**FORM 10-Q**

**United States**

**Securities and ExchangeCommission**

**Washington,D. C. 20549**
| **(Mark One**) |                                                   |       |
|----------------|--------------------------------------------------------|------------|
| **x**          | **Quarterly  Report Pursuant to Section 13 or 15(d)**  | ** ** |
|           | **of the  Securities Exchange Act of 1934**            | ** ** |
|           | ** **                                             | ** ** |
|           | **For the  quarterly period ended: November 30, 2006** | ** ** |
|           | ** **                                             | ** ** |
|           | **OR**                                                 | ** ** |
|           | ** **                                             | ** ** |
| **o**          | **Transition  Report Pursuant to Section 13 or 15(d)** | ** ** |
|           | **of the  Securities Exchange Act of 1934**            | ** ** |

 

**CommissionFile Number: 0-14820**

**IMMUCOR, INC.**

(Exact name ofregistrant as specified in its charter)

| **Georgia**                      | ** ** | **22-2408354**       |
|----------------------------------|------------|----------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer     |
| incorporation or  organization)  |       | Identification  No.) |

 

**3130Gateway Drive     P.O. Box 5625      Norcross,Georgia 30091-5625**(Address of principal executive offices)          (Zip Code)

Registrant’stelephone number:  **(770)441-2051**

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes  x         No  o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

Large accelerated filer x         Acceleratedfiler o         Non-accelerated filero

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes  o        No  x

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

# As of December 31, 2006: Common Stock, $0.10 Par Value– 68,827,913

 

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**IMMUCOR,INC. AND SUBSIDIARIES**

**FORM 10-Q**

**INDEX**
|              | ** ** | **PART  I.          FINANCIAL  INFORMATION**                                                             |       |       |
|--------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **   | ** ** | ** **                                                                                                                                                 |       |       |
| **Item 1.**  | ** ** | **Financial  Statements**                                                                                                                                  |       |       |
| ** **   | ** ** | ** **                                                                                                                                                 |       |       |
|         |       | Condensed Consolidated Balance Sheets as of November  30, 2006 (unaudited) and May 31, 2006                                                                |       |       |
|         |       |                                                                                                                                                       |       |       |
|         |       | Condensed Consolidated Statements of Income for the  three and six months ended November 30, 2006 and 2005 (unaudited)                                     |       |       |
|         |       |                                                                                                                                                       |       |       |
|         |       | Condensed Consolidated Statement of Shareholders’  Equity and Comprehensive Income for the period June 1, 2006 through November  30, 2006 (unaudited) |       |       |
|         |       |                                                                                                                                                       |       |       |
|         |       | Condensed Consolidated Statements of Cash Flows for  the six months ended November 30, 2006 and 2005 (unaudited)                                           |       |       |
|         |       |                                                                                                                                                       |       |       |
|         |       | Notes to  Condensed Consolidated Financial Statements (unaudited)                                                                                          |       |       |
|         |       |                                                                                                                                                       |       |       |
| **Item 2.**  | ** ** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**                                                            | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| **Item 3.**  | ** ** | **Quantitative  and Qualitative Disclosures about Market Risk**                                                                                            | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| **Item 4.**  | ** ** | **Controls and  Procedures**                                                                                                                               | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| ** **   | ** ** | **PART II.            OTHER  INFORMATION**                                                     |       |       |
| ** **   | ** ** | ** **                                                                                                                                                 |       |       |
| **Item 1.**  | ** ** | **Legal Proceedings**                                                                                                                                      | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| **Item 1A.** | ** ** | **Risk Factors**                                                                                                                                           | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| **Item 2.**  | ** ** | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                                                                           | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| **Item 4.**  | ** ** | **Submission of  Matters to a Vote of Security Holders**                                                                                                   | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| **Item  6.** | ** ** | **Exhibits**                                                                                                                                               | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
| ** **   | ** ** | ** **                                                                                                                                                 | ** ** | ** ** |
|         |       | SIGNATURES                                                                                                                                                 |       |       |

 

2

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** **

**PART I**

**FINANCIALINFORMATION**

**ITEM 1.Financial Statements.**

**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

(Amounts in thousands, except share data)
| ** **                                                                                                                                                                  | ** ** | **November 30, 2006** | ** ** | **May 31, 2006** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                                  | ** ** | **(unaudited)**                 | ** ** | ** **                 | ** ** |
| **ASSETS**                                                                                                                                                                  | ** ** | ** **                      | ** ** | ** **                 | ** ** |
|                                                                                                                                                                        |       |                            |       |                       |       |
| CURRENT ASSETS:                                                                                                                                                             |       |                            |       |                       |       |
| Cash and cash equivalents                                                                                                                                                   |       | $                               | 74,523     |                       | $          | 54,103 |   |
| Short-term investments                                                                                                                                                      |       | 674                             |       | 1,640                      |       |
| Trade accounts receivable, net of allowance for  doubtful accounts of $1,843 at                                                                                             |       |                            |       |                       |       |
| November 30, 2006 and $1,950 at May 31, 2006                                                                                                                                |       | 41,269                          |       | 37,199                     |       |
| Inventories                                                                                                                                                                 |       | 22,615                          |       | 20,651                     |       |
| Deferred income tax assets, current portion                                                                                                                                 |       | 2,564                           |       | 2,041                      |       |
| Prepaid expenses and other current assets                                                                                                                                   |       | 9,512                           |       | 5,158                      |       |
| Total current assets                                                                                                                                                        |       | 151,157                         |       | 120,792                    |       |
|                                                                                                                                                                        |       |                            |       |                       |       |
| PROPERTY AND  EQUIPMENT, Net                                                                                                                                                |       | 27,437                          |       | 25,684                     |       |
| GOODWILL                                                                                                                                                                    |       | 34,427                          |       | 34,691                     |       |
| OTHER INTANGIBLE  ASSETS, Net                                                                                                                                               |       | 6,128                           |       | 6,532                      |       |
| DEFERRED INCOME  TAX ASSETS                                                                                                                                                 |       | 4,527                           |       | 3,115                      |       |
| OTHER ASSETS                                                                                                                                                                |       | 802                             |       | 873                        |       |
| Total assets                                                                                                                                                                |       | $                               | 224,478    |                       | $          | 191,687 |   |
|                                                                                                                                                                        |       |                            |       |                       |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                              | ** ** | ** **                      | ** ** | ** **                 | ** ** |
| ** **                                                                                                                                                                  | ** ** | ** **                      | ** ** | ** **                 | ** ** |
| CURRENT  LIABILITIES:                                                                                                                                                       |       |                            |       |                       |       |
| Accounts payable                                                                                                                                                            |       | $                               | 6,307      |                       | $          | 7,271 |   |
| Accrued expenses and other current liabilities                                                                                                                              |       | 11,681                          |       | 9,470                      |       |
| Income taxes payable                                                                                                                                                        |       | 904                             |       | 5,519                      |       |
| Deferred revenue, current portion                                                                                                                                           |       | 5,552                           |       | 4,575                      |       |
| Current portion of long-term liabilities                                                                                                                                    |       | 810                             |       | 1,074                      |       |
| Total current liabilities                                                                                                                                                   |       | 25,254                          |       | 27,909                     |       |
|                                                                                                                                                                        |       |                            |       |                       |       |
| ACQUISITION  LIABILITY                                                                                                                                                      |       | 3,610                           |       | 3,980                      |       |
| DEFERRED REVENUE                                                                                                                                                            |       | 11,824                          |       | 11,500                     |       |
| DEFERRED INCOME  TAX LIABILITIES                                                                                                                                            |       | 2,167                           |       | 2,232                      |       |
| OTHER LONG-TERM  LIABILITIES                                                                                                                                                |       | 2,189                           |       | 2,195                      |       |
| Total liabilities                                                                                                                                                           |       | 45,044                          |       | 47,816                     |       |
|                                                                                                                                                                        |       |                            |       |                       |       |
| Commitments and  contingencies (Note 9)                                                                                                                                     |       |                            |       |                       |       |
| SHAREHOLDERS’  EQUITY:                                                                                                                                                 |       |                            |       |                       |       |
|                                                                                                                                                                        |       |                            |       |                       |       |
| Common stock, $0.10 par value; authorized  120,000,000 shares, issued and outstanding 68,816,405 and 67,926,206 shares  at November 30, 2006 and May 31, 2006, respectively |       | 6,882                           |       | 6,793                      |       |
| Additional paid-in capital                                                                                                                                                  |       | 23,318                          |       | 14,752                     |       |
| Retained earnings                                                                                                                                                           |       | 146,535                         |       | 119,700                    |       |
| Accumulated other comprehensive income                                                                                                                                      |       | 2,699                           |       | 2,626                      |       |
| Total shareholders’ equity                                                                                                                                             |       | 179,434                         |       | 143,871                    |       |
| Total  liabilities and shareholders’ equity                                                                                                                            |       | $                               | 224,478    |                       | $          | 191,687 |   |

 

The accompanying notesare an integral part of these Condensed Consolidated Financial Statements.

3

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** **

**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF INCOME**

(Amounts in thousands,except per share data)

(Unaudited)
| ** **                            | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|---------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                            | ** ** | **November 30,**            | ** ** | **November 30,**          | ** ** | **November 30,** | ** ** | **November 30,** | ** ** |
| ** **                            | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                  |       |                             |       |                           |       |   |   |   |   |
| NET SALES                             |       | $                                | 54,426     |                           | $          | 44,025 |   | $ | 105,466 |   | $ | 86,459 |   |
| COST OF SALES                         |       | 16,583                           |       | 15,484                         |       | 33,087 |   | 31,223 |   |
| GROSS PROFIT                          |       | 37,843                           |       | 28,541                         |       | 72,379 |   | 55,236 |   |
|                                  |       |                             |       |                           |       |   |   |   |   |
| OPERATING  EXPENSES                   |       |                             |       |                           |       |   |   |   |   |
| Research and development              |       | 1,808                            |       | 1,208                          |       | 3,034 |   | 2,463 |   |
| Selling and marketing                 |       | 6,755                            |       | 5,195                          |       | 12,314 |   | 10,410 |   |
| Distribution                          |       | 2,380                            |       | 1,931                          |       | 4,668 |   | 3,782 |   |
| General and administrative            |       | 5,291                            |       | 4,888                          |       | 10,513 |   | 10,710 |   |
| Restructuring expense                 |       | 182                              |       | 2,457                          |       | 569 |   | 2,457 |   |
| Amortization expense and other        |       | 86                               |       | 96                             |       | 173 |   | 167 |   |
| Total operating expenses              |       | 16,502                           |       | 15,775                         |       | 31,271 |   | 29,989 |   |
|                                  |       |                             |       |                           |       |   |   |   |   |
| INCOME FROM  OPERATIONS               |       | 21,341                           |       | 12,766                         |       | 41,108 |   | 25,247 |   |
|                                  |       |                             |       |                           |       |   |   |   |   |
| OTHER INCOME  (EXPENSE)               |       |                             |       |                           |       |   |   |   |   |
| Interest income                       |       | 645                              |       | 233                            |       | 1,163 |   | 416 |   |
| Interest expense                      |       | (111                             | )          | (183                           | )          | (229 | ) | (342 | ) |
| Other income (loss)                   |       | 154                              |       | (153                           | )          | 94 |   | (70 | ) |
| Total other income (expense), net     |       | 688                              |       | (103                           | )          | 1,028 |   | 4 |   |
|                                  |       |                             |       |                           |       |   |   |   |   |
| INCOME BEFORE  INCOME TAXES           |       | 22,029                           |       | 12,663                         |       | 42,136 |   | 25,251 |   |
| PROVISION FOR  INCOME TAXES           |       | 7,927                            |       | 4,608                          |       | 15,301 |   | 9,191 |   |
| NET INCOME                            |       | $                                | 14,102     |                           | $          | 8,055 |   | $ | 26,835 |   | $ | 16,060 |   |
|                                  |       |                             |       |                           |       |   |   |   |   |
| Earnings per  share:                  |       |                             |       |                           |       |   |   |   |   |
| Per common share - basic              |       | $                                | 0.21       |                           | $          | 0.12 |   | $ | 0.39 |   | $ | 0.24 |   |
| Per common share  - assuming dilution |       | $                                | 0.20       |                           | $          | 0.11 |   | $ | 0.38 |   | $ | 0.22 |   |

 

The accompanying notesare an integral part of these Condensed Consolidated Financial Statements.

4

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**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME**

(Unaudited, amounts in thousands)
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|------------|-------------------|------------|------------------------|------------|------------|------------|
| ** **                               | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **        | ** ** | **Other**              | ** ** | **Total**  | ** ** |
| ** **                               | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** | **Shareholders’** | ** ** |
| ** **                               | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Earnings**      | ** ** | **Income**             | ** ** | **Equity** | ** ** |
|                                     |       |                  |       |        |       |           |       |              |       |                   |       |       |       |
| BALANCE, MAY 31,  2006                   |       | 67,926                |       | $           | 6,793      |           | $          | 14,752            |       | $                      | 119,700    |       | $          | 2,626 |   | $ | 143,871 |   |
| Exercise of  stock options               |       | 1,172                 |       | 117         |       | 2,283          |       | —            |       | —                 |       | 2,400      |       |
| Expense  recognized on options awarded   |       | —                |       | —      |       | 1,652          |       | —            |       | —                 |       | 1,652      |       |
| Stock  repurchases and retirements       |       | (282                  | )          | (28         | )          | (4,844         | )          | —            |       | —                 |       | (4,872     | )          |
| Tax benefits  related to stock options   |       | —                |       | —      |       | 9,475          |       | —            |       | —                 |       | 9,475      |       |
| Comprehensive  income (net of taxes):    |       |                  |       |        |       |           |       |              |       |                   |       |       |       |
| Foreign currency translation adjustments |       | —                |       | —      |       | —         |       | —            |       | 73                     |       | 73         |       |
| Net income                               |       | —                |       | —      |       | —         |       | 26,835            |       | —                 |       | 26,835     |       |
| Total  comprehensive income              |       |                  |       |        |       |           |       |              |       |                   |       | 26,908     |       |
|                                     |       |                  |       |        |       |           |       |              |       |                   |       |       |       |
| BALANCE, NOVEMBER 30,  2006              |       | 68,816                |       | $           | 6,882      |           | $          | 23,318            |       | $                      | 146,535    |       | $          | 2,699 |   | $ | 179,434 |   |

 

Accumulated OtherComprehensive Income balance primarily consists of foreign currency translationadjustments and has no tax effect.

The accompanying notesare an integral part of these Condensed Consolidated Financial Statements.

5

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**IMMUCOR, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited, amounts in thousands)
| ** **                                                                          | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                          | ** ** | **November 30,**          | ** ** | **November 30,** | ** ** |
| ** **                                                                          | ** ** | **2006**                       | ** ** | **2005** | ** ** |
| OPERATING  ACTIVITIES:                                                              |       |                           |       |   |   |
| Net income                                                                          |       | $                              | 26,835     |   | $ | 16,060 |   |
|                                                                                |       |                           |       |   |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:  |       |                           |       |   |   |
| Depreciation and amortization                                                       |       | 3,211                          |       | 3,491 |   |
| Accretion of acquisition liabilities                                                |       | 90                             |       | 77 |   |
| Loss on retirement of fixed assets                                                  |       | 100                            |       | 132 |   |
| Impairment of long lived assets                                                     |       | —                         |       | 2,457 |   |
| Unrealized foreign exchange gain                                                    |       | —                         |       | (241 | ) |
| Provision for doubtful accounts                                                     |       | (53                            | )          | 145 |   |
| Compensation expense recognized for stock options                                   |       | 1,652                          |       | 80 |   |
| Changes in operating assets and liabilities, net of  effects from acquired company: |       |                           |       |   |   |
| Accounts receivable, trade                                                          |       | (3,635                         | )          | (3,169 | ) |
| Income taxes                                                                        |       | (1,263                         | )          | (102 | ) |
| Excess tax benefit from stock-based compensation                                    |       | (9,475                         | )          | — |   |
| Deferred income taxes                                                               |       | (1,913                         | )          | (186 | ) |
| Inventories                                                                         |       | (1,883                         | )          | 1,514 |   |
| Other current assets                                                                |       | 1,712                          |       | 614 |   |
| Other long-term assets                                                              |       | 46                             |       | 578 |   |
| Accounts payable                                                                    |       | (1,013                         | )          | 2,693 |   |
| Deferred revenue                                                                    |       | 1,361                          |       | 3,732 |   |
| Accrued expenses and other current liabilities                                      |       | 1,878                          |       | 32 |   |
| Other long-term liabilities                                                         |       | 123                            |       | 884 |   |
| Cash provided by  operating activities                                              |       | 17,773                         |       | 28,791 |   |
|                                                                                |       |                           |       |   |   |
| INVESTING  ACTIVITIES:                                                              |       |                           |       |   |   |
| Purchases of property and equipment                                                 |       | (4,729                         | )          | (4,402 | ) |
| Payment for net assets of acquired company                                          |       | —                         |       | (4,732 | ) |
| Proceeds from (purchase of) short-term investments, net                             |       | 988                            |       | (996 | ) |
| Cash used in  investing activities                                                  |       | (3,741                         | )          | (10,130 | ) |
|                                                                                |       |                           |       |   |   |
| FINANCING  ACTIVITIES:                                                              |       |                           |       |   |   |
| Repayments of long-term debt, liabilities and  capital leases                       |       | (478                           | )          | (7,478 | ) |
| Repurchase of common stock                                                          |       | (4,872                         | )          | (14,857 | ) |
| Proceeds from exercise of stock options                                             |       | 2,389                          |       | 130 |   |
| Excess tax benefit from stock-based compensation                                    |       | 9,475                          |       | — |   |
| Cash provided by  (used in) financing activities                                    |       | 6,514                          |       | (22,205 | ) |
|                                                                                |       |                           |       |   |   |
| EFFECT OF  EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                              |       | (126                           | )          | (140 | ) |
| INCREASE IN  (DECREASE IN) CASH AND CASH EQUIVALENTS                                |       | 20,420                         |       | (3,684 | ) |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                   |       | 54,103                         |       | 37,107 |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                         |       | $                              | 74,523     |   | $ | 33,423 |   |
|                                                                                |       |                           |       |   |   |
| SUPPLEMENTAL  INFORMATION:                                                          |       |                           |       |   |   |
| Tax paid                                                                            |       | $                              | 17,793     |   | $ | 9,851 |   |
| Interest paid                                                                       |       | 120                            |       | 196 |   |
| Non-cash investing and financing activities:                                        |       |                           |       |   |   |
| Acquisition  obligation                                                             |       | —                         |       | 5,123 |   |

 

The accompanyingnotes are an integral part of these Condensed Consolidated FinancialStatements.

6

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**IMMUCOR, INC. AND SUBSIDIARIES**

**Notes toCondensed Consolidated Financial Statements**

(Unaudited)

**1.****              NATURE OF BUSINESSAND BASIS OF PRESENTATION**

***Nature of Business***

Immucor, Inc. (“Immucor” and, together with its whollyowned subsidiaries, the “Company”) is in the business of developing,manufacturing and marketing immunological diagnostic medical products. TheCompany operates facilities in the United States, Canada, Europe and Japan. Theunaudited condensed consolidated financial statements include the accounts ofthe Company and all of its subsidiaries.

***Basis of Presentation***

The accompanying condensed consolidated financialstatements are unaudited and have been prepared in accordance with U.S.generally accepted accounting principles (“GAAP”) for interim financialinformation, and the Securities and Exchange Commission’s (“SEC”) instructionsfor Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by GAAP for complete financial statements. In the opinion ofmanagement, all adjustments, consisting of normal recurring adjustments, unlessotherwise disclosed in a separate note, considered necessary for a fairpresentation of the unaudited condensed consolidated financial statements havebeen recorded in the interim periods presented. These unaudited, condensedconsolidated financial statements should be read in conjunction with theCompany’s audited, consolidated financial statements and related notes for theyear ended May 31, 2006, included in the Company’s Annual Report on Form 10-K.

The accompanying condensed consolidated financialstatements present results of operations for the three months and six monthsended November 30, 2006. These results are not necessarily indicative of theresults that may be achieved for the year ending May 31, 2007, or any otherperiod.

Shares and per share amounts for the three-month andsix-month periods ended November 30, 2005 have been adjusted to reflect theimpact of a three-for-two stock split in May 2006.

***Basis of Consolidation***

The condensed consolidated financial statementsinclude the accounts of Immucor and all its subsidiaries. All significantinter-company balances and transactions have been eliminated in consolidation.

**2.****              INVENTORIES**

Inventories are stated at the lower of cost (first-in, first-out basis)or market (net realizable value):
|                             | ** ** | **November 30, 2006** | ** ** | **May 31, 2006** | ** ** |
|-----------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                  | ** ** | **(in thousands)**         | ** ** |
| Raw materials  and supplies |       | $                               | 3,993      |                       | $          | 4,341 |   |
| Work in process             |       | 3,266                           |       | 3,495                      |       |
| Finished goods              |       | 15,356                          |       | 12,815                     |       |
|                        |       | $                               | 22,615     |                       | $          | 20,651 |   |

 

7

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**3.****              PREPAIDEXPENSES AND OTHER CURRENT ASSETS**
|                                                 | ** ** | **November 30, 2006** | ** ** | **May 31, 2006** | ** ** |
|-------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                                      | ** ** | **(in thousands)**         | ** ** |
| Income taxes  receivable                        |       | $                               | 6,049      |                       | $          | 54 |   |
| Factored  receivables                           |       | 1,932                           |       | 1,992                      |       |
| Other current  assets                           |       | 1,531                           |       | 3,112                      |       |
| Prepaid expenses and  other current assets, net |       | $                               | 9,512      |                       | $          | 5,158 |   |

 

Income taxes receivable as of November 30, 2006includes approximately $6.0 million which represents a portion of anapproximate $9.1 million tax benefit that arose on the exercise of stockoptions in the second quarter of fiscal year 2007. The Company will utilizethis amount of $6.0 million in February 2007 when it makes its estimated taxpayment for the third quarter.

**4.****              STOCK-BASEDCOMPENSATION**

*Background*

In December 2004, the Financial Accounting StandardsBoard revised Statement of Financial Accounting Standards No. 123, “Accountingfor Stock-Based Compensation” (“SFAS 123R”), requiring companies to recordshare-based payments to employees as compensation expense at the grant datefair value. The Company adopted SFAS 123R in the fiscal year beginning June 1,2006, using the modified prospective transition method, which requires thatcompensation costs be recorded as earned for all unvested stock optionsoutstanding at the beginning of the first fiscal year of adoption of SFAS 123Rbased on the grant date fair value estimated in accordance with the originalprovisions of SFAS 123, and for compensation costs for all share-based paymentsgranted or modified subsequent to the adoption to be recorded, based on fairvalue estimated in accordance with the provisions of SFAS 123R. In accordancewith the modified prospective transition method, the Company has not restatedthe financial statements for prior periods and those statements do not includethe impact of SFAS 123R.

*Impact of adoption of SFAS 123R*

On adoption of SFAS 123R as of June 1, 2006, theunrecognized compensation expense associated with the remaining portion of theunvested outstanding awards was $4.5 million ($2.9 million, net of taxes). Thiscompensation expense is expected to be recognized through May 2010 on astraight-line basis over the weighted-average vesting period of approximately1.75 years.

Total share-based compensation expense included in theCondensed Consolidated Statements of Income for the three-month and six-monthperiods ended November 30, 2006 was $0.9 million ($0.7 million, net of taxes)and $1.7 million ($1.2 million, net of taxes), respectively. As a result ofadopting SFAS 123R on June 1, 2006, the Company’s financial results were lowerthan under the Company’s previous accounting method for share-basedcompensation by the following amounts:
|                                                  | ** ** | **Three Months**           | ** ** | **Six Months**             | ** ** |
|--------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **Ended**                       | ** ** | **Ended**                       | ** ** |
| ** **                                       | ** ** | **November 30, 2006** | ** ** | **November 30, 2006** | ** ** |
| ** **                                       | ** ** | **(in thousands)**         | ** ** |
| Income before  income taxes                      |       | $                               | 944        |                            | $          | 1,652 |   |
| Income after  income taxes                       |       | 661                             |       | 1,171                           |       |
| Basic and  diluted net earnings per common share |       | $                               | 0.01       |                            | $          | 0.02 |   |

 

Prior to adopting SFAS 123R, the Company presented alltax benefits resulting from the exercise of stock options as operating cashflows in the Condensed Consolidated Statement of Cash Flows. SFAS 123R requirescash flows resulting from excess tax benefits to be classified as a part ofcash flows from financing activities. Excess tax benefits are realized taxbenefits from tax deductions for exercised options in excess of the deferredtax asset attributable to stock compensation costs for such options. As aresult of adopting SFAS 123R, $9.5 million of excess tax benefits for the sixmonths ended November 30, 2006 have been classified as a financing

8

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cash inflow. Prior to the adoption of SFAS 123R, such tax benefits were nettedagainst income taxes payable and were disclosed in the working capital sectionof operating activities.

The following table shows total stock-basedcompensation expense for the three-month and six-month periods ended November30, 2006, included in the Condensed Consolidated Statements of Income:
|                                 | ** ** | **Three Months**           | ** ** | **Six Months**             | ** ** |
|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                      | ** ** | **Ended**                       | ** ** | **Ended**                       | ** ** |
| ** **                      | ** ** | **November 30, 2006** | ** ** | **November 30, 2006** | ** ** |
| ** **                      | ** ** | **(in thousands)**         | ** ** |
| Cost of sales                   |       | $                               | 119        |                            | $          | 237 |   |
| Research and  development       |       | 73                              |       | 144                             |       |
| Selling and  marketing          |       | 164                             |       | 303                             |       |
| Distribution                    |       | 30                              |       | 61                              |       |
| General and  administrative     |       | 558                             |       | 907                             |       |
| Total stock-based  compensation |       | $                               | 944        |                            | $          | 1,652 |   |

 

Had the Company adoptedthe fair value recognition provisions of SFAS Statement No. 123 “*Accounting for Stock-Based Compensation*”, as amended by SFASStatement No. 148 for the three-month and six-month periods ended November 30,2005, the effect on the Company’s net income and earnings per share would havebeen as follows (in thousands, except per share data):
|                                                             | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **November 30,**            | ** ** | **November 30,**          | ** ** |
| ** **                                                  | ** ** | **2005**                         | ** ** | **2005**                       | ** ** |
| Net income as  reported                                     |       | $                                | 8,055      |                           | $          | 16,060 |   |
| Stock based  employee compensation included in reported net |       |                             |       |                           |       |
| income, net of  taxes                                       |       | 29                               |       | 64                             |       |
| Stock based  employee compensation expense determined under |       |                             |       |                           |       |
| fair value based  methods for all awards, net of taxes      |       | (400                             | )          | (815                           | )          |
| Pro forma net income                                        |       | $                                | 7,684      |                           | $          | 15,309 |   |
|                                                        |       |                             |       |                           |       |
| Earnings per  share as reported:                            |       |                             |       |                           |       |
| Per common share - Basic                                    |       | $                                | 0.12       |                           | $          | 0.24 |   |
| Per common share - Diluted                                  |       | $                                | 0.11       |                           | $          | 0.22 |   |
|                                                        |       |                             |       |                           |       |
| Pro forma  earnings per share:                              |       |                             |       |                           |       |
| Per common share - Basic                                    |       | $                                | 0.11       |                           | $          | 0.22 |   |
| Per common share  - Diluted                                 |       | $                                | 0.11       |                           | $          | 0.21 |   |

 

*Valuation method used and assumptions*

The Company estimates the fair value of stock optionsusing a Black-Scholes valuation model, consistent with the provisions of SFAS123R, Securities and Exchange Commission Staff Accounting Bulletin 107 (“SAB107”) and the Company’s prior pro forma disclosures of net earnings, includingthe fair value of stock-based compensation.

Key input assumptions used to estimate the fair valueof stock options include the expected term until the exercise of the option,the expected volatility of the Company’s stock, risk-free rates of return,option forfeiture rates, and dividend yields, if any. The fair value of eachoption grant in the first and second quarter of fiscal year 2007 was estimatedon the date of grant using the Black-Scholes option-pricing model with thefollowing weighted-average assumptions:

9

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|                               | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                    | ** ** | **November 30,**            | ** ** | **November 30,**          | ** ** | **November 30,** | ** ** | **November 30,** | ** ** |
| ** **                    | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| Risk-free  interest rate (1)  |       |                             | 4.61       | %                              |       |   | 4.42 | % |   |   | 4.96 | % |   |   | 4.18 | % |   |
| Expected  volatility (2)      |       |                             | 46.82      | %                              |       |   | 68.13 | % |   |   | 47.81 | % |   |   | 68.20 | % |   |
| Expected life  (years) (3)    |       |                             | 4.25       |                           |       |   | 8.00 |   |   |   | 4.25 |   |   |   | 8.00 |   |   |
| Expected  forfeiture rate (4) |       |                             | 0.81       | %                              |       |   | n/a |   |   |   | 0.81 | % |   |   | n/a |   |   |
| Expected dividend yield  (5)  |       |                             | —     |                           |       |   | — |   |   |   | — |   |   |   | — |   |   |

 

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1.                                       Basedon the U.S. Treasury yield curve in effect at the time of grant.

2.                                       Expectedstock price volatility is based on the average historical volatility of the Company’sshares during the period corresponding to the expected life of the options.

3.                                       Representsthe period of time options are expected to remain outstanding. The weightedaverage expected option term was determined using the “simplified method” asallowed by SAB 107. The “simplified method” calculates the expected term as theaverage of the vesting term and original contractual term of the options.Beginning June 1, 2006, the contractual life of awards granted was reduced from10 years to 6 years which, besides the impact of adoption of the simplifiedmethod, accounted for the reduction in expected life in fiscal year 2007.

4.                                       Infiscal year 2007, the expected forfeiture rate is based upon historicalexperience. Before the adoption of SFAS 123R, the Company used actualforfeiture rates to calculate compensation expense as allowed by SFAS 123 forthe disclosure footnote required under SFAS 148. Management estimates that theimpact of this change, from the actual forfeiture rates to the estimated forfeiturerates as required under SFAS 123R, is not likely to be material as it isexpected that the Company will continue to experience low staff turnover.

5.                                       TheCompany has not paid dividends on its common stock and does not expect to paydividends on its common stock in the near future.

*Plan summary*

At an annual meeting ofthe Company’s shareholders held on December 13, 2005, the shareholders approvedestablishment of the Immucor, Inc. 2005 Long-Term Incentive Plan (the “2005Plan”). The 2005 Plan replaced the Company’s preexisting stock option planswhich have been frozen and remain in effect only to the extent of awardsoutstanding under these plans. Under the 2005 Plan, besides granting stockoptions, management is able to award stock appreciation rights, restrictedstock, deferred stock, and other performance-based awards as incentive andcompensation to employees. The maximum number of shares of the Company’s commonstock as to which awards may be granted under the 2005 Plan is 3,600,000. Themaximum number of shares that may be used for awards other than stock optionsis 1,800,000, and the maximum number of shares that may be used for grants ofincentive stock options is 1,800,000. Options are granted at the closing market price on the date of the grant.Option awards generally vest equally over a four-year period and have a 6-yearcontractual term. Restricted stock awards generally vest equally over afive-year period.  The 2005 Plan providesfor accelerated vesting of option and restricted stock awards if there is achange in control, as defined in the plan.

*Stock option activity*

During the three-monthperiod ended November 30, 2006, options to acquire 2,596 shares of common stockwere granted under the 2005 Plan. During the three-month period ended August31, 2006, options to acquire 166,280 shares of common stock were granted and127,105 shares of common stock were issued as restricted shares under the 2005Plan.  These options have a six year termwith vesting of 25% at the end of each of the first four years; the restrictedshares vest 20% at each anniversary of the issuance date. Compensation costsfor stock options with tiered vesting terms are recognized evenly over thevesting periods.

The following is asummary of the changes in outstanding options for the six months ended November30, 2006:

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|                                                          | ** ** | ** **         | ** ** | ** **              | ** ** | **Weighted**          | ** ** | ** **               | ** ** |
|----------------------------------------------------------|------------|--------------------|------------|-------------------------|------------|-----------------------|------------|--------------------------|------------|
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | **Average**           | ** ** | ** **               | ** ** |
| ** **                                               | ** ** | ** **         | ** ** | **Weighted**            | ** ** | **Remaining**         | ** ** | **Aggregate**            | ** ** |
| ** **                                               | ** ** | **Number of** | ** ** | **Average**             | ** ** | **Contractual**       | ** ** | **Intrinsic Value** | ** ** |
| ** **                                               | ** ** | **Shares**         | ** ** | **Exercise Price** | ** ** | **Life (years)** | ** ** | **(1)**                  | ** ** |
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | ** **            | ** ** | **(in thousands)**  | ** ** |
| Outstanding May  31, 2006                                |       | 4,892,957          |       | $                       | 4.14       |                  |       |                     |       |   |
| Granted                                                  |       | 166,280            |       | $                       | 17.56      |                  |       |                     |       |   |
| Exercised                                                |       | (69,459            | )          | $                       | 3.22       |                  |       |                     |       |   |
| Forfeited                                                |       | (8,045             | )          | $                       | 7.62       |                  |       |                     |       |   |
| Expired                                                  |       | (34,369            | )          | $                       | 11.37      |                  |       |                     |       |   |
| Outstanding at  August 31, 2006                          |       | 4,947,364          |       | $                       | 4.55       |                  | 5.2        |                     | $          | 80,294 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Granted                                                  |       | 2,596              |       | $                       | 22.50      |                  |       |                     |       |   |
| Exercised                                                |       | (1,102,709         | )          | $                       | 1.97       |                  |       |                     |       |   |
| Forfeited                                                |       | (228               | )          | $                       | 22.94      |                  |       |                     |       |   |
| Expired                                                  |       | (15,910            | )          | $                       | 6.87       |                  |       |                     |       |   |
| Outstanding at  November 30, 2006                        |       | 3,831,113          |       | $                       | 5.29       |                  | 5.4        |                     | $          | 82,773 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Exercisable at  November 30, 2006                        |       | 2,821,022          |       | $                       | 3.58       |                  | 4.8        |                     | $          | 65,796 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Shares available for  future grants at November 30, 2006 |       | 1,550,863          |       |                    |       |                  |       |                     |       |

 

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(1)          The aggregate intrinsicvalue in the above table represents the total pre-tax intrinsic value (thedifference between the Company’s closing stock price on the last trading day ofthe respective quarter of fiscal year 2007 and the exercise price, multipliedby the number of options.) The amount of aggregate intrinsic value will changebased on the fair market value of the Company’s stock.

(2)          The weighted-averagegrant-date fair value of share options granted during the first six months offiscal years 2007 and 2006 was $7.83 and $13.31, respectively.  The total intrinsic value of share optionsexercised during the first six months of fiscal years 2007 and 2006 was $27.8million and $3.6 million, respectively.

*Restricted stock activity*

The following is asummary of the changes in unvested restricted stock for the six months endedNovember 30, 2006:
|                                                          | ** ** | ** **                     | ** ** | **Weighted-Average**     | ** ** |
|----------------------------------------------------------|------------|--------------------------------|------------|--------------------------|------------|
| ** **                                               | ** ** | ** **                     | ** ** | **Grant-Date Fair** | ** ** |
| ** **                                               | ** ** | **Number of Shares** | ** ** | **Value**                | ** ** |
| Nonvested stock  outstanding at May 31, 2006             |       | —                         |       | $                        | —     |   |
| Granted                                                  |       | 127,105                        |       | 17.51                    |       |
| Exercised                                                |       | —                         |       | —                   |       |
| Forfeited                                                |       | (1,135                         | )          | 17.51                    |       |
| Expired                                                  |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at August 31, 2006          |       | 125,970                        |       | $                        | 17.51      |   |
|                                                     |       |                           |       |                     |       |
| Granted                                                  |       | —                         |       | —                   |       |
| Exercised                                                |       | —                         |       | —                   |       |
| Forfeited                                                |       | (865                           | )          | 17.51                    |       |
| Expired                                                  |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at November 30, 2006        |       | 125,105                        |       | $                        | 17.51      |   |
|                                                     |       |                           |       |                     |       |
| Shares available for  future grants at November 30, 2006 |       | 1,674,895                      |       |                     |       |

 

As of November 30, 2006, there was $6.1 million of total unrecognizedcompensation cost related to non-vested share-based compensation arrangements.This compensation cost is expected to be recognized through June 6, 2011 basedon existing vesting terms with the weighted average remaining expenserecognition period being approximately two years from November 30, 2006.

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**5.****              EARNINGSPER SHARE**

The following table sets forth the computation ofbasic and diluted earnings per share in accordance with SFAS No. 128, *Earnings per Share*.

Basic earnings per common share are calculated bydividing net income by weighted-average common shares outstanding during theperiod. Diluted earnings per common share are calculated by dividing net incomeby weighted-average common shares outstanding during the period plus dilutivepotential common shares, which are determined as follows (in thousands, exceptper share data):
|                                                                                     | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                          | ** ** | **November 30,  2006**      | ** ** | **November 30,  2005**    | ** ** | **November 30,  2006** | ** ** | **November 30,  2005** | ** ** |
| Numerator for  basic and diluted earnings per share:                                |       |                             |       |                           |       |   |   |   |   |
| Net Income                                                                          |       | $                                | 14,102     |                           | $          | 8,055 |   | $ | 26,835 |   | $ | 16,060 |   |
|                                                                                |       |                             |       |                           |       |   |   |   |   |
| Denominator:                                                                        |       |                             |       |                           |       |   |   |   |   |
| For basic earnings per share  - weighted average shares basis                       |       | 68,245                           |       | 68,282                         |       | 67,971 |   | 68,297 |   |
| Effect of dilutive stock options                                                    |       | 2,301                            |       | 3,192                          |       | 2,388 |   | 3,271 |   |
| Denominator for diluted earnings per share  -adjusted weighted average shares basis |       | 70,546                           |       | 71,474                         |       | 70,359 |   | 71,568 |   |
|                                                                                |       |                             |       |                           |       |   |   |   |   |
| Earnings per  common share – basic                                             |       | $                                | 0.21       |                           | $          | 0.12 |   | $ | 0.39 |   | $ | 0.24 |   |
| Earnings per common  share – diluted                                           |       | $                                | 0.20       |                           | $          | 0.11 |   | $ | 0.38 |   | $ | 0.22 |   |

 

**6.****              SEGMENT ANDGEOGRAPHIC INFORMATION**

The Company’s operations and segments are organizedaround geographic areas. Immucor’s “Other” segment includes the operations ofBelgium, Portugal and Spain. The foreign locations principally function asdistributors of products developed and manufactured by the Company in theUnited States and Canada. The accounting policies applied in the preparation ofthe Company’s consolidated financial statements are applied consistently acrossthe segments. Intersegment sales are recorded at market price and areeliminated in consolidation.

##### Segment information for the three-month andsix-month periods ended November 30, 2006 and 2005 is summarized below (inthousands).

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#####  

| ** **                     | ** ** | **For the Three Months Ended November 30, 2006** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues:         |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | $                                                                                   | 35,153     |   | $ | 2,638 |   | $ | 3,595 |   | $ | 2,659 |   | $ | 2,043 |   | $ | 2,307 |   | $ | — |   | $ | 48,395 |   |
| Affiliates                     |       | 2,896                                                                               |       | 734 |   | — |   | 57 |   | — |   | 91 |   | (3,778 | ) | — |   |
| Total                          |       | 38,049                                                                              |       | 3,372 |   | 3,595 |   | 2,716 |   | 2,043 |   | 2,398 |   | (3,778 | ) | 48,395 |   |
| Net instrument  revenues:      |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | 2,608                                                                               |       | 1,132 |   | 304 |   | 149 |   | 3 |   | 686 |   | — |   | 4,882 |   |
| Affiliates                     |       | 248                                                                                 |       | 1,054 |   | — |   | — |   | — |   | — |   | (1,302 | ) | — |   |
| Total                          |       | 2,856                                                                               |       | 2,186 |   | 304 |   | 149 |   | 3 |   | 686 |   | (1,302 | ) | 4,882 |   |
| Net collagen  revenues:        |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | 1,149                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,149 |   |
| Affiliates                     |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | - |   |
| Total                          |       | 1,149                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,149 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                      |       | 42,054                                                                              |       | 5,558 |   | 3,899 |   | 2,865 |   | 2,046 |   | 3,084 |   | (5,080 | ) | 54,426 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations |       | 18,778                                                                              |       | (53 | ) | 896 |   | 1,405 |   | 163 |   | 231 |   | (79 | ) | 21,341 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                   |       | 783                                                                                 |       | 160 |   | 341 |   | 48 |   | 39 |   | 198 |   | — |   | 1,569 |   |
| Amortization                   |       | 71                                                                                  |       | — |   | — |   | — |   | 16 |   | 2 |   | — |   | 89 |   |
| Restructuring  expenses        |       | 182                                                                                 |       | — |   | — |   | — |   | — |   | — |   | — |   | 182 |   |
| Income tax  (benefit) expense  |       | 6,997                                                                               |       | (95 | ) | 498 |   | 536 |   | — |   | 20 |   | (29 | ) | 7,927 |   |
| Capital expenditures           |       | 2,346                                                                               |       | 228 |   | 145 |   | 20 |   | 8 |   | 202 |   | — |   | 2,949 |   |
|                                |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                     | ** ** | **For the Three Months Ended November 30, 2005** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues:         |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | $                                                                                   | 28,118     |   | $ | 2,620 |   | $ | 2,934 |   | $ | 2,215 |   | $ | 1,945 |   | $ | 2,129 |   | $ | — |   | $ | 39,961 |   |
| Affiliates                     |       | 2,739                                                                               |       | 464 |   | — |   | 40 |   | — |   | 49 |   | (3,292 | ) | — |   |
| Total                          |       | 30,857                                                                              |       | 3,084 |   | 2,934 |   | 2,255 |   | 1,945 |   | 2,178 |   | (3,292 | ) | 39,961 |   |
| Net instrument  revenues:      |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | 1,642                                                                               |       | 368 |   | 357 |   | 234 |   | 2 |   | 358 |   | — |   | 2,961 |   |
| Affiliates                     |       | 48                                                                                  |       | 530 |   | 1 |   | — |   | — |   | — |   | (579 | ) | - |   |
| Total                          |       | 1,690                                                                               |       | 898 |   | 358 |   | 234 |   | 2 |   | 358 |   | (579 | ) | 2,961 |   |
| Net collagen  revenues:        |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | 1,103                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,103 |   |
| Affiliates                     |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | - |   |
| Total                          |       | 1,103                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,103 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                      |       | 33,650                                                                              |       | 3,982 |   | 3,292 |   | 2,489 |   | 1,947 |   | 2,536 |   | (3,871 | ) | 44,025 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations |       | 11,563                                                                              |       | (14 | ) | 294 |   | 1,096 |   | (121 | ) | 230 |   | (282 | ) | 12,766 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                   |       | 778                                                                                 |       | 197 |   | 377 |   | 58 |   | 25 |   | 88 |   | — |   | 1,523 |   |
| Amortization                   |       | 140                                                                                 |       | — |   | — |   | — |   | 28 |   | 2 |   | — |   | 170 |   |
| Restructuring  expenses        |       | 2,457                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,457 |   |
| Income tax  (benefit) expense  |       | 4,103                                                                               |       | 3 |   | 213 |   | 414 |   | (42 | ) | 21 |   | (104 | ) | 4,608 |   |
| Capital  expenditures          |       | 1,333                                                                               |       | 216 |   | 173 |   | 64 |   | — |   | — |   | — |   | 1,786 |   |
|                                |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

13

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| ** **                      | ** ** | **For the Six Months Ended November 30, 2006** | ** ** |
|---------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S.**                                                                          | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues:          |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers          |       | $                                                                                 | 68,901     |   | $ | 5,363 |   | $ | 6,864 |   | $ | 5,306 |   | $ | 4,073 |   | $ | 4,582 |   | $ | — |   | $ | 95,089 |   |
| Affiliates                      |       | 5,697                                                                             |       | 1,187 |   | — |   | 115 |   | — |   | 133 |   | (7,132 | ) | — |   |
| Total                           |       | 74,598                                                                            |       | 6,550 |   | 6,864 |   | 5,421 |   | 4,073 |   | 4,715 |   | (7,132 | ) | 95,089 |   |
| Net instrument  revenues:       |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers          |       | 4,827                                                                             |       | 1,563 |   | 585 |   | 254 |   | 5 |   | 918 |   | — |   | 8,152 |   |
| Affiliates                      |       | 438                                                                               |       | 1,876 |   | — |   | — |   | — |   | — |   | (2,314 | ) | — |   |
| Total                           |       | 5,265                                                                             |       | 3,439 |   | 585 |   | 254 |   | 5 |   | 918 |   | (2,314 | ) | 8,152 |   |
| Net collagen  revenues:         |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers          |       | 2,225                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,225 |   |
| Affiliates                      |       | —                                                                            |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                           |       | 2,225                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,225 |   |
|                            |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                       |       | 82,088                                                                            |       | 9,989 |   | 7,449 |   | 5,675 |   | 4,078 |   | 5,633 |   | (9,446 | ) | 105,466 |   |
|                            |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations  |       | 36,929                                                                            |       | (338 | ) | 1,533 |   | 2,611 |   | 52 |   | 638 |   | (317 | ) | 41,108 |   |
|                            |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                    |       | 1,483                                                                             |       | 327 |   | 667 |   | 95 |   | 78 |   | 384 |   | — |   | 3,034 |   |
| Amortization                    |       | 141                                                                               |       | — |   | — |   | — |   | 32 |   | 4 |   | — |   | 177 |   |
| Restructuring  expenses         |       | 569                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 569 |   |
| Income tax  (benefit) expense   |       | 13,610                                                                            |       | (95 | ) | 838 |   | 1,030 |   | — |   | 35 |   | (117 | ) | 15,301 |   |
| Capital  expenditures           |       | 3,633                                                                             |       | 274 |   | 404 |   | 35 |   | 20 |   | 363 |   | — |   | 4,729 |   |
| Property &  equipment - net |       | 18,207                                                                            |       | 2,447 |   | 2,904 |   | 1,239 |   | 529 |   | 2,111 |   | — |   | 27,437 |   |
| Total assets at period  end     |       | 196,081                                                                           |       | 12,911 |   | 20,715 |   | 15,479 |   | 13,020 |   | 10,402 |   | (44,130 | ) | 224,478 |   |
|                                 |            |                                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                     | ** ** | **For the Six Months Ended November 30, 2005** | ** ** |
|--------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                                                          | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan (1)** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues:         |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | $                                                                                 | 55,902     |   | $ | 5,322 |   | $ | 5,892 |   | $ | 4,498 |   | $ | 3,387 |   | $ | 4,203 |   | $ | — |   | $ | 79,204 |   |
| Affiliates                     |       | 4,936                                                                             |       | 949 |   | — |   | 126 |   | — |   | 93 |   | (6,104 | ) | — |   |
| Total                          |       | 60,838                                                                            |       | 6,271 |   | 5,892 |   | 4,624 |   | 3,387 |   | 4,296 |   | (6,104 | ) | 79,204 |   |
| Net instrument  revenues:      |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | 2,954                                                                             |       | 842 |   | 599 |   | 176 |   | 3 |   | 512 |   | - |   | 5,086 |   |
| Affiliates                     |       | 74                                                                                |       | 1,253 |   | 1 |   | — |   | — |   | — |   | (1,328 | ) | — |   |
| Total                          |       | 3,028                                                                             |       | 2,095 |   | 600 |   | 176 |   | 3 |   | 512 |   | (1,328 | ) | 5,086 |   |
| Net collagen  revenues:        |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated customers         |       | 2,169                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,169 |   |
| Affiliates                     |       | —                                                                            |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                          |       | 2,169                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,169 |   |
|                           |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                      |       | 66,035                                                                            |       | 8,366 |   | 6,492 |   | 4,800 |   | 3,390 |   | 4,808 |   | (7,432 | ) | 86,459 |   |
|                           |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from operations |       | 22,616                                                                            |       | 115 |   | 443 |   | 2,027 |   | (34 | ) | 401 |   | (321 | ) | 25,247 |   |
|                           |       |                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                   |       | 1,533                                                                             |       | 405 |   | 856 |   | 120 |   | 28 |   | 296 |   | — |   | 3,238 |   |
| Amortization                   |       | 223                                                                               |       | — |   | — |   | — |   | 28 |   | 2 |   | — |   | 253 |   |
| Restructuring  expenses        |       | 2,457                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,457 |   |
| Income tax  (benefit) expense  |       | 8,086                                                                             |       | 51 |   | 341 |   | 777 |   | — |   | 54 |   | (118 | ) | 9,191 |   |
| Capital  expenditures          |       | 3,489                                                                             |       | 435 |   | 327 |   | 149 |   | 2 |   | — |   | — |   | 4,402 |   |
| Property &  equipment, net |       | 12,451                                                                            |       | 2,404 |   | 3,525 |   | 1,290 |   | 434 |   | 1,952 |   | — |   | 22,056 |   |
| Total assets at period  end    |       | 142,144                                                                           |       | 11,387 |   | 17,314 |   | 12,094 |   | 13,776 |   | 8,867 |   | (43,632 | ) | 161,950 |   |
|                                |            |                                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)    Results of operations forJapan are included from July 5, 2005 onwards, the date on which the Companyacquired Immucor-Kainos, Inc.  No proforma information regarding revenue and income for Immucor-Kainos, Inc. isprovided as the effect of the acquisition on the consolidated financialstatements is not material.

The Company’s U.S. operations made net export sales tounaffiliated customers of approximately $1.4 million and $1.1 million for thethree months ended November 30, 2006 and 2005, respectively, and approximately$2.6 million and $2.5 million for the six months ended November 30, 2006 and2005, respectively.  The Company’s Germanoperations made net export sales to unaffiliated customers of approximately$1.3 million and $0.9 million for the three months ended November 30, 2006 and2005, respectively and approximately $2.2 million and $1.8 million for the sixmonths ended November 30, 2006 and 2005, respectively.  The Company’s Canadian operations made netexport sales to unaffiliated customers of approximately****$0.4million and $0.2 million for the three months ended November 30, 2006 and 2005,respectively and approximately $0.9 million and $1.1 million for the six monthsended November 30, 2006 and 2005, respectively.

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7.                **COMPREHENSIVE INCOME**

The components ofcomprehensive income for the three-month and six-month periods ended November30, 2006 and 2005 are as follows (in thousands):
|                                               | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **November 30,  2006**      | ** ** | **November 30,  2005**    | ** ** | **November 30,  2006** | ** ** | **November 30,  2005** | ** ** |
| Net income                                    |       | $                                | 14,102     |                           | $          | 8,055 |   | $ | 26,835 |   | $ | 16,060 |   |
| Net foreign  currency translation adjustments |       | 811                              |       | (1,591                         | )          | 73 |   | (1,186 | ) |
| Hedge loss  reclassified into earnings        |       | —                           |       | 5                              |       | —   |   | 10 |   |
| Comprehensive income                          |       | $                                | 14,913     |                           | $          | 6,469 |   | $ | 26,908 |   | $ | 14,884 |   |

 

No tax effect isrecorded for foreign currency translation since the foreign net assetstranslated are deemed permanently invested.

**8.****              STOCK REPURCHASEPROGRAM**

The Company instituted a stock repurchase program inJune 1998 for up to 6,075,000 shares of its common stock.  Subsequently, the Company’s Board ofDirectors authorized the Company to repurchase up to an additional 675,000shares, 1,125,000 shares, and 1,500,000 shares on June 1, 2004, August 2, 2004,and December 13, 2005, respectively, bringing the total number of sharesauthorized for repurchase to 9,375,000.

During the quarter ended November 30, 2006, thecompany did not repurchase any shares under the 1998 repurchase program.  As of November 30, 2006, 8,232,944 shares hadbeen repurchased under the program, leaving 1,142,056 shares available forpurchase.

During the six-month period ended November 30, 2006,281,969 shares amounting to $4.9 million were bought under this program. Duringthe quarter ended November 30, 2005, 963,900 shares were repurchased forapproximately $14.9 million. No shares were repurchased during the quartersended November 30, 2006 and August 31, 2005. The repurchased shares werereturned to the status of authorized, but unissued shares.

**9.****              COMMITMENTS ANDCONTINGENCIES**

As previously reported, theCompany’s Italian subsidiary and Dr. Gioacchino De Chirico, the formerPresident of the subsidiary, are the subjects of criminal proceedings in Milan,Italy centered on payments by several companies, including Immucor, to certainItalian physicians allegedly in exchange for favorable contract awards by theirhospitals. Dr. De Chirico has been charged as the former President of the subsidiarywith directing a €13,500 payment to one physician and payments totalingapproximately $47,000 to another physician, and the subsidiary has also beencharged concerning the €13,500 payment under an Italian law holding thesubsidiary responsible for actions allegedly taken by an officer. The SEC hasissued a formal investigative order in these matters but has not expressed tothe Company any conclusions about the ultimate outcome of its investigation. Apreliminary hearing is ongoing in Italy and is expected to conclude on or aboutJanuary 18, 2007.  The Company hasnegotiated a settlement with the Italian prosecutor on terms that will not havea material adverse effect on the Company’s consolidated financial position, andexpects the Italian judge to rule on the settlement on or about January 18,2007.  However, Dr. De Chirico hasindicated he intends to contest any charges against him, and such proceedingsand related appeals could continue for an extended period of time.  Both the Company and Dr. De Chirico intend toseek to settle the SEC investigation in the near term.  Except in connection with the proposedsettlement with the Italian prosecutor, no determination can yet be made as towhether, in connection with these circumstances, the Company will becomesubject to any fines, penalties and/or other charges imposed by anygovernmental authority, or any other damages or costs that may arise inconnection with these circumstances.

Between August 31 and October 19, 2005, a series often class-action lawsuits were filed in the United States District Court forthe Northern District of Georgia against the Company and certain of its currentand former directors and officers alleging violations of the securities laws.The Court has consolidated these cases for disposition under the caption In reImmucor, Inc. Securities Litigation, File No. 1:05-CV-2276-WSD, designated leadplaintiffs, permitted the filing of an amended consolidated complaint, andestablished a schedule

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for briefing the Company’s motion to dismiss theclaims. The consolidated complaint, brought on behalf of a putative class ofshareholders who purchased Immucor stock between August 16, 2004 and August 29,2005, alleges that the Company’s stock prices during that period were inflatedas a result of material misrepresentations or omissions in the Company’sfinancial statements and other public announcements regarding the Company’sbusiness. On March 7, 2006, the Company timely moved to dismiss theconsolidated complaint. On October 4, 2006, the Court denied the Company’smotion to dismiss. The Company has answered the consolidated complaint denyingliability and the case is proceeding through the discovery phase under an ordercontemplating completion of all discovery by July 15, 2007. The Court has madeno determination whether any of the plaintiffs’ claims have merit or should beallowed to proceed as a class action. Management believes the claims arewithout merit, and intends to vigorously defend the Company. While managementdoes not currently expect these lawsuits to materially affect the Company’sfinancial condition or results of operations, there can be no assurance of anyparticular outcome.

Other than as set forth above or as previouslyreported in the Company’s Annual Report on Form 10-K for the fiscal year endedMay 31, 2006, the Company is not currently subject to any material legalproceedings, nor, to the Company’s knowledge, is any material legal proceedingthreatened against the Company. However, from time to time, the Company maybecome a party to certain legal proceedings in the ordinary course of business.Management does not believe any ongoing legal proceedings, including thosesummarized above, will have a material adverse effect on the Company’sconsolidated financial position.

**10.****       RECENT ACCOUNTINGPRONOUNCEMENTS**

*Income taxes*

In June 2006, the Financial Accounting Standards Boardissued FASB Interpretation No. 48,*Accounting for Uncertainty in Income Taxes, an interpretation of FASB StatementNo. 109*  (“FIN 48”). FIN48 clarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with FASB StatementNo. 109,*  Accounting for Income Taxes*.  FIN 48 describes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return and alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition. FIN 48 will be effective for theCompany in fiscal 2008.  TheCompany has not yet determined the impact of this new accounting interpretationon its financial statements.

*Quantifying financial statement misstatements*

In September 2006, the Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”). Due todiversity in practice among registrants, SAB 108 expresses SEC staff viewsregarding the process by which misstatements in financial statements areevaluated for purposes of determining whether financial statement restatementis necessary. SAB 108 requires registrants to quantify misstatements using boththe balance sheet and income statement approaches and to evaluate whethereither approach results in quantifying an error that is material in light ofrelative quantitative and qualitative factors. SAB 108 is effective for fiscalyears ending after November 15, 2006, and early application is encouraged. TheCompany does not believe SAB 108 will have a material impact on the Company’sresults from operations or financial position.

*Fair value measurements*

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, “*Fair Value Measurements*”(“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value tomeasure assets and liabilities. This standard also responds to investors’requests for expanded information about the extent to which companies measureassets and liabilities at fair value, the information used to measure fairvalue and the effect of fair value measurements on earnings. SFAS No. 157applies whenever other standards require (or permit) assets or liabilities tobe measured at fair value. The standard does not expand the use of fair valuein any new circumstances. SFAS No. 157 is effective for financial statementsissued for fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years; therefore, the Company expects to adopt SFAS No. 157at the beginning of fiscal 2009. The Company does not believe SFAS No. 157 willhave a material impact on the Company’s results from operations or financialposition.

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**ITEM 2.****                       ****Management’s Discussion andAnalysis of Financial Condition and Results of Operations.**

*Certain statements that the Company may make fromtime to time, including all statements contained in this report that are notstatements of historical fact, constitute “forward-looking statements” underthe federal securities laws. Forward-looking statements may be identified bywords such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,”“will,” “should” and other words of similar meaning used in conjunction with,among other things, discussions of future operations, financial performance,product development and new product launches, FDA and other regulatoryapplications and approvals, market position and expenditures.  Factors that could cause actual results todiffer materially from those expressed in any forward-looking statement madeby, or on behalf of, the Company include the following, some of which aredescribed in greater detail below:  thedecision of customers to defer capital spending; the inability of customers toefficiently integrate our instruments into their blood banking operations;increased competition in the sale of instruments and reagents; productdevelopment or regulatory obstacles; the ability to hire and retain keymanagers; changes in interest rates and foreign currency exchange rates; theability of the Company’s Japanese subsidiary to attain expected revenue, grossmargin and net income levels; delays in regulatory approvals or otherunforeseen delays related to the Company’s plans to move Houston manufacturingoperations to another Company facility; higher than expected costs related tothe planned closure of the Houston facility; higher than expected manufacturingconsolidation costs; problems in efficiently producing products after theconsolidation; the outcome of any legal claims known or unknown; and generaleconomic conditions. In addition, the strengthening of the dollar versus theEuro, Canadian Dollar and Japanese Yen would adversely impact reported results.  Investors are cautioned not to place unduereliance on any forward-looking statements. The Company cautions that historical results should not be relied uponas indications of future performance. The Company assumes no obligation to update any forward-lookingstatements.*  *Additional informationconcerning these and other factors which could cause differences betweenforward-looking statements and future actual results is discussed under theheading “Risk Factors” in our Annual Report on Form 10-K for the year endedMay 31, 2006, as filed with the SEC on August 1, 2006.*

**Overview**

Founded in 1982,Immucor develops, manufactures and sells a complete line of reagents andautomated systems used primarily by hospitals, clinical laboratories and bloodbanks in a number of tests performed to detect and identify certain propertiesof the cell and serum components of human blood prior to bloodtransfusion.  Our strategy is tostrengthen our leadership position in the automation of blood bank testing bycontinuing to expand our base of installed instruments. To facilitateinstrument placements, we offer customers a selection of automated analyzers,which address the various needs of low, medium, and high-volume testingfacilities.  We utilize a “razor/razorblade”business model.  Our instruments aredesigned to operate with our proprietary reagents.  Therefore, once a customer procures aninstrument from us, the customer is likely to continue to purchase proprietaryreagents from us for use with the instrument on an on-going basis.  In order to satisfy the broad spectrum ofcustomers’ operational and financial criteria, we intend to continue to offerseveral instrument procurement options, including third-party financing leases,direct sales and reagent rentals and to expand the range and price points ofour instrument offerings.

As furtherdiscussed below under “Results of Operations,” the improvement in revenues andgross margins during the quarter ended November 30, 2006, as compared to theprior year period, was due primarily to the following:

·                  Reagentprice increases;

·                  IncreasedCapture® reagent revenues with placement of additional instruments whichrequire the use of Capture® reagents; and

·                  Increasedmanufacturing efficiencies due in part to the continued elimination of a numberof redundant products previously manufactured at our three manufacturingfacilities.

*Business outlook*

For the second half of fiscal 2007 and in the next twoyears, besides continuing to focus on improving gross margins on our productsthrough achieving continued benefits from successful strategies alreadyimplemented, our focus will be on customer satisfaction, improving our productsby using new technologies and increasing market share. These factors will bemajor business drivers for achieving our planned growth. To that end, we havemade changes to our organizational structure, streamlined certain operations tomaximize efficiencies and commenced research and

17

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development work on a second generation Galileoautomated assay instrument.  As wemonitor our progress and strengthen our focus to achieve these goals, ourorganization will evolve and we may make more changes to our organization andthe way we do business.

As previously reported,we expect to further improve our competitive position through the launch ofGalileo ECHOTM, our third generation automated assay instrument, which iscurrently expected to be released in the U.S. and European markets in thefourth quarter of fiscal 2007. The actual launch date is dependent on FDA clearanceof the instrument in the United States, which is based on a number ofvariables, some of which are outside our control.  A launch of the Galileo ECHOTM in the fourthquarter of fiscal 2007 assumes our submission to the FDA is made by the thirdquarter of fiscal 2007 and assumes clearance is granted within 90 days afterthat submission.  A delay in thesubmission or in FDA review and clearance would delay the launch. The GalileoECHOTM has substantially all of the features of our larger Galileo product, apartfrom lower throughput, and is significantly smaller and faster than theABS2000, the instrument it is intended to replace. We believe the Galileo ECHOTMwill appeal to the small- to medium-sized hospital market, the largest segmentof our customers (which number approximately 5,000 to 6,000 worldwide), towhich our ABS2000 instrument is currently marketed.  Based on the positive customer reaction toour planned launch of the Galileo ECHOTM, we believe we can achieve market sharegain and revenue growth through continued Galileo placements and the launch ofthe Galileo ECHOTM.  As of November 30,2006, we had received purchase orders for a total of 427 Galileo instrumentsworldwide (an increase of 41 instruments in the current quarter), including 266in Europe, 159 in North America and 2 in Japan, and 355 of these instrumentswere generating reagent revenues, an increase of 38 in the current quarter.

Additionally, as aresult of the planned closure of the Houston, Texas, manufacturing facilityscheduled for December 2007 and the subsequent consolidation of production inNorcross, Georgia, and Halifax, Nova Scotia, the Company anticipates asignificant reduction in costs, with the benefits expected to be partiallyrealized in the 2008 fiscal year and fully realized in fiscal 2009 andsubsequent years.

**Resultsof Operations**

We generatedrevenues of $54.4 million and $105.5 million for the three-month and six-monthperiods ended November 30, 2006, compared to $44.0 million and $86.5 millionfor the three-month and six-month periods ended November 30, 2005.  These revenue results represented increasesof $10.4 million, or 24%, and $19.0 million, or 22%, respectively, over thecorresponding fiscal periods in the prior year.

Our gross marginincreased to 70% for the quarter ended November 30, 2006, from 65% achieved inthe prior year quarter. For the six-month period ended November 30, 2006, thegross profit margin increased to 69%, from 64% achieved in the prior yearperiod.

Net income for thethree-month and six-month periods ended November 30, 2006, totaled $14.1million and $26.8 million, respectively compared to $8.1 million and $16.1million, respectively for the three-month and six-month periods ended November30, 2005; the results represented respective increases of $6.0 million, or 75%,and $10.7 million, or 67%, in net income over the corresponding fiscal periodsin the prior year.

Diluted earningsper share were $0.20 for the three-month period ended November 30, 2006compared with diluted earnings per share of $0.11 for the three-month periodended November 30, 2005, an increase of 82%. Diluted earnings per share were $0.38 for the six-month period endedNovember 30, 2006 compared with diluted earnings per share of $0.22 for thesix-month period ended November 30, 2005, an increase of 73%.

For thethree-month and six-month periods ended November 30, 2006, the effect on netsales of the change in the exchange rates was an approximate increase of $0.7million and $1.2 million, respectively.

The adoption ofSFAS 123R on June 1, 2006, resulted in a reduction of net income ofapproximately $0.7 million and $1.2 million for the three-month and six-monthperiods ended November 30, 2006.

United Statesoperations continue to generate a majority of our revenue and operating income.U.S. operations generated 72% and 90%, respectively, of our revenue andoperating income in the six months ended November 30, 2006, compared to 71% and90%, respectively, in the corresponding periods of fiscal year 2006.

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| ** **                     | ** ** | **Three Months Ended  November 30,** | ** ** | ** ** | ** ** | **Six Months Ended  November 30,** | ** ** | ** ** | ** ** |
|--------------------------------|------------|-----------------------------------------------------|------------|------------|------------|---------------------------------------------------|------------|------------|------------|
| ** **                     | ** ** | **2006**                                            | ** ** | **2005**   | ** ** | **% change**                                 | ** ** | **2006**   | ** ** | **2005** | ** ** | **% change** | ** ** |
| ** **                     | ** ** | **($ in thousands)**                      | ** ** | ** ** | ** ** | **($ in thousands)**                    | ** ** | ** ** | ** ** |
| Net Sales                      |       | $                                                   | 54,426     |       | $          | 44,025                                            |       | 24         | %          | $ | 105,466 |   | $ | 86,459 |   | 22 | % |
| Gross profit                   |       | 37,843                                              |       | 28,541     |       | 33                                                | %          | 72,379     |       | 55,236 |   | 31 | % |
| Gross profit  percentage       |       | 70                                                  | %          | 65         | %          | 7                                                 | %          | 69         | %          | 64 | % | 7 | % |
| Research and development       |       | 1,808                                               |       | 1,208      |       | 50                                                | %          | 3,034      |       | 2,463 |   | 23 | % |
| Selling and marketing          |       | 6,755                                               |       | 5,195      |       | 30                                                | %          | 12,314     |       | 10,410 |   | 18 | % |
| Distribution                   |       | 2,380                                               |       | 1,931      |       | 23                                                | %          | 4,668      |       | 3,782 |   | 23 | % |
| General and administrative     |       | 5,291                                               |       | 4,888      |       | 8                                                 | %          | 10,513     |       | 10,710 |   | -2 | % |
| Restructuring expense          |       | 182                                                 |       | 2,457      |       | -93                                               | %          | 569        |       | 2,457 |   | -77 | % |
| Amortization expense and other |       | 86                                                  |       | 96         |       | -10                                               | %          | 173        |       | 167 |   | 4 | % |
| Total operating expenses       |       | 16,502                                              |       | 15,775     |       | 5                                                 | %          | 31,271     |       | 29,989 |   | 4 | % |
| Other income (loss)            |       | 688                                                 |       | (103       | )          | n/m                                               |       | 1,028      |       | 4 |   | n/m |   |
| Income before  income tax      |       | 22,029                                              |       | 12,663     |       | 74                                                | %          | 42,136     |       | 25,251 |   | 67 | % |
| Provision for  income tax      |       | 7,927                                               |       | 4,608      |       | 72                                                | %          | 15,301     |       | 9,191 |   | 66 | % |
| Net income                     |       | $                                                   | 14,102     |       | $          | 8,055                                             |       | 75         | %          | $ | 26,835 |   | $ | 16,060 |   | 67 | % |

 

*Revenues*

Revenue for this fiscal quarter totaled $54.4 million,up 24% from $44.0 million in the corresponding period in the prior fiscal year.The $10.4 million increase was primarily the result of price increases in theU.S. (approximately $5.3 million), volume increase in the U.S. (approximately$1.7 million), increase in instrument revenue (including warranty and serviceincome) in the U.S. (approximately $1.0 million), increase in sales outside theU.S. (approximately $1.7 million) and gain from fluctuations in exchange rates(approximately $0.7 million).  For thesix-months ended November 30, 2006, revenue increased by approximately $19.0million to $105.5 million, an increase of 22%. The $19.0 million increase was primarily the result of price increasesin the U.S. (approximately $9.7 million), volume increase in the U.S.(approximately $4.0 million), increase in sales outside the U.S. (approximately$4.1 million) and gain from fluctuations in exchange rates (approximately $1.2million).

Traditional reagent revenues (i.e. revenues fromproducts not using the Company’s patented Capture® technology) grew by $5.9million to $37.4 million compared to $31.5 million in the prior year quarter, a19% increase in the second quarter of fiscal 2007.  For the six-month period ended November 30,2006, traditional reagent revenues increased by $11.7 million to $74.5 million,an increase of 19%. The growth in traditional reagent revenue occurred mainlyas a result of price increases in the U.S. Traditional reagent sales have historicallybeen our primary source of revenue and still constitute a very significantportion of our business. We expect the significance of this line of products toeventually decline as we place more instruments in the market and increasesales of our Capture® products.

Capture® product sales increased to $11.0 million in the three-monthperiod ended November 30, 2006 compared to $8.4 million in the correspondingperiod of fiscal 2006.  For the six-monthperiod ended November 30, 2006, Capture® product sales increased from $16.3million to $20.5 million, an increase of 26%. The revenue growth was primarilyattributable to volume increase. Sales of Capture® products are largelydependent on the number of instruments requiring the use of Capture® reagentsplaced with customers and in operation. As we succeed in placing moreinstruments in the market, we expect revenue from Capture® products to continueto increase.

Sales of instruments were $4.9 million in the secondquarter of fiscal 2007 compared to $3.0 million in the prior year quarter. Mostof our current instrument sales are accompanied by reagent contracts with priceguarantee clauses. Therefore, we defer and recognize the revenue from thesecontracts over the related guarantee periods, normally five years. However, werecord the cost of these instruments at the time the instruments are installed.In the second quarter of fiscal 2007, approximately $1.1 million of instrumentsales were deferred in this manner while the entire cost of these instrumentsof $0.8 million was expensed, and $1.0 million of previously deferred revenuewas recognized. For the six-month period ended November 30, 2006, approximately$3.0 million of instrument sales were deferred in this manner while the entirecost of these instruments of $2.2 million was expensed, and $1.8 million ofpreviously deferred revenue was recognized. As of November 30, 2006, deferredrevenues totaled $17.4 million, an increase of $0.3 million in the quartercompared to an increase of $1.0 million in the quarter ended August 31, 2006.

The instrument business continues to be uneven.  Instrument sales are typically uneven due todifferences in the time it takes customers to put the instruments intooperation. We ended the second quarter with 22 Galileo orders in Europe and 19in North America for a total of 41 orders compared to 23 orders received in theprior year quarter. We expect to sell more instruments in each of the last twoquarters than the number of instruments we sold in the second

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quarter and, consequently, we expect that our cost ofsales on instruments will increase and that our instrument margins willdecrease. In December 2006, we signed a supply agreement with QuestDiagnostics, Inc. and we expect to receive orders to ship up to 27 Galileoinstruments under this agreement in fiscal year 2007. We expect to receiveapproximately 130 Galileo purchase orders in total in fiscal year 2007. Inaddition to the new revenue we expect to generate from the continued placementof more Galileo instruments in the market, we also expect to begin generatingrevenues in fiscal 2008 from the sale of our new Galileo ECHOTM instruments.

*Gross Margins*

Overall gross margin improved during the quarter endedNovember 30, 2006 to a record 70%, up from 65% in the prior year quarter. Forthe six-month period ended November 30, 2006, overall gross margin increased to69%, up from 64% in the prior year period. Gross margin on traditional reagentsfor the quarter ended November 30, 2006 increased to 75%, from 68% in the prioryear quarter primarily as a result of the price increases discussed above aswell as from increases in manufacturing efficiencies. For the six-month periodended November 30, 2006, gross margin on traditional reagents increased to 74%,up from 69% in the prior year period. The gross margin on Capture® products was83% for the quarter ended November 30, 2006, compared to 79% in the prior yearquarter. For the six-month period ended November 30, 2006, gross margin onCapture® products increased to 82%, up from 79% in the prior year period. Thegross margin on instruments, including the impact of the cost of providingservice, was 9% for the quarter ended November 30, 2006, compared to 0.2% forthe same quarter last year.  For thesix-month period ended November 30, 2006, gross margin on instruments was anegative 7% compared to a negative 31% in the prior year period. Instrumentgross margin is negatively impacted by deferral of revenue from instrumentsales while the entire cost of sales on those instrument sales was expensed inthe quarter in which the instruments are sold.

*Operating Expenses*

Research anddevelopment expenses increased by $0.6 million to $1.8 million for the quarterended November 30, 2006, an increase of 50% compared to the prior year quarter.Expenses relating to testing of the Galileo ECHOTM and development of a secondgeneration Galileo accounted for $0.4 million of the increase. For thesix-month period ended November 30, 2006, research and development expensesincreased to $3.0 million, an increase of $0.6 million over the prior yearperiod; expenses relating to testing of the Galileo ECHOTM and development of asecond generation Galileo accounted for $0.3 million of the increase.

Selling andmarketing expenses increased by approximately $1.6 million to $6.8 million forthe three-month period ended November 30, 2006, compared to the prior yearquarter, impacted by new hires ($0.3 million), increase in travel ($0.2million), increase in convention expenses ($0.2 million), and stock-basedcompensation expenses of $0.2 million related to the adoption of SFAS 123R. Forthe six-month period ended November 30, 2006, selling and marketing expensesincreased by $1.9 million to $12.3 million compared to the prior year period,impacted by new hires ($0.5 million), increase in travel ($0.3 million),increase in convention expenses ($0.2 million), increase in bonus accrual ($0.2million) and stock-based compensation expenses of $0.3 million related to theadoption of SFAS 123R.

Distribution expenses increased by approximately $0.4million, as compared to the prior year period, to $2.4 million for thethree-month period ended November 30, 2006. This increase was due to anincrease in U.S. shipment costs of approximately $0.2 million, and our newJapanese subsidiary was responsible for approximately $0.2 million of theincrease.  For the six-month period endedNovember 30, 2006, distribution expenses increased by $0.9 million, as comparedto the prior year period, to $4.7 million. Our Japanese subsidiary accountedfor $0.3 million of the increase and increased shipments of instruments andfreight costs in general accounted for $0.2 million of the increase.

General andadministrative expenses increased in the three months ended November 30, 2006by $0.4 million to $5.3 million for the second quarter of 2007 as compared tothe prior year quarter, mainly due to a $0.6 million increase in stockcompensation expense that resulted from the adoption of SFAS 123R. For thesix-month period ended November 30, 2006, general and administration expensesdecreased by $0.2 million to $10.5 million compared to the prior year period.

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During the quarterended November 30, 2006, we recorded a charge of approximately $0.2 million inconnection with the planned closure of our Houston facility. The total cost ofclosing this plant is estimated at $4.6 million, including approximately $2.3million for impairment of long-lived assets which we recorded in fiscal year2006. As of November 30, 2006, we have recorded a total cost of $3.3 millionand expect to incur approximately $1.3 million of additional costs until weclose the facility in December 2007. Total future cash outlays for therestructuring plan are expected to be approximately $1.7 million.  Restructuring charges of approximately $2.5million were recorded in the second quarter of fiscal year 2006, approximately$2.3 million of which was for impairment of long-lived assets.

*Net Income and Earnings per Share*

Higher sales, improved margins and only a marginalincrease in expenses resulted in net income for the fiscal 2007 second quarterof $14.1 million, up 75% from $8.1 million for the same quarter last year. Forthe six-month period ended November 30, 2006, net income of $26.8 million was67% higher compared to $16.1 million for the prior year period.  For the fiscal 2007 second quarter, dilutedearnings per share was $0.20, up from $0.11 for the prior year period.  For the six-month period ended November 30,2006, diluted earnings per share was $0.38, up from $0.22 for the prior yearperiod.

**Liquidityand Capital Resources**
| ** **                                                    | ** ** | **For the Six Months Ended** | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                    | ** ** | **November 30,**                            | ** ** |
| ** **                                                    | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| ** **                                                    | ** ** | **(in thousands)**                          | ** ** |
| Net cash  provided by operating activities                    |       | $                                                | 17,773     |   | $ | 28,791 |   |
| Net cash used in  investing activities                        |       | (3,741                                           | )          | (10,130 | ) |
| Net cash  provided by (used in) financing activities          |       | 6,514                                            |       | (22,205 | ) |
| Effect of  exchange rate changes on cash and cash equivalents |       | (126                                             | )          | (140 | ) |
| Increase in  (decrease in) cash and cash equivalents          |       | $                                                | 20,420     |   | $ | (3,684 | ) |

 

We have adequateworking capital and sources of capital to carry on our current business and tomeet our long- and short-term capital requirements.  At November 30, 2006, we had working capitalof $125.9 million, compared to $92.9 million of working capital at May 31,2006.  Our cash, cash equivalents andmarketable securities totaled $75.2 million at November 30, 2006 as compared to$70.4 million at August 31, 2006 and $55.7 million at May 31, 2006.

*Operatingactivities* - Net cash generated by operating activities was$17.8 million for the six months ended November 30, 2006, compared to $28.8million generated in the prior year period. The increase of $10.8 million due to the increase in net income (from$16.0 million for the six months ended November 30, 2005 to $26.8 million forthe current period) was more than offset by, among other things, an adjustmentof approximately $9.5 million for the tax benefits arising on exercise of stockoptions which is required to be disclosed as cash generated by financingactivity upon adoption of SFAS 123R effective June 1, 2006. While the thirdquarter estimated tax payment will be reduced by these benefits; the timingdifference between the recording of the credit for the tax benefit and the adjustment toestimated tax payments reflected a temporary, negative impact onoperating cash flows.

*Investingactivities -* For the six months ended November 30, 2006, $3.7million of net cash was used in investing activities, primarily for thepurchase of property and equipment ($4.7 million), which was offset by proceedsfrom the maturity of short term investments ($1.0 million).  Planned capital expenditures for fiscal 2007total approximately $13.5 million, which we intend to finance from our internalresources.

In the first sixmonths of fiscal 2006, we spent $4.4 million on the purchase of property andequipment and invested $1.0 million in short-term investments.  In the same period, we also acquiredImmucor-Kainos, Inc. and paid ¥459 million (approximately $4.2 million) in cashon signing of the purchase agreements. We incurred other costs amounting to$0.5 million relating to this acquisition. Under the terms of the purchaseagreements, we are also required to pay an additional ¥300 million(approximately $2.5 million) over three years with payments of ¥125 million ineach of the first two years and the remaining ¥50 million in the third year. Asof November 30, 2006, we

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have paid ¥200million of this liability.  In addition,a final payment of ¥441 million will be made after a three-year transitionperiod ending on June 30, 2008, or earlier upon mutual agreement.

*Financingactivities -* Net cash generated from financing activitiestotaled approximately $6.5 million for the six months ended November 30, 2006.During this period, we utilized $4.9 million to repurchase shares of our commonstock and $0.5 million to repay a portion of the acquisition liability; wereceived $2.4 million from the proceeds of stock option exercises and $9.5million from the excess tax benefit from stock option exercises. Net cash usedby financing activities totaled approximately $22.2 million for the six monthsended November 30, 2005. During this period, we repaid long-term debt andcapital leases amounting to $7.5 million and utilized $14.9 million torepurchase shares of our common stock; we received $0.1 million from theproceeds of stock option exercises.

*Stock Repurchase Program*

During the six-monthperiod ended November 30, 2006, we repurchased 281,969 shares at an average pershare price of $17.23, totaling $4.9 million, bringing the aggregate number ofshares repurchased to date to 8,232,944 under the program. During the six-monthperiod ended November 30, 2005, the total amount spent for the shares boughtunder this program amounted to $14.9 million. No shares were repurchased during the quarters ended November 30, 2006and August 31, 2005.  An aggregate of1,142,056 shares were available for repurchase under the program as of November30, 2006.

*ContingentLiabilities*

We record contingent liabilities resulting from asserted andunasserted claims against us when it is probable that a liability has beenincurred and the amount of the loss is reasonably estimable. We disclosecontingent liabilities when there is a reasonable possibility that the ultimateloss will exceed the recorded liability. Estimating probable losses requiresanalysis of multiple factors, in some cases including judgments about thepotential actions of third-party claimants and courts. Therefore, actual lossesin any future period are inherently uncertain. We currently are involved in certainlegal proceedings. We do not believe these proceedings will have a materialadverse effect on our consolidated financial position. It is possible, however,that future results of operations for any particular quarterly or annual periodcould be materially affected by changes in our assumptions or the effectivenessof our strategies related to these proceedings. Contingent liabilities aredescribed in Note 9 to the condensed consolidated financial statements.

*FutureCash Requirements and Restrictions*

We expect thatcash and cash equivalents and cash flows from operations will be sufficient tosupport operations and planned capital expenditures for at least the next 12months.  There are no restrictions on oursubsidiaries in the matter of sending dividends, or making loans or advances toImmucor.

**Critical Accounting Policies**

*General*

We have identifiedthe policies below as critical to our business operations and the understandingof our results of operations. The impact and any associated risks related tothese policies on our business operations is discussed throughout Management’sDiscussion and Analysis of Financial Condition and Results of Operations wheresuch policies affect our reported and expected financial results.  For a detailed discussion on the applicationof these and other accounting policies, see the notes to the condensedconsolidated financial statements of this quarterly report on Form 10-Q and thenotes to the consolidated financial statements and the MD&A contained inour 2006 Annual Report on Form 10-K for the fiscal year ended May 31,2006.  Note that our preparation of thisForm 10-Q requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities, the disclosure of contingent assetsand liabilities at the date of our financial statements, and the reportedamounts of revenue and expenses during the reporting period. Actual resultscould differ from those estimates, and certain assumptions could prove to beincorrect.  Senior management has discussedthe development and selection of critical accounting estimates and the relateddisclosures in this Management’s Discussion and Analysis of Financial Conditionand Results of Operations with the Audit Committee of the Board of Directors.

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*Revenue Recognition*

We recognize revenue whenthe following four basic criteria have been met:  (1) persuasive evidence of an arrangementexists; (2) delivery has occurred or services rendered; (3) the fee is fixedand determinable; and (4) collectibility is reasonably assured.  Should changes in conditions cause managementto determine these criteria are not met for certain future transactions,revenue recognized for any reporting period could be adversely affected.

·                  Reagentsales

Revenue from the sale of our reagents to end users isrecognized upon shipment when both title and risk of loss transfer to thecustomer upon shipment, unless there are specific contractual terms to thecontrary.  Revenue from the sale of ourreagents to distributors is recognized FOB customs clearance when both titleand risk of loss transfer to the customer.

·                  Medicalinstrument sales

Revenue from the sale of our medical instruments isgenerally recognized upon shipment and completion of contractualobligations.  Revenue from rentals of ourmedical instruments is recognized over the term of the rental agreement.  Instrument service contract revenue isrecognized over the term of the contract.

Beginning in the second quarter of fiscal year 2004,we began recognizing revenue on the sale of medical instruments in accordancewith Emerging Issues Task Force (“EITF”) Issue No. 00-21, *Accounting for Revenue Arrangements with MultipleDeliverables*.  Our medicalinstrument sales contracts involve multiple deliverables, including the sale orrental of an instrument (including delivery, installation and training), theservicing of the instrument during the first year, and, in some cases, priceguarantees for consumables purchased during the contract period and/orproviding a software interface.  We havedetermined the fair value of certain of these elements, such as training andfirst year service.  The portion of theinstrument sales price applicable to the instrument itself is recognized uponshipment and completion of contractual obligations relating to training and/orinstallation based on the related contractual specifications. If the agreementdoes not include any price guarantees, the sales price in excess of the fairvalues of training and service is allocated to the instrument itself.  The fair value of a training session isrecognized as revenue when services are provided.  If multiple sessions are contractuallyprovided for, and not all training has been completed at the time theinstrument is recognized, additional training revenue is recognized upondelivery.  The fair value of first yearservice is deferred and recognized over the first year of the contract. If theagreement contains price guarantees, the entire sales price is deferred andrecognized over the related guarantee period due to the fair value of the priceguarantee not being determinable at that time. The allocation of the total consideration received, which is based onthe estimated fair value of the units of accounting, requires judgment by management.

·                  Salessubject to a plan of factoring

Sales subject to a plan offactoring are recorded at net realizable value (defined as gross sales less theannual estimated cost of factoring the sale). Should the factored sale remain uncollected by the factor at the end ofone year, an estimate of the additional factoring discount is made and recordedmonthly as an additional reduction of sales revenue.

*Trade Accounts Receivable andAllowance for Doubtful Accounts*

Trade receivables atNovember 30, 2006, totaling $41.3 million, and at May 31, 2006, totaling $37.2million, are net of allowances for doubtful accounts of $1.8 million and $2.0million, respectively.  The allowance fordoubtful accounts represents a reserve for estimated losses resulting from theinability of our customers to pay their debts. The collectibility of tradereceivable balances is regularly evaluated based on a combination of factorssuch as customer credit-worthiness, past transaction history with the customer,current economic industry trends and changes in customer payment patterns. Ifit is determined that a customer will be unable to fully meet its financialobligation, such as in the case of a bankruptcy filing or other material eventsimpacting its business, a specific allowance for doubtful accounts is recordedto reduce the related receivable to the amount expected to be recovered.

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*Inventory*

Inventories arestated at the lower of cost (first-in, first-out basis) or market (netrealizable value). Cost includes material, labor and manufacturingoverhead.  We use a standard cost systemas a tool to monitor production efficiency. The standard cost system applies estimated labor and manufacturingoverhead factors to inventory based on budgeted production and efficiencylevels, staffing levels and costs of operation, based on the experience andjudgment of management.  Actual costs andproduction levels may vary from the standard established and such variances arecharged to the consolidated statement of income as a component of cost ofsales.  Since U.S. generally acceptedaccounting principles require that the standard cost approximate actual cost,periodic adjustments are made to the standard rates to approximate actualcosts.  The provision for obsolete and/orexcess inventory is reviewed on a quarterly basis or, if warranted bycircumstances, more frequently.  Inevaluating this reserve, management considers technology changes, competition,customer demand, product shelf life and manufacturing quality.  No material changes have been made to theinventory policy during the second quarter of fiscal 2007.

*Goodwill*

On adoption ofSFAS No. 142, *Goodwill and Other Intangible Assets,*goodwill and indefinite lived intangible assets are no longer amortized but aretested for impairment annually or more frequently if impairment indicatorsarise.  Intangible assets that havefinite lives are continuing to be amortized over their useful lives.

We evaluate thecarrying value of goodwill during the fourth quarter of each year and betweenannual evaluations if events occur or circumstances change that would morelikely than not reduce the fair value of the reporting unit below its carryingamount. Such circumstances could include, but are not limited to: (1) asignificant adverse change in legal factors or in business climate, (2) unanticipatedcompetition, or (3) an adverse action or assessment by a regulator. Whenevaluating whether goodwill is impaired, we compare the fair value of thereporting unit to which the goodwill is assigned to the reporting unit’scarrying amount, including goodwill. The fair value of the reporting unit isestimated using primarily the income, or discounted cash flows, approach. Ifthe carrying amount of a reporting unit exceeds its fair value, then the amountof the impairment loss must be measured. The impairment loss would becalculated by comparing the implied fair value of reporting unit goodwill toits carrying amount. In calculating the implied fair value of reporting unitgoodwill, the fair value of the reporting unit is allocated to all of the otherassets and liabilities of that unit based on their fair values. The excess ofthe fair value of a reporting unit over the amount assigned to its other assetsand liabilities is the implied fair value of goodwill. An impairment loss wouldbe recognized when the carrying amount of goodwill exceeds its implied fairvalue. Our evaluation of goodwill completed during the year ended May 31, 2006resulted in no impairment losses.

*Income Taxes*

Our income taxpolicy records the estimated future tax effects of temporary differencesbetween the tax bases of assets and liabilities and amounts reported in theaccompanying consolidated balance sheets, as well as operating loss and taxcredit carry-forwards. The value of our deferred tax assets assumes that wewill be able to generate sufficient future taxable income in certain taxjurisdictions, based on estimates and assumptions. If these estimates andrelated assumptions change in the future, we may be required to recordadditional valuation allowances against our deferred tax assets resulting inadditional income tax expense in our consolidated statements of income. Inassessing the realizability of deferred tax assets, we consider whether it ismore likely than not that some portion or all of the deferred tax assets willnot be realized and consider the scheduled reversal of deferred taxliabilities, projected future taxable income, carry-back opportunities, andtax-planning strategies in making this assessment.  We also evaluate the realizability of thedeferred tax assets and assess the need for additional valuation allowancesquarterly.  No material changes have beenmade to the income tax policy during the second quarter of fiscal 2007.

*Stock-Based Employee Compensation*

In December 2004,the Financial Accounting Standards Board revised Statement of FinancialAccounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS123R”), requiring companies to record share-based payment transactions ascompensation expense at the grant date fair value. We adopted SFAS 123Reffective June 1, 2006, using the modified prospective transition method, whichrequires that compensation costs be recorded as earned for all unvested stockoptions outstanding at the beginning of the first fiscal year of adoption ofSFAS 123R based on the grant date fair value estimated in accordance with theoriginal provisions of SFAS 123 and for compensation costs for all share-basedpayments granted or modified subsequent to the adoption to be recorded,

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based on fairvalue estimated in accordance with the provisions of SFAS 123R. In accordancewith the modified prospective transition method, we have not restated thefinancial statements for prior periods and those statements do not include theimpact of SFAS 123R.

Total share-basedcompensation expense included in the Condensed Consolidated Statement of Incomefor the three months ended November 30, 2006 was $0.9 million. As a result ofadopting SFAS 123R on June 1, 2006, our pre-tax income for the three monthsended November 30, 2006 was $0.9 million lower, and our net income after taxwas $0.7 million lower than if we had continued to account for share-basedcompensation under APB No. 25. Basic and diluted earnings per share forthe quarter ended November 30, 2006 were lower by $0.01 due to the adoption ofSFAS 123R.  Total share-basedcompensation expense included in the Condensed Consolidated Statement of Incomefor the six months ended November 30, 2006 was $1.7 million. As a result ofadopting SFAS 123R on June 1, 2006, our pre-tax income for the six months endedNovember 30, 2006 was $1.7 million lower, and our net income after tax was $1.2million lower than if we had continued to account for share-based compensationunder APB No. 25. Basic and diluted earnings per share for the year endedNovember 30, 2006 were lower by $0.02 due to the adoption of SFAS 123R.

We estimate thefair value of stock options using a Black-Scholes valuation model, consistentwith the provisions of SFAS 123R, Securities and Exchange Commission StaffAccounting Bulletin 107 (“SAB 107”) and our prior pro-forma disclosures of netearnings, including the fair value of stock-based compensation. Key inputassumptions used to estimate the fair value of stock options include theexpected term until the exercise of the option, the expected volatility of ourstock, risk-free rates of return, option forfeiture rates, and dividend yields,if any. The expected term of the options is based on the simplified transitionmethod permitted by SAB 107. The expected volatility is derived from thehistorical volatility of our stock price on the NASDAQ market. The risk-freeinterest rate is the yield from a Treasury bond or note corresponding to theexpected term of the option. Estimated option forfeiture rates are based on ourhistorical forfeiture rates. Before the adoption of SFAS 123R, we used actualforfeiture rates to calculate compensation expense as allowed by SFAS 123 forthe disclosure footnote required under SFAS 148. We estimate that the impact ofthis change, from the actual forfeiture rates to the estimated forfeiture ratesas required under SFAS 123R, is not likely to have a material impact on ourfinancial statements as it is expected that we will continue to experience lowstaff turnover.  We have not paiddividends on our common stock and do not expect to pay dividends on our commonstock in the near future, and hence dividends are not considered in determiningthe fair value of stock options.

As of November 30,2006, there was $6.1 million of total unrecognized compensation cost related tonon-vested share based compensation arrangements. This cost is expected to berecognized through June 6, 2011 based on existing vesting terms with theweighted average remaining expense recognition period being approximately twoyears from November 30, 2006.

**ITEM 3.****                        Quantitativeand Qualitative Disclosures about Market Risk.**

Therehave been no material changes regarding the Company’s market risk positionsince the filing of its Annual Report on Form 10-K for the fiscal year endedMay 31, 2006.  For further detailsregarding the quantitative and qualitative disclosures about market risk, seeItem 7A-Quantitative and Qualitative Disclosures About Market Risk, containedin the Company’s Annual Report on Form 10-K for the fiscal year ended May 31,2006.

**ITEM 4.****                       ****Controlsand Procedures.**

As required by Rule 13a-15 under the SecuritiesExchange Act of 1934, an evaluation was carried out under the supervision andwith the participation of our management, including the Chief Executive Officerand Chief Financial Officer, of the effectiveness of the design and operationof our disclosure controls and procedures as of November 30, 2006. Based uponour evaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that, as of November 30, 2006, our disclosure controls and procedureswere effective to provide reasonable assurance that information required to bedisclosed in the reports that we file or submit under the Securities ExchangeAct of 1934 is recorded, processed, summarized and reported within the timeperiods specified in the applicable rules and forms, and that it isaccumulated and communicated to our management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure.

There were no changes in our internal control overfinancial reporting during the quarter ended November 30, 2006 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART II**

**OTHERINFORMATION**

**ITEM 1.****                        LegalProceedings.**

As previously reported, ourItalian subsidiary and Dr. Gioacchino De Chirico, the former President of thesubsidiary, are the subjects of criminal proceedings in Milan, Italy centeredon payments by several companies, including Immucor, to certain Italianphysicians allegedly in exchange for favorable contract awards by theirhospitals. Dr. De Chirico has been charged as the former President of thesubsidiary with directing a €13,500 payment to one physician and paymentstotaling approximately $47,000 to another physician, and the subsidiary hasalso been charged concerning the €13,500 payment under an Italian law holdingthe subsidiary responsible for actions allegedly taken by an officer. The SEChas issued a formal investigative order in these matters but has not expressedto us any conclusions about the ultimate outcome of its investigation. Apreliminary hearing is ongoing in Italy and is expected to conclude on or aboutJanuary 18, 2007.  We have negotiated asettlement with the Italian prosecutor on terms that will not have a materialadverse effect on our consolidated financial position, and expect the Italianjudge to rule on the settlement on or about January 18, 2007.  However, Dr. De Chirico has indicated heintends to contest any charges against him, and such proceedings and relatedappeals could continue for an extended period of time.  Both the Company and Dr. De Chirico intend toseek to settle the SEC investigation in the near term.  Except in connection with the proposedsettlement with the Italian prosecutor, no determination can yet be made as towhether, in connection with these circumstances, we will become subject to anyfines, penalties and/or other charges imposed by any governmental authority, orany other damages or costs that may arise in connection with thesecircumstances.

Between August 31 and October 19, 2005, a series often class-action lawsuits were filed in the United States District Court forthe Northern District of Georgia against us and certain of our current andformer directors and officers alleging violations of the securities laws. TheCourt has consolidated these cases for disposition under the caption In reImmucor, Inc. Securities Litigation, File No. 1:05-CV-2276-WSD, designated leadplaintiffs, permitted the filing of an amended consolidated complaint, andestablished a schedule for briefing our motion to dismiss the claims. Theconsolidated complaint, brought on behalf of a putative class of shareholderswho purchased Immucor stock between August 16, 2004 and August 29, 2005,alleges that the Company’s stock prices during that period were inflated as aresult of material misrepresentations or omissions in our financial statementsand other public announcements regarding our business. On March 7, 2006, wetimely moved to dismiss the consolidated complaint. On October 4, 2006,the Court denied our motion to dismiss. We have answered the consolidatedcomplaint denying liability and the case is proceeding through the discoveryphase under an order contemplating completion of all discovery by July 15,2007. The Court has made no determination whether any of the plaintiffs’ claimshave merit or should be allowed to proceed as a class action. Managementbelieves the claims are without merit, and intends to vigorously defend theCompany. While management does not currently expect these lawsuits tomaterially affect our financial condition or results of operations, there canbe no assurance of any particular outcome.

A description of our other material pending legalproceedings is included in Note 8 to the accompanying condensed consolidatedfinancial statements, which is incorporated herein by reference thereto. Otherthan as set forth above or as previously reported in our Annual Report on Form10-K for the fiscal year ended May 31, 2006, as filed with the SEC on August 1,2006, we are not currently subject to any material legal proceedings, nor, toour knowledge, is any material legal proceeding threatened against us. However,from time to time, we may become a party to certain legal proceedings in theordinary course of business. We do not believe any ongoing legal proceedings,including those summarized above, will have a material adverse effect on ourconsolidated financial position.

**ITEM 1A.****               RiskFactors.**

There have been no material changes from the riskfactors set forth in our Annual Report on Form 10-K for the year ended May 31,2006, as filed with the SEC on August 1, 2006. In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, Item 1A. “Risk Factors” in our Annual Report onForm 10-K which could materially affect our business, financial condition orfuture results. The risks described in our Annual Report on Form 10-K are notthe only risks facing our company. Additional risks and uncertainties not currentlyknown to us or that we currently deem immaterial also may have a materialadverse effect on our business, financial condition and/or operating results.

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**ITEM 2.****                        UnregisteredSales of Equity Securities and Use of Proceeds.**

The Company did not repurchase any shares of its Common Stock during thequarter ended November 30, 2006.  As ofNovember 30, 2006, an aggregate of 1,142,056 shares of Common Stock remainauthorized for repurchase under the Company’s stock repurchase programs.

**ITEM 4.****                        Submissionof Matters to a Vote of Security Holders**

The Company heldits Annual Meeting of Shareholders on November 15, 2006. The following is asummary of the matters voted on at that meeting:

The shareholdersvoted on the election of seven directors, all incumbent directors of theCompany, to serve until the Company’s next Annual Meeting of Shareholders oruntil their successors are duly elected and qualified. Each of these directorswas elected by the affirmative vote of a plurality of the votes cast at theAnnual Meeting. The number of shares cast for and the number of shareswithheld, with respect to each of these persons, were as follows:
| Name                      | ** ** | **Votes For** | ** ** | **Votes Withheld** | ** ** |
|---------------------------|------------|--------------------|------------|-------------------------|------------|
|                      |       |               |       |                    |       |
| Roswell S.  Bowers        |       | 57,448,094         |       | 8,177,200               |       |
| Dr. Gioacchino  DeChirico |       | 63,776,038         |       | 1,849,256               |       |
| Ralph A. Eatz             |       | 62,965,418         |       | 2,659,875               |       |
| Michael S.  Goldman       |       | 59,318,163         |       | 6,307,131               |       |
| John A. Harris            |       | 60,576,713         |       | 5,048,581               |       |
| Hiroshi Hoketsu           |       | 63,883,548         |       | 1,741,746               |       |
| Joseph E. Rosen           |       | 60,672,478         |       | 4,952,816               |       |

 

**ITEM 6.****                        Exhibits.**

The Company hasfiled the following exhibits with this report:

3.1                                 Amendedand Restated Articles of Incorporation

3.2                                 Amendedand Restated Bylaws (incorporated by reference to Exhibit 3.1 to Immucor, Inc.’sCurrent Report on Form 8-K on September 13, 2006).

31.1                           Certificationof Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*

31.2                           Certificationof Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*

32.1                           Certificationof Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of2002.*

32.2                           Certificationof Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of2002.*

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*                 Thecertifications contained in these exhibits are not “filed” for purposes ofSection 18 of the Exchange Act [15 U.S.C. 78r], or otherwise subject to theliability of that section.  Suchcertifications will not be deemed to be incorporated by reference into anyfiling under the Securities Act or the Exchange Act, except to the extent thatthe Company specifically incorporates them by reference.

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SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

IMMUCOR, INC.

(Registrant)
| Date:  | January 5, 2007 |                                                          | By: | /s/ Dr. Gioacchino DeChirico |   |
|--------|-----------------|---------------------------------------------------------------|-----|------------------------------|--------|
|   |            | Dr. Gioacchino DeChirico, Chief Executive Officer             |
|   |            | (on behalf of Registrant and as Principal Executive  Officer) |
|   |            |                                                          |
|   |            |                                                          |
| Date:  | January 5, 2007 |                                                          | By: | /s/ Patrick D. Waddy         |   |
|   |            | Patrick D. Waddy, Chief Financial Officer and  Secretary      |
|   |            | (Principal Financial and Accounting Officer)                  |
|        |                 |                                                               |     |                              |        |  |

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**EXHIBIT INDEX**
| Number | ** ** | **Description**                                                                                                                                    |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1    |       | Amended and Restated Articles of Incorporation                                                                                                     |
|   |       |                                                                                                                                               |
| 3.2    |       | Amended and Restated Bylaws (incorporated by  reference to Exhibit 3.1 to Immucor, Inc.’s Current Report on Form 8-K on  September 13, 2006). |
|   |       |                                                                                                                                               |
| 31.1   |       | Certification of Principal Executive Officer  Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*                                                      |
|   |       |                                                                                                                                               |
| 31.2   |       | Certification of Principal Financial Officer  Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*                                                      |
|   |       |                                                                                                                                               |
| 32.1   |       | Certification of Chief Executive Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.*                                              |
|   |       |                                                                                                                                               |
| 32.2   |       | Certification of Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.*                                              |

 

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*                 Thecertifications contained in these exhibits are not “filed” for purposes ofSection 18 of the Exchange Act [15 U.S.C. 78r], or otherwise subject to theliability of that section.  Suchcertifications will not be deemed to be incorporated by reference into anyfiling under the Securities Act or the Exchange Act, except to the extent thatthe Company specifically incorporates them by reference.

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