INVERNESS MEDICAL INNOVATIONS INC - 10-K Annual Report

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

INVERNESS MEDICAL INNOVATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.001 per share par value		American Stock Exchange

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 ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

The aggregate market value of the voting common stock held by non-affiliates of the registrant based on the closing price of the registrant's stock on the American Stock Exchange on June 28, 2002 (the last business day of the registrant's most recently completed second fiscal quarter) was $176,074,593. For this computation, the Registrant has excluded the market value of all shares of common stock reported as beneficially owned by executive officers and directors of the registrant; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the registrant.

As of March 28, 2003, the registrant had 15,007,336 shares of common stock, par value $0.001 per share, outstanding.

Portions of the registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission on or prior to April 30, 2003 are incorporated by reference into Part III of this Form 10-K.

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can identify these statements by forward-looking words such as "may," "could," "should," "would," "intend," "will," "expect," "anticipate," "believe," "estimate," "continue" or similar words. There are a number of important factors that could cause actual results of Inverness Medical Innovations, Inc. and its subsidiaries to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the risk factors detailed in this annual report on Form 10-K and other risk factors identified from time to time in our periodic filings with the Securities and Exchange Commission. Readers should carefully review the factors discussed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors Affecting Future Results" and "Special Statement Regarding Forward-Looking Statements" beginning on pages 38 and 53, respectively, in this annual report on Form 10-K and should not place undue reliance on our forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this report. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Unless the context requires otherwise, references in this annual report on Form 10-K to "we," "us" and "our" refer to Inverness Medical Innovations, Inc. and its subsidiaries.

Our company, Inverness Medical Innovations, Inc., a Delaware corporation, was initially formed in May 2001 as a wholly owned subsidiary of Inverness Medical Technology, Inc., or IMT. On November 21, 2001, as part of a split-off and merger transaction in which Johnson & Johnson acquired IMT's diabetes business, we acquired all of IMT's non-diabetes businesses, i.e., its women's health, nutritional supplements and professional diagnostics businesses, and were split-off from IMT as a separate publicly traded company.

We develop, manufacture and market consumer healthcare products, including self-test diagnostic products for the women's health market and vitamins and nutritional supplements. We also develop, manufacture and distribute a wide variety of diagnostic products for use by medical and laboratory professionals.

Our consumer diagnostic products allow individuals to obtain accurate information regarding various medical conditions on a confidential, non-prescription basis, without the expense, inconvenience and delay associated with physician visits or laboratory testing. This information gives individuals greater control over their health and their lives, allowing them to make timely and informed decisions and take action to protect their health, alone or in consultation with healthcare professionals. Our existing self-test products are targeted at the women's health market, one of the largest existing markets for self-care diagnostics, and include home pregnancy detection tests and home ovulation prediction tests. We also sell a wide variety of vitamins and nutritional supplements, which also provide individuals with the ability to better manage their own health.

In September 2002, we significantly expanded our professional diagnostics business by acquiring the Wampole Laboratories division of MedPointe Inc. Wampole is a leader in enzyme linked immuno

sorbent assay (ELISA) testing within the professional laboratory marketplace and also offers a broad line of visually-read assays for point-of-care testing. Wampole's products are sold to hospitals, major reference testing laboratories, physician's offices and clinics through an extensive U.S. distribution network and these products compliment our existing professional diagnostic products lines and international distribution networks.

Inverness Medical Innovations, Inc. is a Delaware corporation. Our principal executive offices are located at 51 Sawyer Road, Suite 200, Waltham, Massachusetts 02453 and our telephone number is (781) 647-3900. Our common stock is listed on the American Stock Exchange under the symbol "IMA."

Our web site is www.invernessmedical.com and we make available through this site, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. These reports may be accessed through our website's company information page.

On September 6, 2002, we entered into an agreement and plan of merger with Ostex International, Inc. pursuant to which we intend to acquire Ostex. Ostex develops and commercializes osteoporosis diagnostic products. Our pending acquisition of Ostex is subject to several closing conditions, including approval of the merger agreement governing the acquisition by Ostex's shareholders and our receipt of any necessary consents with respect to the transactions contemplated by the merger agreement required under any of our material loan agreements. On February 18, 2003, in order to increase the likelihood that we would obtain the consent of our senior lender to the merger, as required under our material loan agreements, we and Ostex amended the merger agreement to reduce the consideration we will pay to acquire Ostex. Under the merger agreement, as amended, the aggregate number of shares of our common stock to be issued in the merger for Ostex's outstanding shares and to be reserved for options and warrants to be assumed is 1.9 million shares. Under the amended merger agreement, at the effective time of the merger, each outstanding share of Ostex common stock will be converted into the right to receive a number of shares of our common stock equal to a conversion ratio that is to be calculated by dividing 1.9 million by the sum of (1) the total number of shares of Ostex common stock outstanding immediately prior to the effective time of the merger; and (2) the total number of shares of Ostex common stock subject to outstanding stock options and warrants that we are to assume in the merger. The shares of Ostex common stock subject to options and warrants to be assumed by us will convert at the same ratio. The merger remains subject to approval by the holders of two thirds of Ostex's outstanding voting stock, the receipt of third-party consents, including the consent of our senior lender, and other customary closing conditions, so there can be no assurance that our acquisition of Ostex will occur.

On December 19, 2002, the United States District Court for the District of New Jersey entered an order granting our motion for a preliminary injunction against Pfizer, Inc., based on a finding that Pfizer's e.p.t® pregnancy tests, as manufactured by ABI, a subsidiary of Apogent, Inc., likely infringe U.S. Patent No. 6,352,862. The Court further denied Pfizer's request for a stay of the injunction pending appeal, which Pfizer has since filed. We posted a bond of $3.5 million in December 2002 as required by the Court and this injunction is in effect.

On March 12, 2003, the Court granted a subsequent preliminary injunction against Pfizer, Inc., based on a finding that a new version of Pfizer's e.p.t. pregnancy tests manufactured by Mizuho USA, Inc., a subsidiary of Mizuho Medy, Ltd., also likely infringes the same patent, as well as another patent owned by our subsidiary, Inverness Medical Switzerland GmbH. The Court also denied Pfizer's request for a stay of this injunction pending appeal. The Court has required that we post an additional bond in the amount $35 million before this injunction will become effective.

The Court's orders effectively preclude Pfizer from selling either of these versions of its e.p.t. pregnancy tests pending appeal upon posting of the respective bonds. The orders do not prohibit Pfizer from finding new sources of supply.

Our major reportable operating segments are consumer products and professional diagnostics. Our consumer products are further divisible into self-test diagnostic products and vitamins and nutritional supplements. We further categorize our sales by major geographic areas of the world. Below are discussions of each of our operating segments. Financial information about our business segments is provided in Note 14 of the "Notes to Consolidated Financial Statements," which are included elsewhere in this report.

Consumer Diagnostics. Our current consumer diagnostic products target the women's health market. A.C. Neilsen & Co. estimates total United States retail sales of pregnancy and ovulation prediction tests at approximately $282 million for the 52 weeks ending February 22, 2003, approximately 85% of which represents sales of pregnancy detection tests and approximately 15% of which represents sales of ovulation prediction tests. The demand for ovulation prediction products is growing steadily because of increased awareness of the incidence of infertility and a desire on the part of couples to plan conception with more certainty. The demand for pregnancy test products is growing also, but at a slower pace.

There are numerous pregnancy self-tests on the market, which are typically urine-based tests and provide results in less than five minutes. Ovulation prediction tests inform women of the best time to conceive a baby by detecting the surge of the luteinizing hormone, which precedes ovulation. Ovulation prediction tests are generally easy to use and urine-based ovulation predictions tests have become widely accepted by professional fertility care providers and the general public. Urine-based ovulation tests consist of disposable stick tests, which are similar to pregnancy tests, and fertility monitoring devices, such as our Clearblue Easy® Fertility Monitor, which is the only reusable monitoring device which measures estrogen levels as well as the luteinizing hormone. There are also saliva-based ovulation tests on the market which are lower cost alternatives to urine-based tests, but generally are not as easy to interpret and do not provide notification of ovulation as early as urine-based tests can.

Vitamins and Nutritional Supplements. According to Nutrition Business Journal estimates, total mass merchandise retail sales of vitamins and nutritional supplements in the United States during 2002 were approximately $6 billion. Most growth in the industry is attributed to new products that generate attention in the marketplace. Well-established market segments, where competition is greater and media commentary less frequent, generally experience relatively slow and stable growth. Slow overall growth in the industry has resulted in retailers reducing shelf space for nutritional supplements and has forced many under-performing items out of distribution, including several broad product lines. Sales growth of store brand, or private label, products has outpaced the overall industry growth, as retailers continue to add to the number of private label nutritional products on their shelves.

The professional diagnostics market consists of products designed to assist medical professionals in both preventative and interventional medicine. These products allow qualitative and/or quantitative analysis of the patients body fluids or tissue for evidence of specific medical conditions, disease states or to measure response to therapy.

Customers in this market can be divided into several distinct groups. One such group consists of large, centralized laboratories offering wide-ranging clinical laboratory services in hospital or related settings. These are frequently characterized by very significant levels of test automation and integration of information systems. As high-throughput facilities their product requirements often vary from those of other customer groups such as small and medium-sized, non-centralized laboratories and testing locations. Examples in this latter category include physician office laboratories, small blood banks, specialist mobile clinics and some rapid-response laboratories in larger medical centers.

We believe that the demand for infectious disease diagnostic products is growing faster than demand in many other segments of the point-of-care immunoassay market due to the increasing incidence of certain diseases or groups of diseases, including lyme disease, viral hepatitis, acquired immuno deficiency syndrome and tuberculosis, as well as chlamydia and other sexually transmitted diseases. Furthermore, it is generally accepted that the emerging field of theranostics (the use of diagnostic assays to monitor and assess a patient's response to therapy) is one of the fastest growth areas in the broad in vitro diagnostics marketplace.

In general, we believe that the ability to deliver faster, accurate results at reasonable prices drives demand for professional diagnostic products. This means that while there is certainly growing demand for faster, more efficient automated equipment from large hospitals and major reference testing laboratories, there is also growing demand by point-of-care facilities and smaller laboratories for fast, high-quality, inexpensive, self-contained diagnostic kits. As the speed and accuracy of such products improve, we believe that these products will play an increasingly important role in achieving early diagnosis, timely intervention and therapy-monitoring outside of acute medicine environments. Efforts of insurers and government agencies world-wide to control health care costs also play a large role in the increasing demand for fast, efficient results.

Consumer Diagnostics. Our consumer diagnostics business currently develops, manufactures and markets home pregnancy and ovulation prediction tests under our own brands and under various private labels. Our Clearblue® home pregnancy detection and ovulation prediction tests are global leaders in terms of both sales and technology and our Clearblue Easy® Fertility Monitor is the leading reusable monitoring device available to assist women attempting to conceive. Until recently our Clearblue ovulation prediction products were marketed under the ClearPlan® and ClearPlan Easy® labels. Our Accu-Clear™ branded products are marketed to value-oriented consumers in the United States. In addition, we are a major United States supplier of private label home pregnancy detection and ovulation prediction products. We also sell Persona®, a contraceptive monitoring device sold overseas, primarily in Germany and the United Kingdom.

Vitamins and Nutritional Supplements. We market a wide variety of vitamins and nutritional supplements through retail drug store chains, mass merchandisers, food stores and warehouse clubs primarily within the United States and Canada. Inverness Medical Nutritionals Group, or IMN, is a leading national supplier of private label vitamin and nutritional products for major drug and food chains and also manufactures bulk vitamins, minerals and nutritional supplements under contract for unaffiliated brand name distributors. IMN also manufactures a comprehensive assortment of vitamin, mineral and nutritional supplement products for sale under Inverness Medical brand names.

Our Inverness Medical branded nutritional products are primarily high quality products sold at moderate prices through national and regional drug stores, supermarkets and mass merchandising chains. These branded products include Stresstabs®, a B-complex vitamin with added antioxidants; Ferro-Sequels™, a time-release iron supplement; Protegra®, an antioxidant vitamin and mineral supplement; Posture®, a calcium supplement; SoyCare™, a soy supplement for menopause; ALLBEE®, a line of B-complex vitamins; and Z-BEC®, a zinc supplement with B-complex vitamins and added antioxidants. We also market these branded products under the SmartCare® program, which assists consumers in matching their health concerns to the appropriate supplement products that we sell. SmartCare provides a means of linking our various nutritional supplement products, allowing for greater efficiencies in advertising, promotion and merchandising.

SmartCare is a registered trademark of Inverness Medical, Inc. ALLBEE, Posture, Protegra, SoyCare, Stresstabs and Z-BEC are U.S. trademarks of Inverness Medical, Inc., which also licenses the North American rights to Ferro-Sequels.

With our acquisition of Wampole Laboratories, we now develop and market a broad range of diagnostic test kits and instrumentation to professional diagnostic users. In the United States our professional diagnostic products are sold under our Wampole® and Clearview® labels and we also distribute products on behalf of third parties. We market our Clearview products worldwide and we sell several proprietary platforms of products manufactured by our subsidiary Orgenics, Ltd., located in Yavne, Israel, outside of the United States. Our professional diagnostic products include:

Wampole and Isolator are trademarks of Wampole Laboratories, Inc. Clearview is a trademark of Inverness Medical Switzerland GmbH. ImmunoComb, DoubleCheck and ImmunoGold are trademarks of Orgenics Ltd. Labotech, PersonalLAB, MicroTrak and AtheNA Multi-Lyte are trademarks of their respective owners.

Consumer Diagnostic Products. We market and sell our consumer diagnostic products under our own brand names as well as under store brands. Our customers include retail drug store chains, drug wholesalers, grocery retailers and mass merchandisers in North America, Europe and Japan. Our Clearblue brand pregnancy detection and ovulation prediction test products, which are marketed under the name Clearblue Easy in the United States, are leading brands both in the United States and globally. With the exception of our Clearblue Easy pregnancy tests in the United States, our Clearblue products are marketed as premium products and compete intensively with other premium brand name products. Persona is also marketed as a premium product in Europe. Marketing of premium branded products focuses on brand awareness as well as feature and performance differentiation. We achieve this through TV, radio and magazine advertising. Within the United States, our Clearblue Easy pregnancy tests are not established as a premium brand because they have yet to acquire the level of brand awareness and brand loyalty typical of a premium brand. We are attempting to build market share by pricing our Clearblue pregnancy tests below the premium brands as well as through aggressive mass media advertising of the brand. Our Accu-Clear brand products compete primarily based on price and are not heavily advertised. Our consumer diagnostics products are marketed in the United States, the UK and in Germany using our own sales managers and a network of sales representatives. In other areas of the world, including Japan, Canada, Australia and the rest of Europe, our Clearblue products are sold though distribution contracts with large consumer diagnostics companies. Private label arrangements accounted for 19% of our consumer diagnostics business' net product sales for 2002. Our five largest customers during 2002 based on net product sales were Walgreen Co., Boots Company, CVS Corporation, Schering AG and Mitsui & Co.

Vitamins and Nutritional Supplements. We primarily market and sell our vitamins and nutritional supplements in the United States and Canada through private label arrangements with retail drug store chains, drug wholesalers, grocery retailers and mass merchandisers who sell our products under their store brands. We also sell a variety of branded products to the same types of retailers. To a much lesser extent we provide contract manufacturing services to third parties. Our three largest customers during 2002 were Walgreen Co., Costco and Eckerd Drug. Our rights to the trademarks Stresstabs, Ferro-Sequels, Posture, Protegra, ALLBEE and Z-BEC are limited to use in North America, but we are not restricted from marketing the formulations sold under those brand names in North America under other brand names outside of North America.

In the United States, we distribute our professional diagnostics products to hospitals, major reference testing laboratories, physician's offices and clinics through the extensive distribution network we acquired with Wampole Laboratories. For the calendar year 2002, the three largest customers of our U.S. professional diagnostics business were Cardinal Health, Quest Diagnostics and Laboratory Corporation of America.

Outside the United States, we sell our Clearview products through third party distributors, except in Germany, where we have our own sales force. We also sell a C.difficile Toxin A test and a Listeria test product that we manufacture at our Bedford facility to an unaffiliated company who markets the products under its own brands. That arrangement prohibits us from selling these tests directly or to other resellers with the exception that we sell the C.difficile test in the United States. Five countries, the United States, Germany, the United Kingdom, Japan and China, represent 78% of our sales of Clearview products.

Our Orgenics products are sold through sales offices, the largest of which are in Israel, France and Brazil, which market those products to smaller laboratories, blood banks, physicians' offices and other patient point-of-care sites in more than 90 countries, principally in Europe, Latin America, Africa and Asia.

Other than our Clearview products, which we develop and manufacture in Bedford, England, and our Orgenics products, which we manufacture in Israel, our professional diagnostics products are manufactured by third parties and, in some cases, our distribution rights are limited to the United States. Our Orgenics products, as well as several of our Clearview products, are not approved for sale, and are not sold, in the United States.

Consumer Diagnostic Products. We produce our disposable consumer diagnostic products at our facilities in Bedford, England and Galway, Ireland. Both facilities are ISO 9001 and EN 46001 certified, FDA registered establishments that employ modern production techniques to produce consistent, high-quality components. A significant portion of our products produced and assembled at our Galway plant is subsequently packaged by a third party in the United States. We rely on third parties for nearly all our production materials. We purchase our electronic, consumer diagnostic products, the Clearblue Easy Fertility Monitor and Persona, to our specifications from third party suppliers in Europe. Because most components of our diagnostic products are produced to our specifications, some of our suppliers are single source suppliers with few, if any, alternative sources immediately available.

We own one-half and lease one-half of our Galway facility and we are currently using the Bedford facility pursuant to an agreement with Unilever entered into in connection with our acquisition of the Unipath business in 2001. For more information regarding our use of the Bedford facility and the risks associated with our arrangement to use this facility see "Item 2—Description of Property" and the related risk factor on page 14.

Vitamins and Nutritional Supplements. IMN manufactures substantially all of our vitamin and nutritional products at its facilities in Freehold and Irvington, New Jersey. The facility located in Freehold, New Jersey is equipped with large-volume blending, tableting and coating equipment, packaging equipment, including "cartoning," "stretch carding" and "blister carding" equipment, and testing and quality control laboratories. IMN internally manufactures all of its softgel requirements at the Irvington facility. Our Freehold facility manufactures in full compliance with Good Manufactures Practice, or GMP, standards recently proposed by the FDA for the dietary supplement industry. Our Irvington facility manufactures to GMP standards applicable to drug makers and is an FDA registered facility.

Greater than 65% of the professional diagnostic products that we sell, based on net product sales for fiscal year 2002, are manufactured by third parties. Our Clearview diagnostic products are manufactured at our facility in Bedford, England, which is described above, and our Orgenics products are manufactured in Yavne, Israel. The Yavne manufacturing facility is ISO 9001 and EN 46001 certified, as well as Good Manufacturing Practices certified by the Israeli Ministry of Health.

We intend to focus our research and development efforts on the development of new products and enhanced features for our lines of women's health and professional diagnostics products, as well as the development of product lines targeting new markets, primarily in cardiology. Currently the majority of our budget for research and development is allocated to new product development. Most of our research and development activities are carried out in Bedford, England, Galway, Ireland and Yavne, Israel. We may, from time to time, supplement our internal research and development efforts with third parties' efforts either through co-development or licensing arrangements, or through product or technology acquisitions. In connection with co-development or licensing activities that we may enter

into in the future, we may provide financial development assistance to these parties and may also utilize our own research and development resources to design certain portions of such products.

Our business relies heavily on our foreign operations. Three of our manufacturing facilities are outside the United States, in Bedford, England, Galway, Ireland and Yavne, Israel. Approximately 42% of our net revenues were generated from outside of the United States during 2002. Our Clearblue products, pregnancy tests in particular, have historically been much stronger brands outside the United States, with 68% of our net product sales of Clearblue products coming from outside the United States during 2002. In addition, IMN generated almost 17.5% of its net product sales outside of the United States during 2002. Persona is sold exclusively outside of the United States, and our Orgenics professional diagnostic products have always been sold exclusively outside of the United States. However, Wampole Laboratories, which we acquired in September 2002, was primarily a U.S. distribution business and has historically had very little revenue from foreign operations. While our international distribution networks may allow us to expand the scope of Wampole's sales territory, we cannot guarantee that this will happen.

We have existing competitors, as well as a number of potential new competitors, who have greater name recognition, and significantly greater financial, technical and marketing resources than we do. These strengths may allow them to devote greater resources than we can to the development, marketing and sales of products. These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies and make more attractive offers to existing and potential employees, customers and clients.

We expect that industry forces will impact us and our competitors. Our competitors will likely strive to improve their product offerings and price competitiveness. We also expect our competitors to develop new strategic relationships with providers, referral sources and payors, which could result in increased competition. The introduction of new and enhanced services, acquisitions and industry consolidation, and the development of strategic relationships by our competitors could cause a decline in sales or loss of market acceptance of our products, intensify price competition or make our products less attractive. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse effect on our business, financial condition and results of operations.

Consumer Diagnostic Products. Competition in the pregnancy detection and ovulation prediction market is intense. Our competitors in the United States, and worldwide, are numerous and include, among others, large medical and consumer products companies as well as numerous private label manufacturers. Our main competitors for the sale of pregnancy test products in the United States include Abbott Laboratories, Armkel, Becton Dickinson and Pfizer, Inc., although Pfizer, Inc., whose e.p.t pregnancy test is the market leader in the United States, has recently been preliminarily enjoined (pending appeal) from selling e.p.t. in the United States (See "Recent Developments—Preliminary Injunctions Against Pfizer, Inc." on page 3 hereof). Other competitors include Acon Laboratories, London International Holdings, Inc., Omega Pharma, Princeton BioMeditech Corporation, Rhoto Pharmaceutical Co., Syntron Bioresearch and Quidel Corp. Our competitors for the sale of ovulation predictors include Armkel, Apogent, Princeton BioMeditech, Syntron and Quidel. Competition among branded consumer diagnostics products is based on brand recognition and price. Products sold under

well-established or "premium" brand names can demand higher prices and maintain high market shares due to brand loyalty. Outside of the United States, Clearblue is a premium brand and is a market leader. In the United States, where our Clearblue pregnancy tests are less well-established, the premium brands can demand higher pricing than we can, even though Clearblue constitutes a leading brand that is marketed based on brand development. Our Clearblue ovulation prediction products qualify as premium brands worldwide and are market leaders both in the United States and globally. Our Accu-Clear branded consumer products compete based on price and do not attempt to compete based on brand recognition. For private label manufacturers, competition is based primarily on the delivery of products at lower prices that have substantially the same features and performance as brand name products. The Clearblue Fertility Monitor and Persona are unique products and their competitors or markets are not easily defined.

Many of our competitors have substantially greater financial, production, marketing and distribution resources than we do. However, we believe that we can continue to compete effectively in the consumer diagnostics market based on our research and development capabilities, advanced manufacturing expertise, diversified product positioning, global market presence and established wholesale and retail distribution networks.

Vitamins and Nutritional Supplements. The market for private label vitamins and nutritional supplements is extremely price sensitive, with quality, customer service and marketing support also being important. Many of the companies that mass market branded vitamins and nutritionals, including Pharmavite, Leiner Health Products, Royal Numico, Bayer and NBTY, also sell to private label customers and constitute our major competitors for private label business. In addition, there are several companies, such as Perrigo and Contract Pharmacal, that compete only in the private label business.

In the branded nutritional supplements industry, competition is based upon brand name recognition, price, quality, customer service and marketing support. There are many companies, both small and large, selling vitamin products to retailers. A number of these companies, particularly manufacturers of nationally advertised brand name products, are substantially larger than we are and have greater financial resources. Among the major competitors of our branded products that are sold through supermarkets and other mass retailers are Wyeth, Pharmavite, Leiner Health Products, Royal Numico, NBTY and SmithKline Beecham.

Our competitors for the ELISA diagnostics market include large corporations, such as Abbott Laboratories, Diagnostic Products Corporation and Ortho-Clinical Diagnostics, which manufacture state-of-the-art automated immunoassay systems and a wide array of diagnostic products designed for processing on those systems. These entities benefit from economies of scale and have the resources to design and manufacture state-of-the-art automated equipment. Other competitors in this market, DiaSorin and Meridian Bioscience in particular, are more similar in size to us and compete based on quality and service. In the United States and Canada, we focus on matching the instrumentation and product testing requirements of our customers by offering a wide selection of diagnostic products and test equipment. Our ImmunoComb product line, which consists of manual tests sold to small laboratories and point-of-care locations in developing nations, competes against automated ELISA systems based on price.

In the rapid membrane market, our main competitors are Abbott Laboratories, Becton Dickinson, Quidel Corporation and Beckman Coulter. Some competitors in this market, such Abbott and Becton Dickinson are large companies with greater resources than we have. Other competitors in some product segments are small but aggressive companies such as Syntron Bioresearch, Princeton BioMeditech Corporation, Applied Biotech, Vedalab and Trinity Biotech. Some automated immunoassay systems can be considered competitors when labor shortages force laboratories to automate or when the costs of

such systems are lower. Such systems are provided by Abbott, Bayer, Roche Diagnostics, Beckman Coulter and other large diagnostic companies. In the infectious disease area, new technologies utilizing amplification techniques for analyzing molecular DNA gene sequences from companies such as Abbott, Roche and Gen-Probe are making in-roads into this market. Competition in this market is intense and is primarily based on price, breadth of line and distribution capabilities.

The markets for our serology and our IFA and microbiology products are mature, and competition is based primarily on price and customer service. Our main competitors in serology and microbiology testing include Med-Ox Diagnostics, Biokit, S.A. and Quidel Corporation. Our main competitors in IFA testing are Bio—Rad Laboratories, INOVA Diagnostics, Immuno Concepts, The Binding Site and DiaSorin. However, products in these categories also compete to a large extent against rapid membrane and ELISA products, which are often easier to perform and read and can be more precise.

The medical products industry, including the diagnostic testing industry, places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Our success will depend, in part, on our ability to obtain patent protection for our products and manufacturing processes to preserve our trade secrets and to avoid infringing the proprietary rights of third parties.

We hold certain patent rights and expect to seek additional patents in the future. However, we cannot assure you as to our success or timeliness in obtaining any such patents or as to the breadth or degree of protection that any such patents might afford us. The patent position of medical products and diagnostic testing firms is often highly uncertain and usually involves complex legal and factual questions. There is a substantial backlog of patents at the United States Patent and Trademark Office and in other patent registration offices around the world. No consistent policy has emerged regarding the breadth of claims covered in medical product patents. Accordingly, we cannot assure you that patent applications relating to our products or technology will result in patents being issued, that, if issued, such patents will afford adequate protection to our products or that our competitors will not be able to design around such patents.

The medical products industry, including the diagnostic testing industry, historically has been characterized by extensive litigation regarding patents, licenses and other intellectual property rights. We could and have incurred substantial costs both in asserting infringement claims against others and in defending ourselves against patent infringement claims. We expect to continue to incur substantial litigation costs as we continue to aggressively protect and defend our proprietary rights. We currently have approximately twenty suits pending against parties whom we believe manufacture or sell products that infringe our patents. To determine the priority of inventions, we may also have to participate in interference proceedings declared by the United States Patent and Trademark Office or foreign patent and trademark authorities, which could also result in substantial costs to us. If the outcome of any such litigation is adverse to us, our business could be materially adversely affected.

In addition, we sometimes obtain licenses to patents or other proprietary rights of third parties to manufacture and market our products. We cannot assure you that licenses required under any such patents or proprietary rights would be made available on terms acceptable to us, if at all. If we do not obtain such licenses, we may encounter delays in product market introductions while we attempt to design around such patents or other rights, or we may be unable to develop, manufacture or sell such products in certain countries, or at all.

We also seek to protect our proprietary technology, including technology that may not be patented or patentable, in part through confidentiality agreements and, if applicable, inventors' rights agreements with collaborators, advisors, employees and consultants. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach or that our trade secrets will

not otherwise be disclosed to, or discovered by, competitors or potential competitors. Moreover, we may from time to time conduct research through academic advisors and collaborators who are prohibited by their academic institutions from entering into confidentiality or inventors' rights agreements. In such circumstances, our ability to protect our proprietary developments may be limited.

Finally, we believe that certain of our trademarks in our consumer products product lines are valuable assets and are important to the marketing of our products. Substantially all of these trademarks have been registered with the United States Patent and Trademark Office or internationally, as appropriate. We cannot assure you, however, that registrations will afford us adequate protection and will not be challenged as unenforceable or invalid, or will not be infringed. In addition, we could incur substantial costs in defending suits brought against us or in prosecuting suits in which we assert rights under such registrations.

Our research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation by numerous governmental authorities in the United States and other countries. Most of our self-test products require governmental approvals for commercialization. Future products may require pre-clinical and clinical trials. Manufacturing and marketing of many of our products are subject to the rigorous testing and approval process of the Food and Drug Administration (FDA) and corresponding foreign regulatory authorities. The marketing of our consumer diagnostic products is also subject to regulation by the Federal Trade Commission (FTC). Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations that could delay, limit or prevent regulatory approval. In addition, we may encounter delays or rejection as a result of changes in, or additions to, regulatory policies for device marketing authorization during the period of product development and regulatory review. Delays in obtaining such approvals could adversely affect our marketing of products developed and our ability to generate commercial product revenues.

In addition, we are required to meet regulatory requirements in countries outside the United States, which can change rapidly with relatively short notice, resulting in our products being banned in certain countries and an associated loss of revenues and income. Foreign regulatory agencies can also introduce test format changes which, if we do not quickly address, can result in restrictions on sales of our products. Such changes are not uncommon due to advances in basic research.

The manufacturing, processing, formulation, packaging, labeling and advertising of our nutritional supplements are subject to regulation by one or more federal agencies, including the FDA, the DEA, the FTC and the Consumer Product Safety Commission. These activities are also regulated by various agencies of the states, localities and foreign countries in which our nutritional supplements are now sold or may be sold in the future. In particular, the FDA regulates the safety, manufacturing, labeling and distribution of dietary supplements, including vitamins, minerals and herbs, as well as food additives, over-the-counter and prescription drugs and cosmetics. The Good Manufacturing Practices promulgated by the FDA are different for nutritional supplement, drug and device products. In addition, the FTC has jurisdiction along with the FDA to regulate the promotion and advertising of dietary supplements, over-the-counter drugs, cosmetics and foods.

The testing, manufacturing and marketing of consumer and professional diagnostic devices entail an inherent risk of product liability claims. In addition, the marketing of our vitamins and nutritional supplements may subject us to various product liability claims, including, among others, claims that our products have inadequate warnings concerning side effects and interactions with other substances. Potential product liability claims may exceed the amount of our insurance coverage or may be excluded

from coverage under the terms of the policy. There can be no assurance that existing insurance can be renewed at a cost and level of coverage comparable to that presently in effect, if at all. In the event that we are held liable for a claim, against which we are not indemnified or for damages exceeding the limits of our insurance coverage, such liability could have a material adverse effect on our business, financial condition and results of operations.

As of March 26, 2003, we had a total of 1,187 full-time employees, of which 488 employees are located in the United States. In addition, we utilize the services of a number of consultants specializing in research and development in our targeted markets, regulatory compliance, strategic planning, marketing and legal matters.

Our principal corporate administrative office, together with the administrative office for most of our United States operations, are housed in approximately 20,600 square feet of leased space located at 51 Sawyer Road, Waltham, Massachusetts at a monthly rent of approximately $74,000. The sublease covering this space expires on May 30, 2003, although we have entered into a five year lease with the owner of this space that will commence upon the expiration of our current sublease. The initial monthly rent under this new lease will be approximately $43,000.

Our European operations are currently administered from a 150,000 square foot facility located in Bedford, England. The Bedford facility is also currently providing the manufacturing for our Clearblue and Clearview products and serving as our research and development center. This facility contains fully automated assembly equipment, and state-of-the-art research laboratories, with excess space and capacity to support potential future expansion. We are currently using the Bedford facility pursuant to an agreement with Unilever entered into in connection with our acquisition of the Unipath business. Unilever currently leases this facility from a third party landlord. Pursuant to Unilever's lease, Unilever is not permitted to assign the lease to us or sublet the Bedford facility to us without obtaining the prior written consent of the landlord (which consent may not be unreasonably withheld). The landlord has indicated that it will not consent to an assignment of the lease to us, and we, Unilever and the landlord are therefore currently negotiating the terms of a sublease. The terms of our acquisition of the Unipath business in 2001 obligate Unilever to use its best efforts to obtain the landlord's consent to assignment or a sublease and, if necessary, to pursue the assignment or sublease through the courts. Unilever has also agreed to permit us to use the Bedford facility until such time as the lease is assigned to us or the facility is subleased to us by Unilever for the remaining term of the lease, which expires on December 11, 2021. Under the terms of this agreement, we are required to pay all amounts owed under the lease and otherwise comply with the terms of the lease. The annual rent for the Bedford facility is currently £1.46 million (approximately, $2.35 million) and is upwardly adjustable every five years, with the next adjustment to take place in September 2006. If Unilever is unable to successfully assign the lease to us or otherwise enable us to realize the benefit of its lease of the Bedford facility, we may be forced to renegotiate a lease of this facility on substantially less favorable terms, seek alternative, more costly means of producing our products or suffer other adverse effects to our business.

We also have manufacturing operations in Freehold, New Jersey, Irvington, New Jersey, Galway, Ireland and Yavne, Israel. We own a 160,000 square foot manufacturing facility in Freehold, New Jersey and lease a 35,000 square foot facility in Irvington, New Jersey. The Irvington lease has a current term of 5 years expiring on December 31, 2006, with an option to extend for an additional 5 years, and the monthly rent is currently approximately $18,100. The New Jersey facilities manufacture our vitamin and nutritional supplement products that we sell to private label customers, to third parties in bulk and under our own brands. Our facility in Galway, Ireland consists of a 40,000 square foot space. We own

half of the Galway facility and lease the other half from a private developer under a lease that expires in 2026. The Galway facility houses the manufacturing of our Accu-Clear brands and most of our private label pregnancy detection and ovulation prediction test products, as well as some research and development. Aggregate annual mortgage and lease payments for our Galway facility total approximately $175,000.

The FDA regulates companies that manufacture commercial medical devices and requires that such companies manufacture such devices in a properly designed and validated environment. A registered facility is required to submit to an FDA inspection not less than once every two years. As required by the regulations, each of the above-described facilities have been registered with the FDA and are Good Manufacturing Practices compliant. The Bedford facility operates to international standards of Good Manufacturing Practice, Good Laboratory Practice, Good Clinical Practice and Quality Assurance (ISO 9001, EN 46001 and ISO 13485). Our Galway facility is also ISO 9001, EN 46001 and ISO 13485 certified.

We also house the development, manufacturing, administrative and marketing operations related to our Orgenics professional diagnostics products in a leased facility of approximately 10,000 square feet in Yavne, Israel. The lease for this facility expires in 2006 and carries rent of $25,000 per month. The facility includes a number of specialized features and equipment, including environmentally controlled areas, customized production equipment, and computerized systems for purchasing, inventory management and materials tracking. Our Yavne facility is ISO 9001, EN 46001 and Good Manufacturing Practices certified.

We also lease a 130,000 square foot facility in Freehold, New Jersey, which has served as IMN's primary warehouse and distribution facility. This lease expires on July 27, 2008 and the current monthly rent is approximately $43,333. We sublease approximately 30,000 square feet of this facility to a third party. We have also recently signed a letter of intent to lease a 30,000 square foot warehouse in Irvington, New Jersey to support our softgel manufacturing operation, which is located next door. We also have leases or other arrangements for administrative offices, lab space and warehouses in New Jersey (Princeton, Cranbury and Springfield), British Columbia (Surrey), Belgium (Sint-Niklaas), Germany (Cologne) and Sweden (Lund), and our Orgenics products are sold through small sales offices in France, Brazil and several other countries. We believe that our facilities, along with certain third party manufacturing, packaging and distribution arrangements that we utilize, are adequate to support the operations of our businesses in the foreseeable future. We have insurance coverage for the properties and equipment that we own or lease.

In April 1998, Abbott Laboratories ("Abbott") commenced a lawsuit against Inverness Medical Technology, Inc. ("IMT"), our former parent and formerly known as Selfcare, Inc., and Princeton BioMeditech Corporation ("PBM"), which previously manufactured certain products for IMT, in an action filed in the United States District Court for the District of Massachusetts ("District Court"). In the lawsuit Abbott asserts patent infringement arising from IMT's and PBM's manufacture, use and sale of products that Abbott claims are covered by one or more of the claims of U.S. Patent Nos. 5,073,484, 5,654,162 and 6,020,147 (the "Pregnancy Test Patents"), to which Abbott asserts that it is the exclusive licensee. Abbott claims that certain of IMT's products relating to pregnancy detection and ovulation prediction (now our products to the extent they are still sold) infringe the Pregnancy Test Patents. Abbott is seeking a finding that IMT and PBM infringe the Pregnancy Test Patents, an order permanently enjoining IMT and PBM from infringing the Pregnancy Test Patents, compensatory damages to be determined at trial, treble damages, costs, prejudgment and post-judgment interest on

Abbott's compensatory damages, attorneys' fees, and a recall of all of existing products found to infringe the Pregnancy Test Patents.

On August 5, 1998, the court denied Abbott's motion for a preliminary injunction. On March 31, 1999, the District Court granted a motion by IMT, PBM and PBM-Selfcare LLC (the "LLC"), a joint venture between PBM and IMT, which sought leave to amend the counterclaim against Abbott, asserting that Abbott is infringing U.S. Patent Nos. 5,559,041 (the "041 patent") and 5,728,587 (the "587 patent"), which are owned by the LLC. The amended counterclaims seek a declaration that Abbott infringes the LLC's patents, as well as permanent injunctive relief, money damages and attorneys' fees.

On November 5, 1998, Abbott filed suit in the United States District Court for the Northern District of Illinois seeking a declaratory judgment of non-infringement, unenforceability and invalidity of the 041 patent and the 587 patent. The Illinois court granted IMT's motion to transfer the aforementioned Illinois action to the District Court. IMT and PBM moved for summary judgment on their defense that the Abbott patents are invalid, and on September 29, 2000, the District Court granted partial summary judgment, holding that certain key claims in Abbott's patents are invalid as a matter of law. The court refused to grant summary judgment on Abbott's claims of infringement or IMT's remaining claims of invalidity.

On December 17, 2001, the District Court denied a motion by Abbott seeking reconsideration of the court's partial summary judgment in favor of IMT and PBM. Abbott renewed this motion on February 15, 2002. The District Court has not ruled on this motion. No trial date has been set at this time. In connection with our split-off from IMT, we assumed all obligations and liabilities of IMT arising out of this matter. We believe that we have strong defenses against Abbott's claims and we will continue to defend the case vigorously; however, a final ruling against IMT or us could have a material adverse impact on our sales, operations or financial performance.

Through several of our subsidiaries, we currently have several lawsuits pending against Pfizer, Inc. ("Pfizer") and certain other parties in the United States District Court for the District of New Jersey alleging, among other things, that Pfizer's e.p.t ® brand pregnancy tests infringe patents owned by us and seeking injunctive relief against further infringement, as well as damages. In the most recently filed of these cases, on December 19, 2002, the Court granted our request for a preliminary injunction against Pfizer, Inc., based on a finding that Pfizer's e.p.t.™ pregnancy tests, as manufactured by ABI, a subsidiary of Apogent, Inc., likely infringe U.S. Patent No. 6,352,862. The Court further denied Pfizer's request for a stay of the injunction pending appeal, which Pfizer has since filed. On March 12, 2003, the Court granted a further preliminary injunction against Pfizer, Inc., based on a finding that a new version of Pfizer's e.p.t. pregnancy test manufactured by Mizuho USA, Inc., a subsidiary of Mizuho Medy, Ltd., also likely infringes the same patent, as well as another patent owned by our subsidiary, Inverness Medical Switzerland GmbH. The Court's orders effectively preclude Pfizer from selling either of these versions of its e.p.t. pregnancy tests pending appeal and posting of a bond.

Princeton BioMeditech Corporation, a co-defendant in one the infringement suits against Pfizer and the subject of two other related infringement suits initiated by us, has brought several counterclaims against us. The counterclaims allege, among other things, that we have breached various obligations to PBM arising out of a joint venture with us and that we have attempted to monopolize the market for home pregnancy tests. We believe that we have strong defenses to all of the counterclaims and we are defending them vigorously. However, a final ruling against us could have a material adverse impact on our sales, operations or financial performance.

In April 2001, 68 consumers brought an action in London claiming defects in Unipath's Persona contraceptive device, negligence and breach of contract, all allegedly leading to unwanted pregnancies by the claimants in or prior to 1998. We believe that we have substantial defenses to the claims and we intend to vigorously defend this litigation. Formal documentary and other discovery permitted under the laws of the United Kingdom has only recently commenced and a trial is not expected until late 2003 or 2004. The case is insured, in the aggregate, by Unilever's product liability insurance up to 50 million British Pounds Sterling or more, depending on when the events giving rise to the consumers' suit occurred. As a result, we do not believe that an adverse ruling against us would have a material adverse impact on our sales, operations or financial performance.

Because of the nature of our business, we may be subject at any particular time to consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for personal injuries or other commercial or employment claims. An adverse ruling in such a lawsuit could have a material adverse effect on our sales, operations or financial performance. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties, such as the suits against Pfizer and PBM discussed above. These suits can be expensive and results in counterclaims challenging the validity of our patents and other rights. We have filed at least twenty law suits around the world, including suits in the United States, Germany, France, Japan and Australia, against competitors whom we believe to be selling products that infringe our propriety rights.

No matters were submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2002.

Our common stock trades on the American Stock Exchange (AMEX) under the symbol "IMA." The following table sets forth the high and low closing sale prices of our common stock on AMEX for each quarter during fiscal 2002 and for the period November 23, 2001 through December 31, 2001. Our common stock began trading on AMEX on November 23, 2001, and prior to that date there was no established public trading market for shares of our common stock.

		High		Low
Fiscal 2002
	Fourth Quarter	$	15.35	$	8.00
	Third Quarter	$	18.90	$	9.49
	Second Quarter	$	28.21	$	17.45
	First Quarter	$	25.41	$	18.00
Fiscal 2001
	November 23 through December 31	$	19.35	$	15.47

The closing price of our common stock on March 28, 2003 was $19.26 and on that date there were 361 holders of record of our common stock.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings to support our growth strategy and do not anticipate paying cash dividends on our common stock in the foreseeable future. The declaration of future dividends, if any, on our common stock will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. Our senior credit facility currently prohibits the payment of dividends.

The following tables provide selected financial data of our company as of and for each of the fiscal years in the five-year period ended December 31, 2002 and should be read in conjunction with our consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.

The selected financial data as of and for each of the fiscal years in the three-year period ended December 31, 2002 have been derived from our consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K. The information as of and for the year ended December 31, 2002 included in our consolidated financial statements was audited by Ernst & Young LLP, independent auditors, while the information as of and for years ended December 31, 2001 and 2000 included in our consolidated financial statements was audited by Arthur Andersen LLP, independent public accountants. The selected financial data as of and for the year ended December 31, 1999 have been derived from our audited consolidated financial statements not included herein. The selected financial data as of and for the year ended December 31, 1998 have been derived from our unaudited consolidated financial statements which have been prepared on a basis consistent with our audited consolidated financial statements and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our consolidated results of operations and financial position for that period.

On November 21, 2001, our company was split-off as an independent public company as part of a split-off and merger transaction whereby Johnson & Johnson acquired our former parent company, IMT. As part of the split-off and merger, we acquired all rights to IMT's women's health, nutritional supplement and professional diagnostics businesses, as well as certain intellectual property. Because we

had not historically been operated or accounted for as a stand-alone business, the financial results for the periods prior to the split-off on November 21, 2001, presented below in the selected financial data, are derived from consolidated financial statements of our businesses, which have been carved out of IMT's financial statements in accordance with the requirements of accounting principles generally accepted in the United States. Because the financial results for the periods prior to the split-off have been carved out of IMT's past financial statements, they may not reflect what our results of operations and financial position would have been had we been a separate stand-alone entity during those periods or be indicative of our future performance. In addition, the acquisitions of the Unipath business in late 2001 and IVC and the Wampole business during 2002 materially affected the comparability of the selected financial data. For a discussion of certain factors that materially affect the comparability of the selected financial data or cause the data reflected herein not to be indicative of our future results of operation or financial condition, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Factors Affecting Future Results."

Effect of the Adoption of Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets"

On January 1, 2002, we adopted SFAS No. 142 and, accordingly, no longer amortize goodwill and other intangible assets with indefinite lives, but rather such assets are subject to annual impairment reviews or more frequently, if events or circumstances indicate that they may be impaired. During the first quarter of 2002, we completed the implementation review as required under SFAS No. 142 and recorded an impairment of goodwill related to our nutritional supplements reporting unit in the amount of $12.1 million, which we accounted for as a cumulative effect of a change in accounting principle in our consolidated statement of operations in that period. The following table presents the (loss) income from continuing operations data of our company, as if SFAS No. 142 was adopted for all periods presented.

Delaware		04-3565120
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
51 Sawyer Road, Suite 200, Waltham, Massachusetts		02453
(Address of principal executive offices)		(Zip Code)

			2002			2001			2000			1999			1998
			(in thousands, except per share data)
Consolidated Statements of Operations:
Net revenue			$	207,897		$	47,268		$	49,728		$	49,087		$	53,445
Cost of sales				112,508			26,149			26,235			27,823			27,168

Gross profit				95,389			21,119			23,493			21,264			26,277

Operating expenses:
	Purchased in-process research and development			—			6,980			—			—			—
	Research and development			14,471			1,810			1,360			1,395			2,322
	Sales and marketing			42,487			8,531			8,101			8,581			11,481
	General and administrative			28,067			11,702			7,048			7,214			9,493
	Other expenses			23,306			10,441			—			—			4,969

		Total operating expenses		108,331			39,464			16,509			17,190			28,265

	Operating (loss) income			(12,942	)		(18,345	)		6,984			4,074			(1,988	)
Interest and other expenses, net				(8,492	)		(3,983	)		(2,423	)		(2,710	)		(3,074	)

	(Loss) income from continuing operations before income taxes			(21,434	)		(22,328	)		4,561			1,364			(5,062	)
Provision for income taxes				2,683			2,134			1,781			1,007			1,115

	(Loss) income from continuing operations		$	(24,117	)	$	(24,462	)	$	2,780		$	357		$	(6,177	)

(Loss) income from continuing operations available to common shareholders(1)			$	(36,065	)	$	(24,462	)	$	2,780		$	357		$	(6,177	)

(Loss) income from continuing operations per common share—basic and diluted(1)			$	(3.63	)	$	(3.84	)	$	0.59		$	0.11		$	(2.53	)

	December 31,
	2002		2001		2000			1999			1998
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	30,668	$	52,024	$	3,071		$	661		$	1,111
Working capital (deficit)		28,209		19,555		(6,464	)		(4,060	)		(1,986	)
Total assets		357,746		278,521		74,958			72,210			70,191
Debt obligations		104,614		78,124		12,830			19,076			23,163
Redeemable convertible preferred stock		9,051		51,894		—			—			—
Total stockholders' equity		162,904		89,614		41,812			34,953			28,932