,  each of which is intended to serve the  overall
     compensation philosophy.

     Base Salary

            The  Company's  salary  levels  are  intended  to  be
     consistent  with  competitive pay  practices  and  level  of
     responsibility, with salary increases reflecting competitive
     trends,  the  overall financial performance of the  Company,
     general  economic conditions as well as a number of  factors
     relating   to  the  particular  individual,  including   the
     performance   of   the   individual  executive,   level   of
     experience, ability and knowledge of the job.

     Short-Term Incentives

          At the start of each fiscal year, target levels of pre-
     tax  profits  and revenue growth are established  by  senior
     management  of the Company during the budgeting process  and
     approved  by  the  Board of Directors.  An  incentive  award
     opportunity  is established for each employee based  on  the
     employee's  level of responsibility, potential contribution,
     the  success  of  the  Company and  competitive  conditions.
     Generally,  approximately  25% of an  executive's  potential
     bonus   relates  to  his  or  her  achievement  of  personal
     objectives  and 75% relates to the Company's achievement  of
     its pre-tax profit and revenue goals.

          The employee's actual award is determined at the end of
     the  fiscal year based on the Company's achievement  of  its
     pre-tax  profit and revenue goals and an assessment  of  the
     employee's individual performance, including achievement  of
     personal  objectives.  This ensures that  individual  awards
     reflect  an  individual's  specific  contributions  to   the
     success of the Company.

     Long-Term Incentives

           Stock  options are granted from time to time to reward
     key  employees  for  their   contributions.   The  grant  of
     options  is  based  primarily on a key employee's  potential
     contribution  to  the  Company's growth  and  profitability.
     Options are currently granted at an option  price  of  $1.45
     per share and vest immediately upon granting.

     Employment, Severance, and Change of Control Agreements

          On January 23, 1998, Donald K. McGhan resigned as Chief
     Executive Officer of the Company.  Subsequently, on February
     11, 1998, Mr. McGhan resigned  as  Chairman  of the Board as
     well as a Director, positions he had held  since 1985.  From
     time to time, as requested  by the  Company's  new Chairman, 
     Mr. McGhan continues to provide the benefit of his knowledge,
     ideas and  experience to  the  Company  in the  non-director
     capacity of Chairman Emeritus.

           On  January  23,  1998, the Company  entered  into  an
     Employment  Agreement with Richard G. Babbitt (the  "Babbitt
     Agreement"), whereby the Company engaged Mr. Babbitt to  act
     as President and Chief Executive Officer for a term of three
     years. Under the terms of the Babbitt Agreement, Mr. Babbitt
     is  to  be paid $400,000 per year. In addition, Mr.  Babbitt
     received an Executive Officer Warrant granting him the right
     to  purchase 400,000 shares of the Company's Common Stock at
     a price of $3.525 per share.

           On  January  22,  1998, the Company  entered  into  an
     Employment   Agreement  with  Ilan  K.  Reich  (the   "Reich
     Agreement"), whereby the Company engaged Mr. Reich to act as
     Executive  Vice President for a term of three  years.  Under
     the  terms of the Reich Agreement, Mr. Reich is to  be  paid
     $400,000  per  year.  In  addition, Mr.  Reich  received  an
     Executive  Officer Warrant granting Mr. Reich the  right  to
     purchase 400,000 shares of the Company's Common Stock  at  a
     price of $3.95 per share.

           Mr. Babbitt and Mr. Reich (each, a "Covered Employee")
     have  each  entered into an Employee Severance Agreement  (a
     "Severance Agreement") with the Company. Under the terms  of
     the Severance Agreement, and for a term of three years, upon
     a  change  in  control of the Company  (as  defined  in  the
     Severance Agreement), and the subsequent termination of  the
     Covered Employee, such Covered Employee will be entitled  to
     certain benefits, including, among other things, a lump  sum
     severance payment equal to 300% of annual base salary and  a
     cash  payment in lieu of shares of Common Stock issuable  to
     the  Covered  Employee upon severance of certain outstanding
     options.   The  payments under the Severance  Agreement  are
     subject  to a "gross-up" provision whereby the Company  will
     pay  an  additional  amount  to  the  Covered  Employee   to
     counteract  the effect of any excise tax under Section  4999
     of the Internal Revenue Code.

            On  April  1,  1998,  the  Company  entered  into  an
     Employment  Agreement with Tom K. Larson, Jr.  (the  "Larson
     Agreement"), whereby the Company engaged Mr. Larson  to  act
     as Chief Financial officer for a term of three years.  Under
     the  terms of the Larson Agreement, Mr. Larson is to be paid
     $165,000  per  year.   In addition, Mr. Larson  received  an
     option  to  acquire  20,000 shares of the  Company's  Common
     Stock  at a price of $1.45 under an existing employee  stock
     option  plan.  Mr. Larson also received an Executive Officer
     Warrant  granting  Mr. Larson the right to  purchase  25,000
     shares of the Company's Common Stock at a price of $5.00 per
     share.

     On June 24, 1998, Jim J. McGhan's employment with the Company
     and its subsidiaries  was  terminated.  Jim J. McGhan was the
     Chief Operating Officer of  the  Company, and he is Donald K.
     McGhan's  son.  Jim  J. McGhan  continues  as a member of the
     Board of Directors.

     Stock Option Plans

            In  1984,  McGhan  Medical  Corporation  adopted   an
     incentive  stock option plan (the "1984 Plan").   Under  the
     terms  of the 1984 Plan, 100,000 shares of its common  stock
     were  reserved for issuance to key employees at  prices  not
     less  than  the market value of the stock at  the  date  the
     option  is  granted.  In 1985, INAMED Corporation agreed  to
     substitute  options to purchase its shares (on a two-for-one
     basis)  for those of McGhan Medical Corporation.  No options
     were granted under the 1984 Plan during 1997, 1996, 1995  or
     1994.

            In   1986,  the  Company  adopted  an  incentive  and
     nonstatutory stock option plan (the "1986 Plan").  Under the
     terms of the 1986 Plan, 300,000 shares of common stock  have
     been  reserved  for issuance to key employees.   No  options
     were granted under the 1986 Plan during 1997, 1996, 1995  or
     1994.

            In 1993, the Company adopted a Non-Employee Director
     Stock Option Plan which authorized the Company to issue up to 
     150,000 shares of common stock to directors who are not
     employees of or consultants to the Company and who are thus
     not eligible to receive stock option grants under the Company's
     stock option plans.  Pursuant to this Plan, each non-employee
     director is automatically granted an option to purchase 5,000
     shares of common stock on the date of his or her inital 
     appointment or election as a director, and an option to 
     purchase an additional 5,000 shares of common stock on each
     anniversary of his or her initial grant date providing he or
     she is still serving as a director.  The exercise price per 
     share is the fair market value per share on the date of grant.
     At December 31, 1997 30,000 options were granted under this 
     plan.  The Company recorded stock compensation expense of
     $51,000 for the year ended December 31, 1997.

     Stock Award Plan

           In  1987, the Board of Directors adopted a stock award
     plan  (the  "1987  Plan")  whereby  300,000  shares  of  the
     Company's  common  stock  were  reserved  for  issuance   to
     selected  employees  of  the Company.   The  1987  Plan  was
     adopted  to  further the Company's growth,  development  and
     financial  success  by  providing additional  incentives  to
     employees  by  rewarding  them  for  their  performance  and
     providing  them the opportunity to become owners  of  common
     stock of the Company, and thus to benefit directly from  its
     growth,  development  and  financial  success.   Shares  are
     awarded  under the 1987 Plan to employees as selected  by  a
     committee  appointed by the Board of Directors to administer
     the  plan.  Stock awards totaling 180,388 have been  granted
     as of December 31, 1997.  No stock awards were granted under
     this plan during 1997 and 1996.

     
<TABLE>
<CAPTION>

     Summary Compensation Table

                The  following table sets forth information  with
     respect  to  the  compensation of  the  Company's  executive
     officers  as of December 31, 1997 for services in  executive
     capacities to the Company in 1994, 1995, 1996 and 1997:

                                                                                    Long-Term
                                                                                  Compensation
                        Annual Compensation
                                                                                     Stock
                                                                                   Options/SARs  
                                                                  Other                              
                                                                 Annual              Granted        All Other
 Name and Principal Position     Year    Salary     Bonus     Compensation          (in Shares)     Compensation (6)   
<S>                              <C>     <C>        <C>       <C>                   <C>             <C> 
Donald K. McGhan (1)             1997    $ 27,763   $     __    $       __           $      __         $ 20,289  
Chairman, Chief Executive        1996       6,427         --            --                  --           32,994
Officer and President            1995     299,676         --            --                  --               __   
                                 1994     253,187         --            --                  --               --

Michael D. Farney (2)            1997      56,250         --            --                  --            3,573
Chief Executive Officer          1996     225,000         --            --                  --           19,302
And Secretary                    1995     245,165    714,277            --                  --               --
                                 1994     207,354         --            --                  --               __

Jim J. McGhan (3)                1997     218,077      3,462       180,000                  --              536
Chief Operating Officer          1996          --         --       330,000                  --               --
                                 1995          --         --       260,000                  --               --
                                 1994          --         --       314,000                  --               --

Thomas R. Pilholski (4)          1997      17,692         --            --                  --            3,726
Chief Financial Officer

Jeffrey J. Barber (5)            1997     120,462      9,162            __                  __            5,536

_________________
</TABLE>


(1)  Mr.  McGhan  was  Chairman from 1985 to  February  6,  1998,
     President  from  January  1987  to  March  1997,  and  Chief
     Executive Officer from April 1987 until June 1992 and  March
     31,  1997  until January 22, 1998.  Mr. McGhan is  currently
     Chairman Emeritus, and no longer has any executive or  board
     responsibilities with the Company.

(2)  Mr. Farney resigned as Chief Executive Officer and Secretary
     as of March 31, 1997.

(3)  Mr. McGhan served as Chief Operating  Officer  from  January
     22,  1998 through June 24, 1998 and served as President from 
     March  31, 1997 to January  22, 1998.  Prior  to  his direct 
     employment with the Company,  he  served  as a consultant to 
     one   of  the   Company's   subsidiaries,   McGhan   Medical 
     Corporation. Consulting  fees paid  to Mr. McGhan  in  prior
     years are listed in other annual compensation.  Mr. McGhan's
     employment with the Company ceased on June 24, 1998.

(4)  Mr.  Pilholski  commenced employment  with  the  Company  on
     November 19, 1997 and departed on March 3, 1998.

(5)  Mr.  Barber  has  served as Executive Vice  President  since
     March 31, 1997.

(6)  Fringe  benefits including automobile allowance,  relocation
     allowances and group term insurance.





Table  of  Stock Option Exercises in 1997 and 1996  and  Year-End
Option Values

                                          No. of            Value of
                      No. of              Securities        Unexercised In-
                      Shares              Underlying        the-Money
                      Acquired  Value     Unexercised       Options at
Name                  on        in $      Options at        12/31/97 ($)
                      Exercise  Realized  12/31/97 ($)      Exercisable/
                                          Exercisable/      Unexercisable
                                          Unexercisable
Jeffrey J. Barber          -        __       10,000/0          $30,000/$0
     


COMPARISON OF TOTAL SHAREHOLDER RETURN

       The   following  graph  sets  forth  the  Company's  total
shareholder return as compared to the NASDAQ Market Index and the
Standard  & Poor's Medical Products and Supplies Index  over  the
period from December 31, 1992 until December 31, 1997.  The total
shareholder return assumes $100 invested at December 31, 1992  in
the  Company's  Common  Stock, the NASDAQ Market  Index  and  the
Standard & Poor's Medical Products and Supplies Index.   It  also
assumes reinvestment of all dividends.


                          12/92   12/93   12/94   12/95   12/96   12/97
                               

INAMED Corporation        100     105     124     338     324     157

Nasdaq Stock Market       100     115     112     159     195     240
(U.S.)
S&P Health Care (Medical  100      76      90     153     175    219
Products & Supplies)

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

      The following table sets forth information as to the shares
of common stock owned as of June 5, 1998, by (i) each person who,
insofar  as  the Company has been able to ascertain, beneficially
owned  more than five percent of the outstanding common stock  of
the Company, (ii) each director, (iii) each of the officers named
in  the Summary Compensation Table and (iv) all the directors and
officers as a group.  Unless otherwise indicated in the footnotes
following the table and subject to community property laws  where
applicable, the person(s) as to whom the information is given had
sole  voting and investment power over the shares of common stock
shown as beneficially owned.

Name of Beneficial            
Owner or Identity of Group     Number of Shares    Percent of Class
Group

Appaloosa Management LP        4,593,355(1)        33.10%
26 Main Street
Chatham,  NJ 07928

Donald K. McGhan               1,330,203(2)        13.13%
3800 Howard Hughes Parkway
Suite 1800
Las Vegas, Nevada 89109

Oracle Partners, L.P.          1,195,891(3)        10.64%
712 Fifth Avenue, 45th Floor
New York, New York 10019

HBK Investments L.P. et al          583,928          5.77%
777 Main Street, Suite 2750
Forth Worth, Texas 76102

Richard G. Babbitt(4)                  0(5)

Ilan K. Reich(4)                  75,000(6)         0.74%

Tom K. Larson, Jr.(4)             20,000(7)

Jim J. McGhan(4)                       0

Jeffrey J. Barber(4)              12,000            0.12%

Harrison E. Bull(4)               35,000(8)         0.84%

Richard Wm. Talley(4)             60,000(8)         1.09%

John E. Williams(4)               35,000(8)         0.84%

All officers and                 237,000            3.63%
directors as a group     


(1)  Includes  2,660,341 shares of which Appaloosa Management  LP
     has  beneficial  ownership by reason  of  the  ownership  of
     $14,205,714 aggregate principal amount of the Company's  11%
     Secured  Convertible Notes due 1999. Also includes 1,098,214
     shares of common stock issuable upon exercise of warrants to
     purchase common stock at $7.50 per share.

(2)  Includes 207,310 shares of common stock owned by Shirley  M.
     McGhan,  the wife of Donald K. McGhan, to which  Mr.  McGhan
     disclaims  beneficial ownership; 107,985 shares owned  by  a
     corporation  of  which Mr. McGhan is the  chairman;  197,280
     shares owned by a limited partnership of which Mr. McGhan is
     the  general partner; and 173,453 shares owned by a  limited
     liability  corporation of which Mr. McGhan is  the  managing
     member.  Also includes 8,571 shares of common stock issuable
     upon  exercise of warrants to purchase common stock at $7.50
     per share.

(3)  Includes  749,091 shares of which Oracle Partners  L.P.  has
     beneficial   ownership  by  reason  of  the   ownership   of
     $4,000,000  aggregate principal amount of the Company's  11%
     Secured  Convertible Notes due 1999. Also  includes  375,000
     shares of common stock issuable upon exercise of warrants to
     purchase common stock at $7.50 per share.

(4)  The  address of these officers and directors is 3800  Howard
     Hughes Parkway, Suite 900, Las Vegas, Nevada  89109

(5)  Does not include a warrant to purchase 400,000 shares, which
     begins to vest in 1999.

(6)  Based  on  a  warrant to purchase stock at $5.51 per  share,
     which is currently exercisable.  Does not include a warrant to
     purchase 400,000 shares, which begins to vest in 1999.

(7)   Does not include a warrant to purchase 25,000 shares, which
      begins to vest in 1999.

(8)  Includes  director options and warrants which are  currently
     exercisable.  Does not include a warrant to purchase  50,000
     shares, which begins to vest in 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     From April 1997 until January 1998, International Integrated
Industries, LLC, ("Industries") an entity affiliated with Mr. 
Donald K.  McGhan, the  Company's  former  Chairman, Chief
Executive  Officer  and President  and 13% stockholder, lent the 
Company an aggregate  of $9.9 million, of which $8.8 million is 
included in liabilities at December 31, 1997.  That indebtedness 
is denoted as the Company's 10.5% subordinated notes.  By the 
terms of the 11% senior secured convertible  notes, the 10.5% 
subordinated notes are junior in right of payment and liquidation 
and, accordingly, no interest or principal  payments can be made 
with respect thereto without the consent of the senior 
Noteholders. Interest expense of $386,000 was accrued in the 1997
income statement with respect to those notes but has not been 
paid to date.

After Industries began to loan those monies to the Company, Mr.
McGhan represented to the Board of Directors that those funds
were derived from personal financial resources.  Recently, 
however, in connection with Mr. McGhan's unsuccessful efforts to
negotiate a payment schedule for the interest and principal of
that loan, the Company learned that approximately two-thirds of
the monies lent by Industries to the Company were in fact derived
from loans made to Industries by Medical Device Alliance, Inc.
("MDA").  MDA is a private company formed by Mr. McGhan in 1995 
to develop and market various products for use in ultrasonic 
liposuction; the Company believes that approximately $20 
million has been raised to date by MDA from various outside
investors through private placement transactions.  The Company
does not believe those outside investors were apprised of the
loans from MDA to Industires; importantly, however, the 
investment of those funds in a medical device company such as
INAMED was apparently within the permitted scope of the proposed
use of funds which existed when those investors made their
investment.  The Company's Board of Directors has been advised
by legal counsel: (a) that the Company has no responsibility
whatsoever to the outside investors in MDA for the monies which
Mr. McGhan arranged to loan to Industries, which in turn were
loaned by Industries to the Company, and (b) that Mr. McGhan,
as the controlling person of both MDA and Industries at the 
times those loans were made, is solely responsible to the
outside investors in MDA for his actions with respect to
those monies.

     The  Company  plans   to negotiate  the  conversion of the 
10.5% subordinated  notes  into common  stock  sometime during 
1998, although  there  can  be  no assurance that such a 
transaction will occur or that the price or timeframe for any
such conversion will  be  favorable  to  the Company's  existing 
stockholders.

     In 1997, the Company entered into an agreement with Medical
Device  Alliance,  Inc.  ("MDA") to sell furniture,  artwork  and
equipment  which  the  Company was acquiring  through  a  capital
sublease  with  Wells Fargo Bank for a total  purchase  price  of
$300,001.   The  Company recorded a gain on  sale  of  assets  of
approximately  $9,000 in 1997 in respect to this transaction.  In
1997, the Company also entered into an agreement to sublease from
MDA on a month-to-month basis approximately 5,000 square feet  of
office  space  in  Las Vegas for $10,000 per  month.   Donald  K.
McGhan is the Chairman of MDA.

      In  1996  and  1997,  the Company performed  administrative
services for MDA and other related parties.  The Company believes
the value  of  these  services is approximately $150,000 and will
invoice MDA when  it  finishes  assessing  the  extent  of  those 
services.

      In 1997, the  Company  signed a distribution agreement with 
Lysonix Inc., a  subsidiary of MDA, to  sell  ultrasonic  surgery
equipment in the  European and  Latin American  regions.  Special 
incentive   discounts   were  offered  to  the  Company  for  the 
introduction  of  the  product  in 1997.  Net  sales in 1997 were
approximately  $300,000.  In  1998,  the  terms  of  the original
agreement were revised so that the Company would obtain the goods
on a consignment basis and not have an  obligation  with  Lysonix 
until the products were sold. This  agreement  and  its  revision 
have  been  reviewed  and  approved  by  the   Company's  current 
management.  

      Included in general and administrative expense on the income
statement  in 1997 and 1996 is $1.6 million and $1.5  million  in
aircraft  rental  expenses  paid to Executive  Flite  Management,
Inc., a company that is controlled by the family of Mr. Donald K.
McGhan.   No  signed contract exists and the Company  was  billed
based  on  its  usage.   The Company believes  that  such  rental
expenses are on substantially equivalent terms to that which  the
Company  could obtain from an unaffiliated third party.  In  1998
the Company discontinued the use of such corporate aircraft.

     Included in related party notes  receivable  in  1996  is  a
10.5%  note with McGhan Management Corporation, in the amount  of
$202,510.   Mr.  Donald K. McGhan and his wife are  the  majority
shareholders  of McGhan Management Corporation.   This  note  has
since been paid  in  its  entirety.   During  1996,  the  Company 
incurred  $253,000  for  flight   related  services  with  McGhan 
Management  Corporation.   During  1997,  the   Company  incurred 
$140,000 for flight related services.

     Included  in  assets in 1995 is an unsecured note receivable
from  Michael D. Farney, former Chief Executive Officer and Chief
Financial  Officer of the Company.  This receivable  approximated
$386,000  as  of December 31, 1995.  The note bears  interest  at
9.5%  per annum and was due in June 1996.  On March 4, 1996,  the
balance of the note was paid in full.

       Included in liabilities in 1995 are notes payable to McGhan
Management  Corporation, and Donald K.  McGhan.   These  payables
approximated $1,209,000 as of December 31, 1995.  The notes  bear
interest  at prime plus 2% per annum (10.5% per annum at December
31,  1995) and were due June 30, 1996, or on demand.  The Company
paid  the  balance  of these notes in full on January  25,  1996.
Also  included  in  liabilities in 1995  is  a  note  payable  of
approximately  $550,000 to Pedro Ramirez,  a  former  officer  of
INAMED,  S.A.,  in connection with the Company's  acquisition  of
this subsidiary.  Final payment on this note was made on February
6, 1996.

          During 1992, the Company entered into a rental arrangement
with  Star  America  Corporation for rental  of  an  aircraft  to
provide  air  transportation for corporate purposes.  Michael  D.
Farney   is  the  only  director  and  officer  of  Star  America
Corporation.  Rental expense for 1995 and 1994 was  $900,000  and
$888,000, respectively.  In February 1995, the Company received a
credit voucher from Star America Corporation for $800,000.   This
amount  represented payments made during 1994 in  excess  of  the
actual  rental  arrangement.  At December 31,  1995,  the  credit
voucher had an outstanding balance of $107,670.  This balance was
paid  to  the  Company on March 11, 1996.  The rental arrangement
with  Star America Corporation was terminated effective  December
31, 1995.
                             PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K.


(a)(1)  Consolidated Financial Statements:              Page(s)
        Report of Independent Accountants               F-1
        Consolidated Balance Sheets as of               F-2
          December 31, 1997, and 1996
        Consolidated Statements of Operations for the   F-4
          Years ended December 31, 1997 and 1996
        Consolidated Statements of Stockholders'        F-5
          Deficiency for the years ended December 31,
          1997 and 1996
        Consolidated Statements of Cash Flows for the   F-6
          Years ended December 31, 1997 and 1996
        Notes to Consolidated Financial Statements      F-8
        Consolidated Balance Sheet as of                F-35
          December 31, 1995
        Consolidated Statements of Operations for the   F-37
          Years ended December 31, 1995 and 1994
        Consolidated Statements of Stockholders'        F-38
          Equity (Deficit) for the years ended December
          31, 1995 and 1994
        Consolidated Statements of Cash Flows for the   F-39
          Years ended December 31, 1995 and 1994
        Notes to Consolidated Financial Statements      F-42


(a)(2)  Consolidated Financial Statement Schedules:
        Schedule II - Valuation and Qualifying Accounts F-63


      All  other  schedules  are  omitted  because  the  required
information  is  not  present  or  is  not  present  in   amounts
sufficient  to require submission of the schedule or because  the
information  required  is  given in  the  consolidated  financial
statements or notes thereto.

(a)(3)      Exhibits:
 Exhibit    Description
       3.1  Registrant's Articles of Incorporation.
            (Incorporated herein by reference to Exhibit 3.1 of
            the Company's Financial Report on Form 10-K for the
            year ended December 31, 1995 (Commission File No. 0-
            7101).)
       3.2  Registrant's By-Laws.  (Incorporated herein by
            reference to Exhibit 3.2 of the Company's Financial
            Report on Form 10-K for the year ended December 31,
            1995 (Commission File No. 0-7101).)
       4.1  Specimen Stock Certificate for INAMED Corporation
            Common Stock, par value $.01 per Share.
            (Incorporated herein by reference to Exhibit 3.3 of
            the Company's Financial Report on Form 10-K for the
            year ended December 31, 1995 (Commission File No. 0-
            7101).)
       4.2  Warrant Agreement dated as of  July 2, 1997 between
            INAMED Corporation and U.S. Stock Transfer
            Corporation.  (Incorporated herein by reference to
            Exhibit 10.6 of the Company's Current Report on Form
            8-K filed with the Commission on July 9, 1997.)
      10.1  Stock Option Plan, together with form of Incentive
            Stock Option Agreement and Nonstatutory Stock Option
            Agreement.  (Incorporated herein by reference to
            Exhibit 10.1 of the Company's Financial Report on
            Form 10-K for the year ended December 31, 1995
            (Commission File No. 0-7101).)
      10.2  Stock Award Plan.  (Incorporated herein by reference
            to Exhibit 10.2 of the Company's Financial Report on
            Form 10-K for the year ended December 31, 1995
            (Commission File No. 0-7101).)
      10.3  Non-Employee Directors' Stock Option Plan.
            (Incorporated herein by reference to Exhibit 10.3 of
            the Company's Financial Report on Form 10-K for the
            year ended December 31, 1995 (Commission File No. 0-
            7101).)
      10.4  Form of INAMED Corporation February 27, 1997 Letter
            Agreement. (Incorporated herein by reference to
            Exhibit 10.4 of the Company's Financial Report on
            Form 10-K for the year ended December 31, 1996.)
      10.5  Form of INAMED Corporation 4% Convertible Debenture.
            (Incorporated herein by reference to Exhibit 10.5 of
            the Company's Financial Report on Form 10-K for the
            year ended December 31, 1996.)
      10.6  Form of Registration Rights Agreement. (Incorporated
            herein by reference to Exhibit 10.6 of the Company's
            Financial Report on Form 10-K for the year ended
            December 31, 1996.)
      10.7  Form of Convertible Debenture Agreement.
            (Incorporated herein by reference to Exhibit 10.7 of
            the Company's Financial Report on Form 10-K for the
            year ended December 31, 1996.)
      10.8  Rights Agreement, dated as of June 2, 1997, between
            INAMED Corporation and U.S. Stock Transfer
            Corporation, which includes the form of Rights
            Certificate as Exhibit A and the Summary of Rights
            to Purchase Common Stock as Exhibit B.
            (Incorporated herein by reference to Exhibit 4.1 of
            the Company's Current Report on Form 8-K filed with
            the Commission on May 23, 1997.)
      10.9  Form of Letter from the Board of Directors of INAMED
            Corporation to Shareholders to be mailed with copies
            of the Summary of Rights appearing as Exhibit B to
            Exhibit 1 hereto.  (Incorporated herein by reference
            to Exhibit 99.2 of the Company's Current Report on
            Form 8-K filed with the Commission on May 23, 1997.)
     10.10  Amendment No. 1 to Rights Agreement, dated as of
            June 13, 1997, between INAMED Corporation and U.S.
            Stock Transfer Corporation. (Incorporated herein by
            reference to Exhibit 10.10 of the Company's
            Financial Report on Form 10-K for the year ended
            December 31, 1996.)
     10.11  Letter Agreement dated as of July 2, 1997 by and
            among INAMED Corporation, Appaloosa Management L.P.,
            and Donald K. McGhan.  (Incorporated herein by
            reference to Exhibit 10.1 of the Company's Current
            Report on Form 8-K filed with the Commission on July
            9, 1997.)
     10.12  Second Supplemental Indenture, dated as of July 2,
            1997, between INAMED Corporation and Santa Barbara
            Bank & Trust.  (Incorporated by reference to Exhibit
            10.2 of the Company's Current Report on Form 8-K
            filed with the Commission on July 9, 1997.)
     10.13  Letter of Representation of INAMED Corporation dated
            as of July 2, 1997 in favor of holders of 11%
            Secured Convertible Notes due 1999.  (Incorporated
            herein by reference to Exhibit 10.3 of the Company's
            Current Report on Form 8-K filed with the Commission
            on July 9, 1997.)
     10.14  Consent and Waiver of certain holders of 11% Secured
            Convertible Notes due 1999 dated as of July 8, 1997.
            (Incorporated herein by reference to Exhibit 10.4 of
            the Company's Current Report on Form 8-K filed with
            the Commission on July 9, 1997.)
     10.15  Letter executed by Appaloosa Investment Limited
            Partnership, Ferd L.P. and Palomino Fund Ltd.
            withdrawing the notice of default under the
            Indenture.  (Incorporated herein by reference to
            Exhibit 10.5 of the Company's Current Report on Form
            8-K filed with the Commission on July 9, 1997.)
     10.16  Amendment No. 2 to Rights Agreement, dated as of
            July 2, 1997, between INAMED Corporation and U.S.
            Stock Transfer Corporation.  (Incorporated herein by
            reference to Exhibit 10.7 of the Company's Current
            Report on Form 8-K filed with the Commission on July
            9, 1997.)
     10.17  Form of Note Purchase Agreement.  (Incorporated
            herein by reference to Exhibit 99.1 of the Company's
            Current Report on Form 8-K filed with the Commission
            on April 19, 1996.)
     10.18  Indenture between the Registrant and Santa Barbara
            Bank & Trust, as trustee.  (Incorporated herein by
            reference to Exhibit 99.2 of the Company's Current
            Report on Form 8-K filed with the Commission on
            April 19, 1996.)
     10.19  Form of 11% Secured Convertible Note due 1999.
            (Incorporated herein by reference to Exhibit 99.3 of
            the Company's Current Report on Form 8-K filed with
            the Commission on April 19, 1996.)
     10.20  Security Agreement between the Registrant and Santa
            Barbara Bank & Trust, as trustee.  (Incorporated
            herein by reference to Exhibit 99.4 of the Company's
            Current Report on Form 8-K filed with the Commission
            on April 19, 1996.)
     10.21  Guarantee and Security Agreement between certain
            subsidiaries of the Registrant and Santa Barbara
            Bank & Trust, as trustee.  (Incorporated herein by
            reference to Exhibit 99.5 of the Company's Current
            Report on Form 8-K filed with the Commission on
            April 19, 1996.)
     10.22  Guarantee Agreement between certain subsidiaries of
            the Registrant and Santa Barbara Bank & Trust, as
            trustee.  (Incorporated herein by reference to
            Exhibit 99.6 of the Company's Current Report on Form
            8-K filed with the Commission on April 19, 1996.)
     10.23  Loan Purchase Agreement between First Interstate
            Bank of California and Santa Barbara Bank & Trust,
            as trustee.  (Incorporated herein by reference to
            Exhibit 99.7 of the Company's Current Report on Form
            8-K dated filed with the Commission on April 19,
            1996.)
     10.24  Escrow Agreement between the Registrant and Santa
            Barbara Bank & Trust, as trustee.  (Incorporated
            herein by reference to Exhibit 99.8 of the Company's
            Current Report on Form 8-K filed with the Commission
            on April 19, 1996.)
     10.25  Escrow Agreement between the Registrant and Santa
            Barbara Bank & Trust, as trustee.  (Incorporated
            herein by reference to Exhibit 99.9 of the Company's
            Current Report on Form 8-K filed with the Commission
            on April 19, 1996.)
     10.26  Settlement Agreement dated April 2, 1998.
            (Incorporated herein by reference to Exhibit 10.26
            of the Company's Current Report on Form 8-K filed
            with the Commission on April 17, 1998.)
     10.27  Letter Agreement with Appaloosa Management, L.P.
            dated April 2, 1998. (Incorporated herein by
            reference to Exhibit 10.27 of the Company's Current
            Report on Form 8-K filed with the Commission on
            April 17, 1998.)
      21    Registrant's Subsidiaries
      27    Financial Data Schedule


     (b)  Reports on Form 8-K:

          Form 8-K dated March 19, 1997
          Form 8-K dated May 23, 1997
          Form 8-K dated June 11, 1997
          Form 8-K dated June 25, 1997
          Form 8-K dated July 9, 1997
          Form 8-K dated January 23, 1998
          Form 8-K dated February 11, 1998
          Form 8-K dated March 6, 1998 (as amended)
          Form 8-K dated April 1, 1998
          Form 8-K dated April 6, 1998

                           SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) of  the
Securities Exchange Act of 1934, Registrant has duly caused  this
report  to  be signed on its behalf by the undersigned, thereunto
duly authorized.

                       INAMED CORPORATION
    


July 7, 1998                 By: /s/ Richard G. Babbitt
                              Richard G. Babbitt, Chairman of the Board,
                              Chief Executive Officer and President

      Pursuant to the requirements of the Securities Exchange Act
of  1934,  this  report has been signed below  by  the  following
persons  on  behalf of Registrant in the capacities  and  on  the
dates  indicated:


 /s/ Richard G. Babbitt       Chairman of the Board, Chief
Richard G. Babbitt            Executive Officer, President
                              and Director (Principal
                              Executive Officer)

 /s/ Ilan K. Reich            Executive Vice President and
Ilan K. Reich                 Director

 /s/ Tom K. Larson, Jr.       Vice President, Finance and Administration
Tom K. Larson, Jr.            Chief Financial Officer (Principal Accounting 
                              Officer)

 /s/ Harrison E. Bull, Esq.   Director
Harrison E. Bull, Esq.

 /s/ Jim J. McGhan            Director
Jim J. McGhan

 /s/ Richard Wm. Talley        Director
Richard Wm. Talley

 /s/ John E. Williams, M.D.    Director
John E. Williams, M.D.

             STATEMENT OF MANAGEMENT RESPONSIBILITY


To the Stockholders of INAMED Corporation & Subsidiaries

The   Management  of  INAMED  Corporation  and  Subsidiaries   is
responsible for the preparation, integrity and objectivity of the
consolidated financial statements and other financial information
presented   in   this  report.   The  accompanying   consolidated
financial  statements  have  been  prepared  in  conformity  with
generally accepted accounting principles and properly reflect the
effects of certain estimates and judgements made by management.

The  Company's  management  maintains  an  effective  system   of
internal control that is designed to provide reasonable assurance
that   assets  are  safeguarded  and  transactions  are  properly
recorded   and   executed   in   accordance   with   management's
authorization.   The system is continuously monitored  by  direct
management review and the independent accountants.

The  Company's  consolidated financial statements for  the  years
ended  December  31,  1997  and 1996 have  been  audited  by  BDO
Seidman,   LLP,  independent  accountants.   Their  audits   were
conducted   in   accordance  with  generally  accepted   auditing
standards, and included a review of financial controls  and  test
of accounting records and procedures as they considered necessary
in the circumstances.

The Audit Committee of the Board of Directors, which consists  of
outside  directors,  meets  regularly  with  management  and  the
independent accountants to review accounting, reporting, auditing
and  internal  control  matters.  The committee  has  direct  and
private access to the independent accountants.



/s/ Richard G. Babbitt
Richard G. Babbitt
Chairman, Chief Executive
Officer and President



/s/ Tom K. Larson Jr.
Tom K. Larson Jr.
Vice President, Finance
Chief Financial Officer


May 29, 1998



                REPORT OF INDEPENDENT ACCOUNTANTS


The Stockholders and Board of Directors
INAMED Corporation and Subsidiaries:

We  have audited the accompanying consolidated balance sheets  of
INAMED  Corporation and Subsidiaries as of December 31, 1997  and
1996,  and  the  related consolidated statements  of  operations,
stockholders' deficiency and cash flows for the years then ended.
We  have  also  audited the schedule listed in the  accompanying
index  for  the  same  period.  These  financial  statements  and
schedule  are  the  responsibility of the Company's  management.
Our  responsibility is to express an opinion on  these  financial
statements and schedule based on our audits.

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

In  our opinion the consolidated financial statements referred to
above  present  fairly, in all material respects,  the  financial
position  of INAMED Corporation and Subsidiaries at December  31,
1997 and 1996, and the results of their operations and their cash
flows  for   the  years then ended, in conformity with  generally
accepted  accounting  principles.   Also,  in  our  opinion,  the
schedules   present  fairly,  in  all  material   respects,   the
information  set forth therein for the years ended  December  31,
1997 and 1996.

The  accompanying  consolidated financial  statements  have  been
prepared  assuming  that the Company will  continue  as  a  going
concern.   As discussed in Note 1 to the consolidated  financial
statements, the Company, through certain subsidiaries, has been a
defendant  in  substantial litigation related to breast  implants
which   has   adversely  affected  the  liquidity  and  financial
condition  of the Company.  This raises substantial  doubt  about
the   Company's   ability  to  continue  as  a   going   concern.
Management's plans in this regard are discussed in Note  1 to the
consolidated financial statements.


BDO Seidman, LLP

May 29, 1998

               INAMED CORPORATION AND SUBSIDIARIES

                   Consolidated Balance Sheets
                           In (000's)



                   
                                                     December 31,
                Assets                          1997              1996

Current Assets:
 Cash and cash equivalents                     $ 1,946           $ 923
 Trade accounts receivable, net of allowances
 for doubtful accounts and returns of $5,221
 and $5,411                                     13,979          11,452
 Related party notes receivable                    129             236
 Inventories                                    23,117          20,724
 Prepaid expenses and other current assets       1,413           1,563
 Income tax refund receivable                      472             151
                                                ------          ------
        Total current assets                    41,056          35,049
                                                ------          ------
Property and equipment, at cost:
  Machinery and equipment                       12,585          10,555
  Furniture and fixtures                         4,541           4,495
  Leasehold improvements                        10,996           9,148
                                                ------          ------
                                                28,122          24,198

Less, accumulated depreciation and 
amortization                                   (14,639)        (11,938)
                                                ------          ------
          Net property and equipment            13,483          12,260

Notes receivable, net of allowances of $467 
 and $1,067                                      2,799           2,108

Intangible assets, net                           1,164           1,410

Restricted cash, settlement fund                    --          14,796

Other assets                                       340             289
                                                ------          ------
Total assets                                $   58,842       $  65,912
                                                ======          ======

See accompanying notes to consolidated financial statements.

               INAMED CORPORATION AND SUBSIDIARIES

                   Consolidated Balance Sheets
                  In (000's except share data)


                                               December 31,
Liabilities and Stockholders' Deficiency        1997          1996

Current liabilities:
  Current installments of long-term debt    $       30     $     321
  Notes payable to bank                            659           914
  Accounts payable                              14,759        12,373
  Accrued liabilities:
       Salaries, wages, and payroll taxes        2,683         4,895
       Interest                                  3,146         3,110
       Self-insurance                            3,602         1,373
       Other                                     2,667         1,672
  Royalties payable                              4,156         4,039
  Income taxes payable                           2,894         1,841
                                                ------        ------
          Total current liabilities             34,596        30,538
                                                ------        ------

Convertible and other long-term debt            23,574        34,607

Subordinated notes payable, related party        8,813            --

Deferred grant income                              993         1,269

Deferred income taxes                              220           254

Accrued litigation settlement                   37,335         9,152

Commitments and contingencies

Stockholders'  deficiency:
  Common stock, $.01 par value  
  Authorized 20,000,000 shares;
  issued and outstanding 8,885,076
  and  8,036,550                                   89            80
  Additional paid-in capital                   19,027        13,586
  Cumulative translation adjustment              (223)          431
  Accumulated deficit                         (65,582)      (24,005)
                                               ------        ------
          Stockholders' deficiency            (46,689)       (9,908)
                                               ------        ------
Total liabilities and stockholders'
   deficiency                          $       58,842    $   65,912
                                               ======        ======

See accompanying notes to consolidated financial statements.

               INAMED CORPORATION AND SUBSIDIARIES

              Consolidated Statements of Operations
           In (000's except share and per share data)

             Years ended December 31, 1997 and 1996


                                            1997           1996

Net sales                              $    106,381      $   93,372
Cost of goods sold                           37,643          35,295
                                            -------         -------
     Gross profit                            68,738          58,077
                                            -------         -------
Operating expense:
 Marketing                                   30,349          25,569
 General and administrative                  33,848          31,234
 Research and development                     8,863           5,693
                                            -------         -------          
    Total operating expenses                 73,060          62,496
                                            -------         -------
     Operating loss                          (4,322)         (4,419)
                                            -------         -------
Other income (expense):
 Litigation settlement                      (28,150)             --
 Interest income                                817           1,110
 Interest expense and debt costs             (6,990)         (5,387)
 Royalty income                                 347             481
 Foreign currency transaction gains (losses) (1,796)             68
 Miscellaneous income (expense)                 398             (18)
                                            -------         -------
Other expense                               (35,374)         (3,746)
                                            -------         -------
     Loss before income tax expense         (39,696)         (8,165)

Income tax expense                            1,881           3,214
                                            -------         -------
 Net loss                                $  (41,577)      $ (11,379)
                                            =======         =======
Net loss per share of common stock
 Basic                                   $    (4.97)      $   (1.46)
 Diluted                                 $    (4.97)      $   (1.46)
                                            =======         =======

Weighted average shares outstanding        8,371,399       7,811,073
                                           =========       =========


See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
       
        INAMED CORPORATION AND SUBSIDIARIES

       Consolidated Statements of Stockholders' Deficiency
                           In (000's)

             Years ended December 31, 1997 and 1996
  
                                                 Additional   Cumulative   
                             Common  Stock       Paid-in      Translation         Accumulated    Stockholders'
                             Shares  Amount      Capital      Adjustment          Deficit        Deficiency
                             <C>     <C>        <C>           <C>                 <C>            <C>      
Balance, January 1, 1996      7,603   $ 76      $  9,964       $   882            $(12,626)      $  (1,704)
Net loss                         --     --            --            --             (11,379)        (11,379)
Repurchases and retirement
  of common stock                --     --           (3)            --                  --              (3)
Issuance of common stock   
 (exercise ofstock options)      32     --           45             --                  --              45 
Issuance of common stock
 (Regulation S Transaction)     344      3        2,997             --                  --           3,000
Issuance of common stock
(conversions debt to equity)     58      1          583             --                  --             584
Translation adjustment           --     --           __           (451)                 __            (451)  
                             -----------------------------------------------------------------------------
Balance,  December 31, 1996   8,037     80       13,586            431             (24,005)         (9,908)   

Net Loss                         --     --           --             --             (41,577)        (41,577)
Repurchases and retirement     
 of common stock                 (11)   __          (55)            --                  --             (55)
Issuance of common
(exercise of stock options)       71     1          102             --                  --             103   
Issuance of common stock 
(conversions of debt to equity)  616     6        2,261             --                  __           2,267 
Issuance of common stock
(waiver of covenant defaults)    172     2        1,415             --                  --           1,417

Issuance of Warrants & Options    --    --        1,718             __                  __           1,718
Translation adjustment            __    __           __           (654)                 __            (654)
                              ----------------------------------------------------------------------------
Balance, December 31, 1997     8,885  $ 89      $19,027          $(223)           $(65,582)       $(46,689)
                              ============================================================================
See accompanying notes to consolidated financial statements.
</TABLE>


               INAMED CORPORATION AND SUBSIDIARIES

              Consolidated Statements of Cash Flows
              Years ended December 31, 1997 and 1996
                           In (000's)

                                               1997        1996

Cash flows from operating activities:
 Net loss                                  $(41,577)       $(11,379)
 Net cash provided by (used for)
 operating activities:
   Depreciation and amortization              2,267           2,728
   Non-cash debt costs                        1,487              --
   Amortization of deferred grant income       (454)            (96)
   Amortization of intangible assets            244             328
   Amortization of debenture discount           273              --
   Amortization of private offering costs        49              40
   Non-cash compensation to directors           231              --
   Provision for doubtful accounts and returns (185)         (1,216)
   Provision for doubtful notes                (600)             --
   Provision for obsolescence of inventory      264             563
   Deferred income taxes                        (35)          2,030
   Changes in current assets and liabilities:
     Trade accounts receivable               (3,265)            119
     Notes receivable                          (101)             87
     Inventories                             (4,491)         (3,910)
     Prepaid expenses and other
      current assets                             43             273
     Income tax refund receivable              (337)            (61)
     Other assets                              (105)           (173)
     Accounts payable                         2,016          (6,193)
     Accrued salaries, wages, and payroll
     taxes                                   (2,304)         (4,584)
     Accrued interest                            36           1,500
     Accrued self-insurance                   2,230             242
     Other accrued liabilities                1,021            (642)
     Royalties payable                          117           1,112
     Income taxes payable                     1,091              (6)
     Accrued litigation settlement           28,183              --
                                            -------         -------
          Net cash used for
           operating activities             (13,902)        (19,238)
                                            -------         -------
Cash flows from investing activities:
    Disposal of fixed assets                     --             (44)
 Loss on Investments                             --             100
 Purchase of property and equipment          (5,106)         (3,959)
 Purchase of intangible assets                   --             (80)
                                            -------         -------
          Net cash used in
           investing activities              (5,106)         (3,983)
                                            -------         -------
See accompanying notes to consolidated financial statements.

               INAMED CORPORATION AND SUBSIDIARIES

        Consolidated Statements of Cash Flows, continued

                                              1997              1996

Cash flows from financing activities:
Restricted cash in escrow for litigation
 settlement                                   $  14,796         $ (14,796)
Increases in notes payable and long-term debt        --               271
Increases in convertible notes payable
 and debentures payable                           5,648            34,516
Principal repayment of notes payable
 and long-term debt                             (13,816)             (197)
Decrease in related party receivables               105               149
Increase (decrease) in related party payables     8,813            (1,759)
Grants received, gross                               --               210
Proceeds from exercise of stock options             103                46
Repurchase of common stock                          (55)               (3)
Issuance of common stock                             --             3,000
                                               --------           -------

Net cash provided by financing activities        15,594            21,437
                                               --------           -------
Effect of exchange rate changes on cash           4,437              (100)
                                               --------           -------
Net increase (decrease) in cash
 and cash equivalents                             1,023            (1,884)

Cash and cash equivalents at beginning of year      923             2,807
                                               --------           -------
Cash and cash equivalents at end of year       $  1,946           $   923
                                               ========           =======
Supplemental disclosure of cash flow
    information:
  Cash paid during the year for:
   Interest                                    $  3,745           $ 3,519
                                               ========           =======
   Income taxes                                $    988           $ 1,336
                                               ========           =======

See accompanying notes to consolidated financial statements.

                 INAMED Corporation
        Notes to Consolidated Financial Statements
             December 31, 1997 and 1996
        (in 000's, except share and per share data)




(1)  Basis of Presentation and Summary of Significant Accounting
     Policies
     The  accompanying consolidated financial statements  include
     the  accounts of INAMED Corporation and each of its  wholly-
     owned    subsidiaries    (the   "Company").     Intercompany
     transactions are eliminated in consolidation.

     The  Financial  Statements do not  include  any  adjustments
     relating  to  the recoverability and classification  of  the
     recorded asset and liability amounts that might be necessary
     should the Company be unable to continue as a going concern.

     The  Company's continuation as a going concern is  dependent
     upon  its  ability to obtain financing for  the  non-opt-out
     settlement agreement (see Note 14) and its ability to generate 
     sufficient cash flows to meet its obligations on a timely basis.   
     The Company is actively seeking financing and anticipates doing
     a restructuring which the Management believes will ultimately
     enable them to attain profitability.

     The Company

     INAMED   Corporation's  subsidiaries  are   McGhan   Medical
     Corporation  and CUI Corporation, which develop, manufacture
     and  sell  medical devices principally for the  plastic  and
     general   surgery  fields;  BioEnterics  Corporation   which
     develops,   manufactures  and  sells  medical  devices   and
     associated  instrumentation to  the  bariatric  and  general
     surgery   fields;  Biodermis  Corporation  which   develops,
     produces  and  distributes premium products for dermatology,
     wound  care and burn treatment; Bioplexus Corporation  which
     develops,   produces  and  distributes   specialty   medical
     products   for  use  by  the  general  surgery   profession;
     Flowmatrix  Corporation  which  manufactures  high   quality
     silicone  components  and devices for INAMED's  wholly-owned
     subsidiaries  and  distributes  an  international  line   of
     proprietary   silicone   products;    Medisyn   Technologies
     Corporation  which focuses on the development and  promotion
     of the merits of the use of silicone chemistry in the fields
     of   medical  devices,  pharmaceuticals  and  biotechnology;
     INAMED Development Company, which is engaged in the research
     and  development of new medical devices using silicone-based
     technology;  McGhan  Limited,  an  Irish  corporation  which
     manufactures medical devices principally for the plastic and
     general  surgery  fields;  Medisyn  Technologies,  Ltd.  and
     Chamfield Ltd., Irish corporations which specialize  in  the
     development of silicone materials for use by INAMED's wholly-
     owned  subsidiaries; and McGhan Medical B.V., a  Netherlands
     corporation, McGhan Medical B.V.B.A., a Belgium corporation,
     McGhan  Medical  GmbH, a German corporation, McGhan  Medical
     S.R.L.,  an  Italian  corporation, McGhan  Medical  Ltd.,  a
     United  Kingdom  corporation,  McGhan  Medical  S.A.R.L.,  a
     French   corporation,  McGhan  Medical   S.A.,   a   Spanish
     corporation,  INAMED  do  Brasil, a  Brazilian  corporation,
     INAMED Medical Group, a Japanese corporation, McGhan Medical
     Asia  Pacific,  a  Hong  Kong  corporation,  McGhan  Medical
     Mexico, S.A. de C.V., a Mexican corporation, and Bioenterics
     Latin  America,  S.A. de C.V., a Mexican corporation,  which
     all  sell  medical devices on a direct sales  basis  in  the
     various countries in which they are located.


 (1) Basis of Presentation and Summary of Significant Accounting
     Policies (continued)

     Revenue Recognition

     The  Company recognizes revenue in accordance with Statement
     of   Financial   Accounting  Standards  No.   48,   "Revenue
     Recognition  When  Right  of Return  Exists".  Revenues  are
     recorded  net  of  estimated  returns  and  allowances  when
     product is shipped. The Company ships product with the right
     of  return and has provided an estimate of the allowance for
     returns based on historical returns.  Because management can
     reasonably  estimate future returns, the product prices  are
     substantially  fixed  and the Company recognizes  net  sales
     when  the  product is shipped. The estimated  allowance  for
     returns is based on the historical trend of returns, year-to-
     date sales and other factors.

     Inventories

     Inventories are stated at the lower of cost or market  using
     the  first-in,  first-out  (FIFO) convention.   The  Company
     provides  a provision for obsolescence based upon historical
     experience.

     Current Vulnerability Due to Certain Concentrations

     The  Company  has limited sources of supply for certain  raw
     materials   which  are  significant  to  its   manufacturing
     process.   A  change in suppliers could  cause  a  delay  in
     manufacturing  and  a possible loss of  sales,  which  would
     adversely affect operating results.

     Property and Equipment

     Property  and equipment are stated at cost less  accumulated
     depreciation and amortization. Significant improvements  and
     betterments  are capitalized while maintenance  and  repairs
     are charged to operations as incurred.

     Depreciation of property and equipment is computed using the
     straight-line method based on estimated useful lives ranging
     from   five  to  ten  years.   Leasehold  improvements   are
     amortized  on  the straight-line basis over their  estimated
     economic  useful lives or the lives of the leases, whichever
     is  shorter.   Fully  depreciated assets  still  in  use  at
     December  31, 1997 and 1996 include machinery and  leasehold
     improvements   of   approximately   $5,800    and    $1,600,
     respectively.

     Intangible and Long-Term Assets

     Intangible  and  long-term assets are stated  at  cost  less
     accumulated  amortization, and  are  being  amortized  on  a
     straight-line  basis  over  their  estimated  useful   lives
     ranging from 5 to 17 years.

  (1) Basis of Presentation and Summary of Significant Accounting
      Policies (continued)

     Intangible and Long-Term Assets (continued)

     The  Company  classifies as goodwill the cost in  excess  of
     fair   value   of  the  net  assets  acquired  in   purchase
     transactions.    The  Company  periodically  evaluates   the
     realizability  of goodwill in accordance with  Statement  of
     Financial  Account  Standards No. 121, "Accounting  for  the
     Impairment of Long-Lived Assets and for Long-Lived Assets to
     be  Disposed of" (SFAS No. 121).  Based upon its most recent
     analysis,  no impairment of goodwill exists at December  31,
     1997.

     SFAS  No. 121 was adopted by the Company for the year  ended
     December  31, 1995.  This statement requires that long-lived
     assets and certain identifiable intangible assets to be held
     and  used  be  reviewed for impairment  whenever  events  or
     changes  in circumstances indicate that the carrying  amount
     of such assets may not be recoverable. The carrying value of
     long-term assets is periodically reviewed by management, and
     impairment losses, if any, are recognized when the  expected
     non-discounted future
     operating cash flows derived from such assets are less  than
     their  carrying  value. Impairment of long-lived  assets  is
     measured  by  the  difference between the discounted  future
     cash  flows  expected  to be generated from  the  long-lived
     asset against the fair value of the long-lived asset.   Fair
     value  of  long-lived assets is determined by the amount  at
     which  the  asset  could be bought  or  sold  in  a  current
     transaction between willing parties.

     Research and Development

     Research and development costs are expensed when incurred.

     Advertising costs

     Advertising  costs are charged to  operations  in  the  year
     incurred and totaled approximately $426 and $441 in 1997 and
     1996.

     Income Taxes

     The   Company  accounts  for  its  income  taxes  using  the
     liability  method, under which deferred taxes are determined
     based on the differences between the financial statement and
     tax bases of assets and liabilities, using enacted tax rates
     in  effect  for  the  years  in which  the  differences  are
     expected  to  reverse.  Valuation allowances are established
     when  necessary to reduce deferred tax assets to the  amount
     expected to be realized.

     The  Company has provided an allowance against  deferred tax
     assets on its U.S. operations at December 31, 1997 and 1996.



  (1) Basis of Presentation and Summary of Significant Accounting
      Policies (continued)

     Use of Estimates

     In   preparing  financial  statements  in  conformity   with
     generally  accepted accounting principles,  the  Company  is
     required  to make estimates and assumptions that affect  the
     reported   amounts  of  assets  and  liabilities   and   the
     disclosure of contingent assets and liabilities at the  date
     of the financial statements and revenues and expenses during
     the  reporting  period.  Actual results  could  differ  from
     those estimates.

     Earnings Per Share

     During 1997, the Financial Accounting Standards Board issued
     Statement  of  Financial  Accounting  Standards   No.   128,
     "Earnings  per Share",  ("SFAS No. 128") which provides  for
     the calculation of "basic" and "diluted" earnings per share.
     SFAS  No.  128 is effective for financial statements  issued
     for  periods ending after December 15, 1997. Basic  earnings
     per  share includes no dilution and is computed by  dividing
     income  available  to common shareholders  by  the  weighted
     average  number of common shares outstanding for the period.
     Diluted earnings per share reflect, in periods in which they
     have a dilutive effect, the effect of common shares issuable
     upon  exercise of  common  stock  equivalents.  The  assumed 
     conversion of the notes payable and exercise of the warrants 
     and options would have been  anti-dilutive  and,  therefore, 
     were not considered in the computation of  diluted  earnings 
     per share for December 31, 1997  and 1996.   As  required by 
     this Statement, all periods presented have been restated  to
     comply with the provisions of SFAS No. 128.

     Foreign Currency Translation

     The   functional   currencies  of  the   Company's   foreign
     subsidiaries  are  their local currencies, and  accordingly,
     the assets and liabilities of these foreign subsidiaries are
     translated  at  the  rate of exchange at the  balance  sheet
     date.   Revenues  and expenses have been translated  at  the
     average  rate of exchange in effect during the periods.  For
     the  year  ended December 31, 1997, the foreign subsidiaries
     have  incurred  significant  intercompany  debts  which  are
     denominated  in various foreign currencies.  The translation
     of  the  intercompany debts resulted in a  foreign  currency
     translation   loss   of   $1,796.   Unrealized   translation
     adjustments do not reflect the results of operations and are
     reported   as   a   separate  component   of   stockholders'
     deficiency, while transaction gains and losses are reflected
     in  the consolidated statement of operations.  To date,  the
     Company has not entered into hedging transactions to protect
     against changes in foreign currency exchange rates.







(1)  Basis  of Presentation and Summary of Significant Accounting
     Policies (continued)

     Stock-Based Compensation

     The  Company  has adopted the disclosure-only  option  under
     Statement  of  Financial  Accounting  Standards   No.   123,
     "Accounting for Stock Based Compensation", ("SFAS No.  123")
     as  of  December 31, 1996.  Pro-forma information  regarding
     net  income  and  earnings per share using  the  fair  value
     method is required by SFAS No. 123; however, application  of
     SFAS  No.  123 would not result in a significant  difference
     from  reported  net income and earnings per  share  for  the
     years ended December 31, 1997 and 1996.

     Statement of Cash Flows

     For  purposes  of the statement of cash flows,  the  Company
     considers all highly liquid debt instruments and other short-
     term investments with an initial maturity of three months or
     less  to  be  cash equivalents. 

     Concentrations of Credit Risk

     Certain   financial  instruments  potentially  subject   the
     Company  to concentrations of credit risk.  These  financial
     instruments consist primarily of trade receivables and short-
     term cash investments.

     The Company places its short-term cash investments with high
     credit quality financial institutions and, by policy, limits
     the   amount  of  credit  exposure  to  any  one   financial
     institution.  Concentrations of credit risk with respect  to
     trade  receivables are limited due to a large customer  base
     and  its  dispersion  across different types  of  healthcare
     professionals  and geographic areas.  The Company  maintains
     an allowance for losses based on the expected collectability
     of all receivables.

     Financial Instruments

     The  fair value of cash and cash equivalents and receivables
     approximate  their  carrying value due to  their  short-term
     maturities.   The fair value of long-term debt  instruments,
     including  the  current portion, approximates  the  carrying
     value and is estimated based on the current rates offered to
     the Company for debt of similar maturities.

     New Accounting Pronouncements

     In  June  1997,  the  Financial Accounting  Standards  Board
     issued  SFAS  No.  131, "Disclosures about  Segments  of  an
     Enterprise and Related Information", ("SFAS No. 131")  which
     supersedes SFAS No. 14, Financial Reporting for Segments  of
     a  Business Enterprise.  SFAS No. 131 establishes  standards
     for  the  way  public  companies  report  information  about
     operating  segments  in  annual  financial  statements   and
     requires  reporting of selected information about  operating
     segments in interim financial

     (1)   Basis of Presentation and Summary of Significant Accounting
           Policies (continued)

     New Accounting Pronouncements (continued)

     statements  issued  to  the  public.   It  also  establishes
     standards  for disclosures regarding products and  services,
     geographic areas and major customers.  SFAS No. 131  defines
     operating  segments as components of a company  about  which
     separate   financial  information  is  available   that   is
     evaluated regularly by the chief operating decision maker in
     deciding   how  to  allocate  resources  and  in   assessing
     performance.

     Statement  of  Financial  Accounting  Standards   No.   130,
     "Reporting   Comprehensive   Income,"   ("SFAS   No.   130")
     established   standards  for  reporting   and   display   of
     comprehensive   income,  its  components   and   accumulated
     balances.   Comprehensive income is defined to  include  all
     changes in equity except those resulting from investments by
     owners   and   distributions   to   owners.    Among   other
     disclosures, SFAS No. 130 requires that all items  that  are
     required to be recognized under current accounting standards
     as  components  of  comprehensive income be  reported  in  a
     financial  statement  that  is  displayed  with   the   same
     prominence as other financial statements.

     Both  SFAS  Nos.  130  and 131 are effective  for  financial
     statements for periods beginning after December 15, 1997 and
     require  comparative  information for earlier  years  to  be
     restated.   The adoption of these standards is not  expected
     to  have  a  material  effect  on  the  Company's  financial
     position,  results  of  operations  or  financial  statement
     disclosures.

     Reclassification

     Certain  reclassifications  were  made  to  1996  and   1995
     consolidated  financial statements to conform  to  the  1997
     presentation.   There  was  no  effect  on  net  income   or
     stockholders'    deficiency   as   a   result    of    these
     reclassifications.


(2) Accounts and Notes Receivable

     Accounts and notes receivable consist of the following:

                                                   December 31,
                                                     1997         1996


     Accounts receivable                        $   19,200     $  16,863
     Allowance for doubtful accounts                  (865)         (714)
     Allowance for returns and credits              (4,356)       (4,697)
                                                  _________     _________

     Net accounts receivable                     $  13,979     $  11,452
                                                  ========      ========

     Notes receivable                            $   3,266     $   3,175
     Allowance for doubtful notes                     (467)       (1,067)
                                                 _________     _________

     Net notes receivable                        $   2,799     $   2,108
                                                 =========     =========
(3) Inventories

    Inventories are summarized as follows:

                                                     December 31,
                                                      1997         1996
 
     Raw materials                               $    4,671    $    3,554
     Work in progress                                 3,799         3,911
     Finished goods                                  16,161        14,584
                                                  _________     _________

                                                     24,631        22,049
     Less allowance for
     obsolescence                                    (1,514)       (1,325)
                                                  _________     _________

                                                  $  23,117     $  20,724
                                                  =========     =========
 (4)  Intangible Assets

      Intangible  assets primarily consist of patents,  trademarks
      and   goodwill   net   of   accumulated   amortization    of
      approximately  $3,733  and $3,973 amounting  to  $1,164  and
      $1,410 at December 31, 1997 and 1996.

(5)  Lines of Credit

     The  Company's Dutch subsidiary has a line of credit with  a
     major  Dutch  bank,  currently totaling $860.  The  line  of
     credit   is   collateralized  by  the  accounts  receivable,
     inventories  and  certain other assets of  that  subsidiary.
     The  line  of  credit  was  renegotiated  in  1996  with  no
     expiration  date.  As of December 31, 1997,  no  funds  were
     drawn  on  the  line  of credit.  As of  December  31,  1996
     approximately  $537 had been drawn on the  line  of  credit.
     The interest rate on the line of credit is 7% per annum.

     For  the  years  ended  December  31,  1997  and  1996,  the
     Company's  foreign subsidiaries financed approximately  $659
     and $377 which was secured by its accounts receivable.

     The  Company's weighted average interest rate on  short-term
     borrowings was 7% in both 1997 and 1996.

     The  Company  is currently seeking to establish  a  domestic
     line of credit.

(6)  Long-Term Debt

     Long-term debt is summarized as follows:

                                                          December 31,
                                                       1997          1996
  11% Secured Convertible Note payable,
  maturing January 1999, interest payable
  quarterly, January 1, April 1, July 1,
  and October 1  (a)                               $  19,691      $ 34,460

  4% Convertible Debenture payable, maturing
  January 2000 interest payable March 31, June 30,
  September  30 and December  31   (b)                 3,857            56

  Capital lease obligations, collateralized 
  by related equipment                                    56           412
                                                          --           ---
                                                      23,604        34,928

 Less, current installments                              (30)         (321)
                                                     -------       -------
                                                    $ 23,574      $ 34,607
                                                     =======       =======
(6) Long-Term Debt (continued)

The following is a summary of the Company's significant long-term
debt:

     (a)   During January 1996, $35,000 of proceeds were received
     upon  the issuance of 11% senior secured convertible  notes,
     due  March 31, 1999, in a private placement transaction.  Of
     that  amount, $14,800 was placed in an escrow account to  be
     released  within  one year, following court  approval  of  a
     mandatory non-opt-out class settlement of the breast implant
     litigation.  Inasmuch as that condition was not met, in July
     1997 the Company returned those escrowed funds to the senior
     Noteholders, in exchange for warrants to purchase $13,900 of
     common  stock at $8.00 per share (subsequently  adjusted  to
     $7.50  per  share), resulting in a charge of  $864  to  debt
     costs  for  1997.  The conversion price of  the  11%  senior
     secured convertible notes was originally $10 per share.   In
     July  1997 the Company and the senior Noteholders agreed  to
     change  the conversion price to $5.50 per share at  103%  of
     principal  balance as part of an overall restructuring  plan
     which  included the waiver of past defaults. The  conversion
     price of $5.50 per share was above market value.  At May 29,
     1998, $19,600 of the 11% senior notes were outstanding.   In
     1996  the Company offered an incentive to convert the senior
     secured  convertible  notes.  The  incentive  increased  the
     number  of  shares  received upon  conversion  by  10%.   At
     December   31,  1996  $540  in  notes  had  been  converted,
     resulting  in  a $44 charge to debt costs.   There  were  no
     conversions in 1997.

           On March 31, 1996, the Company was in default of certain
     financial covenants.  The Noteholders  waived  the  covenant
     default  and in return they received additional stock  equal
     to  5%  of  the  number  shares as if  the  notes  had  been
     converted  on  June 10, 1996.  This resulted in  an  accrued
     charge  to  debt  costs of $1,417 in 1996.   The  stock  was
     issued in 1997.

     (b)   During January 1997, $5,700 of proceeds were  received
     upon   the  issuance  of  $6,200  principal  amount  of   4%
     convertible   debentures,  due  January  30,  2000.    These
     debentures  were convertible at 85% of the market  price  of
     the  common  stock.  On March 31, 1997 the  Company  was  in
     default  of  certain  covenants.  The default  required  the
     Company  to reduce the conversion price by 6%.  In addition,
     the  Company incurred 3% liquidated damages per month on the
     outstanding principal balance.  These transactions  resulted
     in  $396  and $1,202 of debt and interest expenses in  1997.
     In  1998, the remaining debentures have been converted  into
     an  aggregate  of  1,108,059 shares  of  common  stock.   At
     December 31, 1997 $2,120 of the convertible debentures  were
     converted  into  615,958 shares of common  stock  at  prices
     ranging from $2.60 to $4.60 per share.

            In   addition,  commencing  during  April  1997   and
     continuing through January 1998, an entity controlled by the
     Company's  former  Chairman  and 13.14%  stockholder  loaned
     $9,900 to the Company to provide it with working capital  to
     fund its operations.  At December 31, 1997, the Company owed
     $8,800  (see note 12).  The loan agreement discussed in  (a)
     above  precludes  the payment of interest and  principal  on
     this  10.5%  subordinated note without the  consent  of  the
     senior  Noteholders.  The Company intends to  negotiate  the
     conversion of the 10.5% subordinated notes into common stock
     sometime  during  1998, although there can be  no  assurance
     that such a transaction will occur or that the price or
(6) Long-Term Debt (continued)

     timeframe for any such conversion will be favorable to
     the  Company's  existing stockholders  or  that  the  former
     Chairman will agree to the conversion.

     The aggregate installments of long-term debt as of December
     31, 1997 are as follows:

                       Year ending December 31:
   
                        1998       $       30
                        1999           19,701
                        2000            3,865
                        2001                8
                                       ------
                                    $  23,604
                                       ======
(7)  Deferred Grant Income

     Deferred  grant income represents grants received  from  the
     Irish  Industrial  Development   Authority  (IDA)  for   the
     purchase  of  capital equipment and is  being  amortized  to
     income  over  the life of the related assets.   Amortization
     for  the  years  ended  December  31,  1997  and   1996  was
     approximately $454 and $96.

     IDA  grants  are  subject to revocation  upon  a  change  of
     ownership  or liquidation of McGhan Limited.  If  the  grant
     were revoked, the Company would be liable on demand from the
     IDA  for  all sums received and deemed to have been received
     by  the  Company in respect to the grant.  In the  event  of
     revocation of the grant, the Company could be liable for the
     amount of approximately $1,418 at December 31, 1997.

(8)  Income Taxes

     The  Company  currently  has  a  net  operating  loss  (NOL)
     carryforward   for   financial   statement    purposes    of
     approximately $55,000.  NOL carryforwards for federal income
     tax  purposes  of  approximately $14,000  are  available  to
     offset federal taxable income through the year 2012.  If the
     Company  has a change in ownership as defined under Internal
     Revenue  Code Section 382, use of the NOL carryforward  will
     be limited.  The cost of the litigation settlement discussed
     in  Note  14  will  be  deductible for  federal  income  tax
     purposes at such time as the consideration is deposited in a
     court   supervised  escrow  account  and  accordingly   will
     increase  the  NOL  carryforward  for  federal  income   tax
     purposes by the same amount.


     The   primary  components  of  temporary  differences  which
     compose the Company's deferred tax assets as of December 31,
     1997 and 1996 are as follows:

(8)  Income Taxes (continued)

                                     December 31,        December 31,
                                        1997                1996
                                     -----------         -----------
  Allowance for returns             $  1,742            $  1,879
  Allowance for doubtful accounts        346                 286
  Allowance for inventory obsolescence   605                 530
  Accrued liabilities                  1,673                 776
  Allowance for doubtful notes           187                 427
  Litigation reserve                  14,821               3,661
  Net operating losses                 8,200               3,900
  Debt costs                             568                 567
                                    -----------         -----------
  Deferred tax assets                 28,142              12,026
  Valuation allowance                (28,142)            (12,026)
                                    -----------         -----------
  Deferred tax assets              $      __           $      __
                                    ===========         ===========

     The  Company's  deferred tax assets have been  reduced  100%
     with  a  valuation  allowance as the  Company's  ability  to
     generate future taxable income is not presently estimable.


     Income  tax  expense for 1997 pertains primarily to  foreign
     operations.  The Company recorded a provision  in  1997  for
     foreign   taxes   of   $1,000   related   to   the   planned
     capitalization   of  intercompany  balances   with   foreign
     subsidiaries.  In  addition to taxes on foreign  operations,
     income  tax  expense  for  1996 includes  providing  a  100%
     allowance on the deferred tax assets not previously  allowed
     for of $2,006.

     The tax provision differs from the amount computed using the
     Federal  statutory income tax rate due to foreign taxes  and
     the  increases  in the allowances provided on  deferred  tax
     assets.   Provision has not been made for U.S. or additional
     foreign   taxes   on  undistributed  earnings   of   foreign
     subsidiaries.  Those earnings have been and will continue to
     be  permanently  reinvested.  These  earnings  could  become
     subject   to  additional  tax  if  they  were  remitted   as
     dividends, if foreign earnings were loaned to the Company or
     a U.S. affiliate, or if the Company should sell its stock in
     the   foreign  subsidiaries.   It  is  not  practicable   to
     determine  the amount of additional tax, if any, that  might
     be payable on the foreign earnings. The cumulative amount of
     reinvested earnings was approximately $5,460 and  $3,147  at
     December 31, 1997 and 1996.

(9)  Royalties

     The  Company has obtained the right to produce, use and sell
     patented technology through various license agreements.  The
     Company pays royalties ranging from 5% to 10% of the related
     net  sales,  depending upon sales levels.   Royalty  expense
     under

(9) Royalties (continued)

     these agreements was approximately $5,689 and $6,302 for the
     years  ended December 31, 1997 and 1996, and is included  in
     marketing  expense.  The license agreements  expire  at  the
     expiration of the related patents.

(10) Stockholders' Equity

     The  Company has adopted several incentive and non-qualified
     stock  option plans.  Under the terms of the plans,  610,345
     shares  of  common stock are reserved for  issuance  to  key
     employees.

     Activity under these plans for the years ended December  31,
     1997, and 1996:

                                 1997                      1996
                                     Wgtd.Avg.                    Wgtd.Avg.
                             Shares  Exer.Price           Shares  Exer.Price

Options outstanding
 at  beginning  of  year     115,000 $ 1.46               146,500 $1.46
 Granted                      30,000   3.81                    --    --
 Exercised                   (73,500)  1.45               (31,500) 1.45
                             -------                      -------
     Options outstanding
       at end of year         71,500   2.46               115,000  1.46
                             =======                      =======
     Options exercisable
        at end of year        71,500   2.46                90,000  1.47
                             =======                      =======

     The Company issued 1,846,071 warrants in connection with the
     restructuring  of the $35,000 convertible debt  and  500,000
     warrants  in  connection  with the issuance  of  the  $6,200
     convertible  debenture (see Note 6).  Compensatory  warrants
     totaling 175,000 were also issued to non-employee directors.

                                  1997                           Fair Market
                                      Exercise                   Value on
                           Shares     Price    Expiration Date   Grant Date
Warrants granted in 1997   1,846,071  $7.50    March 30,2000     $ 864,000
Warrants granted in 1997     500,000  $9.81    January 15, 2000    623,000     
Warrants granted in 1997     175,000  $5.51    April 1, 2004       180,000


(10) Stockholders' Equity (continued)

     The  Company  estimates the fair value of each stock  option
     and  warrant  at  the grant date by using the  Black-Scholes
     option-pricing  model  with  the following  weighted-average
     assumptions used for grants in 1997: no dividends  paid  for
     all  years; expected volatility of 34.8%; risk-free interest
     rates  ranging  from  6.17%  to 5.87%;  and  expected  lives
     ranging from 2.6 years to 6.7 years.

     The  Company  has  recorded in 1997 $1,487 as  interest  and
     other debt costs and $231 as directors fees.

     The  exercise  price  of all options outstanding  under  the
     stock option plans range from $1.45 to $2.49 per share.  All
     options exercised in 1996 and 1997 were exercised at a price
     of  $1.45.  At December 31, 1997, there were 163,900  shares
     available for future grant under these plans.  Under certain
     plans, the Company granted options at $1.45, which was below
     the  fair  market value of the common stock at the  date  of
     grant.   The Company recorded compensation expense  for  the
     difference  between the fair market value and  the  exercise
     price of the related outstanding options.

     In  1984,  McGhan Medical Corporation adopted  an  incentive
     stock option plan (the "1984 Plan").  Under the terms of the
     1984 Plan, 100,000 shares of common stock were reserved  for
     issuance to key employees at prices not less than the market
     value  of  the stock at the date the option is granted.   In
     1985,  INAMED  Corporation agreed to substitute  options  to
     purchase  its shares (on a two-for-one basis) for  those  of
     McGhan  Medical Corporation.  No options were granted  under
     the 1984 Plan during 1997 or 1996.

     In  1986, the Company adopted an incentive and non-qualified
     stock option plan (the "1986 Plan").  Under the terms of the
     1986 Plan, 300,000 shares of common stock have been reserved
     for  issuance  to  key employees.  No options  were  granted
     under the 1986 Plan during 1997 or 1996.

     In  1987, the Company adopted an incentive stock award  plan
     (the  "1987  Plan").   Under the terms  of  the  1987  Plan,
     300,000 shares of common stock were reserved for issuance to
     employees  at  the discretion of the Board of Directors.  No
     shares were awarded under the 1987 Plan during 1997 and 1996.
     At December  31, 1997 and  1996, there  were  119,612  shares
     available for future grant under the 1987 Plan.

     In  1993, the Company adopted a Non-Employee Director  Stock
     Option  Plan  which authorized the Company to  issue  up  to
     150,000  shares  of common stock to directors  who  are  not
     employees of or consultants to the Company and who are  thus
     not  eligible  to  receive  stock option  grants  under  the
     Company's  stock option plans.  Pursuant to this Plan,  each
     non-employee director is automatically granted an option  to
     purchase 5,000 shares of common stock on the date of his  or
     her  initial appointment or election as a director,  and  an
     option  to  purchase an additional 5,000  shares  of  common
     stock on

(10) Stockholders' Equity (continued)

     each  anniversary of his or her initial grant date providing
     he  or  she  is  still serving as a director.  The  exercise
     price  per share is the fair market value per share  on  the
     date  of  grant.  At December 31, 1997 30,000  options  were
     granted  under  this  plan.   The  Company  recorded   stock
     compensation expense of $51 for the year ended December  31,
     1997.


(11) Geographic Segment Data

<TABLE>
<CAPTION>
                                       U.S.      International   Elimination      Consolidated
<S>                                    <C>       <C>             <C>              <C>   
Year ended December 31, 1997 
 Net sales to unaffiliated customers   $ 66,778  $ 39,603                         $106,381
 Intersegment sales                       7,857    33,785        $(41,642)
                                        --------------------------------------------------
Total net sales                        $ 74,635  $ 73,388        $(41,642)        $106,381      
                                         =================================================

 Operating (loss) profit               $  1,101  $  3,349                         $  4,450
                                         =================================================
 General corporate expenses              (7,444)       __                           (7,444)
 Litigation settlement expense                                                     (28,150)
 Depreciation and amortization           (2,025)     (354)                          (2,379)
 Net interest expense                                                               (6,173)
                                                                                   _______       
 Profit/(Loss) before income taxes     $(42,246)  $  2,550                        $(39,696)
                                                                                   =======          
 Identifiable assets                   $ 28,148   $ 29,530             __         $ 57,678
                                       ===================================================

Year ended December 31, 1996
 Net sales to unaffiliated customers   $ 60,831   $ 32,541                        $ 93,372
 Intersegment sales                       5,587     25,235       $(30,822)              __
                                       --------------------------------------------------- 
 Total net sales                       $ 66,418   $ 57,776       $(30,822)        $ 93,372
                                       ===================================================
 Operating profit                      $  2,147   $  2,206             __         $  4,353
                                       ===================================================
 General corporate expenses              (5,241)        __                          (5,241)
 Depreciation and amortization           (2,257)      (743)                         (3,000)
 Net interest expense                                                               (4,277)
                                                                                   -------
 Loss before income taxes              $ (9,489)  $  1,324                        $ (8,165)
                                                                                   =======
 Identifiable Assets                   $ 39,222   $ 25,280             __         $ 64,502
                                       ===================================================


     The international classification above includes European
     countries, specifically the Netherlands, United Kingdom,
     Italy, France, Belgium, Germany and Ireland.  The operations
     in Spain, Mexico, Brazil and Hong Kong were not material and
     were therefore also included in the international
     classification.

</TABLE>

(12) Related Party Transactions

     From April 1997 until January 1998, International Integrated
     Industries,  LLC, ("Industries") an  entity  affiliated with  
     Mr. Donald K. McGhan, the Company's  former Chairman,  Chief  
     Executive Officer and President and 13% stockholder, lent 
     the Company an  aggregate  of  $9,900, of which $8,800  is  
     included  in liabilities  at  December 31, 1997.   That  
     indebtedness  is denoted as the Company's 10.5% subordinated 
     notes. By the terms of the 11% senior secured convertible 
     notes, the 10.5% subordinated notes are junior in  right  of  
     payment and liquidation and,  accordingly,  no  interest  or  
     principal payments can be made with respect thereto  without
     the consent of the senior Noteholders.  Interest expense of
     $386 was accrued in the 1997 income statement with respect
     to those notes but has not been paid to date.
 
     After Industries began to lend those monies to the Company,
     Mr. McGhan represented to the Board of Directors that those
     funds were derived from person financial resources. Recently,
     however, in connection with Mr. McGhan's unsuccessful efforts
     to negotiate a payment schedule for the interest and
     principal of that loan, the Company learned that approximatlely
     two-thirds of the monies lent by Industries to the Company
     were in fact derived from loans made to Industries by Medical
     Device Alliance ("MDA").  MDA is a private company formed by
     Mr. McGhan in 1995 to develop and market various products for
     use in ultrasonic liposuction; the Company believes that 
     approximately $20 million has been raised to date by MDA from
     various outside investors through private placement trans-
     actions.  The Company does not believe those outside 
     investors were apprised of the loans from MDA to Industries;
     importantly, however, the investment of those funds in a 
     medical device company such as INAMED was apparently within
     the permitted scope of the proposed use of funds which existed
     when those investors made their investment.  The Company's
     Board of Directors has been advised by legal counsel: (a) that
     the Company has no responsibility whatsoever to the outside
     investors in MDA for the monies which Mr. McGhan arranged
     to loan to Industries, which in turn were loaned by Industries
     to the Company, and (b) that Mr. McGhan, as the controlling
     person of both MDA and Industries at the times those loans
     were made, is solely responsible to the outside investors in
     MDA for his actions with respect to thoe monies.

     In 1997, the Company entered into an agreement with Medical Device
     Alliance, Inc. ("MDA") to sell furniture, artwork and equipment
     which the Company was acquiring through a capital
     sublease with Wells Fargo Bank for a total purchase price of
     $300.   The  Company recorded a gain on sale  of  assets  of
     approximately $9 in 1997 in respect to this transaction.  In
     1997, the Company also entered into an agreement to sublease
     approximately 5,000 square feet of office space in Las Vegas
     from MDA for  $10  per  month, on a month  to  month  basis.
     Donald K. McGhan is the Chairman of MDA.

     In 1996 and 1997, the Company performed administrative services for
     MDA and other related parties. The Company believes the value of
     these services is approximately $150,000 and will invoice MDA when
     it finishes assessing the extent of those services.

     In 1997, the Company signed a distribution agreement with
     LySonix, Inc., a subsidiary of MDA, to sell ultrasonic surgery
     equipment in the European and Latin American regions.  Special
     incentive discounts were offered to the Company for the 
     introduction of the product in 1997.  Net sales in 1997 were
     approximatley $300.  In 1998, the terms of the original 
     agreement were revised so that the Company would obtain the
     goods on a consignment basis and not have an obligation with
     LySonix until the products were sold.  This agreement and
     its revision has been reviewed and approved by the Company's
     current management.

     Included in general and administrative expense on the income
     statement in 1997 and 1996 is $1,600 and $1,500 in  aircraft
     rental expenses paid to Executive Flite Management, Inc.,  a
     company  that is controlled by the family of Mr.  Donald  K.
     McGhan. No signed contract exists and the Company was billed
     based  on its usage.  The Company believes that such  rental
     expenses are on substantially equivalent terms to that which
     the  Company could obtain from an unaffiliated third  party.
     In  1998, the Company discontinued the use of such corporate
     aircraft.

     Included  in  related party notes receivable in  1996  is  a
     10.5%  note with McGhan Management Corporation in the amount
     of $203.  Mr. Donald K. McGhan and his wife are the majority
     shareholders  of McGhan Management Corporation.   This  note
     has since been paid in its entirety.  During 1996, the Company
     paid a $1,209 Note in full to McGhan Management Corporation
     and incurred $253 for flight related services with McGhan
     Management Corporation.  During 1997, the Company incurred
     $140 for flight related services.

     During 1996, the Company collected a $386 receivable from the
     former Chief Executive Officer and Chief Financial Officer of 
     the Company.  The Company also collected $108 from Star America,
     Inc. a company owned by the former officer.

     On February 6, 1996, the Company paid $550 to a former officer of
     INAMED S.A. in connection with the Company's acquisition of this
     subsidiary.     

(13) Employee Benefit Plans

     Effective  January  1, 1990, the Company  adopted  a  401(k)
     Defined   Contribution  Plan  (the  "Plan")  for  all   U.S.
     employees.  Participants may contribute to the Plan and  the
     Company  may, at its discretion, match a percentage  of  the
     participant's  contribution  as  specified  in  the   Plan's
     provisions.   Participants direct their own investments  and
     the  funds  are  managed by a trustee.  The Company  has  no
     liability  for future contributions and has not  contributed
     to the Plan since 1993.

(13)  Employee Benefit Plans (continued)

     Certain  foreign  subsidiaries sponsor  defined  benefit  or
     defined  contribution plans.  The two largest are summarized
     below.  The remaining plans, covering approximately 50  non-
     U.S. employees, were instituted at various times during 1991
     through 1997 and the accumulated assets and obligations  are
     immaterial.   These plans are funded annually  according  to
     plan provisions with aggregate contributions of $125 and $86
     for the years ended December 31, 1997 and 1996.

     Effective  February 1, 1990, a certain subsidiary adopted  a
     Defined  Contribution Plan for all non-production employees.
     Upon   commencement  of  service,  these  employees   become
     eligible  to  participate in the plan and may contribute  to
     the  plan  up  to 5% of their compensation.   The  Company's
     matching  contribution is equal to 10%  of the participant's
     compensation.  The employee is immediately and fully  vested
     in  the  Company's contribution. The Company's contributions
     to  the plan approximated $303 and $254 for the years  ended
     December 31, 1997 and 1996.

     Effective  January  1,  1990, a certain  foreign  subsidiary
     adopted  a  Defined  Benefit Plan for  all  employees.    At
     December  31, 1997, there were 30 active employees  covered,
     none  retired and seven deferred pensioners.  For  the  year
     ended  December 31, 1997, the plan had net periodic  pension
     cost  of  $46, plan assets at fair market value of  $371,  a
     projected benefit obligation of $415 a vested benefit amount
     of  $212,  and an unfunded liability of $60.  The  plan  has
     assumed  a 6% discount rate, 6% expected long-term  rate  of
     return on plan assets and a 3.5% salary increase rate.

 (14)      Litigation

     INAMED  and  its  McGhan Medical and  CUI  subsidiaries  are
     defendants  in  numerous  state and federal  court  lawsuits
     involving  breast implants.  The alleged factual  basis  for
     typical  lawsuits includes allegations that the  plaintiffs'
     silicone   gel-filled  breast  implants   caused   specified
     ailments   including,  among  others,  auto-immune  disease,
     lupus,  scleroderma, systemic disorders, joint swelling  and
     chronic fatigue.  The Company has opposed plaintiffs' claims
     in these lawsuits and other similar actions and continues to
     deny  any wrongdoing or liability of any kind.  In addition,
     the  Company  believes that a substantial  body  of  medical
     evidence  exists  which indicates that  silicone  gel-filled
     implants  are  not  causally related to  any  of  the  above
     ailments.  Numerous studies in the past few years by medical
     researchers in North America and Europe have failed to  show
     a  definitive connection between breast implants and disease
     (some  critics, however, have assailed the methodologies  of
     these   studies).   Nevertheless,  plaintiffs  continue   to
     contest the findings of these studies, and more than  15,000
     lawsuits  and  claims  alleging such  ailments  are  pending
     against  the  Company and its subsidiaries.  The  volume  of
     lawsuits  has  created  substantial ongoing  litigation  and
     settlement  expense,  in addition to the  inherent  risk  of
     adverse jury verdicts in cases not resolved by dismissal  or
     settlement.



(14) Litigation (continued)

     Proposed Class Action Settlement

     As  a result of the burdens imposed by the litigation on the
     Company's management and operations, the substantial ongoing
     litigation and settlement expense, the continuing litigation
     risks,  and  the  adverse perception held by  the  financial
     community  arising  out of the litigation,  the  Company  is
     seeking approval of a mandatory ("non-opt-out") class action
     settlement  (the "Settlement") under Federal Rule  of  Civil
     Procedure  23(b)(1)(B).  As described below, the Company  is
     seeking  through  this  settlement  to  resolve  all  claims
     arising   from  McGhan  Medical  and  CUI  breast   implants
     implanted   before  June  1,  1993,  a  cutoff  date   which
     encompasses    substantially   all    domestically-implanted
     silicone gel-filled implants.

     Background of Class Settlement Negotiations

     The Settlement has its genesis in negotiations begun in 1994
     with  the  Plaintiffs'  Negotiation  Committee  ("PNC"),   a
     committee  of  the  national Plaintiffs' Steering  Committee
     ("PSC") appointed by Judge Sam C. Pointer, Jr. of the United
     States  District Court for the Northern District of  Alabama
     (the  "Court")  to represent the interests of plaintiffs  in
     multi-district breast implant litigation transferred to  the
     Court  for  pretrial  proceedings under the  federal  multi-
     district transfer statute.  At that time the Company entered
     into an agreement to participate in a proposed industry-wide
     class   action  settlement  (the  "Global  Settlement")   of
     domestic breast implant litigation and petitioned the  Court
     to certify the Company's portion of the Global Settlement as
     a  mandatory  class  under Federal Rule of  Civil  Procedure
     23(b)(1)(B), meaning that claimants could not elect to  "opt
     out"  from the class in order to pursue individual  lawsuits
     against  the  Company.   Negotiations  with  the  PNC   over
     mandatory  class  treatment were tabled,  however  (and  the
     Company's  petition consequently not ruled  upon),  when  an
     unexpectedly high projection of current disease  claims  and
     the  subsequent election of Dow Corning Corporation to  file
     for protection under federal bankruptcy laws necessitated  a
     substantial restructuring of the Global Settlement.

     In late 1995, the Company agreed to participate in a scaled-
     back  Revised  Settlement  Program  ("RSP")  providing   for
     settlement, on a non-mandatory basis, of claims by  domestic
     claimants  who were implanted before January  1,  1992  with
     silicone  gel-filled implants manufactured by the  Company's
     McGhan Medical subsidiary, and who met specified disease and
     other  criteria.   Under the terms of the RSP,  80%  of  the
     settlement  costs relating to the Company's  McGhan  Medical
     implants   were   to  be  paid  by  3M  and  Union   Carbide
     Corporation,  with  the remaining 20%  to  be  paid  by  the
     Company. However, because the RSP did not provide a  vehicle
     for  settling  claims other than by persons who  elected  to
     participate, and because of continuing uncertainty about the
     Company's ability to fund its obligations under the  RSP  in
     the  absence  of a broader settlement also resolving  breast
     implant  lawsuits against the Company and its CUI subsidiary
     which would not be covered by the RSP, the Company continued
     through 1996 and 1997 to negotiate with the PNC in an effort
     to  reach  a  broader resolution through a mandatory  class.
     The PNC was advised in these negotiations by its consultant,
     Ernst & Young LLP, which at the PNC's

(14) Litigation (continued)

     request  conducted  reviews of the  Company's  finances  and
     operations in 1994 and again in 1996 and 1997.

     On  April  2,  1998,  the Company and the  Settlement  Class
     Counsel   executed  a  formal  settlement   agreement   (the
     "Settlement Agreement"), resolving, on a mandatory, non-opt-
     out  basis, all claims arising from McGhan Medical  and  CUI
     breast   implants  implanted  before  June  1,   1993.   The
     Settlement  Agreement  was  submitted  to  the   Court   for
     preliminary approval on May 21, 1998.

     Terms and Conditions of the Settlement Agreement

     Under  the  Settlement Agreement, $31,500 of  consideration,
     consisting  of  $3,000 of cash, $3,000 of common  stock  and
     $25,500  principal amount of a 6% subordinated note will  be
     deposited in a court supervised escrow account approximately
     90  days  after  preliminary approval  by  the  Court.   The
     parties will then request the Court to authorize the mailing
     of  a notice of the proposed Settlement to all class members
     and  schedule  a fairness hearing, which would  probably  be
     held in the fourth quarter of 1998.

     In  the  event  the  Court  grants  final  approval  of  the
     Settlement,  the  consideration held in the  escrow  account
     will  then be released, once the Court's final order becomes
     non-appealable, to the court-appointed settlement office for
     distribution  to  the  plaintiff  class,  and  the   $25,500
     subordinated  note will mature and become payable  in  cash.
     However,  this payment will not become due before April  30,
     1999  or 90 days after the Court's final order becomes  non-
     appealable,   whichever  is  later.   In   the   event   the
     subordinated note is still outstanding on September 1, 1999,
     the interest rate will increase to 11%.

     The  Settlement Agreement covers all domestic claims against
     the  Company  and  its  subsidiaries  by  persons  who  were
     implanted with McGhan Medical or CUI silicone gel-filled  or
     saline  implants before June 1, 1993, including  claims  for
     injuries not yet known and claims by other persons asserting
     derivative   recovery   rights  by   reason   of   personal,
     contractual  or  legal relationships with  such  implantees.
     The  Settlement  is  structured as a mandatory,  non-opt-out
     class settlement pursuant to Federal Rule of Civil Procedure
     23(b)(1)(B),   and   is   modeled  on   similarly-structured
     mandatory  class  settlements approved in  the  1993  Mentor
     Corporation breast implant litigation, and more recently  in
     the 1997 Acromed Corporation pedicle screw litigation.

     On  June  2,  1998  the  Court issued  a  preliminary  order
     approving   the  Settlement.   The  Court  also  issued   an
     injunction  staying  all pending breast  implant  litigation
     against  the  Company (and its subsidiaries) in federal  and
     state  courts.   The Company believes that  this  stay  will
     alleviate  a  significant financial  and  managerial  burden
     which these lawsuits had placed on the Company.

     The   application   for  preliminary   approval   included
     evidentiary submissions by both the

(14) Litigation (continued)

     Company and the plaintiffs addressing requisite elements for
     certification and approval, including the existence,  absent
     settlement, of a "limited fund" insufficient to  respond  to
     the   volume   of  individual  claims,  and  the   fairness,
     reasonableness and adequacy of the Settlement.

     The  Settlement  is  subject  to  a  number  of  conditions,
     including:

     1.    Extinguishment of the Company's Obligations under  the
     RSP.   The  Settlement is conditioned on the  entry  by  the
     Court of an order, pursuant to the default provisions of the
     RSP,  extinguishing the Company's obligations under the  RSP
     and  restoring RSP participants' previously existing  rights
     in  the  litigation  system  against  the  Company  and  its
     subsidiaries.   On May 19, 1998, the Court  issued  such  an
     order.

     2.    Certification of Settlement Class.  The Settlement  is
     conditioned on the Court's certification of a new settlement
     class   pursuant   to  Federal  Rule  of   Civil   Procedure
     23(b)(1)(B).   The parties are requesting such certification
     under the same theory applied in the Mentor Corporation  and
     Acromed Corporation settlements, namely that the Company  is
     a  "limited fund" whose resources, absent a mandatory  class
     settlement,  are insufficient to respond to  the  volume  of
     claims pending against it.

     3.   Court Approval of Settlement. The Settlement is subject
     to  judicial approval of its terms and conditions  as  fair,
     reasonable  and  adequate  under  Federal  Rule   of   Civil
     Procedure  23(e), a determination which takes  into  account
     such  factors as the nature of the claims, the arms'  length
     negotiation  process,  the  recommendation  of  approval  by
     experienced  class counsel, and the defendant's  ability  to
     pay.

     4.    Resolution  of 3M Contractual Indemnity  Claims.   The
     settlement  is conditioned on resolution of claims  asserted
     by 3M under a contractual indemnity provision which was part
     of the August 1984 transaction in which the Company's McGhan
     Medical  subsidiary purchased 3M's plastic surgery business.
     To  resolve these claims, on April 16, 1998 the Company  and
     3M entered into a provisional agreement (the "3M Agreement")
     pursuant  to which the Company will seek to obtain releases,
     conditional on judicial approval of the Company's settlement
     and  favorable resolution of any appeals, of claims asserted
     against   3M   in   lawsuits   involving   breast   implants
     manufactured  by  the Company's McGhan subsidiary.   The  3M
     Agreement  provides  for release of  3M's  indemnity  claim,
     again conditional on judicial approval of the Settlement and
     favorable resolution of any appeals, upon achievement of  an
     agreed  minimum number of conditional releases for 3M.   The
     3M  Agreement requires that this condition be met or  waived
     before notice of the Settlement is given to the class.

     Under  the terms of the 3M Agreement, the Company  will  pay
     $3,000  to  3M once the Court grants final approval  of  the
     Settlement;  except  that no payment  will  become  due  any
     sooner  than  April  30, 1999 or 90 days after  the  Court's
     final   order  on  the  Settlement  becomes  non-appealable,
     whichever is later.

(14) Litigation (continued)

     Under the terms of the 3M Agreement, after the indemnity  to
     3M  is  released,  the Company will assume  certain  limited
     indemnification  obligations to 3M  beginning  in  the  year
     2000,  subject  to a cap of $1,000 annually  and  $3,000  in
     total.

     5.    State  Law  Contribution and  Indemnity  Claims.   The
     Settlement is conditioned on entry by the Court of an  order
     finding  the Settlement to have been made in good faith  and
     barring   joint  tortfeasor  claims  for  contribution   and
     indemnity arising under state law (e.g., claims against  the
     Company by other manufacturers, suppliers or physicians also
     sued  by a settling class member).  As additional protection
     against such claims in states whose laws do not provide  for
     a   bar   of   contribution   and  indemnity   claims   upon
     determination of good faith settlement, the Settlement  also
     requires  class  members to reduce any  judgments  they  may
     obtain against such third parties by the amount necessary to
     eliminate  such  parties' contribution or  indemnity  claims
     against the Company under state law.

     6.   U.S. Government and Private Carrier Claims.  The United
     States government and private insurance carriers are seeking
     reimbursement of medical services provided to class members.
     The  Company is presently in discussions with these  parties
     concerning  the  terms  of  such  settlement.    While   the
     Settlement is not conditioned on resolution of these claims,
     the  Company  anticipates that it, together with  Settlement
     Class Counsel and the Court, if appropriate, will be able to
     resolve  the  issues raised by the U.S. government  and  the
     private  insurance carriers before the mailing date  of  the
     class notice.

     7.    Favorable  Resolution of Appeals.  The  Settlement  is
     conditioned on favorable resolution of any appeals which may
     be taken from the final judgment approving the Settlement or
     from an interim stay order.  In the event the Settlement  is
     disapproved on appeal, all of the escrowed settlement funds,
     plus accrued interest, will be returned to the Company,  and
     the  litigation will be restored to the status which existed
     prior to any class settlements.

     8.    Allocation  and  Distribution of Settlement  Proceeds.
     Following  the procedures adopted in the Mentor  Corporation
     and  Acromed  Corporation mandatory class  settlements,  the
     Settlement  leaves  allocation  and  distribution   of   the
     proceeds  to  class  members  to  later  proceedings  to  be
     conducted by the Court, and contemplates that the Court  may
     appoint  subclasses or adopt other procedures  in  order  to
     ensure   that   all   relevant  interests   are   adequately
     represented in the allocation and distribution process.

     Class Settlement Approval Process and Timetable

     Following  the issuance by the Court of a preliminary  order
     on   June  2,  1998,  the  settlement  approval  process  is
     anticipated to proceed in several stages, as follows:



(14) Litigation (continued)

     1.    Satisfaction of the Condition under the 3M  Agreement.
     Within  60  days  after  the date of the  preliminary  order
     (extendable to 90 days at the Company's option), the Company
     needs to obtain an agreed minimum number of conditional releases
     for  3M pursuant to the terms of the 3M Agreement.  At  3M's
     option, that condition can be modified or waived.  The Company
     anticipates satisfying that condition by August 1, 1998.

     2.    Notice  to  the  Class.  Following  conditional  class
     certification and preliminary approval of the Settlement, as
     well as satisfaction (or waiver) of the condition in the  3M
     Agreement,  the  parties will give notice to  class  members
     advising class members of the Court's preliminary order  and
     advising them of their opportunity to be heard in support of
     or  opposition  to  final certification and  approval.   The
     parties expect that class notice will be given approximately
     30  days  after  satisfaction of the  condition  in  the  3M
     Agreement.   Prior to the distribution of the class  notice,
     the  Company  must  deposit  in a  court  supervised  escrow
     account  $31,500 of consideration, consisting of  $3,000  of
     cash,  $3,000 of common stock (to be  valued  based  on  the
     average closing bid  price  for  the  Company's common stock
     during the  period of  June 10, 1998 through  July 8, 1998),
     and $25,500 principal  amount  of  a  6% subordinated  note.
     The Company anticipates that this deposit  will occur  prior 
     to September 30, 1998.

     The  parties'  proposed  form of notice  provides  a  60-day
     deadline  for class members to submit comments,  objections,
     or  requests  to  intervene  and  be  heard,  with  a  final
     settlement   hearing   scheduled   approximately   20   days
     thereafter.   Assuming the Court adopts this  schedule,  the
     final  settlement hearing would occur in the latter part  of
     the  fourth  quarter of 1998, barring further  unanticipated
     delays.

     3.    Hearing on Final Certification and Approval.   At  the
     hearing on final certification and approval, the Court  will
     consider  any  comments and objections received  from  class
     members  as well as any further evidence and legal  argument
     submitted  by  the parties or interveners concerning  issues
     relevant  to  certification  and  approval,  including   the
     Company's   status  as  a  "limited  fund"   and   fairness,
     reasonableness and adequacy of the Settlement.   Assuming  a
     favorable outcome, the Court will thereafter issue  a  final
     order and judgment certifying the class as a mandatory class
     under Federal Rule of Civil Procedure 23(b)(1)(B), approving
     the  settlement, enjoining class members from litigation  of
     settled  claims,  and  barring  contribution  and  indemnity
     claims to the extent permitted under state law.

     Ongoing Litigation Risks

     Although the Company expects the Settlement, if approved, to
     end  as  a  practical matter its involvement in the  current
     mass  product liability litigation in the United States over
     breast implants, there remain a number of ongoing litigation
     risks, including:



(14) Litigation (continued)

     1.    Non-Approval of Settlement.  The Settlement  Agreement
     requires all parties to use their best efforts to obtain approval
     of the Settlement by the Court and on appeal.  However, there can
     be no assurance that the Court will approve the Settlement or
     that a decision approving it will be affirmed on appeal.  The
     approval decision turns on factual issues which may be contested
     by  class  members opposing the Settlement, and additionally
     implicates a number of legal issues that neither the  United
     States  Supreme Court nor the federal appellate courts  have
     definitely ruled upon.  While courts have approved similarly
     structured mandatory class settlements in the Mentor Corporation
     and Acromed Corporation cases, neither of those decisions was
     subjected to appellate review. The Company cannot predict the
     ultimate outcome of the approval process or the appeals process
     in the event any appeals of the Settlement are filed in a timely
     manner.

     2.  Collateral Attack.  As in all class actions, the Company
     may   be   called   upon   to  defend  individual   lawsuits
     collaterally  attacking the Settlement even if approved  and
     affirmed  on  appeal.   However, the  typically  permissible
     grounds  for  such attacks (in general, lack of jurisdiction
     or    constitutionally   inadequate    class    notice    or
     representation) are significantly narrower than the  grounds
     available on direct appeal.

     3.  Non-Covered  Claims.  The Settlement  does  not  include
     several categories of breast implants which the Company will
     be  left  to defend in the ordinary course through the  tort
     system.   These include lawsuits relating to breast implants
     implanted on or after June 1, 1993, and lawsuits in  foreign
     jurisdictions.  The Company regards lawsuits involving post-
     June 1993 implants (predominantly saline-filled implants) as
     routine  litigation  manageable in the  ordinary  course  of
     business.   Breast implant litigation outside of the  United
     States  has  to  date been minimal, and the Court  has  with
     minor  exceptions rejected efforts by foreign plaintiffs  to
     file suit in the United States.

     The  Company  does not currently have any product  liability
     insurance.  Depending on the availability and cost  of  such
     insurance,  the  Company may in the future  seek  to  obtain
     product liability insurance.

     The  Company  plans to obtain the cash needed  to  fund  the
     proposed settlement from a combination of new senior secured
     debt  and  the proceeds to be received upon the exercise  of
     $13,900  of  warrants to purchase common stock  (which  were
     issued   to   the  senior  Noteholders  in  July   1997   in
     anticipation of this event).  The Company has discussed  its
     financing  plans  with Appaloosa Management,  L.P.  and  its
     affiliates, who are jointly the largest holders of  the  11%
     senior  secured  convertible  notes.   Those  entities  have
     indicated  their willingness to provide the  new  financing,
     subject to negotiation of satisfactory terms, covenants  and
     legal  documentation, including amendments to  the  existing
     indenture  and  a new maturity date for the existing  senior
     debt.   Such  new  financing  may  entail  the  issuance  of
     warrants  or convertible securities which could be  dilutive
     to existing holders of the Company's common stock.


(14) Litigation (continued)

     Accounting Treatment

     In   1993,  the  Company  recorded  a  $9,152  reserve   for
     litigation.   For  the  year ended December  31,  1997,  the
     Company  booked  an  additional  reserve  of  $28,150.   The
     litigation  reserve  as  of December  31,  1997  of  $37,335
     includes the cost of the non-opt-out settlement agreement of
     $31,500,  other  settlements of $4,885 and  legal  fees  and
     other related expenses of $950.

(15) Commitments and Contingencies

     The  Company leases facilities under operating leases.   The
     leases  are  generally  on  an all-net  basis,  whereby  the
     Company pays taxes, maintenance and insurance.  Leases  that
     expire  are expected to be renewed or replaced by leases  on
     other properties.  Rent expense aggregated $4,664 and $4,650
     for the years ended December 31, 1997 and 1996.

     Minimum lease commitments under all noncancelable leases  at
     December 31, 1997 are as follows:
                  Year ending December 31:
                      1998                $  5,294
                      1999                   4,048
                      2000                   3,115
                      2001                   2,524
                      2002                   2,430
                      Thereafter             9,689
                                            ------
                                           $27,100
                                            ======
(16) Sale of Subsidiaries                

     In  1993,  the  Company  sold its  wholly-owned  subsidiary,
     Specialty  Silicone Fabricators, Inc. (SSF), a  manufacturer
     of  silicone components for the medical device industry, for
     $10.8  million.  The consideration consisted of $2.7 million
     in  cash,  the  forgiveness of $2.2 million in  intercompany
     notes due to SSF, and $5.9 million in structured notes.  The
     receivable  includes a note in the amount of $2,425  due  on
     February 25, 1995 with interest of 10% per annum and a  note
     in the amount of $3,466 due on August 31, 2003,

(16) Sale of Subsidiaries (continued)

     accruing  interest  quarterly at a rate  of  prime,  not  to
     exceed 11%.  The notes  have been  reflected on  the balance 
     sheet net of a discount of $644.  In  addition,  the Company 
     has recorded an allowance for doubtful notes as of  December 
     31,  1996  of  $1,067.  In 1997, the  Company  reduced  this 
     allowance on the note by $600  and  recorded  the  resulting
     income  effectively  reducing  general  and   administrative
     expenses by the same amount. The reduction of the  allowance
     was in part based on negotiations  with  Specialty  Silicone
     Fabricators.  The  notes  are  collateralized  by all of the 
     assets of the merger. The Company  has  filed a UCC1 and its 
     position is subordinated only to that of the primary lender.

(17) Supplemental Schedule of Non-Cash Investing and Financing Activities

     Year ended December 31, 1997:

     The  Company  issued  615,958 shares  of  common  stock  and
     recorded  a  corresponding $2,267 reduction  of  convertible
     debt  in  connection  with  the  4%  Convertible  Debentures
     converted to equity.

     In 1997, the Company accrued debt costs of $396 related  to
     the default of certain financial covenants related  to  the
     $6,200  convertible  debenture.  During  1997, the  Company
     issued 36,711 shares of common stock as payment of $135  of
     the accrued debt costs.

     Year ended December 31, 1996:

     The  Company  issued  58,400  shares  of  common  stock  and
     recorded a corresponding $540 reduction of convertible notes
     payable in connection with the 11% Secured Convertible Notes
     converted to common stock.

     The  Company recorded an accounting/finance charge of $1,417
     and  corresponding liability in connection with the 5% bonus
     shares given to the 11% Secured Convertible Noteholders  for
     their  consent and waiver of default of the operating income
     covenant  in  the first quarter of 1996.  The liability  was
     extinguished  upon  the issuance of the  shares  in  January
     1997.

     The  Company  recorded a debt conversion charge  of  $44  in
     connection with the 10% conversion inducement offered to the
     11% Secured Convertible Noteholders.

(18) Subsequent Events

     In  January,  1998,  the  Company  entered  into  Employment
     Agreements  with  Richard G.  Babbitt and   Ilan  K.  Reich,
     whereby  the  Company  engaged  those  persons  to  act   as
     President  and  Chief Executive Officer, and Executive  Vice
     President,  respectively, for a term of three years.   Under
     the  terms of those agreements, each of Messrs. Babbitt  and
     Reich  received an Executive Officer Warrant  granting  them
     the right to purchase 400,000 shares of the Company's common
     stock   at   a   price  of  $3.525  and  $3.95  per   share,
     respectively.


(18) Subsequent Events (continued)

     On  April  1,  1998, the Company entered into an  Employment
     Agreement  with  Tom  K. Larson, Jr. , whereby  the  Company
     engaged Mr. Larson to act as Chief Financial officer  for  a
     term of three years.  Under the terms of that agreement, Mr.
     Larson  received an option to acquire 20,000 shares  of  the
     Company's common stock at a price of $1.45 under an existing
     employee stock option plan, and an Executive Officer Warrant
     granting  him  the right to purchase 25,000  shares  of  the
     Company's  common stock at a price of $5.00 per share.   The
     Company  will  record compensation expense of  approximately
     $80,000 in the first quarter of 1998 related to the issuance
     of Mr. Larson's stock options and warrants.
  
(19) Quarterly Summary of Operations (Unaudited)

     The  following is a summary of selected quarterly  financial
     data for 1997 and 1996:

                                       Quarter
                       First      Second     Third      Fourth
Net Sales:
     1997             $ 26,417   $ 29,686   $ 24,206   $ 26,072
     1996               20,402     27,859     23,260     21,851
Gross Profit:
     1997              17,264      20,629     16,346     14,499
     1996              12,629      19,928     14,655     10,865
Net Income (loss):
     1997                (277)        269       (908)   (40,661)
     1996              (1,267)      1,143       (988)   (10,267)
Net Income (loss)
per share:
     1997 Basic         (0.03)       0.03      (0.11)     (4.73)
     1997 Diluted       (0.03)       0.03      (0.11)     (4.73)
                      ==========================================
     1996 Basic         (0.17)       0.15      (0.12)     (1.28)
     1996 Diluted       (0.17)       0.15      (0.12)     (1.28)

     Significant Fourth Quarter Adjustments, 1997
     --------------------------------------------
     During  the  fourth quarter of the year ended  December  31,
     1997,  the  Company  recorded significant adjustments  which
     decreased  income  by  $29,700.   The  adjustments  were  as
     follows:

          Litigation related expenses         $ 28,200
          General & administrative expenses
           Related to litigation                   500
          Income Tax Expense                     1,000

     The Company's litigation settlement expense was adjusted  to
     recognize  the  latest developments in  the  breast  implant
     litigation.

     Significant Fourth Quarter Adjustments, 1996
     --------------------------------------------

     During  the  fourth quarter of the year ended  December  31,
     1996,  the Company recorded significant adjustments  to  the
     results of operations which decreased income by $3,842.  The
     adjustments  were as follows:

          Income Tax Expense                   $ 2,006
          Provision for product returns            934
          Provision for product liability          254
          Royalty expense                          648

(19)      Quarterly Summary of Operations (continued)
-----------------------------------------------------

     The Company's provision for product returns was adjusted  to
     recognize  the return of goods previously sold to  customers
     based on historical results.

     The  Company's income tax expense was adjusted to write  off
     the  deferred tax assets previously carried on the  domestic
     subsidiaries financial statements.

     During  1996,  the  provision  for  product  liability   was
     increased by $254 to recognize the potential impact  of  the
     Company's  limited product warranty.  The Company's  royalty
     expense was also increased in the fourth quarter of 1996  by
     $648  to  recognize  the royalty expense for  products  sold
     internationally under various license agreements.


<page intentionally left blank>

               INAMED CORPORATION AND SUBSIDIARIES

                   Consolidated Balance Sheet


                                         December 31, 1995
               Assets

Current Assets:
 Cash and cash equivalents               $ 2,807,327
 Trade accounts receivable, net 
  of allowance for doubtful accounts
  and returns and allowances
  of $ 6,641,177                          10,470,375
  Notes receivable - trade                   157,534
  Related party notes receivable             385,508
  Inventories                             17,695,847
  Prepaid expenses and other 
   current assets                          1,825,213
  Income tax refund receivable                95,580
  Deferred income taxes                    2,014,589
                                         -----------
      Total current assets                35,451,973
                                         -----------
Property and equipment, at cost:
  Machinery and equipment                  8,923,564
  Furniture and fixtures                   3,714,717
  Leasehold improvements                   7,567,208
                                         -----------
                                          20,205,489
Less, accumulated depreciation
 and amortization                         (9,234,166)
                                         -----------
     Net property and equipment           10,971,323

Notes receivable, net of allowance 
 of $1,066,958                             2,047,535

Intangible assets, net                     1,658,926

Other assets, at cost                        255,187
                                         -----------
Total assets                             $50,384,944
                                         ===========

See accompanying notes to consolidated financial statements.

               INAMED CORPORATION AND SUBSIDIARIES

                   Consolidated Balance Sheet


                                                   December 31, 1995
   Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
  Current installments of long-term debt           $    51,735
  Notes payable to bank                              1,273,476
  Related party notes payable                        1,759,417
  Accounts payable                                  18,596,800
  Accrued liabilities:
   Salaries, wages, and payroll taxes                9,559,348
   Interest                                          1,609,947
   Self-insurance                                    1,130,632
   Stock option compensation                            68,714
   Other                                             2,200,860
  Royalties payable                                  2,926,388
  Income taxes payable                               1,812,818
  Deferred income taxes                                 10,065
                                                   -----------
          Total current liabilities                 41,000,200
                                                   -----------
Long-term debt, excluding current installments          89,437

Convertible notes payable                              493,511

Deferred grant income                                1,114,735

Deferred income taxes                                  239,177

Litigation settlement                                9,152,000

Commitments and contingencies

Stockholders'  equity (deficit):
 Common stock, $.01 par value.
 Authorized 20,000,000 shares;
  issued and outstanding 7,602,617                      76,027
 Additional paid-in capital                          9,963,635
 Cumulative translation adjustment                     882,146
 Accumulated deficit                               (12,625,924)
                                                   -----------
        Stockholders' equity (deficit)              (1,704,116)
                                                   -----------
Total liabilities and stockholders' 
 equity (deficit)                                  $50,384,944
                                                   ===========


See accompanying notes to consolidated financial statements.
               INAMED CORPORATION AND SUBSIDIARIES

              Consolidated Statements of Operations

             Years ended December 31, 1995 and 1994



                                  1995           1994
                              -----------     -----------
Net sales                     $81,625,581     $80,385,342
Cost of goods sold             30,155,783      26,264,458
                              -----------     -----------

     Gross profit              51,469,798      54,120,884
                              -----------     -----------
Operating expense:
 Marketing                     23,434,040      19,719,078
 General and administrative    32,833,609      27,099,371
 Research and development       4,392,054       3,724,410
                              -----------     -----------
  Total operating expenses     60,659,703      50,542,859

  Operating (loss) income      (9,189,905)      3,578,025
                              -----------     -----------
Other income (expense):
 Interest income                  770,081         428,704
 Interest expense                (833,086)       (624,261)
 Royalty income                   351,376         419,675
 Foreign currency transaction 
  (losses) gains                 (252,525)        264,473
 Miscellaneous income             578,199         940,487
                              -----------     -----------
     Net other income             614,045       1,429,078
                              -----------     -----------
     Income (loss) before income
     tax (benefit) expense     (8,575,860)      5,007,103

Income tax expense (benefit)   (1,682,799)      2,260,792
                              -----------     -----------
        Net income (loss)     $(6,893,061)    $ 2,746,311
                              ===========     ===========
Net income (loss) per share 
 of common stock
Basic                         $     (0.91)    $      0.37
                              ===========     ===========
Fully diluted                 $     (0.91)    $      0.37
                              ===========     ===========

Weighted average shares
 outstanding                    7,544,335       7,410,591
                              ===========     ===========

See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>
                   INAMED CORPORATION AND SUBSIDIARIES

         Consolidated Statements of Stockholders' Equity (Deficit)

                  Years ended December 31, 1995 and 1994


                                                    Additional   Cumulative
                                 Common Stock       Paid-in      Translation          Accumulated     Stockholders'
                             Shares      Amount     Capital      Adjustment             Deficit       Equity (Deficit)
<S>                          <C>         <C>        <C>          <C>                  <C>             <C>           
Balance, December 31, 1993   7,460,567   $74,606    $9,830,988   $ (78,995)           $(8,479,174)    $1,347,425
Net income                          __        __            __          __              2,746,311      2,746,311
Repurchases and retirement
 of common stock              (124,034)   (1,240)     (405,447)         __                     __       (406,687)                   
Issuances ofcommon stock       129,606     1,296       273,804          --                     __        275,100
Translation adjustment              --        --        --         516,678                     __        516,678
                             -----------------------------------------------------------------------------------
Balance, December 31, 1994   7,466,139    74,662     9,699,345     437,683             (5,732,863)     4,478,827
Net loss                            __        __            __          __             (6,893,061)    (6,893,061)
Repurchases and retirement
 of common stock                  (322)       (3)       (1,342)         --                     --         (1,345)
Issuances of common stock      136,800     1,368       265,632          --                     __        267,000
Translation adjustment              --        --            --     444,463                     __        444,463
                             -----------------------------------------------------------------------------------
Balance, December 31, 1995   7,602,617   $76,027    $9,963,635   $ 882,146           $(12,625,924)   $(1,704,116)  
                             =========   =======    ==========   =========           ============    ===========
See accompanying notes to consolidated financial statements.
</TABLE>

               INAMED CORPORATION AND SUBSIDIARIES

              Consolidated Statements of Cash Flows

             Years ended December 31, 1995 and 1994

                                                1995           1994

Cash flows from operating activities:
 Net income (loss)                              $(6,893,061)   $2,746,311
 Adjustments to reconcile net income (loss)
 to net cash provided by operating activities:
   Depreciation and amortization                  2,432,554     2,058,462
   Amortization of deferred grant income            (78,322)      (61,262)
   Amortization of intangible assets                297,722       254,391
   Non-cash stock compensation                       29,500        29,000
   Non-cash compensation to officers/directors      165,000            --
   Provision for doubtful accounts and returns    1,707,308       884,831
   Provision for obsolescence                       308,632       450,730
   Deferred income taxes                            243,430       199,897
   Write-off of intangible assets                        --        46,017
   Changes in current assets and liabilities:
     Trade accounts receivable                      503,114    (3,634,991)
     Notes receivable                               343,534        12,814
     Inventories                                 (2,539,782)   (1,854,374)
     Prepaid expenses and other current assets      791,350    (2,091,247)
     Income tax refund receivable                   367,476      (113,304)
     Other assets                                    (6,286)      (62,376)
     Accounts payable                             2,731,166     1,610,174
     Accrued salaries, wages, and payroll taxes   6,094,940     2,353,998
     Accrued interest                             1,042,582       342,294
     Accrued self-insurance                        (160,973)       (1,631)
     Other accrued liabilities                     (284,380)     (108,978)
     Royalties payable                            1,872,500        91,526
     Income taxes payable                        (3,147,534)      576,768
                                                -----------    ----------
         Net cash provided by
           operating activities                   5,820,470     3,729,050
                                                -----------    ----------
Cash flows from investing activities:
 Purchase of property and equipment              (4,694,592)   (2,948,945)
  Acquisition of INAMED, S.A.                            --      (400,050)
                                                -----------    ----------
          Net cash used in
           investing activities                  (4,694,592)   (3,348,995)
                                                -----------    ----------
(Continued)

See accompanying notes to consolidated financial statements.
               INAMED CORPORATION AND SUBSIDIARIES

        Consolidated Statements of Cash Flows, continued

                                                1995            1994
            
Cash flows from financing activities:
 Increases in notes payable and long-term debt  $  493,511      $1,077,355
 Principal repayment of notes payable
   and long-term debt                             (608,784)     (1,117,373)
 Decrease in related party receivables             302,676         451,516
 Increase in related party payables                788,807         420,610
 Grants received, gross                            228,453         157,728
 Proceeds from exercise of stock options            72,500          26,100
 Repurchase of common stock                         (1,345)       (406,687)
                                                ----------      ----------
Net cash provided by financing activities        1,275,818         609,249
                                                ----------      ----------
Effect of exchange rate changes on cash           (268,320)       (315,353)
                                                ----------      ----------
Net increase (decrease) in cash
  and cash equivalents                           2,133,376         673,951

Cash and cash equivalents at beginning of year     673,951              --
                                                ----------      ----------
Cash and cash equivalents at end of year        $2,807,327      $  673,951
                                                ==========      ==========
Supplemental disclosure of cash flow
    information:
  Cash paid during the year for:
   Interest                                     $  442,314      $  311,876
                                                ==========      ==========
   Income taxes                                  $ 273,947      $1,639,755
                                                ==========      ==========
(Continued)

See accompanying notes to consolidated financial statements.

                     INAMED CORPORATION AND SUBSIDIARIES

               Consolidated Statements of Cash Flows, continued


Supplemental schedule of non-cash investing and financing activities:

Year ended December 31, 1995:

   In 1995, the Company issued 75,000 shares of common stock and recorded a
   corresponding $165,000 reduction of a liability which had been incurred
   in connection with the acquisition of INAMED, S.A.

Year ended December 31, 1994:

  The 1994 statement of cash flows is presented net of the non-cash effects
  of the acquisition of INAMED, S.A.  In connection with the acquisition of
  INAMED, S.A., the Company initially made cash payments of $250,050, recorded 
  a note payable for future  cash  payments of $700,000 and recorded a 
  liability of $385,000 for the future issuance of 175,000 shares of common
  stock.  As of December 31, 1994, the Company had paid $150,000 on the note
  payable and had issued 100,000 shares of common stock.


See accompanying notes to consolidated financial statements.
                          INAMED CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    As of December 31, 1995 and 
        for each of the years ended December 31, 1995 and 1994


(1)    Basis of Presentation and Summary of Significant Accounting Policies

     The Company

     The  Company  and its subsidiaries are engaged primarily  in
     the development, manufacture and distribution of implantable
     medical  devices for the plastic and general surgery fields.
     Its  primary  products include breast  implants  and  tissue
     expanders.   The  Company  operates  in  both  domestic  and
     foreign markets.

     Basis of Presentation

     The  consolidated financial statements include the  accounts
     of  INAMED  Corporation  and  its wholly-owned  subsidiaries
     (collectively referred to as the Company).  All  significant
     intercompany balances and transactions have been  eliminated
     in consolidation.

     Use of Estimates in the Preparation of Financial Statements

     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 (also see Note 14).

     Cash Equivalents

     The  Company  considers all highly liquid  debt  instruments
     purchased with an original maturity of three  months or less 
     to be cash equivalents.

     Accounts Receivable and Credit Risk

     The  Company  grants credit terms in the  normal  course  of
     business to its customers, primarily hospitals, doctors  and
     distributors.  As a part of its ongoing control  procedures,
     the Company monitors the credit worthiness of its customers.
     Bad  debts have been minimal.  The Company does not normally
     require  collateral  or  other security  to  support  credit
     sales.  An estimated provision for returns and credit losses
     has  been provided for in the financial statements  and  has
     generally been within management's expectations.

     Revenue Recognition

     The  Company recognizes revenue in accordance with Statement
     of   Financial   Accounting  Standards  No.   48,   "Revenue
     Recognition  When  Right of Return  Exists".   Revenues  are
     recorded net of estimated sales returns and allowances  when
     product is


(1)  Basis  of Presentation and Summary of Significant Accounting
     Policies (continued)

     Revenue Recognition (continued)

     shipped.  The Company ships product with the right of return
     and  has  provided  an estimate of the allowance  for  sales
     returns based on its historical  returns  experience,  known
     patterns and other specific factors. Because management  can 
     reasonably estimate future sales returns, the product  sales 
     prices  are  substantially  fixed,  and  other  reasons  the 
     Company recognizes net sales when the product is shipped.

     Inventories

     Inventories are stated at the lower of cost (first-in, first-
     out)  or market (net realizable value).  Estimated inventory
     obsolescence   has  been  provided  for  in  the   financial
     statements   and  has  generally  been  within  management's
     expectations.

     Current Vulnerability Due to Certain Concentrations

     The  Company has primarily one source of supply for  certain
     raw  materials  which are significant to  its  manufacturing
     process.    Although   there  are  a   limited   number   of
     manufacturers  of  the particular raw materials,  management
     believes  that  other  suppliers could provide  similar  raw
     materials  on  comparable terms.   A  change  in  suppliers,
     however, could cause a delay in manufacturing and a possible
     loss  of sales, which may have a material and adverse effect
     on the consolidated results of operations and cash flows.

     Property and Equipment

     Property  and equipment are stated at cost less  accumulated
     depreciation and amortization. Significant improvements  and
     betterments  are capitalized while maintenance  and  repairs
     are charged to operations as incurred.

     Depreciation of property and equipment is computed using the
     straight-line method based on estimated useful lives ranging
     from   five  to  ten  years.   Leasehold  improvements   are
     amortized  on  the straight-line basis over their  estimated
     economic  useful lives or the lives of the leases, whichever
     is shorter.
(1)  Basis  of Presentation and Summary of Significant Accounting
     Policies (continued)

     Intangible and Long-Term Assets

     Intangible  and  long-term assets are stated  at  cost  less
     accumulated  amortization, and are amortized on a  straight-
     line basis over their estimated useful lives as follows:

          Customer lists                        5 years
          Organization costs                    5 years
          Patents                              17 years
          Trademarks and technology             5 years
          Goodwill                          10-12 years

     The  Company  classifies as goodwill the cost in  excess  of
     fair   value   of  the  net  assets  acquired  in   purchase
     transactions.    The  Company  periodically  evaluates   the
     realizability  of  goodwill.  Based  upon  its  most  recent
     analysis,  no impairment of goodwill exists at December  31,
     1995.

     Statement  of Financial Accounting Standards No.  121  (SFAS
     No.  121),  "Accounting  for the  Impairment  of  Long-Lived
     Assets  and  for Long-Lived Assets to be Disposed  of",  was
     adopted by the Company for the year ended December 31, 1995.
     This  statement requires that long-lived assets and  certain
     identifiable  intangible assets  to  be  held  and  used  be
     reviewed  for  impairment  whenever  events  or  changes  in
     circumstances  indicate the carrying amount of  such  assets
     may  not  be  recoverable. The carrying value  of  long-term
     assets   is   periodically  reviewed  by   management,   and
     impairment losses, if any, are recognized when the  expected
     non-discounted future operating cash flows derived from such
     assets  are  less than their carrying value.  Impairment  of
     long-lived assets is measured by the difference between  the
     discounted  future cash flows expected to be generated  from
     the  long-lived asset against the fair value  of  the  long-
     lived  asset.  Fair value of long-lived assets is determined
     by  the amount at which the asset could be bought or sold in
     a current transaction between willing parties.  The adoption
     of  SFAS  No.  121 did not have any impact on the  financial
     position,  results  of  operations, or  cash  flows  of  the
     Company.

     Research and Development

     Research and development costs are expensed when incurred.

     Income Taxes

     The   Company  accounts  for  its  income  taxes  using  the
     liability  method, under which deferred taxes are determined
     based on the differences between the financial statement and
     tax bases of assets and liabilities, using enacted tax rates
     in  effect  for  the  years  in which  the  differences  are
     expected  to  reverse.  Valuation allowances are established
     when  necessary to reduce deferred tax assets to the  amount
     expected to be realized.
(1)  Basis  of Presentation and Summary of Significant Accounting
     Policies (continued)

     Net Income/Loss Per Share

     During 1997, the Financial Accounting Standards Board issued
     Statement  of  Financial  Accounting  Standards   No.   128,
     "Earnings  per Share",  ("SFAS No. 128") which provides  for
     the calculation of "basic" and "diluted" earnings per share.
     SFAS  No.  128 is effective for financial statements  issued
     for  periods ending after December 15, 1997.  Basic earnings
     per  share includes no dilution and is computed by  dividing
     income  available  to common shareholders  by  the  weighted
     average  number of common shares outstanding for the period.
     Diluted earnings per share reflect, in periods in which they
     have a dilutive effect, the effect of common shares issuable
     upon  exercise  of  stock  options.   As  required  by  this
     Statement,  all  periods presented  have  been  restated  to
     comply with the provisions of SFAS No. 128.

     Foreign Currency Translation

     The   functional   currencies  of  the   Company's   foreign
     subsidiaries  are  their local currencies, and  accordingly,
     the assets and liabilities of these foreign subsidiaries are
     translated  at  the  rate of exchange at the  balance  sheet
     date.   Revenues  and expenses have been translated  at  the
     average  rate  of  exchange in effect  during  the  periods.
     Unrealized  translation  adjustments  do  not  reflect   the
     results  of  operations  and  are  reported  as  a  separate
     component   of   stockholders'   equity   (deficit),   while
     transaction   gains  and  losses  are   reflected   in   the
     consolidated statement of operations.  To date, the  Company
     has not entered into hedging transactions to protect against
     changes in foreign currency exchange rates.

     Recently Issued Accounting Standard

     In  October  1995, the Financial Accounting Standards  Board
     issued   SFAS   No.   123,   "Accounting   for   Stock-Based
     Compensation."  The accounting or disclosure requirements of
     this  statement are effective for the Company's fiscal  year
     1996.   The Company has not yet determined whether  it  will
     adopt  the  accounting  requirements  of  this  standard  or
     whether  it will elect only the disclosure requirements  and
     continue  to  measure compensation expense using  Accounting
     Principles Board Opinion No. 25.

     Reclassification

     Certain reclassifications were made to the 1994 consolidated
     financial statements to conform to the 1995 presentation.

(2)  Inventories

     Inventories are summarized as follows:
                          December 31, 1995

     Raw materials      $    2,513,862
     Work in progress        3,773,579
     Finished goods         12,167,768
                            ----------
                            18,455,209
     Less allowance for
     obsolescence             (759,362)
                              --------
                        $   17,695,847
                            ==========
(3)  Intangible Assets

     Intangible assets, at cost, are summarized as follows:
                                           December 31, 1995
     Customer lists                        $ 125,000
     Organization and acquisition costs      251,539
     Patents, trademarks and technology    2,585,961
     Goodwill                              1,785,451
     Other                                   337,827
                                          ----------
                                           5,085,778
     Less accumulated amortization        (3,426,852)
                                          ----------
                                         $ 1,658,926
                                          ==========

     Effective January 1994, the Company acquired the assets of
     Novamedic, S.A.  The cost in excess of fair value of the net
     assets acquired of $797,294 is classified as goodwill.

(4)  Lines of Credit

     As  of  December  31,  1995,  the  Company  had  outstanding
     borrowings  in  the  amount of $328,366 under  a  $5,300,000
     revolving  line  of credit agreement with  a  domestic  bank
     which expired August 31, 1993 and was extended through March
     31,  1996.  The terms of the agreement required the  Company
     to  make  monthly principal payments ($30,000 per  month  at
     December  31, 1995) and monthly interest payments  at  prime
     plus  2.5% per annum (11.0% per annum at December 31, 1995).
     Interest  of $62,519 and  $105,417 was paid on the  line  of
     credit  in 1995 and 1994, respectively.  The line of  credit
     is   collateralized  by  the  Company's  domestic   accounts
     receivable,  inventories  and  certain  other  assets.    In
     September  1994, the company entered into an agreement  with
     the  bank  which deleted the financial covenants  which  had
     been  part  of  the original line of credit  agreement.   In
     January 1996, the  obligation to the bank was satisfied.
4)   Lines of Credit (continued)

     The  Company's Dutch subsidiary has a line of credit with  a
     major   Dutch   bank,   totaling   $1,540,000,   which    is
     collateralized  by the accounts receivable, inventories  and
     certain  other assets of its Dutch subsidiary.  The line  of
     credit expired on March 31, 1996.  As of December 31,  1995,
     approximately $900,000 had been drawn on the line of credit.
     The interest rate on the line of credit is 7% per annum.

     The  Company's weighted average interest rate on  short-term
     borrowings was 8.9% in 1995.

     The Company is currently seeking alternative lending sources
     from  other  financial institutions.  However, no agreements
     have been finalized to replace the line of credit.

(5)  Long-Term Debt

     Long-term debt is summarized as follows:

                                                           December 31, 1995
      11% Secured Convertible Note payable, maturing
        January 1999, interest payable quarterly,
        January 1, April 1, July 1 and October 1           $493,511

     Capital lease obligations, collateralized by related
        equipment, payable in monthly installments
        aggregating $8,754, including interest at 6.9%
        to 15.8%, expiring through November 1998            141,172
                                                           --------
                                                            634,683
     Less, current installments                             (51,735)
                                                           --------
                                                          $ 582,948
                                                           ========

     The aggregate installments of long-term debt as of December 31,
     1995 are as follows:

                       Year ending December 31:
                        1996      $    51,735
                        1997           65,993
                        1998           23,444
                        1999          493,511
                                      ------- 
                                    $ 634,683
                                      =======

(6)  Deferred Grant Income

     Deferred  grant income represents grants received  from  the
     Irish   Industrial  Development  Authority  (IDA)  for   the
     purchase  of  capital equipment, and is amortized  over  the
     life  of the related assets against the related depreciation
     expense.  Amortization for the years
     ended  December 31, 1995 and 1994 was approximately  $78,000
     and $61,000.

     In   addition,  for  the  year  ended  December  31,   1994,
     approximately  $125,000  was received for  training  grants.
     This amount has been offset against the related expenses  on
     the accompanying consolidated statements of operations.

     IDA  grants  are  subject to revocation  upon  a  change  of
     ownership  or  liquidation of McGhan  Limited  (one  of  the
     Company's Irish subsidiaries).  If the grants were  revoked,
     the  Company would be liable on demand from the IDA for  all
     sums  received  and  deemed to have  been  received  by  the
     Company in respect to the grant.  In the event of revocation
     of  the grant, the Company would be liable for the amount of
     $2,552,362 as of December 31, 1995.


(7)  Income Taxes

     Income tax (benefit) expense at December 31, is summarized
as follows:

                              1995               1994
     Current:
       Federa            $(2,267,198)         $1,577,188
       State                (195,969)            310,816
       Foreign               551,893             172,891
                         -----------          ----------
       Total             $(1,911,274)         $2,060,895
                         -----------          ----------
 
    Deferred:
       Federal              $530,419          $  (70,778)
       State                (157,016)            (39,984)
       Foreign              (144,928)            310,659
                            --------          ----------
       Total                 228,475             199,897
                            --------          ----------
                         $(1,682,799)         $2,260,792
                         ===========          ==========

(7)  Income Taxes (continued)

     For financial reporting purposes, earnings from continued
     operations before income taxes includes the following
     components:

     Year ended December 31,       1995           1994
     Pretax income:
     Domestic                $ (6,486,671)    $ 5,728,982
     Foreign                   (2,089,189)       (721,879)
                             ------------     -----------
      Total Pretax Income    $ (8,575,860)    $ 5,007,103
                             ============     ===========

     The primary components of temporary differences which
     comprise the Company's net deferred tax assets as of
     December 31,1995 are as follows:
                                             December 31,
                                                1995
     Deferred tax assets:
       Allowance for doubtful accounts       $  576,350
       Allowance for returns                  2,895,564
       Inventory reserves                        90,090
       Inventory capitalization                 481,456
       Accrued liabilities                      599,605
       Net operating losses                   1,103,248
       State taxes                                2,554
       Intangible assets                        168,151
       Litigation settlement                  3,651,648
       Tax credits                              145,748
       Other                                      8,322
                                             ----------
        Deferred tax assets                   9,722,736
        Valuation allowance                  (7,377,074)
                                             ----------
     Deferred tax assets                      2,345,662
                                             ----------
     Deferred tax liabilities:
       Depreciation and amortization            (46,456)
       Installment sale                        (358,584)
       Other foreign                           (175,275)
                                             ----------
     Deferred tax liability                    (580,315)
                                             ----------
     Net deferred tax asset                  $1,765,347
                                             ==========
(7)  Income Taxes (continued)

     Although realization is not assured, management believes  it
     is  more likely than not that the net deferred tax asset  is
     fully recoverable against taxes previously paid and thus  no
     further valuation allowance for these amounts is required.

     The  difference between actual tax expense (benefit) and the
     "expected"  tax expense (benefit) computed by  applying  the
     Federal  corporate  tax  rate of 34%  for  the  years  ended
     December 31, 1995 and 1994 is as follows:
                                             1995          1994

     "Expected" tax expense (benefit)     $(2,915,792)     $1,702,415
     Tax effect of nondeductible expenses      51,084          43,974
     Goodwill amortization                     49,924          61,525
     Research tax credits                  (1,099,596)       (188,223)
     Foreign taxes                            406,965         483,550
     State franchise tax (benefit), net of
         Federal tax benefits                (268,488)        175,944
     Losses of foreign operations             (48,256)       (290,522)
     Change in valuation allowance of
         deferred tax assets                1,948,830              --
     Tax penalties                            276,708         150,726
     Other                                    (84,178)        121,403
                                           ----------       ---------
                                          $(1,682,799)     $2,260,792
                                           ==========       =========

     The Company had net operating loss carryovers at the foreign
     companies  aggregating approximately $2,260,000 at  December
     31,  1995 (based on exchange rates at that date), to be used
     by  the  individual  foreign  companies  that  incurred  the
     losses.   These net operating loss carryovers  have  various
     expiration dates.  As of December 31, 1995, the Company  had
     a  net  operating loss carryover of approximately $2,400,000
     for   California   franchise  tax  purposes.    These   loss
     carryovers expire in 2000.

(8)  Royalties

     The  Company  has  entered into various  license  agreements
     whereby  the Company has obtained the right to produce,  use
     and  sell  patented technology.  The Company pays  royalties
     ranging  from 5% to 10% of the related net sales,  depending
     upon  sales  levels.  Royalty expense under these agreements
     was  approximately $5,511,000 and $4,326,000 for  the  years
     ended  December  31,  1995 and 1994,  respectively,  and  is
     included  in  marketing  expense.   The  license  agreements
     expire at the expiration of the related patents.



(9)  Stockholders' Equity

     The  Company has adopted several incentive and non-statutory
     stock  option plans.  Under the terms of the plans,  610,345
     shares  of  common stock are reserved for  issuance  to  key
     employees at prices generally not less than the market value
     of  the  stock  at the date the options are granted,  unless
     previously approved by the Board of Directors.

     Activity under these plans for the years ended December  31,
     1995 and 1994 is as follows:

                                                       1995        1994

     Options outstanding at beginning of year        202,500      247,854
     Granted                                              --           --
     Exercised                                       (50,000)     (18,000)
     Expired or canceled                              (6,000)     (27,354)
                                                     -------      -------
     Options outstanding at end of year              146,500      202,500
                                                     =======      =======
     Options exercisable at end of year               94,000      122,500
                                                     =======      =======

     The  exercise  price  of all options outstanding  under  the
     stock option plans range from $1.45 to $2.49 per share.  All
     options exercised in 1994 and 1995 were exercised at a price
     of  $1.45.  At December 31, 1995, there were 114,754  shares
     available for future grant under these plans.  Under certain
     plans, the Company granted options at $1.45, which was below
     the  fair  market value of the common stock at the  date  of
     grant.    Accordingly,  the  Company   is   amortizing   the
     difference  between the fair market value and  the  exercise
     price  of  the related outstanding options over the  vesting
     period  of  the options.  Stock option compensation  expense
     for  the  years ended December 31, 1995 and 1994  aggregated
     $9,000 and $10,000, respectively.

     In  1984,  McGhan Medical Corporation adopted  an  incentive
     stock option plan (the "1984 Plan").  Under the terms of the
     1984  Plan, 100,000 shares of its common stock were reserved
     for  issuance to key employees at prices not less  than  the
     market value of the stock at the date the option is granted.
     In  1985, INAMED Corporation agreed to substitute options to
     purchase  its shares (on a two-for-one basis) for  those  of
     McGhan  Medical  Corporation. The 1993 options  granted  was
     restated  from  20,000 to 100,000 to reflect 80,000  options
     which  were actually granted in 1993 but due to an  internal
     reporting  error  were not recorded until  1995.   When  the
     options  were  originally granted in 1993, the  fair  market
     value of the stock was below the stock option exercise price
     of $1.45 and therefore no compensation expense was recorded.



     (9)  Stockholders' Equity (continued)

     In  1986,  the Company adopted an incentive and nonstatutory
     stock option plan (the "1986 Plan").  Under the terms of the
     1986 Plan, 300,000 shares of common stock have been reserved
     for  issuance  to  key employees.  No options  were  granted
     under the 1986 Plan during 1995.

     In  1987, the Company adopted an incentive stock award plan.
     Under the terms of this plan, 300,000 shares of common stock
     were reserved for issuance to employees at the discretion of
     the  Board  of  Directors.    The Directors  awarded  11,800
     shares  in  1995  and 11,600 shares in 1994  with  aggregate
     values of $29,500 and $29,000, respectively.  No shares were
     awarded  in 1993.  At December 31, 1995, there were  119,612
     shares available for future grant under this plan.

     In  1993  the Company adopted a Non-Employee Director  Stock
     Option  Plan  which authorized the Company to  issue  up  to
     150,000  shares  of common stock to directors  who  are  not
     employees of or consultants to the Company and who are  thus
     not  eligible  to  receive  stock option  grants  under  the
     Company's  stock option plans.  Pursuant to the  Plan,  each
     non-employee director is automatically granted an option  to
     purchase 5,000 shares of common stock on the date of his  or
     her  initial appointment or election as a director,  and  an
     option  to  purchase an additional 5,000  shares  of  common
     stock  on each anniversary of his or her initial grant  date
     on  which  he  or she is still serving as a  director.   The
     exercise price per share is the fair market value per  share
     on  the  date of grant.  As of December 31, 1995 no  options
     were granted under this plan.

(10) Foreign Sales Information

     Net  sales  to customers in foreign countries for the  years
     ended  December 31, 1995 and 1994 represented the  following
     percentages of net sales:

                                     1995        1994

              Europe                 22.3%       21.5%
              Asia-Pacific            3.5         2.7
              Iberia & Latin America  5.4         1.4
              Other                   0.3         0.7
                                     -----       -----
                                     31.5%       26.3%
                                     =====       =====

     The  Europe  classification above includes The  Netherlands,
     Belgium, United Kingdom, Italy, France and Germany. The Asia-
     Pacific  classification includes Hong  Kong,  China,  Japan,
     Taiwan,   Singapore,   Thailand,  The  Philippines,   Korea,
     Indonesia,  India, Pakistan, New Zealand and Australia.  The
     Iberia  &  Latin  American classification  includes  Central
     America, South America, Mexico, Spain and Portugal.)

(11) Geographic Segment Data

     The following table shows net sales, operating income (loss)
     and  identifiable assets by geographic segment for the years
     ended December 31, 1995 and 1994:

                                 1995            1994

     Net sales:
         United States         $55,881,262     59,196,401
         International          25,744,319     21,188,941
                                ----------     ----------
                               $81,625,581     80,385,342
                                ==========     ==========
     Operating income (loss):
         United States         $(7,601,277)     4,717,154
         International          (1,588,628)    (1,139,129)
                                ----------      ---------
                               $(9,189,905)     3,578,025
                                 =========      =========
     Identifiable assets:
         United States         $25,976,480     29,337,456
         International          24,408,464     18,472,945
                                ----------     ----------
                               $50,384,944     47,810,401
                                ==========     ==========

     The international classification above includes the
     Netherlands, United Kingdom, Italy, France, Belgium, Germany
     and Ireland.  The operations in Spain, Mexico, Brazil and
     Hong Kong were not material and were therefore also included
     in the international classification.

(12) Related Party Transactions

     Included  in  assets  is an unsecured note  receivable  from
     Michael D. Farney, former Chief Executive Officer and  Chief
     Financial   Officer   of  the  Company.    This   receivable
     approximated $386,000 and $688,000 as of December  31,  1995
     and  1994, respectively. The note bears interest at 9.5% per
     annum  and was due in June 1996.  The note is primarily  for
     various   personal   activities   and   certain   relocation
     allowances.  On March 4, 1996, the officer paid the  balance
     of the note in full.

     Included   in  liabilities  are  notes  payable  to   McGhan
     Management Corporation, a Nevada Corporation and  Donald  K.
     McGhan,   former  Chairman,  Chief  Executive  Officer   and
     President of the Company.  Mr. McGhan and his wife  are  the
     majority  shareholders of McGhan Management Corporation  and
     Mr.  McGhan  is President and Chairman of that  Corporation.
     This  payable  approximated $1,209,000 as  of  December  31,
     1995.   The  note bears interest at prime plus 2% per  annum
     (10.5% per annum at December 31, 1995) and was  due June 30,
     1996,  or  on demand. The Company paid the balance of  these
     notes  in  full  on  January 25,  1996.   Also  included  in
     liabilities  is a note payable of approximately $550,000  to
     an  officer of INAMED, S.A. in connection with the Company's
     acquisition of this subsidiary.  Final payment on this  note
     was made on February 6, 1996.

(12)  Related Party Transactions (continued)

     During  1992, the Company entered into a  lease  arrangement
     with  Star  America Corporation, a Nevada  corporation,  for
     rental  of  an  aircraft to provide air  transportation  for
     corporate   purposes.   Michael  D.  Farney,  former   Chief
     Executive  Officer  and  Chief  Financial  Officer  of   the
     Company,  is  a  director  and  officer  of  Star    America 
     Corporation.  The minimum rental through December  31,  1993
     was  $95,000  per  month.  In January  1994  this  rent  was
     renegotiated to a month-to-month arrangement with a  monthly
     lease  of $74,000 during 1994.  Rental expense for 1995  and
     1994  was  $900,000 and $888,000 respectively.  In  February
     1995,  the  Company  received a  credit  voucher  from  Star
     America  Corporation for $800,000.  This amount  represented
     payments  made  during 1994 in excess of the  actual  rental
     arrangement.  At December 31, 1995, the credit  voucher  had
     an  outstanding balance of $107,670.  This balance was  paid
     to  the  Company on March 11, 1996.  The  lease  arrangement
     with  Star  America Corp. was terminated effective  December
     31, 1995.

(13)  Employee Benefit Plans

     Effective  January  1, 1990, the Company  adopted  a  401(k)
     Defined  Contribution Plan for all US employees.  After  six
     months  of service, employees become eligible to participate
     in  the Plan.  Participants may contribute to the plan up to
     20% of their eligible compensation annually, subject to  the
     limitations  in the Internal Revenue Code.  The Company  can
     match  contributions  equal  to 10%  of  each  participant's
     eligible contribution, limited to 5%  of  the  participant's
     compensation.  The participants are 100% vested in their own
     contributions and vesting in the Company's contributions  is
     based  on  years  of credited service.  Participants  become
     100%   vested   after   five  years  of  credited   service.
     Participants may invest elective contributions  among  funds
     selected by the Company and the Trustee(s) of the plan.  The
     Trustee(s) and the Company may choose the investment options
     for  any employer nonelective contribution. The Company  did
     not  make  contributions to the plan  for  the  years  ended
     December 31, 1995 and 1994.

     Effective  January 1, 1990, a certain subsidiary  adopted  a
     Defined  Benefit Plan for all employees.  After one year  of
     service,  employees  become eligible to participate  in  the
     plan.   Employees  in active employment on January  1,  1990
     were immediately eligible.  Plan benefits, including pension
     upon retirement at the age of 65 or complete disability, are
     based   on  an  employee's  years  of  service  and  average
     compensation  prior  to retirement.   The  pension  plan  is
     financed by premiums which are paid by the employer and  the
     employees.   The premium is based on financing a pension  of
     70%  of  the salary per person.  Participants share  in  the
     cost of the plan by making contributions of 3% to 5% of  the
     pension  basis.   The funding policy is to pay  the  accrued
     pension contribution currently.  The premiums, paid  to  the
     external  pension management company, are  invested  80%  in
     government  bonds and 20% in stocks listed on the  Amsterdam
     Exchange.   The  return  on  investments  for  the   pension
     management   company   in   1995  was   approximately   24%.
     Administrative costs paid by the Company were  approximately
     $19,100  and $12,900 for the years ended December  31,  1995
     and 1994, respectively.

(13) Employee Benefit Plans (continued)

     Contributions   to   the   defined  benefit   pension   plan
     approximated  $75,000  and  $49,000  for  the  years   ended
     December 31, 1995 and 1994, respectively.

     Effective  February 1, 1990, a certain subsidiary adopted  a
     Defined  Contribution Plan for all non-production employees.
     Upon   commencement  of  service,  these  employees   become
     eligible  to  participate in the plan and may contribute  to
     the  plan  up  to 5% of their compensation.   The  Company's
     matching  contribution is equal to 200% of the participant's
     contribution.  The employee is immediately and fully  vested
     in  the  Company's contribution. The Company's contributions
     to the plan approximated $198,000 and $144,000 for the years
     ended December 31, 1995 and 1994, respectively.

     Effective  January 1, 1991, a certain subsidiary  adopted  a
     Defined  Benefit Plan for all employees.  After one year  of
     service,  employees  become eligible to participate  in  the
     plan.   Plan benefits, including pension upon retirement  or
     complete  disability, are based on an  employee's  years  of
     service  and average compensation prior to retirement.   The
     pension plan is financed by premiums which are paid  by  the
     employer  and the employee.  The premium is based on  8%  of
     the  current salary.  Participants share in the cost of  the
     plan  by  making  contributions of 2% to 3% of  the  pension
     basis.   The  funding policy is to pay the  accrued  pension
     contribution  currently.   The  premiums  are  paid  to   an
     external  pension  management  company  which  invests   the
     premiums in government bonds. The pension management company
     guarantees   a   return  of  5%  per  year  on  investments.
     Administrative costs paid to the pension management  company
     are  approximately  20%  of contributions  made  each  year.
     Contributions   to   the   defined  benefit   pension   plan
     approximated  $17,000  and  $14,000  for  the  years   ended
     December 31, 1995 and 1994, respectively.

     Effective  February 1, 1991, a certain subsidiary adopted  a
     Defined  Benefit Plan for all employees.  After one year  of
     service,  employees  become eligible to participate  in  the
     plan.   Plan  benefits,  including additional  pension  upon
     retirement at age 65 or complete disability, are based on an
     employee's  years of service and average compensation  prior
     to retirement.  Participants do not share in the cost of the
     plan.   The  funding  policy is to pay the  accrued  pension
     contribution currently.  The premiums, paid to the  external
     pension  management company, are invested 52% in  government
     bonds, 13% in stocks, 25% in mortgages and 10% in buildings.
     The  Company  pays the administrative costs to  the  pension
     management  company which totaled $2,155 in 1995 and  $1,344
     in   1994.    The  Company's  contributions  to   the   plan
     approximated  $24,000  and  $10,000  for  the  years   ended
     December 31, 1995 and 1994, respectively.

     Effective  July  1,  1992, a certain  subsidiary  adopted  a
     Defined  Contribution  Plan for all  employees.   After  six
     months  of service, employees become eligible to participate
     in  the plan.  They may contribute to the plan up to  5%  of
     their compensation.  The Company's matching contribution  is
     equal  to  100%  of  the  participant's  contribution.   The
     employee  is  immediately and fully vested in the  Company's
     contribution however, the pension can

(13) Employee Benefit Plans (continued)

     only  be drawn upon retirement or complete disability.   All
     premiums  are  paid  to  an external pension  company  which
     invests  the  accumulated funds in  government  bonds.   The
     return  on investments has been approximately 8% each  year.
     The   Company  pays  administrative  costs  to  the  pension
     management company which totaled $320 and $307 for the years
     ended  December  31,  1995  and  1994,  respectively.    The
     Company's contributions to the plan approximated $9,000  and
     $7,000,  for  the years ended December 31,  1995  and  1994,
     respectively.

     Effective  July  1,  1993, a certain  subsidiary  adopted  a
     Defined  Benefit Plan for all employees.  After one year  of
     service,  employees  become eligible to participate  in  the
     plan.   Plan benefits, including pension upon retirement  at
     age  65  or  complete disability, are based on an employee's
     years   of   service  and  average  compensation  prior   to
     retirement.   Participants do not share in the cost  of  the
     plan.   The  funding  policy is to pay the  accrued  pension
     contribution  currently.  The Company's yearly  contribution
     per  employee is equal to one month of an employee's salary.
     The  premiums  are  paid to an external  pension  management
     company  which  invests  70% of  the  accumulated  funds  in
     government  bonds  and  30% in buildings  and  stocks.   The
     pension  management company's return on investment has  been
     approximately   11%  each  year.   The  Company   has   paid
     administrative  costs  of $3,000 and $2,413  for  the  years
     ended  December  31,  1995  and  1994,  respectively.    The
     Company's contributions to the plan approximated $15,000 and
     $12,000  for  the years ended December 31,  1995  and  1994,
     respectively.

     Effective  January 1, 1995, a certain subsidiary  adopted  a
     Defined  Benefit Plan for all employees.  After one year  of
     service,  employees  become eligible to participate  in  the
     plan. Plan benefits, including a pension upon retirement  at
     age  65  or  complete disability, are based on an employee's
     years   of   service  and  average  compensation  prior   to
     retirement.  The  Company contributes 7% of  the  employees'
     fixed salaries. Participants do not share in the cost of the
     plan.    The  premiums  are  paid  to  an  external  pension
     management  company  and are invested in  government  bonds,
     loans, real estate and French and international stocks.  The
     pension  management company's return on investment  in  1995
     was  6%.  The  Company  paid  administrative  costs  of   an
     insignificant  amount  in  1995 to  the  pension  management
     company.   The   Company's   contributions   to   the   plan
     approximated $15,000 for the year ended December 31, 1995.

     Effective  January 1, 1995, a certain subsidiary  adopted  a
     Defined  Contribution  Plan  for  non-production  employees.
     Upon   commencement  of  service,  these  employees   become
     eligible to participate in the plan.  They may contribute to
     the  plan  up  to 5% of their compensation.   The  Company's
     matching  contribution is equal to 10% of the  participant's
     contribution.  The employee is immediately and fully  vested
     in  the  Company's contribution.  The Company's contribution
     to the plan approximated $17,000 for the year ended December
     31, 1995.

(14) Litigation (See Note 17b)

     INAMED  and/or its subsidiaries are defendants  in  numerous
     State court actions and a Federal class action in the United
     States   District  Court,  Northern  District  of   Alabama,
     Southern  Division, under Chief Judge Sam C.  Pointer,  Jr.,
     U.S. District Court, regarding Master File No. C892-P-10000-
     S (Silicone Gel Breast Implants Product Liability Litigation
     MDL  926).  The claims are for general and punitive  damages
     substantially  exceeding provisions made  in  the  Company's
     consolidated   financial   statements.    The   accompanying
     consolidated   financial  statements  have   been   prepared
     assuming  that  the  Company will  withstand  the  financial
     results of said litigation.

     Several  U.S.  based manufacturers negotiated  a  settlement
     with  the Plaintiffs' Negotiating Committee ("PNC"), and  on
     March  29, 1994 filed a Proposed Non-Mandatory Class  Action
     Settlement in the Silicone Breast Implant Products Liability
     (the "Settlement Agreement") providing for settlement of the
     claims  as  to the class (the "Settlement") as described  in
     the Settlement Agreement.  The Settlement Agreement provides
     for  resolution of any existing or future claims,  including
     claims  for  injuries not yet known, under  any  Federal  or
     State  law, from any claimant who received a silicone breast
     implant  prior to June 1, 1993.  A fairness hearing for  the
     non-mandatory class was held before Judge Pointer on  August
     18,  1994.   On September 1, 1994, Judge Pointer gave  final
     approval to the non-mandatory class action settlement.

     The  Company  was not originally a party to  the  Settlement
     Agreement.   However, on April 8, 1994 the Company  and  the
     PNC  reached an agreement which would join the Company  into
     the  Settlement.  The agreement reached between the  Company
     and  the PNC added great value to the Settlement by enabling
     all  plaintiffs and U.S. based manufacturers to  participate
     in  the  Settlement,  and facilitating  the  negotiation  of
     individual  contributions by the Company,  Minnesota  Mining
     and   Manufacturing  Company  ("3M"),  and   Union   Carbide
     Corporation which total more than $440 million.

     Under  the  terms of the Settlement Agreement,  the  parties
     stipulate and agree that all claims of the Settlement  Class
     against  the  Company regarding breast implants  and  breast
     implant  materials  shall be fully and finally  settled  and
     resolved  on  the  terms and conditions  set  forth  in  the
     Settlement Agreement.

     Under  the  terms of the Settlement Agreement,  the  Company
     will  pay $1 million to the Settlement fund for each  of  25
     years starting three years after Settlement approval by  the
     Court.   The  Company  recorded a  pre-tax  charge  of  $9.1
     million   in  the  fourth  quarter  of  1993.   The   charge
     represents  the  present value (discounted  at  8%)  of  the
     Company's settlement of $25 million over a payment period of
     25 years.

     Under  the  Settlement, $1.2 billion had been  provided  for
     "current  claims"  (disease compensation  claims).   In  May
     1995,  Judge  Pointer  completed  a  preliminary  review  of
     current claims which had been filed as of September 1994, in
     compliance  with deadlines set by the court.  Judge  Pointer
     determined that based on the preliminary review, it

(14) Litigation, continued

     appears  that  projected amounts of eligible current  claims
     exceed  the  $1.2  billion provided in the Settlement.   The
     Settlement  provided  that  in  the  event  of   such   over
     subscription,  the  amounts to be paid to  eligible  current
     claimants would be reduced and claimants would have a  right
     to "opt-out" of the Settlement at that time.

     On  October  1, 1995, Judge Pointer finalized details  of  a
     scaled-back  breast  implant  injury  settlement   involving
     defendants  Bristol-Myers Squibb, Baxter International,  and
     3M,  allowing plaintiffs to reject this settlement and  file
     their own lawsuits if they believe payments are too low.  On
     November  14,  1995, McGhan Medical and Union  Carbide  were
     added  to  this list of settling defendants to  achieve  the
     Bristol,  Baxter,  3M,  McGhan  and  Union  Carbide  Revised
     Settlement Program (the "Revised Settlement Program").

     At  December 31, 1995, the Company's reasonable estimate  of
     its  liability to fund the Revised Settlement Program  is  a
     range  between $9.1 million, the original estimate as  noted
     above,  and $50 million, with no amount within the  range  a
     better  estimate.  Due to the uncertainty  of  the  ultimate
     resolution and acceptance of the Revised Settlement  Program
     by  the PNC, as well as a lack of information related to the
     total  claims, the financial statements do not  reflect  any
     additional provision for the litigation settlement.

     The  Company  has  opposed the plaintiffs' claims  in  these
     complaints and other similar actions, and continues to  deny
     any  wrongdoing or liability to the plaintiffs of any  kind.
     However, the extensive burdens and expensive litigation  the
     Company  would  continue to incur related to  these  matters
     prompted  the  Company to work toward  and  enter  into  the
     Revised   Settlement   Agreement  which   insures   a   more
     satisfactory  method of resolving claims of women  who  have
     received the Company's breast implants.

     Management's commitment to the Settlement does not alter the
     Company's  need  for  complete  resolution  sought  under  a
     mandatory  ("non-opt-out") settlement class (the  "Mandatory
     Class").   Therefore, the Company has petitioned the  United
     States   District  Court,  Northern  District  of   Alabama,
     Southern  Division, for certification of a  Mandatory  Class
     under the provisions of Federal Rule of Civil Procedure.

     The  Company  was  a defendant with 3M in a  case  involving
     three  plaintiffs in Houston, Texas, in March 1994, in which
     the  jury  awarded  the plaintiffs $15 million  in  punitive
     damages  and $12.9 million in damages plus fees  and  costs.
     However,  the decision was reversed in March 1995  resulting
     in no financial responsibility on the part of the Company.

(15) Commitments and Contingencies

     The  Company leases facilities under operating leases.   The
     leases  are  generally  on  an all-net  basis,  whereby  the
     Company pays taxes, maintenance and insurance.  Leases  that
     expire  are expected to be renewed or replaced by leases  on
     other properties.  Rent expense for the years ended December
     31,  1995,  and 1994 aggregated  $4,927,677 and  $4,913,327,
     respectively.

     Minimum lease commitments under all non-cancelable leases as
     of December 31, 1995 are as follows:
                    Year ending December 31:
                      1996                   $3,068,534
                      1997                    1,831,633
                      1998                    1,548,876
                      1999                    1,291,402
                      2000                    1,086,974
                      Thereafter              9,899,150
                                             ----------
                                            $18,726,569
                                             ========== 
(16) Sale of Subsidiaries

     As of August 31, 1993, the Company announced the sale of its
     wholly-owned  subsidiary,  Specialty  Silicone  Fabricators,
     Inc.  (SSF), a manufacturer of silicone components  for  the
     medical  device industry with production facilities in  Paso
     Robles,  California.  The sale included  SSF's  wholly-owned
     subsidiary,  Innovative Surgical Products, Inc.  located  in
     Santa   Ana,  California,  which  assembles,  packages   and
     sterilizes products for other medical device companies.  The
     Company received total consideration of approximately  $10.8
     million   from  the  buyer,  Innovative  Specialty  Silicone
     Acquisition Corporation (ISSAC), a private investment  group
     which included certain members of SSF's management.

     The  consideration consisted of $2.7 million  in  cash,  the
     forgiveness  of $2.2 million in intercompany  notes  due  to
     SSF,  and  $5.9  million  in structured  notes.   The  notes
     include  a note in the amount of $2,425,000 due on  February
     25,  1995 with interest of 10% per annum and a note  in  the
     amount  of  $3,466,198  due  on August  31,  2003,  accruing
     interest  quarterly at a rate of prime plus 2% as quoted  at
     the  beginning of the quarter,  not to exceed 11%. The notes
     have  been reflected on the balance sheet net of a  discount
     of  $643,663 and settlement of certain intercompany  amounts
     totaling  approximately $957,000.  The short-term notes  due
     February  25,  1995  were settled in  full.  The  notes  are
     collateralized by all of the assets of ISSAC.   The  Company
     has  filed a UCC1 and its position is subordinated  only  to
     that of ISSAC's primary lender.

     At  December  31, 1995, the current portion due  from  ISSAC
     under  the  terms of the note agreement is in  dispute.  The
     Company  has classified all current amounts due as long-term
     and an estimated provision for  credit  loss  of  $1,066,958 
     has been provided for in the financial statements.

(17) Subsequent Event

 a)  In  January 1996, the Company completed a private  placement
     offering   by   issuing  three-year  secured  collateralized
     convertible,  non-callable notes due March 31, 1999  bearing
     an  interest rate of 11%.  The Company received $35  million
     in proceeds from the offering to be used for the anticipated
     litigation   settlement,   for   capital   investments   and
     improvements to expand production capacity, and for  working
     capital  purposes.   Of  the  proceeds  received  from   the
     offering,  $15  million is held in an escrow account  to  be
     released  upon the granting and court approval of  mandatory
     class  certification.   At December  31,  1995  proceeds  of
     approximately  $500,000 were received and  classified  as  a
     current liability.  The notes are collateralized by all  the
     assets of the Company.

     The notes become convertible into shares of common stock  at
     the  option  of  the note- holders on April 22,  1996.   The
     conversion  rate is one share of common stock for  each  $10
     principal  amount of notes.  Alternatively,  the  notes  may
     automatically convert into shares of common stock  upon  the
     occurrence  of  certain  events  in  connection   with   the
     certification of the Company's Mandatory Class.

     Under  the  terms  of the note agreement,  the  Company  may
     obtain up to $5 million in structured debt or make an equity
     offering  without restriction.  However, the  terms  of  the
     note agreement restrict the Company's ability to make a debt
     offering.

b)   UNAUDITED
     The litigation disclosure at Note 13 has been updated. Refer
     to the  Breast  Implant  Litigation  section  within Item 3, 
     Legal Proceedings in the afore portion of this document.


(18) Quarterly Summary of Operations (Unaudited)

     The  following is a summary of selected quarterly  financial
     data for 1995 and 1994:

                                   Quarter
             --------------------------------------------------
                First       Second        Third        Fourth
             ----------   ----------    ----------   ----------
Net Sales:
 1995        21,744,875   24,112,600    18,279,111   17,488,995
 1994        16,896,056   21,978,104    20,911,167   20,600,015
Gross Profit:
 1995        15,410,563   16,431,581    11,439,933    8,187,721
 1994        10,476,412   14,664,187    14,085,793   14,894,492
Net Income
(loss):
 1995         1,140,496    2,744,448    (2,592,588)  (8,185,417)
 1994         1,271,942    1,710,309     1,004,409   (1,240,349)
Net Income(loss)
per share:
 1995 Basic         .15          .36          (.34)       (1.08)
 1995 Diluted       .15          .36          (.34)       (1.08)
 1994 Basic         .17          .23           .14         (.17)
 1994 Diluted       .17          .23           .14         (.17)
             ==================================================

(18) Quarterly Summary of Operations (Unaudited) (continued)

Significant Fourth Quarter Adjustments, 1995

     During the fourth quarter of the year ended December 31, 1995,
     significant adjustments to the results of operations were as
     follows:

     Provision for income taxes             $(4,162,607)
     Provision for doubtful accounts and
          returns and allowances              1,424,734
     Compensation expense                       891,200

Significant Fourth Quarter Adjustments, 1994

     During  the  fourth quarter of the year ended  December  31,
     1994,  significant adjustments to the results of  operations
     were as follows:

     Provision for income taxes             $(3,396,858)
     Provision for doubtful accounts and
       returns and allowances                   546,054
     Provision for inventory obsolescence       221,590
     Provision for product liability          1,123,605
     Rental expense                            (800,000)
     Royalty income                            (325,301)
     Compensation expense                       187,500

     The  Company's  provision for income taxes was  adjusted  to
     reduce income tax expense in 1994 and 1995.

     The  provision for doubtful accounts, returns and allowances
     was increased  due to a backlog of returns that developed in
     the  fourth  quarters  of 1994 and  1995.

     Adjustments  to increase compensation expense were  made  in
     1994  and  1995 to reflect bonuses and compensation payments
     declared after year end for certain personnel.

     Other significant adjustments in 1994 include the following:
     provisions for inventory obsolescence was increased based on
     inventory  testing of products available  for  future  sale,
     provision  for  product  liability  was  increased  to  more
     accurately  reflect the potential impact  of  the  Company's
     limited  product warranty, offsetting adjustments to  reduce
     rental  expense based on the receipt of a credit  memo  from
     the  vendor  after  year end, and to record  royalty  income
     receivable  based  on the licensee's remittance  of  royalty
     payments for the fourth quarter of 1994.


<TABLE>
<CAPTION>
       
                                 Schedule II
                           INAMED CORPORATION AND SUBSIDIARIES
                            Valuation and Qualifying Accounts
                   Years ended December 31, 1997, 1996, 1995 and 1994
                          (in 000's except 1995 and 1994 data)

                                  Beginning of
                                  period                                           End of period
Description                       balance       Additions    Deductions            balance
<S>                               <C>           <C>          <C>                   <C>
Year ended December 31, 1997:
 Allowance for returns            $   4,697          __         $341                  $ 4,356 
 Allowance for doubtful accounts        714        $151           __                      865
 Allowance for obsolescence           1,326         187           __                    1,513 
 Valuation allowance for             12,026      16,116           __                   28,142 
  deferred tax assets  
 Self-insurance accrual               1,373       2,229           __                    3,602  
 Allowance for doubtful Notes         1,067          __          600                      467 
 Litigation reserve                   9,152      28,183           __                   37,335

Year ended December 31, 1996:
 Allowance for returns                5,676         934        1,913                    4,697
 Allowance for doubtful accounts        965         101          352                      714
 Allowance for obsolescence             759         567           __                    1,326
 Valuation allowance for              7,377       4,649           __                   12,026
  deferred tax assets               
 Self-insurance accrual               1,131         270           28                    1,373
 Allowance for doubtful Notes         1,067          __           __                    1,067
 Litigation reserve                   9,152          __           __                    9,152

Year ended December 31, 1995:
 Allowance for returns            5,346,885     329,364           __                5,676,249
 Allowance for doubtful accounts    678,942     376,182       90,196                  964,928
 Allowance for obsolescence         450,730     600,847      292,215                  759,362
 Valuation allowance for          5,000,080   2,376,994           __                7,377,074
  deferred tax assets
 Self-insurance accrual           1,291,605       9,000      169,973                1,130,632
 Allowance for doubtful Notes            __   1,066,958           __                1,066,958   

Year ended December 31, 1994:
 Allowance for returns            4,807,675     585,885       46,675                5,346,885
 Allowance for doubtful accounts    333,321     454,380      108,759                  678,942
 Allowance for obsolescence              __     450,730           __                  450,730
 Valuation allowance for          5,606,666          __      606,586                5,000,080
  deferred tax assets
 Self-insurance accrual           1,293,236          __        1,631                1,291,605

</TABLE>

Exhibit 21

List of Subsidiaries of INAMED Corporation

Biodermis Corporation
Biodermis Ltd.
BioEnterics Corporation
BioEnterics, Latin America SA de CV
BioEnterics, Ltd.
Bioplexus Corporation
Bioplexus Ltd.
Chamfield Ltd.
CUI Corporation
Flowmatrix Corporation
Inamed Development Company
Inamed Japan
IMG Japan Inc.
McGhan Ltd.
McGhan Medical Asia Pacific Ltd.
McGhan Medical Benelux B.V.
McGhan Medical Benelux B.V.B.A.
McGhan Medical B.V.
McGhan Medical Corporation
McGhan Medical do Brasil Ltda.
McGhan Medical GmbH
McGhan Medical Ltd.
McGhan Medical Mexico, SA de CV
McGhan Medical S.A.
McGhan Medical S.A.R.L.
McGhan Medical S.R.L.
Medisyn Technologies Corp.
Medisyn Technologies Ltd.