UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1, 2008

INTEGRA LIFESCIENCES HOLDINGS CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		0-26224 (Commission File Number)		51-0317849 (I.R.S. Employer Identification No.)

311 Enterprise Drive
Plainsboro, NJ 08536
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (609) 275-0500

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

This Current Report on Form 8-K/A amends and supplements the Current Report on Form 8-K filed by Integra LifeSciences Holdings Corporation (the “Company”) on August 4, 2008 (the “Initial Form 8-K”) to include financial statements and pro forma financial information permitted pursuant to Item 9.01 of Form 8-K to be excluded from the Initial Form 8-K and filed by amendment to the Initial Form 8-K no later than 71 days after the date the Initial Form 8-K was required to be filed. The financial statements of Theken Spine, LLC, Theken Disc, LLC and Therics, LLC (collectively, the “Theken Companies”) represent the entire business acquired by the Company on August 1, 2008.

As previously announced, on July 23, 2008, Integra LifeSciences Holdings Corporation, a Delaware corporation, entered into the following agreements for the acquisition of Theken Spine, LLC, Theken Disc, LLC and Therics, LLC (collectively, the “Theken Companies”): (i) Unit Purchase Agreement among the Company, Theken Spine, LLC, Randall R. Theken and the other members of Theken Spine, LLC set forth therein (the “Theken Spine Unit Purchase Agreement”); (ii) Unit Purchase Agreement among the Company, Theken Disc, LLC, Randall R. Theken and the other members of Theken Disc, LLC set forth therein; and (iii) Unit Purchase Agreement among the Company, Therics, LLC, Randall R. Theken and AFBS, Inc. (collectively, the “Unit Purchase Agreements”). Pursuant to the Unit Purchase Agreements, on August 1, 2008, the Company, through its wholly-owned subsidiary Integra Spine, Inc., acquired all of the membership interests of each of the Theken Companies from Randall R. Theken, the majority member of each company, and the remaining minority members.

The aggregate purchase price for the Theken Companies paid at closing was $75 million allocated as follows: $47 million for Theken Spine, $20 million for Theken Disc and $8 million for Therics. In addition, under the Theken Spine Unit Purchase Agreement, the Company has agreed to pay up to $125 million in earn-out payments to the members and former appreciation rights holders of Theken Spine in accordance with a formula based on the net sales of the Theken Companies during a two-year period following the closing.

The Theken Companies, based in Akron, Ohio, design, develop and manufacture spinal fixation products, synthetic bone substitute products and spinal arthroplasty products. The description of the terms of the Theken Spine Unit Purchase Agreement is qualified in its entirety by reference to the copy of the Theken Spine Unit Purchase Agreement attached as Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on July 24, 2008.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements of Business Acquired

Theken Spine, LLC Consolidated Financial Statements as of and for the year ended December 31, 2007 and Report of Independent Auditors

Theken Spine, LLC Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007 and Statements of Operations and Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited)

(b) Unaudited Pro Forma Financial Information

Unaudited Pro Forma Condensed Combined Balance Sheet of the Company and the Theken Companies as of March 31, 2008

Unaudited Pro Forma Condensed Combined Statement of Operations of the Company and the Theken Companies for the year ended December 31, 2007

Unaudited Pro Forma Condensed Combined Statement of Operations of the Company and the Theken Companies for the three months ended March 31, 2008

Notes to Unaudited Pro Forma Condensed Combined Financial Information of the Company and the Theken Companies

(d) Exhibits

Exhibit Number		Description of Exhibit
23.1		Consent of Independent Accountants

ITEM 9.01 (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED

THEKEN SPINE, LLC

CONSOLIDATED
FINANCIAL
STATEMENTS

FOR THE
YEAR ENDED
DECEMBER 31, 2007

THEKEN SPINE, LLC

TABLE OF CONTENTS

		Page
REPORT OF INDEPENDENT AUDITORS			1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet			2-3
Consolidated Statement of Income			4
Consolidated Statement of Changes in Members’ Equity			5
Consolidated Statement of Cash Flows			6-7
Notes to Financial Statements			8-19

Report of Independent Auditors

To the Members of Theken Spine, LLC:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, changes in members’ equity and cash flows present fairly, in all material respects, the financial position of Theken Spine, LLC and its subsidiaries at December 31, 2007, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
October 16, 2008

THEKEN SPINE, LLC

CONSOLIDATED BALANCE SHEET

		December 31,
		2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	366,499
Trade accounts receivable, net allowance of $103,459			4,551,572
Inventories, net			5,301,385
Prepaid expenses and other current assets			297,081
TOTAL CURRENT ASSETS			10,516,537
PROPERTY, PLANT AND EQUIPMENT
Land and improvements			796,298
Buildings and improvements			1,830,525
Leasehold improvements			3,125,036
Machinery and equipment			2,378,424
Computers			687,764
Cases and instruments			2,998,542
Vehicles and aircraft			5,673,554
Furniture and fixtures			274,883
			17,765,026
Less: accumulated depreciation			(3,934,625	)
PROPERTY, PLANT AND EQUIPMENT, NET			13,830,401
OTHER ASSETS
Other non-current assets			5,681
Intangible assets, net			323,333
TOTAL OTHER ASSETS			329,014
TOTAL ASSETS		$	24,675,952

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED BALANCE SHEET

		December 31,
		2007
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Line of credit		$	3,666,600
Current portion of long-term debt			317,171
Accounts payable, trade			3,094,969
Accrued commissions			770,539
Other accrued expenses and liabilities			1,283,594
Note payable — member			1,350,000
TOTAL CURRENT LIABILITIES			10,482,873
LONG-TERM LIABILITIES
Long-term debt, net of current portion			5,750,321
TOTAL LONG-TERM LIABILITIES			5,750,321
TOTAL LIABILITIES			16,233,194
COMMITMENTS AND CONTINGENCIES
NONCONTROLLING INTEREST			2,336,191
MEMBERS’ EQUITY			6,106,567
TOTAL LIABILITIES AND MEMBERS’ EQUITY		$	24,675,952

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENT OF INCOME

		FOR THE
		YEAR ENDED
		DECEMBER 31, 2007
NET SALES		$	33,777,508
COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation and amortization)			3,514,142
Research and development			3,096,845
Selling, general and administrative			10,319,718
Commissions			10,845,382
Depreciation and amortization			1,548,155
TOTAL COSTS AND EXPENSES			29,324,242
OPERATING INCOME			4,453,266
OTHER INCOME (EXPENSE)
Interest income			45,260
Interest expense			(728,240	)
Other expense, net			353,927
TOTAL OTHER INCOME (EXPENSE)			(329,053	)
INCOME BEFORE NONCONTROLLING INTEREST NET INCOME			4,124,213
NONCONTROLLING INTEREST NET INCOME			(757,476	)
NET INCOME		$	3,366,737

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS’ EQUITY

		FOR THE
		YEAR ENDED
		DECEMBER 31, 2007
Balance, December 31, 2006		$	3,382,080
Net income			3,366,737
Distributions			(642,250	)
Balance, December 31, 2007		$	6,106,567

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENT OF CASH FLOWS

		FOR THE
		YEAR ENDED
		DECEMBER 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	3,366,737
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,548,155
Noncontrolling interest net income			757,476
Bad debt expense			15,726
Reserve for excess and slow moving inventory			182,177
LIFO reserve			39,896
(Increase) decrease in:
Trade accounts receivable, net			639,577
Notes receivable			204,973
Inventories, net			(2,785,616	)
Prepaid expenses and other current assets			84,387
Non-current assets			(32,369	)
Increase (decrease) in:
Accounts payable, trade			928,994
Accrued expenses and other current liabilities			(1,137,173	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			3,812,940
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment			(4,431,123	)
NET CASH USED IN INVESTING ACTIVITIES			(4,431,123	)

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENT OF CASH FLOWS

		FOR THE
		YEAR ENDED
		DECEMBER 31, 2007
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit		$	2,235,000
Repayments of long-term debt			(196,275	)
Capital contributions to noncontrolling interest			1,083,668
Distributions to noncontrolling interest			(3,154,026	)
Distributions to members			(642,250	)
NET CASH USED IN FINANCING ACTIVITIES			(673,883	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(1,292,066	)
CASH AND CASH EQUIVALENTS, beginning of year			1,658,565
CASH AND CASH EQUIVALENTS, end of year		$	366,499
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		$	731,066

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies

Nature of business

The accompanying financial statements present the consolidated financial results of Theken Spine, LLC and affiliated companies (The Company or Companies). The Companies are as follows:

Theken Spine, LLC (“Spine”) founded in 1998, designs, develops, manufactures and distributes a full range of spinal fusion products including cervical plates, pedicle screw systems, interbody systems and trauma devices. Spine provides product and services to its customers, who consist primarily of orthopedic surgeons, from its principal location in Akron, Ohio.

Theken Disc, LLC (“Disc”) is a biomedical engineering research and development company that is designing and developing a spinal implant device from its principal location in Akron, Ohio.

Therics, LLC (“Therics”) acquired in 2005, designs, develops and manufactures various types of tricalcium phosphate bone void fillers that promote the growth of bone eliminating the risk of disease transmission.

Theken Orthopaedic, Inc. (“Orthopaedic”) (a subchapter S corporation) founded in 1992, provides mechanical testing and FDA regulatory services to medical product manufacturers in need of FDA device approval.

Foxtrot-Papa Management Company, LLC (“Foxtrot”) provides management services to the various affiliated companies, including aircraft management services to its wholly-owned subsidiary, Theken Aviation, LLC (“Aviation”).

Theken Real Estate, LLC (“Real Estate”) was formed to hold and lease real estate to the various companies which comprise the consolidated group.

Theken Aviation, LLC (“Aviation”) was formed to hold an aircraft and associated debt used on behalf of the various affiliated companies.

Principles of consolidation

The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The consolidated statements include the statements of the Company and its affiliates required to be consolidated under Financial Accounting Standards Board (FASB) Interpretation No. 46(R) — “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (FIN 46(R)). The above affiliates are related to Spine as a result of common ownership. Each of the above entities provides services to Spine as their main source of revenue, or is financially supported by Spine in the form of intercompany loans or debt guarantees. As such, Spine is the primary beneficiary of each of the above entities under FIN No. 46(R) and therefore consolidates the results of their operations in the consolidated financial statements. See Note K for further details.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

The initial consolidation under FIN No. 46(R) for Disc was January 1, 2007 and included $929,529 of assets and $219,350 of liabilities. Disc did not generate any revenues and beginning in 2007, Disc became financially supported by Spine through intercompany loans in order to fund ongoing operations.

All intercompany transactions between the Companies have been eliminated in consolidation.

Noncontrolling interests

The Company eliminates 100% of the net income of the variable interest entities or affiliates to noncontrolling interests since the Company does not have any equity ownership of these entities. This is reflected as “noncontrolling interests net income” in the consolidated statement of income. The noncontrolling interests amounts reflected in the balance sheet represent 100% of the equity of the noncontrolling interests.

Use of estimates

Presentation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosures 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.

Cash and cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates market value.

Trade accounts receivable

The Company reports trade accounts receivables at net realizable value. The Company’s allowance for doubtful accounts is estimated by management based on a review of historic receivable write-offs, existing economic conditions and the level and age of receivables from specific customers. As of December 31, 2007 management has established an allowance for uncollectible accounts in the amount of $103,459.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

Inventories

Inventory is stated at the lower of cost or market on a last-in, first-out basis (“LIFO”). Inventory costs include material, labor and overhead. At each balance sheet date, the Company evaluates ending inventories for excess quantities, obsolescence or shelf-life expiration. This evaluation includes analysis of historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions, a review of the shelf life expiration dates for products, as well as the feasibility of reworking or using excess or obsolete products or components in the production of assembly of other products that are not obsolete or for which there are not excess quantities in inventory. To the extent that management determines there are excess or obsolete inventory or quantities with shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, valuation reserves are recorded against all or a portion of the value of the related products to adjust their carrying amount to estimated net realizable value. During the year ended December 31, 2007, the Company increased its reserve for obsolescence for excess and slow-moving inventories by $182,177.

Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation and amortization is provided on a straight-line basis over the estimated useful lives as follows:

		Years
Land improvements			20
Buildings and improvements			20 - 40
Leasehold improvements			5 - 7
Machinery and equipment			5 - 10
Computers			3 - 5
Cases and instruments			3 - 10
Vehicles and aircraft			5 - 15
Furniture and fixtures			10 - 20

Depreciation and amortization expense for the year ended December 31, 2007 was $1,489,822.

Expenditures for major renewals and betterments, including leasehold improvements, that extend the useful life of the asset are capitalized and depreciated over the remaining life of the asset or lease. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement of an asset, the cost and associated accumulated depreciation is eliminated and any resulting gain or loss on disposal is charged to income.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

Long-lived assets

Long-lived assets held and used by the Company, including property, plant and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets to be held and used, a recoverability test is performed using projected undiscounted net cash flows applicable to the long-lived assets. If an impairment exists, the amount of such impairment is calculated based on the estimated fair value of the asset. Impairments to long-lived assets to be disposed of are recorded based upon the fair value of the applicable assets.

Research and development

The Company charges research and development costs to expense as incurred. Total research and development expense incurred for the year ended December 31, 2007 was $3,096,845.

Revenue recognition

The Company principally generates revenue from the sales of spinal implant products. A majority of the Company’s products are distributed through a network of independent medical device distributors throughout the United States. Revenues are recognized upon notification that the product has been utilized in a surgical implant.

Cost of products sold

Cost of products sold generally includes actual material costs associated with products sold and related shipping and handling costs.

Advertising costs

The Company expenses advertising costs as incurred. Total advertising costs charged to expense for the year ended December 31, 2007 was $77,015.

Income taxes

The Companies are organized as limited liability companies and are treated as a partnership for federal, state and local income tax purposes with the exception of Orthopaedic. Accordingly, the tax effects of the Company’s income or loss are passed through to the members and thus, no provision for income taxes is included in these financial statements.

Orthopaedic has elected under the Internal Revenue Code to be an S corporation. Instead of corporation income taxes, the shareholders of an S corporation are taxed on their proportionate share of the Company’s taxable income. Therefore, no provision for federal income taxes has been included in these financial statements.

Shipping and handling costs

Shipping and handling costs are included as a component of cost of products sold and amounted to $258,075 for the year ended December 31, 2007.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

Financial instruments

The Company’s financial instruments recorded on the consolidated balance sheets include cash, accounts receivable, accounts payable and debt. The book value of cash, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The fair value of debt is considered to approximate the book value due to interest thereon being charged at variable and fixed rates that approximate market rates.

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist of temporary cash investments and credit sales.

The Company maintains its cash investments with a financial institution. The investments maintained by the financial institution are insured by the Federal Deposit Insurance Corporation up to $100,000. During various times of the year the Company had cash balances in excess of FDIC insured limits. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risk on such accounts.

Credit sales are made to the Company’s customers in the ordinary course of business. Generally these sales are unsecured. The majority of sales are provided through a network of distributors, with customers limited to the surgical sector of the medical market.

Sales taxes

The Company collects sales tax from its customers on product sales that is remitted to various state governmental authorities when due. The Company’s policy is to record taxes collected from customers as a component of accrued expenses on its balance sheet and not in its statement of income.

Recently issued accounting pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements in accordance with FASB Statement 109, Accounting for Income Taxes. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. The Company will adopt the provisions of FIN 48 for all tax positions during 2008.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for financial assets and liabilities for fiscal years beginning after November 15, 2007 and effective for non-financial assets fiscal years beginning after November 15, 2008.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

Recently issued accounting pronouncements, continued

In February, 2007, the FASB issued Statement of Financial Accounting Standard No. 159, The Option to Measure Financial Assets and Liabilities at Fair Value (“SFAS 159”). SFAS 159 gives companies an option to measure many of their financial assets and liabilities and certain other assets and liabilities (e.g., certain nonfinancial insurance contracts and warranties) at fair value on an instrument-by-instrument basis. FAS 159 is effective at the beginning of a company’s first fiscal year after November 15, 2007.

The adoption of the above standards is not expected to have a material effect on the Company’s financial statements.

NOTE B — Inventories, net

Inventories consisted of the following at December 31, 2007:

Raw materials		$	168,590
Work-in-process			274,632
Finished goods			6,930,236
			7,373,458
Less: reserves for excess and slow-moving inventories			(2,072,073	)
Total inventories, net		$	5,301,385

Recorded inventory cost would have been $113,896 higher as of December 31, 2007, had the Company used the first-in, first-out (FIFO) method to determine inventory cost rather than the last-in, first-out (LIFO) method.

NOTE C — Intangible assets, net

Intangible assets consisted of the following at December 31, 2007:

Patent license agreements		$	250,000
Product rights agreement			225,000
			475,000
Less: accumulated amortization			(151,667	)
Total intangible assets, net		$	323,333

Intangible assets are amortized on a straight-line basis over the respective lives of the assets which range from 15 years for the patent license agreements to 5 years for the product rights agreement.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C — Intangible assets, net, continued

Amortization expense was $58,333 for the year ended December 31, 2007. Estimated amortization expense at December 31, 2007 for each of the five succeeding years is as follows:

2008		$	58,334
2009			58,333
2010			13,334
2011			13,333
2012			13,333
Thereafter			116,666
		$	273,333

NOTE D — Operating lease

Incubator, Canal Place — Akron, Ohio

On May 1, 2006, the Company entered into a lease with the Akron Development Corporation (“ADC”) for a period of twelve months ending April 30, 2007. Monthly rental payments are $1,167. Under the terms of the lease, two additional one year terms are available ending April 30, 2009, with the first additional term being exercised during 2007 extending the lease term to April 30, 2008. Rental expense amounted to $13,992 for the year ended December 31, 2007.

Such renewals are subject to an escalation clause, at ADC’s option, not to exceed 10% per year, compounded annually, of the initial rent.

NOTE E — Obligation under capital lease

The Company is obligated under a capitalized lease for the cost of equipment and a related maintenance agreement. The lease term expires in 2009 and contains a guaranteed bargain purchase option. The equipment was placed in service in September 2007.

The equipment acquired under capital lease at December 31, 2007 is included on the consolidated balance sheets as follows:

Equipment		$	67,061
Less: accumulated amortization			(3,353	)
Assets acquired under capital lease, net		$	63,708

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E — Obligation under capital lease, continued

The following is a schedule of the future minimum lease payments due under this capital lease together with the present value of the net minimum lease payments at December 31, 2007. The agreement provided zero percent financing for up to two years.

Years ending December 31,
2008		$	36,723
2009			24,482
Present value of minimum lease payments			61,205
Less: current portion			(36,723	)
Long-term portion		$	24,482

NOTE F — Line of credit

On September 22, 2003, the Company entered into a $5,000,000 demand line of credit with National City Bank. The line of credit is secured with a blanket lien on accounts receivable, inventory and equipment. Interest on the line is computed using the one month LIBOR rate plus 2.00% (LIBOR was 5.017% at December 31, 2007). The amount outstanding on this line of credit was $3,666,600 at December 31, 2007.

NOTE G — Long-term debt

Long-term debt consisted of the following at December 31, 2007:

Note payable — Cessna Finance Corporation, payable in monthly installments of $43,300 including interest at LIBOR plus 2.23% (LIBOR was 5.017% at December 31, 2007); due November 1, 2012; collateralized by a Raytheon Beechcraft Premier 1A aircraft, inventory and accounts receivable of Theken Spine, LLC, and a personal guarantee by the managing member.		$	4,672,866
Note payable — First Merit Bank, payable in monthly installments of $6,660 including interest at 6.5%; due December 31, 2015; collateralized by real estate owned by Theken Real Estate, LLC located at 20 N. Pennsylvania Avenue in Morrisville, PA, and a personal guarantee by the managing member.			702,807
Note payable — First Merit Bank, payable in monthly installments of $5,924 including interest at 5.96%; due September 5, 2014; collateralized by real estate owned by Theken Real Estate, LLC that is located at 1800 Triplett Blvd. in Akron, OH, and a personal guarantee by the managing member.		$	630,614
Obligation under capital lease			61,205
			6,067,492
Less: current portion			(317,171	)
		$	5,750,321

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G — Long-term debt, continued

Maturities of long-term debt at December 31, 2007 are as follows:

2008		$	317,171
2009			395,291
2010			390,930
2011			412,158
2012			434,555
Thereafter			4,117,387
		$	6,067,492

NOTE H — Note payable — member

Note payable — member in the amount of $1,350,000 at December 31, 2007, consists of a note to a member that is due on demand. The note bears interest monthly at a variable interest rate based upon the short-term Applicable Federal Rate. The rate at December 31, 2007 was 3.88%. The note is secured by the underlying assets of Theken Spine, LLC.

Pursuant to the terms of the unit purchase agreement as discussed in Note M, the note payable to a member has since been fully repaid.

NOTE I — Defined contribution plan

The Company has a 401(k) retirement savings plan. Employee participants may make voluntary contributions up to 100% of their compensation subject to limitations by law. Company contributions to the plan are composed of a matching contribution of 50% of the first 6% of employee contributions. The Company’s total contribution and expense for the year ended December 31, 2007 was $91,011.

NOTE J — Commitments and contingencies

Royalty agreement

The Company has several agreements to pay royalties based on the sales of certain specified product lines. The agreements expire at various dates through July 2009 and require royalty payments that range from 3% to 30% of the sales of that particular product line. Royalty expense relating to these agreements was $562,809 for the year ended December 31, 2007.

Distributor commissions

The Company has entered into various contracts with distributors that assign exclusive territorial rights to market the Company’s product. Distributor commissions are based on sales levels and product lines. Distributor commission expense for the year ended December 31, 2007 was $10,240,388.

Litigation

The Company is involved in various litigation arising in the ordinary course of business. While it is not feasible to predict the outcomes of these actions, in the opinion of the Company’s management and legal counsel, those matters are expected to be resolved without material adverse effect on the financial position or results of operations of the Company.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K — Variable interest entities

FASB Interpretation (“FIN”) No. 46, as revised in December 2003, Consolidation of Variable Interest Entities, (an interpretation of Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements), (“FIN 46(R)”), addresses consolidation by business enterprises of entities to which the usual condition of consolidation described in ARB No. 51 does not apply. The general requirement to consolidate under ARB No. 51 is based on the presumption that an enterprise’s financial statements should include all of the entities in which it has a controlling financial interest. FIN 46(R) interprets this general rule to require consolidation of a variable interest entity in which the enterprise does not have a majority voting interest but, nevertheless, is subject to a majority of the risk of loss, is entitled to a majority of the entity’s residual returns, or both. Effective January 1, 2007, meeting the requirements of FIN 46(R), Spine was the primary beneficiary of Disc, Therics, Orthopaedic, Real Estate, and Foxtrot and its wholly-owned subsidiary, Aviation.

Selected financial information for these entities as of December 31, 2007 is as follows:

Total assets		$	10,287,972
Total liabilities		$	10,575,744
Members’ equity		$	(287,772	)
Net sales		$	3,611,965
Net loss		$	(589,648	)

Noncontrolling interests net income for the year ended December 31, 2007 is comprised of the following:

Variable interest entities combined net loss		$	589,648
Amounts absorbed by Spine (the primary beneficiary) for purposes of the financial statement presentation:
Change in members’ deficit of Therics			(950,325	)
Change in members’ deficit of Disc			(396,799	)
Noncontrolling interest net income		$	(757,476	)

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE L — Appreciation rights plans

The Company has four appreciation rights plans, three dated January 1, 2005 (one of which was amended on March 11, 2005), and one dated June 23, 2003. While the plans may be terminated in accordance with their terms, they generally have no stated expiration date; however, appreciation units issued there-under do expire and/or terminate upon the occurrence of certain stated events (e.g. termination of employment, sale of the company, etc.). The purpose is to enable the Company to attract and retain the services of persons of outstanding competence and to provide an incentive for such key persons to expand and improve the profits and prosperity of the Company. Appreciation units are awarded at the sole discretion of the manager of the Company and, subject to the other terms and conditions of the plan (e.g. provisions governing the termination of rights and/or appreciation units), are fully vested upon award. The plans are unfunded, unsecured obligations of the Company and are not deemed to be qualified under the Internal Revenue Code.

Employees and Distributors Plan dated January 1, 2005

During the year ended December 31, 2007, additional appreciation units were granted to selected employees and distributors as indicated in the summary of appreciation unit activity. In the event of a major event, as defined by the plan, the holder of the appreciation units receives payment for the units, assuming appreciation in the value of the Company. A major event generally means the bona fide sale of the entire Company to independent third parties. The payment amount for each appreciation unit is calculated based on the consideration paid in a sale of the Company net of the Company’s costs, expenses and other liabilities.

Executive Presidents Plan dated January 1, 2005

During the year ended December 31, 2007, no additional appreciation units were granted to Executive Presidents. In the event of a major event, as defined by the plan, the holder of the appreciation units receives payment for the units, assuming appreciation in the value of the Company. A major event generally means the bona fide sale of the entire Company to independent third parties. The payment amount for each appreciation unit is calculated based on the consideration paid in a sale of the Company net of the Company’s costs, expenses and other liabilities.

Consultants Plan dated January 1, 2005 and amended March 11, 2005

During the year ended December 31, 2007, no additional appreciation units were granted to selected consultants. In the event of a major event, as defined by the plan, the holder of the appreciation units receives payment for the units, assuming appreciation in the value of the Company. A major event generally means the bona fide sale of the entire Company to independent third parties. The payment amount for each appreciation unit is calculated based on the consideration paid in a sale of the Company net of the Company’s costs, expenses and other liabilities.

THEKEN SPINE, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE L — Appreciation rights plans, continued

Theken Disc, LLC Appreciation Rights Plan dated June 23, 2003 and amended October 15, 2003

The Company has established a stock appreciation rights plan to attract and retain key personnel. The Plan gives certain individuals the right to receive the appreciation in the underlying stock that occurred from the date the right was granted up to the exercise date.

A summary of appreciation unit activity for four appreciation rights plans for the year ended December 31, 2007 is as follows:

		Beginning								Cancellations				Ending
		Balance				Additional				and/or				Balance
		1/01/07				Grants				Forfeitures				12/31/07
Employees and Distributors Plan			84,094				3,468				—				87,562
Executive Presidents Plan			107,486				—				—				107,486
Consultants Plan			11,478				—				—				11,478
Theken Disc, LLC
Appreciation Rights Plan			—				—				—				—
Total appreciation rights			203,058				3,468				—				206,526

No compensation expense has been recognized under these appreciation rights plans for the year ended December 31, 2007. The acquisition of Spine, Disc and Therics by Integra Spine, Inc. on August 1, 2008, qualified as a major event as defined in the plans (see Note M), and as such, $10,053,399 of compensation expense was recognized immediately prior to the acquisition in 2008.

NOTE M — Subsequent events

On August 1, 2008, pursuant to the terms of a unit purchase agreement, substantially all of the membership interests and operations of Spine, Disc and Therics were acquired by Integra Spine, Inc., a wholly-owned subsidiary of Integra LifeSciences Holdings Corporation. The members of Spine, Disc and Therics received $75,000,000 in connection with the acquisition and up to $125,000,000 in earn-out payments to the members and the former appreciation rights holders of Spine, Disc and Therics during a two-year period following the acquisition. Effective August 1, 2008, all intercompany balances between the Companies were settled.

THEKEN SPINE, LLC

UNAUDITED
CONSOLIDATED
CONDENSED
FINANCIAL
STATEMENTS

FOR THE
THREE MONTHS ENDED
MARCH 31, 2008

THEKEN SPINE, LLC

TABLE OF CONTENTS

		Page
TABLE OF CONTENTS			1
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet (Unaudited)			2-3
Consolidated Statement of Income (Unaudited)			4
Consolidated Statement of Changes in Members’ Equity (Unaudited)			5
Consolidated Statement of Cash Flows (Unaudited)			6-7
Selected Notes to Consolidated Financial Statements (Unaudited)			8-14

THEKEN SPINE, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		MARCH 31,				DECEMBER 31,
		2008				2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	179,279			$	366,499
Trade accounts receivable, net			5,383,288				4,551,572
Inventories, net			5,820,998				5,301,385
Prepaid expenses and other current assets			268,562				297,081
TOTAL CURRENT ASSETS			11,652,127				10,516,537
PROPERTY, PLANT AND EQUIPMENT
Land and improvements			796,298				796,298
Buildings and improvements			1,830,525				1,830,525
Leasehold improvements			3,141,745				3,125,036
Machinery and equipment			2,378,424				2,378,424
Computers			649,986				687,764
Cases and instruments			3,803,347				2,998,542
Vehicles and aircraft			5,673,554				5,673,554
Furniture and fixtures			292,664				274,883
			18,566,543				17,765,026
Less: accumulated depreciation			(4,264,306	)			(3,934,625	)
PROPERTY, PLANT AND EQUIPMENT, NET			14,302,237				13,830,401
OTHER ASSETS
Other non-current assets			5,681				5,681
Intangible assets, net			308,750				323,333
TOTAL OTHER ASSETS			314,431				329,014
TOTAL ASSETS		$	26,268,795			$	24,675,952

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		MARCH 31,				DECEMBER 31,
		2008				2007
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Line of credit		$	3,967,600			$	3,666,600
Current portion of long-term debt			313,648				317,171
Accounts payable, trade			3,463,489				3,094,969
Accrued commissions			772,932				770,539
Other accrued expenses and liabilities			1,317,641				1,283,594
Note payable — member			1,350,000				1,350,000
TOTAL CURRENT LIABILITIES			11,185,310				10,482,873
LONG-TERM LIABILITIES
Long-term debt, net of current portion			5,064,497				5,750,321
TOTAL LIABILITIES			16,249,807				16,233,194
COMMITMENTS AND CONTINGENCIES
NONCONTROLLING INTEREST			3,194,914				2,336,191
MEMBERS’ EQUITY			6,824,074				6,106,567
TOTAL LIABILITIES AND MEMBERS’ EQUITY		$	26,268,795			$	24,675,952

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

		FOR THE THREE MONTHS ENDED
		MARCH 31,
		2008				2007
NET SALES		$	9,915,372			$	8,670,710
COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation and amortization)			1,158,569				815,666
Research and development			890,001				1,066,036
Selling, general and administrative			2,871,159				2,386,238
Commissions			3,160,208				2,698,354
Depreciation and amortization			398,265				369,937
TOTAL COSTS AND EXPENSES			8,478,202				7,336,231
OPERATING INCOME			1,437,170				1,334,479
OTHER INCOME (EXPENSE)
Interest income			27,000				43,517
Interest expense			(144,878	)			(221,881	)
Other expense, net			159,980				173,759
TOTAL OTHER INCOME (EXPENSE)			42,102				(4,605	)
INCOME BEFORE NONCONTROLLING INTEREST NET INCOME			1,479,272				1,329,874
NONCONTROLLING INTEREST NET (INCOME) LOSS			(427,952	)			14,071
NET INCOME		$	1,051,320			$	1,343,945

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY (UNAUDITED)

		FOR THE THREE
		MONTHS ENDED
		MARCH 31, 2007
Balance, December 31, 2006		$	3,382,080
Net income			1,343,945
Balance, March 31, 2007		$	4,726,025

		FOR THE THREE
		MONTHS ENDED
		MARCH 31, 2008
Balance, December 31, 2007		$	6,106,567
Net income			1,051,320
Distributions			(333,813	)
Balance, March 31, 2008		$	6,824,074

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		FOR THE THREE MONTHS ENDED
		MARCH 31,
		2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	1,051,320			$	1,343,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			398,265				369,937
Noncontrolling interest net income (loss)			427,952				(14,071	)
Bad debt expense			39,609				4,797
Reserve for excess and slow moving inventory			9,829				4,410
LIFO reserve			79,179				33,169
(Increase) decrease in:
Trade accounts receivable, net			(871,325	)			91,965
Inventories, net			(608,621	)			(243,320	)
Prepaid expenses and other current assets			28,519				128,856
Other noncurrent assets			—				(7,409	)
Increase (decrease) in:
Accounts payable, trade			368,520				74,119
Accrued expenses and other current liabilities			36,440				323,077
NET CASH PROVIDED BY OPERATING ACTIVITIES			959,687				2,109,475
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment			(855,518	)			(1,629,590	)
NET CASH USED IN INVESTING ACTIVITIES			(855,518	)			(1,629,590	)

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		FOR THE THREE MONTHS ENDED
		MARCH 31,
		2008				2007
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit		$	301,000			$	(300,000	)
Repayments of long-term debt			(689,347	)			(64,295	)
Capital contributions to noncontrolling interest			760,649				242,000
Distributions to noncontrolling interest			(329,878	)			(940,059	)
Distributions to members			(333,813	)			—
NET CASH USED IN FINANCING ACTIVITIES			(291,389	)			(1,062,354	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(187,220	)			(582,469	)
CASH AND CASH EQUIVALENTS, beginning of period			366,499				1,658,565
CASH AND CASH EQUIVALENTS, end of period		$	179,279			$	1,076,096
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		$	174,986			$	179,178

See accompanying notes to consolidated financial statements.

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies

Nature of business

The accompanying financial statements present the consolidated financial results of Theken Spine, LLC and affiliated companies (The Company or Companies). The companies are as follows:

Theken Spine, LLC (“Spine”) founded in 1998, designs, develops, manufactures and distributes a full range of spinal fusion products including cervical plates, pedicle screw systems, interbody systems and trauma devices. Spine provides product and services to its customers, who consist primarily of orthopedic surgeons, from its principal location in Akron, Ohio.

Theken Disc, LLC (“Disc”) is a biomedical engineering research and development company that is designing and developing a spinal implant device from its principal location in Akron.

Therics, LLC (“Therics”) acquired in 2005, designs, develops and manufactures various types of tricalcium phosphate bone void fillers that promote the growth of bone eliminating the risk of disease transmission.

Theken Orthopaedic, Inc. (“Orthopaedic”) founded in 1992, provides mechanical testing and FDA regulatory services to medical product manufacturers in need of FDA device approval.

Foxtrot-Papa Management Company, LLC (“Foxtrot”) provides management services to the various affiliated companies, including aircraft management services to its wholly-owned subsidiary, Theken Aviation, LLC (“Aviation”).

Theken Real Estate, LLC (“Real Estate”) was formed to hold and lease real estate to the various companies which comprise the consolidated group.

Theken Aviation, LLC (“Aviation”) was formed to hold an aircraft and associated debt used on behalf of the various affiliated companies.

Principles of consolidation

The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The consolidated statements include the statements of the Company and its affiliates required to be consolidated under Financial Accounting Standards Board (FASB) Interpretation No. 46(R) — “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (FIN 46(R)). The above affiliates are related to Spine as a result of common ownership. Each of the above entities provides services to Spine as their main source of revenue, or are financially supported by Spine in the form of intercompany loans or debt guarantees. As such, Spine is the primary beneficiary of each of the above entities under FIN No. 46(R) and therefore consolidates the results of their operations in the consolidated financial statements.

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

The initial consolidation under FIN No. 46(R) for Disc was January 1, 2007 and included $929,529 of assets and $219,350 of liabilities. Disc did not generate any revenues and beginning in 2007, Disc became financially supported by Spine through intercompany loans in order to fund ongoing operations.

All intercompany transactions between the companies have been eliminated in consolidation.

Noncontrolling interests

The Company eliminates 100% of the net income of the variable interest entities or affiliates to noncontrolling interests since the Company does not have any equity ownership of these entities. This is reflected as “Noncontrolling interests net income” in the consolidated statement of income. The noncontrolling interests amounts reflected in the balance sheet represent 100% of the equity of the noncontrolling interests.

Use of estimates

In the opinion of management of the Company, the March 31, 2008 and 2007 unaudited consolidated financial statements contain all adjustments necessary for a fair statement of the financial position, results of operations and cash flows of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with the instructions to Rule 10-1 of Regulation S-X. These unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2007. The December 31, 2007 consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States. Operating results for the three-month period ended March 31, 2008 is not necessarily indicative of the results to be expected for the entire year.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the current circumstances. Actual results could differ from these estimates.

Recently issued accounting pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 — Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements in accordance with FASB Statement 109, Accounting for Income Taxes. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. The Company will adopt the provisions of FIN 48 for all tax positions during 2008.

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — Summary of significant accounting policies, continued

Recently issued accounting pronouncements, continued

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for financial assets and liabilities for fiscal years beginning after November 15, 2007 and effective for non-financial assets fiscal years beginning after November 15, 2008.

In February, 2007, the FASB issued Statement of Financial Accounting Standard No. 159, The Option to Measure Financial Assets and Liabilities at Fair Value (“SFAS 159”). SFAS 159 gives companies an option to measure many of their financial assets and liabilities and certain other assets and liabilities (e.g., certain nonfinancial insurance contracts and warranties) at fair value on an instrument-by-instrument basis. FAS 159 is effective at the beginning of a company’s first fiscal year after November 15, 2007.

The adoption of SFAS 157 for financial assets and liabilities and SFAS 159 did not have an impact on the Company’s financial statements and the adoption of the other above standards is not expected to have a material effect on the Company’s financial statements.

NOTE B — Inventories, net

Inventories consisted of the following at:

		March 31,				December 31,
		2008				2007
Raw materials		$	192,590			$	168,590
Work-in-process			147,183				274,632
Finished goods			7,642,306				6,930,236
			7,982,079				7,373,458
Less: reserves for excess and slow-moving inventories			(2,161,081	)			(2,072,073	)
Total inventories, net		$	5,820,998			$	5,301,385

Recorded inventory cost would have been $193,075 and $113,896 higher as of March 31, 2008 and December 31, 2007, respectively, had the Company used the first-in, first-out (FIFO) method to determine inventory cost rather than the last-in, first-out (LIFO) method.

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C — Intangible assets, net

Intangible assets consisted of the following at:

		March 31,				December 31,
		2008				2007
Patent license agreements		$	250,000			$	250,000
Product rights agreement			225,000				225,000
			475,000				475,000
Less: accumulated amortization			(166,250	)			(151,667	)
Total intangible assets, net		$	308,750			$	323,333

Intangible assets are amortized on a straight-line basis over the respective lives of the assets which range from 15 years for the patent license agreements to 5 years for the product rights agreement.

Amortization expense was $14,583 for the periods ended March 31, 2008 and 2007.

NOTE D — Line of credit

On September 22, 2003, the Company entered into a $5,000,000 demand line of credit with National City Bank. The line of credit is secured with a blanket lien on accounts receivable, inventory and equipment. Interest on the line is computed using the one month LIBOR rate plus 2.00% (LIBOR was 2.807% at March 31, 2008). The amount outstanding on this line of credit was $3,967,600 and $3,666,600 at March 31, 2008 and December 31, 2007, respectively.

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E — Long-term debt

Long-term debt consisted of the following at:

		March 31,				December 31,
		2008				2007
Note payable — Cessna Finance Corporation, payable in monthly installments of $43,300 including interest at LIBOR plus 2.23% (LIBOR was 5.017% at December 31, 2007); due November 1, 2012; collateralized by a Raytheon Beechcraft Premier 1A aircraft, inventory and accounts receivable of Theken Spine, LLC, and a personal guarantee by the managing member.		$	4,620,510			$	4,672,866
Note payable — First Merit Bank, payable in monthly installments of $6,660 including interest at 6.5%; due December 31, 2015; collateralized by real estate owned by Theken Real Estate, LLC located at 20 N. Pennsylvania Avenue in Morrisville, PA, and a personal guarantee by the managing member.		$	693,763			$	702,807
Note payable — First Merit Bank, payable in monthly installments of $5,924 including interest at 5.96%; due September 5, 2014; collateralized by real estate owned by Theken Real Estate, LLC that is located at 1800 Triplett Blvd. in Akron, OH, and a personal guarantee by the managing member.			11,848				630,614
Obligation under capital lease			52,024				61,205
			5,378,145				6,067,492
Less: current portion			(313,648	)			(317,171	)
		$	5,064,497			$	5,750,321

Maturities of long-term debt for the 9 months remaining in 2008 and for the calendar years thereafter are as follows:

9 months remaining in 2008		$	223,969
2009			358,710
2010			352,109
2011			370,959
2012			390,832
2013			3,206,629
Thereafter			474,937
		$	5,378,145

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE F — Note payable — member

Note payable — member in the amount of $1,350,000 at March 31, 2008 and December 31, 2007, consists of a note to a member that is due on demand. The note bears interest monthly at a variable interest rate based upon the short-term Applicable Federal Rate. The rates at March 31, 2008 and December 31, 2007 were 2.25% and 3.88%, respectively. The note is secured by the underlying assets of Theken Spine, LLC.

Pursuant to the terms of the unit purchase agreement as discussed in Note I, the note payable to a member has since been fully repaid.

NOTE G — Commitments and contingencies

Royalty agreement

The Company has several agreements to pay royalties based on the sales of certain specified product lines. The agreements expire at various dates through July 2009 and require royalty payments that range from 3% to 30% of the sales of that particular product line. Royalty expense relating to these agreements was $191,326 and $161,939 for the periods ended March 31, 2008 and 2007, respectively.

Distributor commissions

The Company has entered into various contracts with distributors that assign exclusive territorial rights to market the Company’s product. Distributor commissions are based on sales levels and product lines. Distributor commission expense for the periods ended March 31, 2008 and 2007 was $2,964,226 and $2,597,222, respectively.

Litigation

The Company is involved in various litigation arising in the ordinary course of business. While it is not feasible to predict the outcomes of these actions, in the opinion of the Company’s management and legal counsel, those matters are expected to be resolved without material adverse effect on the financial position or results of operations of the Company.

NOTE H — Variable interest entities

FASB Interpretation (“FIN”) No. 46, as revised in December 2003, Consolidation of Variable Interest Entities, (an interpretation of Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements), (“FIN 46(R)”), addresses consolidation by business enterprises of entities to which the usual condition of consolidation described in ARB No. 51 does not apply. The general requirement to consolidate under ARB No. 51 is based on the presumption that an enterprise’s financial statements should include all of the entities in which it has a controlling financial interest. FIN 46(R) interprets this general rule to require consolidation of a variable interest entity in which the enterprise does not have a majority voting interest but, nevertheless, is subject to a majority of the risk of loss, is entitled to a majority of the entity’s residual returns, or both. Effective January 1, 2007, meeting the requirements of FIN 46(R), Spine was the primary beneficiary of Disc, Therics, Orthopaedic, Real Estate, and Foxtrot and its wholly-owned subsidiary, Aviation.

THEKEN SPINE, LLC

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H — Variable interest entities, continued

Selected financial information for these entities as of March 31, 2008 and for the three months ended March 31, 2008 and 2007 is as follows:

		2008				2007
Total assets		$	10,930,708				*
Total liabilities		$	10,580,230				*
Members’ equity		$	350,478				*
Net sales		$	898,941			$	738,905
Net loss		$	(32,906	)		$	(156,493	)

* Not required to be presented in these financial statements.

Noncontrolling interests net (income) loss for the three months ended March 31, 2008 and 2007 is comprised of the following:

		2008				2007
Variable interest entities combined net loss		$	32,906			$	156,493
Elimination of interest expense in consolidation			(2,075	)			—
Amounts absorbed by Spine (the primary beneficiary) for purposes of the financial statement presentation:
Change in members’ deficit of Therics			(255,979	)			(142,422	)
Change in members’ deficit of Disc			(202,804	)			—
		$	(427,952	)		$	14,071

NOTE I — Subsequent event

On August 1, 2008, pursuant to the terms of a unit purchase agreement, substantially all of the membership interests and operations of Spine, Disc and Therics were acquired by Integra Spine, Inc., a wholly-owned subsidiary of Integra LifeSciences Holdings Corporation. The members of Spine, Disc and Therics received $75,000,000 in connection with the acquisition and up to $125,000,000 in earn-out payments to the members and the former appreciation rights holders of Spine, Disc and Therics during a two-year period following the acquisition. Effective August 1, 2008, all intercompany balances between the Companies were settled.

The Company had four Appreciation Rights Plans, for which compensation is triggered upon the occurrence of a major event, as defined by each plan. The acquisition of Spine, Disc and Therics by Integra Spine, Inc. met the definition of a major event, and as such, $10,053,399 was recognized as an expense immediately prior to the acquisition in 2008.

ITEM 9.01 (b) UNAUDITED PRO FORMA FINANCIAL INFORMATION

On August 1, 2008, Integra LifeSciences Holdings Corporation (the “Company”), through its wholly-owned subsidiary Integra Spine, Inc., completed the acquisition of all of the membership interests of Theken Spine, LLC, Theken Disc, LLC and Therics, LLC, collectively “Theken Companies”. These Theken Companies are included in the Theken Spine, LLC consolidated financial statements (“Theken Consolidated”), along with other entities that have not been acquired by the Company. The total purchase price of the Theken Companies was $77.3 million and included $2.3 million of transaction related costs. The acquisitions of Theken Spine, LLC and Therics, LLC are accounted for under Statement of Financial Accounting Standards No. 141, “Business Combinations,” (“SFAS No. 141”). The acquisition of Theken Disc, LLC is accounted for as a purchase of assets acquired in a transaction other than a business combination because the acquired assets did not constitute a business under SFAS No. 141. In addition, under the Theken Spine Unit Purchase Agreement, the Company has agreed to pay up to $125 million in earn-out payments to the members and former appreciation rights holders of Theken Spine in accordance with a formula based on the net sales of the Theken Companies during a two-year period following the closing.

The Theken Companies specialize in pioneering spinal implant technologies that seek to improve spinal surgical techniques, thereby benefitting patients as well as surgeons. Theken Spine, LLC provides comprehensive product lines that offer surgeons peace of mind through steadfast product reliability and easy-to-use instrumentation. Products include cervical plates, pedicle screws, spacers, degenerative/deformity, trauma devices, and synthetic bone substitute products. Therics, LLC designs, develops and manufactures a variety of synthetic bone substitute products. Theken Disc, LLC is a development stage company focused on next generation artificial disc replacement technology.

The Company’s management believes the acquisition is a strategic fit with the Company’s other products to position the combined company to expand its reach into the spine market and offer a more comprehensive neuro-ortho product portfolio. The combined company will provide some of the most advanced technology addressing surgeons’ needs. By leveraging the combined company’s resources, technologies and management expertise, the Company expects to drive enhanced revenue growth and value creation. These initiatives are expected to enhance revenue growth and earnings per share over the long term.

The unaudited pro forma condensed combined balance sheet as of March 31, 2008 was prepared by combining the historical balance sheet of the Company at March 31, 2008 with the historical balance sheet of Theken Consolidated at March 31, 2008, giving effect to the acquisition as though it was completed on March 31, 2008.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2007 and the three months ended March 31, 2008 were prepared by combining the Company’s historical statements of operations for the year ended December 31, 2007 and the three months ended March 31, 2008 with Theken Consolidated’s historical statements of operations for the year ended December 31, 2007 and the three months ended March 31, 2008, respectively, giving effect to the acquisition as though it was completed on January 1, 2007. These unaudited pro forma condensed combined statements of operations do not give effect to any potential cost savings or other operating efficiencies that could result from the acquisition, nor any non-recurring expenses resulting from the transaction.

These pro forma condensed combined financial statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable. These pro forma condensed combined financial statements do not purport to represent what the consolidated results of operations or financial position of the Company would actually have been if the acquisition had occurred on the dates referred to above, nor do they purport to project the results of operations or financial position of the Company for any future period or as of any date.

Integra LifeSciences Holdings Corporation
Pro Forma Condensed Combined Balance Sheet
March 31, 2008

						Theken
		Integra				Consolidated				Adjustments				Note				Pro Forma
Assets:
Cash and cash equivalents		$	199,013			$	179			$	(162	)			(B	)		$	199,030
Accounts receivable, net			106,880				5,383				(104	)			(B	)			112,159
Inventories, net			144,037				5,821				6,251				(D	)			156,302
											193				(L	)
Deferred tax assets			25,075				—												25,075
Prepaids and other current assets			14,318				269				(42	)			(B	)			14,545
Current Assets			489,323				11,652				6,136								507,111
Property & equipment, net			63,344				14,302				(7,735	)			(B	)			70,698
											787				(E	)
Intangible assets, net			192,086				309				27,320				(F	)			219,406
											(309	)			(G	)
Goodwill			214,423				—				7,093				(H	)			221,516
Other assets			13,480				6				(1	)			(B	)			13,485
Total Assets		$	972,656			$	26,269			$	33,291							$	1,032,216
Liabilities:
Borrowings under senior credit facility		$	120,000			$	3,968			$	77,318				(A	)		$	197,318
											(3,968	)			(C	)
Current portion of long-term debt			119,380				314				(277	)			(B	)			119,390
											(27	)			(C	)
Accounts payable, trade			26,365				3,463				571				(B	)			30,399
Deferred revenue			3,205				—												3,205
Accrued expenses and other current liabilities			48,163				3,440				(2	)			(B	)			51,601
Current Liabilities			317,113				11,185				73,615								401,913
Long term debt			330,000				5,065				(5,050	)			(B	)			330,000
											(15	)			(C	)
Deferred tax liabilities			16,608				—												16,608
Other non-current liabilities			20,057				—												20,057
Total Liabilities			683,778				16,250				68,550								768,578
Noncontrolling interest			—				3,195				(3,195	)			(J	)			—
Stockholders’ Equity:
Common stock and paid-in capital, net of treasury stock			149,954				6,824				(3,286	)			(B	)			149,954
											(3,538	)			(J	)
Accumulated other comprehensive income (loss)			29,184				—												29,184
Retained earnings			109,740				—				(25,240	)			(I	)			84,500
Total Stockholders’ equity			288,878				6,824				(32,064	)							263,638
Total Liabilities and Stockholders’ equity		$	972,656			$	26,269			$	33,291							$	1,032,216

Integra LifeSciences Holdings Corporation
Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 2007

						Theken
		Integra				Consolidated				Adjustments				Note				Pro Forma
Total revenue		$	550,459			$	33,778			$	—							$	584,237
Costs and expenses:
Cost of product revenues			214,674				3,514				(89	)			(B	)			219,284
											1,225				(F	)
											(40	)			(L	)
Research and development			30,658				3,097				600				(K	)			34,355
Sales, general and administrative			225,187				22,655				(1,145	)			(B	)			247,431
											734				(K	)
Amortization			12,652				58				1,731				(F	)			14,383
											(58	)			(G	)
Total costs and expenses			483,171				29,324				2,958								515,453
Operating income			67,288				4,454				(2,958	)							68,784
Interest income			3,552				45				(45	)			(B	)			3,552
Interest (expense)			(13,749	)			(728	)			(2,677	)			(A	)			(16,439	)
											498				(B	)
											217				(C	)
Other income (expense), net			2,971				354				22				(B	)			3,347
			(7,226	)			(329	)			(1,985	)							(9,540	)
Minority interest			—				(758	)			758				(J	)			—
Income before taxes			60,062				3,367				(4,185	)							59,244
Income tax expense (benefit)			26,591				—				(1,695	)			(M	)			24,896
Net income		$	33,471			$	3,367			$	(2,490	)						$	34,348
Net income per share
Basic		$	1.21															$	1.24
Diluted		$	1.13															$	1.16
Weighted average shares outstanding
Basic			27,712																27,712
Diluted			29,578																29,578