**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-K**

(Mark One)

**x**                      ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended May 31, 2007**

**OR**

**o**                         TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Forthe transition periodfrom                to                **

**Commission file number**0-14820

**IMMUCOR,INC.**

**(Exact name of registrant asspecified in its charter)**

| **Georgia**                                                     | ** ** | **22-2408354**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  Identification No.) |
| **3130 GATEWAY DRIVE,**                                         |       | **30091-5625**                        |
| **P.O. BOX  5625  Norcross, Georgia**                      |       | (Zip Code)                            |
| (Address of  principal executive offices)                       |       |                                  |

Registrant’s telephone number, including area code, is **(770) 441-2051**

Securities registered pursuant to Section 12(b) ofthe Act:

**NONE**

Securities registered pursuant to Section 12(g) ofthe Act:

**COMMON STOCK, $.10 PARVALUE**

(Title of Class)

**COMMON STOCK PURCHASERIGHTS**

(Title of Class)

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes o   No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act. Yes o   No x

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

Indicate by a check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer x |   | Accelerated  filer o |   | Non-accelerated filer o |   |
|--------------------------------|--------|---------------------------|--------|------------------------------|--------|

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o   No x

As of November 30,2006, the aggregate market value of the common stock held by non-affiliates ofthe registrant was $1,827,047,758, based upon the closing price on The NasdaqStock Market on that date. For the purpose of calculating this amount, allofficers and directors have been treated as affiliates.

As of June 30, 2007,there were 69,123,685 shares of common stock outstanding.

**DOCUMENTSINCORPORATED BY REFERENCE**

Part III - Portions ofthe Registrant’s definitive Proxy Statement relating to the registrant’s 2007Annual Meeting of Shareholders, to be filed with the Securities and ExchangeCommission within 120 days following the end of the Company’s fiscal year, areincorporated by reference in Part III of this Annual Report on Form 10-Kas indicated herein.

 

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**Tableof Contents**
| **Part I**   |   |                                                                                               |   |   |
|-------------------|--------|----------------------------------------------------------------------------------------------------|--------|--------|
| Item 1.           |   | Business                                                                                           |   | 3      |
| Item 1A.          |   | Risk Factors                                                                                       |   | 13     |
| Item 1B.          |   | Unresolved  Staff Comments                                                                         |   | 17     |
| Item 2.           |   | Properties                                                                                         |   | 17     |
| Item 3.           |   | Legal  Proceedings                                                                                 |   | 18     |
| Item 4.           |   | Submission  Of Matters To A Vote Of Security Holders                                               |   | 18     |
| **Part II**  |   |                                                                                               |   |   |
| Item 5.           |   | Market  For The Registrant’s Common Equity, Related Stockholder Matters And Issuer  Purchases |   | 19     |
| Item 6.           |   | Selected  Financial Data                                                                           |   | 22     |
| Item 7.           |   | Management’s  Discussion And Analysis Of Financial Condition And Results Of Operations        |   | 23     |
| Item 7A.          |   | Quantitative  And Qualitative Disclosures About Market Risk                                        |   | 38     |
| Item 8.           |   | Financial  Statements And Supplementary Data                                                       |   | 39     |
| Item 9.           |   | Changes  In And Disagreements With Accountants On Accounting And Financial Disclosure              |   | 71     |
| Item 9A.          |   | Controls  And Procedures                                                                           |   | 71     |
| Item 9B.          |   | Other  Information                                                                                 |   | 72     |
| **Part III** |   |                                                                                               |   |   |
| Item 10.          |   | Directors  And Executive Officers Of The Registrant                                                |   | 73     |
| Item 11.          |   | Executive  Compensation                                                                            |   | 73     |
| Item 12.          |   | Security  Ownership Of Certain Beneficial Owners And Management                                    |   | 73     |
| Item 13.          |   | Certain  Relationships And Related Transactions                                                    |   | 73     |
| Item 14.          |   | Principal  Accountant Fees And Services                                                            |   | 73     |
| **Part IV**  |   |                                                                                               |   |   |
| Item 15.          |   | Exhibits  And Financial Statement Schedules                                                        |   | 74     |
| Signatures        |   | 79                                                                                                 |
| Ex-21             |   | Subsidiaries Of  The Registrant                                                                    |   |   |
| Ex-23             |   | Consents Of  Experts And Counsel                                                                   |   |   |
| Ex-31.1           |   | Certificate Of  Principal Executive Officer Pursuant To Rule 13a-14(a)                        |   |   |
| Ex-31.2           |   | Certificate Of  Principal Financial Officer Pursuant To Rule 13a-14(a)                        |   |   |
| Ex-32             |   | Certifications  Required Under Section 906 Of The Sarbanes-Oxley Act Of 2002                  |   |   |

 

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**PART I**

**FORWARD—LOOKINGSTATEMENTS**

*This annual reporton Form 10-K contains forward-looking statements that are based uponcurrent expectations and are made pursuant to the Safe Harbor Provisions of thePrivate Securities Litigation Reform Act of 1995. Forward-looking statementsinclude, without limitation, any statement that may predict, forecast,indicate, or imply future results, performance, or achievements, and maycontain the words “believe”, “anticipate”, “expect”, “estimate”, “project”, “willbe”, “will continue”, “will likely result”, or words or phrases of similarmeaning. Forward-looking statements involve risks and uncertainties that maycause actual results to differ materially from the forward-looking statements.We intend that such statements be protected by the safe harbor created thereby.The risks and uncertainties are detailed from time to time in reports filed byus with the SEC, including Forms 8-K, 10-Q, and 10-K.*

*In addition, such statements are subject to the risksand uncertainties discussed in the “Risk Factors” section and elsewhere in thisannual report on Form 10-K. The risks included here are notexhaustive. Other sections of this report may include additional factors thatcould adversely affect our business and financial performance. Moreover, weoperate in a very competitive and rapidly changing environment. New riskfactors emerge from time to time, and it is not possible for management topredict all such risk factors, nor can it assess the impact of all such riskfactors on our business or the extent to which any factor, or combination offactors, may cause actual results to differ materially from those contained inany forward-looking statements. Given these risks and uncertainties, investorsshould not place undue reliance on forward-looking statements as a predictionof actual results.*

**Item 1.—Business.**

Founded in 1982, Immucor, Inc.,a Georgia corporation (“Immucor” or the “Company”), develops, manufactures andsells a complete line of reagents and automated systems used primarily byhospitals, clinical laboratories and blood banks in a number of tests performedto detect and identify certain properties of the cell and serum components ofhuman blood prior to blood transfusion. We continue to place increasingemphasis on the development and sale of instruments and instrument systems thatuse our proprietary reagents, while promoting increased sales of ourtraditional reagent product line.

**Developments duringFiscal Year 2007**

*Launchof Galileo® EchoTM—In*June 2007 we received U.S.Food and Drug Administration (“FDA”) clearance to market our Galileo® EchoTMinstrument in the United States. The EchoTM was also recently registered as a CEmarked IVD device for distribution in Europe. The EchoTM has many of thefeatures of the Galileo®, our automated assay instrument which caters to largecustomers, including a broad test menu and quick turnaround time. We expect theEchoTM to appeal to the small- to medium-sized hospital market, the largestsegment of our customers, numbering approximately 5,000 to 6,000 worldwide.

*FurtherMarket Penetration by the Galileo®—In*fiscal year2007, we continued to increase our market share by signing contracts to sellour Galileo® instrument to several large, prestigious hospitals andlaboratories which previously had been using our competitors’ products. Wereceived 114 purchase orders for Galileo® instruments in fiscal 2007. As of May 31,2007, we had received 481 purchase orders in total for Galileo® instrumentsworldwide, including 286 in Europe, 193 in North America, and 2 in Japan, and423 of these instruments were generating reagent revenues.

*Improved margins**—*In fiscal year 2007, we remained focused on the executionof our Customer Loyalty pricing strategies which are detailed below under “Strategy”.We improved our profit margins as a result of implementation of thesestrategies and conversion of selected group purchasing contracts tostandardized pricing.

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**Industry**

We are part of the immunohematology industry, whichgenerally seeks to prevent or cure certain diseases or conditions through thetesting and transfusion of blood and blood components. In the U.S., the FDAregulates the transfusion of human blood as a drug and as a biological product.The FDA regulates all phases of the immunohematology industry, including donorselection and the collection, classification, storage, handling and transfusionof blood and blood components. The FDA requires all facilities that manufactureproducts used for any of those purposes, and the products themselves, to beregistered or licensed by the FDA. See “Regulation.”

The principal components of blood are plasma (thefluid portion) and red cells. Blood also contains antibodies and antigens. Antibodiesare proteins that are naturally produced by the human body in response to theintroduction of foreign substances (antigens). Antigens are substances thatstimulate the production of antibodies. Red blood cells, which transport oxygenfrom the lungs to other parts of the body and return carbon dioxide to thelungs, are categorized by four blood groups (A, B, AB and O) and two bloodtypes (Rh positive and Rh negative), based on the presence or absence ofcertain antigens on the surface of the cells. It is crucial that the healthcare provider correctly identify the antibodies and antigens present in patientand donor blood. For example, if a donor’s red blood cells contain antigensthat could react with the corresponding antibody in the patient’s plasma, thetransfusion of the red blood cells may result in the potentiallylife-threatening destruction of the transfused red blood cells.

Because of the critical importance of matching patientand donor blood, highly skilled and educated technologists in hospitals, bloodbanks and laboratories generally perform procedures for testing compatibility.At present, the majority of these tests are performed manually, making bloodtesting laboratories much more labor-intensive than other types of testinglaboratories. In recent years, most companies in the blood banking industry,including Immucor, have invested in automation and developed new technologiesto reduce the labor component of blood testing, and thereby increase theirmarket share and profitability. We believe that our blood bank automation andsolid phase testing systems improve test results and reduce time necessary toperform certain test procedures, thereby offering a more cost-effective,accurate and efficient alternative to our customers. See “Instruments andInstrument Systems” below.

We estimate the market fortraditional blood bank reagents (those used in manual testing) at approximately$700 to $800 million for North America, Western Europe and Japan, and webelieve this market is relatively mature given current technology.

**Strategy**

Our goal is toincrease our share of the worldwide market by automating the blood banklaboratory and firmly establishing ourselves as the world leader in blood bankautomation. In order to implement this strategy, we intend to:

*i) Increase Instrument Placements—*Ourstrategy is to strengthen our leadership position in the automation of bloodbank testing by continuing to expand our base of installed instruments withemphasis on markets in the United States, Western Europe, Canada and Japan. Weoffer customers a selection of automated analyzers, marketed as ScalableSolutions, which address the various needs of low, medium, and high-volumetesting facilities. We use a “razor/razorblade” business model since ourinstruments are designed to operate only with our proprietary reagents. Once acustomer procures an instrument from us, the customer is likely to continue touse our proprietary reagents for all of its needs. We offer several instrumentprocurement options to place more instruments in the market, including directsales and rentals.

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*ii) Convert to Standardized Pricing and PromoteCustomer Loyalty—*We continue to follow our pricing strategyto ultimately convert all major group-purchasing contracts to the standardizedtier pricing we use for other customers. We also continue to offer a CustomerLoyalty Program, which partially protects our loyal customers from the effectsof price increases. We expect these pricing adjustments will continue to have afavorable impact on our financial performance in the near term.

*iii) Maximize Revenue Stream per InstrumentPlacement—*Each instrument placed typically provides us with arecurring revenue stream through the sale of reagents and supplies. OurGalileo® and EchoTM blood bank testing systems operate exclusively with ourproprietary reagent lines. These reagents command a premium price overtraditional products. The average annual revenue per Galileo® placement hasaveraged over $100,000. We continue to develop new reagent applications andupgrade system software and hardware in order to expand instrument test menus,thereby increasing reagent usage per placement.

*iv) DevelopNew and Enhanced Products—*We continually seek to improveexisting products and develop new products to increase our market share andrevenues. In the past ten years we have successfully introduced and commercializeda number of automated and semi-automated analyzers and, in June 2007,received clearance to market our Galileo® EchoTM in the U.S. All theseinstruments are designed to operate exclusively with our proprietary solidphase Capture assays. Our current research and development efforts are directedtowards introducing a new version of the Galileo® and expanding the offering ofreagent tests for use on the Galileo® and the EchoTM.

**ProprietaryTechnology Platform**

*ManualTesting.**  *Undertraditional agglutination blood testing techniques, the technologist mixesserum with red blood cells in a test tube, performs several additionalprocedures, and then examines the mixture to determine whether there has beenan agglutination reaction. A positive reaction will occur if the cells aredrawn together in clumps by the presence of corresponding antibodies andantigens. However, since the mixture is a fluid, it is sometimes difficult forthe technologist to determine whether a positive reaction has occurred.

Due to the critical importance of matching patient anddonor blood, testing procedures using agglutination techniques are usuallyperformed manually by highly educated technologists. Depending on the manualtest method used (as well as the technical proficiency of the person performingthe test), the process can take from 30 minutes to an hour, and if the testresults are ambiguous, the entire process may need to be repeated. Thus, asignificant amount of expensive labor is involved in manual agglutinationtesting.

*SolidPhase Technology.**  *Ourautomated reagent products are part of a proprietary solid phase blood testsystem, in which one of the reactants (either an antigen or an antibody) isapplied or bound to a solid support like a microtitration plate (the solid phase),and the bound reactant captures other reactants in a fluid state and bindsthose fluid reactants to the solid phase. In these test systems, patient ordonor serum or plasma is placed in the well of a plastic microtitration plateon which antigen or antibody reactants have been bound. Special proprietaryindicator cells manufactured by Immucor are then added. Positive reactionsadhere to the well as a thin layer and negative reactions do not adhere butsettle to the bottom as a small cell button. These reactions occur rapidly andresult in clearly defined, machine-readable test results that are often easierto interpret than the subjective results sometimes obtained from existingagglutination technology. Also, in batch test mode these solid phase test resultscan generally be obtained in substantially less time than by traditionalagglutination techniques.

We have obtained FDA clearance for sale of five testsystems using our solid phase technology: a platelet antibody detection system,Capture-P; a red cell antibody detection system, Capture-R; Capture-R 

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Select, used for antibodyscreening, identification, phenotyping, cross matching and in the weak D test;and two infectious disease tests, Capture-CMV and Capture-S.

Labor costs are thelargest component of the total cost of operating a hospital blood bank. Webelieve our solid phase blood testing system improves test results and,particularly when used on our automated blood analyzers, significantly reducesthe time necessary to perform many blood and blood component tests, therebymaking significant labor cost savings possible.

**Reagents**

Most of our current reagent products are used in testsperformed prior to blood transfusions to determine the blood group and type ofpatient and donor blood, in the detection and identification of blood groupantibodies, in platelet antibody detection and in prenatal care. The FDArequires the accurate testing of blood and blood components prior totransfusions using only FDA licensed reagents.

Thefollowing table lists the products sold by us, most of which are manufacturedby or exclusively for us:

| Product Group                              | ** ** | ** **                                                                                                                                                                                                  | ** ** | **Principal Use** |
|-------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| ABO Blood Grouping                              |       | Detect and identify ABO  antigens on red blood cells in order to classify a specimen’s blood group as  either A, B, AB or O.                                                                           |
| Rh Blood Typing                                 |       | Detect Rh antigens in  order to classify a specimen as either Rh positive or Rh negative,  and to detect other Rh-hr antigens.                                                               |
| Anti-human Globulin  Serums (Coombs Serums)     |       | Used with other products  for routine cross matching, and antibody detection and identification; allows  a reaction to occur by bridging between antibodies that by themselves could  not cause a reaction. |
| Reagent Red Blood Cells                         |       | Detect and identify  antibodies in blood, confirm ABO blood grouping results and validate the  performance of anti-human serum in the test system.                                                          |
| Rare Serums                                     |       | Detect the presence or  absence of rare red cell antigens.                                                                                                                                                  |
| Antibody Potentiators                           |       | Increase the sensitivity  of antigen-antibody tests.                                                                                                                                                        |
| Quality Control Systems                         |       | Daily evaluation of the  reactivity of routine blood testing reagents.                                                                                                                                      |
| Monoclonal (Hybridoma)  Antibody-based Reagents |       | Detect and identify ABO  and other antigens on red blood cells.                                                                                                                                             |
| Technical Proficiency  Systems                  |       | Reagent tests used to  determine technical proficiency and provide continuing education for  technical staff.                                                                                               |
| Fetal Bleed Screen Kit                          |       | Detect excessive  fetal-maternal hemorrhage in Rh-negative women.                                                                                                                                           |
| Capture-P                                       |       | Detect platelet  antibodies.                                                                                                                                                                                |
| Capture-R                                       |       | Detect and identify  unexpected IgG antibodies to red blood cells.                                                                                                                                          |
| Capture-CMV                                     |       | Detect antibodies to  cytomegalovirus.                                                                                                                                                                      |
| Capture-S                                       |       | Detect antilipid  antibodies for syphilis screening.                                                                                                                                                        |
| Capture-R Select                                |       | Used for Antibody screening, identification,  phenotyping, cross matching and in the weak D test.                                                                                                           |

 

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**Instruments andInstrument Systems**

The blood banking industry today is stilllabor-intensive, and we believe our instruments and instrument systemssignificantly reduce the amount of time required to perform routine bloodcompatibility tests.

*GALILEO®**—*The Galileo® provides hospitals, clinical referencelaboratories and blood donor centers a fully-automated solution to perform allthe routine blood bank tests, including blood grouping, antibody screening,crossmatch, direct antiglobulin test (DAT), antibody identification,cytomegalovirus (CMV) andsyphilis screening. A high throughput instrument, Galileo® can process up to224 different samples at once, and can perform approximately 70 type-and-screen tests an hour. The Galileo® uses our proprietary Capture reagent producttechnology and is manufactured exclusively for us by Stratec Biomedical AG.

*GALILEO®ECHOTM**—*The instrumentwas cleared for sale in the U.S. in June 2007 and was also recentlyregistered as a CE marked IVD device for distribution in Europe. The EchoTM hasmany of the features of the Galileo® including a broad test menu and quickturnaround time with a throughput of 20 different samples at a time, and canperform approximately 14 type-and-screen tests an hour. We expect the EchoTM toappeal to the small- to medium-sized hospital market, the largest segment ofour customers, numbering approximately 5,000 to 6.000 worldwide.

*CAPTUREWORKSTATION (Semi-automated Processor)—The*Workstationhas semi-automated components for performing our proprietary Capture assaysmanually. It is marketed as a back-up system for our fully-automated Galileo®and EchoTM, or as a stand alone instrument for small laboratories looking tostandardize testing.

*ROSYSPlato (Microplate Liquid Handler and Sample Processor)**—*The ROSYS Plato provides medium-sized donor centers,clinical reference laboratories and large hospital transfusion laboratorieswith automated liquid and sample handling for processing of microtitrationplates, and also uses our proprietary solid phase Capture assays. Our salesstrategy is to switch the customers who are using ROSYS Plato to ourfully-automated Galileo® system.

*ABS2000*(*First Generation Blood Bank System)—*Thisautomated, “walk-away” blood bank analyzer—our first automated blood bankinstrument - is a carousel-based batch analyzer using our proprietary Capturereagent product technology to perform blood typing and antibody screening. Oursales strategy is to switch the customers who are using ABS2000 to ourfully-automated EchoTM system.

**Collagen**

Since 2004, we haveproduced human collagen mesh at our Houston facility for Inamed Corporation, aglobal healthcare company and a market leader in the popular dermal fillermarket, and now a wholly-owned subsidiary of Allergan, Inc. We alsoproduce NouriCel®, a by-product of the human collagen production process. Theseproducts form a very small part of our business with fiscal 2007 revenue of$4.1 million. We have terminated the Inamed contract effective July 2008due to our plan to close our Houston facility.

**Products underDevelopment**

We continually seek toimprove our existing products and to develop new ones in order to increase ourmarket share. Prior to their sale, any new product requires licensing orpre-market clearance from the FDA. As of May 31, 2007, we employed 25technical personnel whose specific duties are to improve existing products anddevelop new products. We also have established relationships with otherindividuals and institutions that provide similar services, and we expect thatwe will continue to form and maintain such relationships. We intend to continuefocusing our product development efforts primarily in blood 

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bankautomation, solid phase technology and in areas that may also be useful in thedevelopment of these products. For the fiscal years ended May 31, 2007,2006 and 2005, we spent approximately $6.4 million, $4.6 million and $4.5million, respectively, for research and development. We may in the futureacquire related technologies and product lines, or the companies that own them,for growth and to improve our ability to meet the needs of our customers.

*Blood Bank Automation—We*plan to continue development of the Galileo® automated blood bank instrument,including new assays, software and hardware improvements. New assays are alsoin development for the Galileo® EchoTM platform, and planning is also underwayfor future software and hardware improvements.

*KODE Biotech LimitedTechnology Licensing Agreement**—*InJuly 2005, we signed a comprehensive technology licensing agreement withKODE Biotech Limited (formerly Kiwi Ingenuity Limited) to use its KODETMtechnology platform to create a quality control system for blood group typing.KODE Biotech Limited, in association with the Auckland University of TechnologyBiotechnology Research Institute, has developed a range of KODETM technologyplatforms which allow for the attachment of molecules to the outside of cells,thereby resulting in a quality control system for blood grouping.

**Marketing and Distribution**

Our potential U.S.customers are blood banks, hospitals and clinical laboratories. We maintain anactive client base of over 7,500 customers worldwide, and no single customerpurchases in excess of 5% of our current annual sales volume. We believe thereis a slight amount of seasonality to our sales activity as fewer donations andelective surgical procedures are performed in our first quarter (June-August) andthird quarter (December-February).

We market and sell ourproducts directly through 158 sales, marketing and distribution personnelemployed by us in the U.S., Canada, Europe and Japan. As of May 31, 2007,besides the 158 personnel employed by us, we use eight sales agents in Italy.We have hired highly experienced personnel with in-depth knowledge of the bloodbank diagnostic business. We also conduct extensive training of our sales forceand sponsor workshops in the U.S., Europe, Latin America, and Asia forcustomers and potential customers.

There is no materialbacklog of reagent revenues. At May 31, 2007, as required by U.S.generally accepted accounting principles, we had not recognized revenue frominstrument sales contracts which had five-year price protection to customers onour reagents amounting to approximately $19.7 million. In fiscal year 2007,approximately 71% of consolidated net sales were generated in the U.S. Withexpected penetration of markets in the rest of the world, the percentage contributionfrom sales outside the United States is likely to increase in the future.

**Suppliers**

We obtain raw materialsfrom numerous outside suppliers. We are not dependent on any single supplier,except for two manufacturers of instrumentation, Bio-Tek Instruments, Inc.for the Galileo® EchoTM and Stratec Biomedical AG for the Galileo®. We also havea joint manufacturing arrangement with Celliance Ltd. (a subsidiary ofMillipore Corporation), for some of our monoclonal antibody-based products. Webelieve that our business relationship with our suppliers is excellent. Webelieve that if the supply of instrumentation were interrupted, alternatesuppliers could be found, but the commencement of supply could take one to twoyears.

Certain of our productsare derived from blood having particular or rare combinations of antibodies orantigens, which are found in a limited number of individuals. To date, we havenot experienced any major difficulty in obtaining sufficient quantities of suchblood for use in manufacturing our products, but there can be no assurance thata sufficient supply of such blood will always be available to us.

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**Regulation**

The manufacture and sale of blood banking products isa highly regulated business and is subject to continuing compliance withmultiple U.S., Canadian, European, Japanese and other country-specificstatutes, regulations and standards that generally include licensing, producttesting, facilities compliance, product labeling, post-market vigilance andconsumer disclosure.

In the U.S., an FDA facility license is issued for anindefinite period of time, subject to the FDA’s right to revoke the license. Aspart of its overview responsibility, the FDA makes plant and facilityinspections on an unannounced basis. Further, a sample of each production lotof many of our products must be submitted to and cleared by the FDA prior totheir sale or distribution. In 2006, we consolidated the Gamma Biologicals, Inc.,Houston facility (U.S. Government Establishment License No. 435) under theImmucor, Inc. License No. 886, and the Houston facility now operatesunder the Immucor, Inc. name.

In addition, each product manufactured by us issubject to formal product submissions and review processes by the FDA and otherregulatory bodies, such as Health Canada, a European recognized Notified Bodyand the Japanese Ministry of Health prior to authorization to market. Significantchanges to our products or facilities can require additional submission andreview prior to implementation.

For example, we hold several FDA product licenses tomanufacture blood-grouping reagents, anti-human globulin reagents and reagentred blood cells. We must submit biological product license applications or 510(k) pre-marketnotifications to the FDA to obtain product licenses or market clearance for anew product or instrument. To accomplish this, we must submit detailed productinformation to the FDA, perform a clinical trial of the product, anddemonstrate to the satisfaction of the FDA that the product meets certainefficacy and safety standards. There can be no assurance that any futureproduct licenses or instrument clearances will be obtained by us.

In fiscal 2006, all our manufacturing facilitiesworldwide successfully transitioned their quality management system from ISO13485:1996 to the next revision of the standard, ISO 13485:2003. This is aninternationally recognized standard and certification is required in order tocontinue product distribution in key markets such as Europe and Canada. Inaddition, to continue marketing our products to the European Union, we arerequired to maintain certification under the EC Full Quality Assurance SystemAssessment in accordance with the requirements of Annex IV of the IVD MedicalDevices Directive 98/79/EC. This certification authorizes the use of the CEmark on our products that allows products free access to all countries withinthe European Union. We successfully completed certifications for CE marking ofall products manufactured for the European market.

In addition to the U.S., Europe, Canada and Japan,there are multiple countries worldwide that also impose regulatory barriers tomarket entry. We continue to maintain product registrations and approvalsnecessary to maintain access to foreign markets.

In North America, we havehired and retained several employees who are highly experienced in FDA andother regulatory authority compliance, and we believe that our manufacturingand on-going quality control procedures conform to the required statutes,regulations and standards.

**Environmental**

We generate hazardouswaste and have a U.S. Environmental Protection Agency identification number.All hazardous material is manifested and disposed of properly. We are incompliance with applicable portions of the federal and state hazardous wasteregulations and have never been a party to any environmental proceeding.

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**Patents, Trademarksand Royalties**

Since 1986, the U.S. Patent Office has issued to ussix patents pertaining to our solid phase technology, one of which expired in2003 and another in September 2006. The remaining four patents expire in2007, 2008, 2010 and 2012. We believe the remaining patents, together with ourtrade secrets and know-how, will prevent any current or future competitors fromsuccessfully copying and distributing our solid phase products. In addition,the requirement to register products with the FDA and have them produced at anFDA-licensed facility acts as an additional barrier to entry into this market.

Our solid phase technology was initially acquired in1983 from five researchers at the Community Blood Center of Greater Kansas City(“Blood Center”) pursuant to an agreement that terminated on September 8,2006. Under that agreement we have expensed the Blood Center royalties equal to4% of the net sales from products using the solid phase technology, includingfor the fiscal years ended May 31, 2007, 2006 and 2005 approximately$237,000, $848,000, and $523,000, respectively.

We have registered the trademark “Immucor” and “Gamma”and several product names, such as “ABS2000”, “ImmuAdd”, “Capture”, “Capture-P”,“MCP”, “Capture-R”, “Ready-Screen”, “Ready-ID”, “Capture-CMV”, “Galileo” and “ECHO”.Dominion Biologicals, Limited, our wholly-owned Canadian subsidiary in Halifax,Nova Scotia, has registered the trademark “NOVACLONE”.

Through the acquisition ofthe BCA blood bank division of Biopool International, Inc. (now known asTrinity Biotech Manufacturing Ltd.), we acquired several registered trademarksbut produce only one of the products with the registered trademark “RESt”. Wecontinue to distribute four products manufactured by Trinity BiotechManufacturing Ltd.

*Trademarks Used inthis Report*

We claim rights to the following trademarks used inthis report:

ABS2000®Capture®Capture-CMV®Capture-P®Capture-R®EchoTMGalileo®Gamma®ImmuAdd®Immucor®MCP®NOVACLONE®Ready-ID®Ready-Screen®RESt®

This report also refers to the following products forwhich trademarks are claimed by other companies:

“KODE” (KODE Biotech Limited)“NouriCel” (SkinMedica, Inc.)“ROSYS Plato” (Qiagen, Inc.)

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**Competition**

Competition in the immunohematology industry is basedon quality of product, pricing, talent of the sales forces, ability to furnisha range of quality existing and new products, reliable technology, skilled andtrained technicians, customer service and continuity of product supply. In thepast several years, we have maintained our overseas sales and increased ourdomestic reagent market share. We believe that this is due to our emphasis onproduct quality, innovative automated systems, introduction of new andspecialty products, customer service and training.

In the United States, Ortho-Clinical Diagnostics (“Ortho”),a Johnson & Johnson company, is our main competitor with licenses tomanufacture an extensive line of blood banking reagents. A small line ofreagent red blood cells manufactured in Europe by Medion Diagnostics GmbH isdistributed by Olympus America, Inc. (“Olympus”) in the U.S. market, butthis product line lacks many traditional reagents required by the blood bankindustry. We have been the North American market leader since 1999. We seek toincrease our worldwide market share through the use of our experienced directsales force and expansion of our product line based on our blood bankautomation strategy and solid phase technology.

Our Galileo® instrument was introduced to the majorEuropean countries in 2002 and in the U.S. market in 2004. Throughput forABO/Rh and antibody screening on the Galileo® is 70 tests per hour. This is animportant feature for the European market where most of the laboratories areopen for one shift per day and the testing is condensed into an eight-hourtesting period versus a 24-hour testing period in the United States. Webelieve that none of the instruments currently marketed are as fast as theGalileo®. The instrument speed coupled with our broad test menu gives theGalileo® the advantage in the U.S. market as well.

In 2003, Ortho, through its Micro Typing Systemssubsidiary, began marketing the Ortho ProVueTM in the U.S. Throughput for ABO/Rhand antibody screening is believed to be eight to ten tests per hour and ituses the proprietary ID-Micro TypingTM Gel TestTM for both ABO/Rh type andantibody screen. Ortho also competes in the European market with the AutoVueTMinstrument with a throughput for ABO/Rh and antibody screening of approximately25 tests per hour. This system, which has been on the market for about 10years, uses Ortho Biovue column agglutination. The only Immucor instrumentswith which the ProVueTM and the AutoVueTM currently competes directly are theABS2000 and the newly developed Galileo® EchoTM. We believe the EchoTM andABS2000’s use of traditional reagents for ABO and Rh type combined with ourproprietary technologies for antibody screen offers a competitive priceadvantage over these instruments.

Olympus has also developed an automated analyzer forthe blood donor market. The instrument, known as PK7200, has been on the marketfor a number of years. The instrument performs only ABO/Rh testing, CMV andsyphilis screening, and does not perform antibody screening. In May 2007,Olympus received FDA clearance to market their next generation instrument,PK7300 which performs donor ABO/Rh grouping, including Weak D testing, and Rhand Kell phenotyping. Due to lack of a broad menu and their inability topenetrate the market, we do not believe the Olympus PK instruments will have amaterial adverse effect on our revenue or instrument strategy in North America.

In 2005, Biotest AG, a German pharmaceutical anddiagnostic company (“Biotest”) received U.S. clearance to market the Tango, afully-automated instrument to perform ABO/Rh and antibody screening. The Tangohas been sold in Europe and other markets by Biotest for several years, but hasnot been favorably accepted in the U.S. market.

Biotest presently has FDA licenses to sell six reagentproducts in the U.S., as well as the special reagents used by the Tango. Webelieve that Biotest plans to introduce a complete line of traditional reagentsto the U.S. market and that it will take between 6 to 12 months for Biotest tocomplete that line.

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DiaMed AG, a Swiss company, has marketed in Europe theWalk Away Diana instrument that is manufactured by Grifols, a Spanish company. Thissystem uses DiaMed’s proprietary gel cards and is the same instrument that ismarketed as the ProVueTM by Ortho in the U.S. DiaMed has recently introduced thefully-automated Techno instrument for larger laboratories, which is similar inperformance to the Ortho AutoVue, as well as the semi-automated Swinginstrument. These instruments also use DiaMed’s proprietary gel cards. It istoo early to predict how successful they will be. Grifols produces a line ofgel cards which are sold principally in Spain, Portugal and Latin America. Thesecards will probably be more widely marketed as DiaMed’s patents for the geltechnology continue to expire.

Bio-Rad Laboratories, a U.S. company, recentlyannounced an agreement to acquire DiaMed. If that transaction closes, theCompany believes Bio-Rad could become a significant competitor in Europe assoon as the transaction closes, and could become a significant competitor inNorth America within five years.

We jointly manufacture some of our monoclonalantibody-based products with Celliance Ltd (“Celliance”) (a subsidiary ofMillipore Corporation) under a 5-year contract expiring in January 2008.Under a former provision of the contract, Celliance was prohibited fromactively selling its branded finished products to end users in North Americaand Western Europe. However, this restriction terminated in July 2006 uponthe sale of Celliance’s parent corporation. However, we believe lifting of thisrestriction is not likely to have any material impact on our business.

We believe that we arewell positioned to compete favorably in the blood bank business principallybecause of the completeness of our product line, reliability and quality of ourproducts, competitive pricing structure and introduction of new innovativeproducts such as blood bank automation coupled with our Capture products (seeReagents, and Instruments and Instrument Systems). Continuing research effortsin the area of blood bank automation (see Products under Development), theexperience and expertise of our sales personnel (see Marketing andDistribution) and the expertise of our technical and customer support staffwill enable us to retain our competitive advantage in the market.

**FinancialInformation about Geographic Areas**

We conduct our business globally with manufacturingfacilities in the United States and Canada. We have sales operations in severalEuropean countries and Japan. Roughly 30% of our revenues are generated by ourinternational affiliates. In addition to the potentially adverse impact offoreign regulations, see “Regulations,” we may also be affected by toughermarket conditions which could impact our revenues and profit margins. Also,there may be adverse consequences from fluctuations in foreign currencyexchange rates, which may affect the competitiveness of our products and ourprofit margins, because our affiliates sell our products predominantly in localcurrencies, but our cost structure is weighted towards the U.S. dollar.

For financial informationabout geographic areas, see Note 15 “Domestic and Foreign Operations” of thenotes to the consolidated financial statements.

**Employees**

At May 31, 2007, together with our subsidiaries,we had a total of 610 full-time employees (an increase of 47 during the fiscalyear, principally sales and service personnel added in the U.S. in anticipationof the launch of the EchoTM). We had 402 full-time employees in the U.S., ofwhom 65 were in sales and marketing, 275 were in manufacturing, research anddistribution, and 62 were in administration. In Germany, Portugal, Italy,Spain, Canada, Belgium and Japan, we had 208 full-time employees, 93 of whomworked in sales and marketing, 75 in manufacturing, research and distribution,and 40 in administration.

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As in the past, weexperienced a low staff turnover rate in fiscal 2007. There are no Companyemployees that are represented by a union. We consider our employee relationsto be good.

**AvailableInformation**

We file reports, proxystatements and other information under the Securities Exchange Act of 1934, asamended (the “1934 Act”) with the Securities and Exchange Commission (the “Commission”).Electronic versions of our annual report on Form 10-K, quarterlyreports on Form 10-Q, current reports on Form 8-K and anyamendments to these reports filed or furnished with the SEC may be accessedfree of charge through our website at www.immucor.com under “About Us/InvestorInformation/SEC Filings”. The information may also be accessed at the Commission’sweb site at (www.sec.gov).

**Item 1A.—RiskFactors.**

*We are subject to various risks and uncertaintiesrelating to or arising out of the nature of our business and general business,economic, financing, legal and other factors or conditions that may affect us.We provide the following cautionary discussion of risks and uncertaintiesrelevant to our business, which we believe are factors that, individually or inthe aggregate, could have a material and adverse impact on our business,results of operations and financial condition, or could cause our actualresults to differ materially from expected or historical results. You shouldunderstand that it is not possible to predict or identify all such factors.Consequently, our business operations could also be affected by additionalfactors that are not presently known to us or that we currently consider to beimmaterial to our operations.*

***Risks Relating to Our Company***

**A catastrophic event at our Norcross, Georgiafacility would prevent us from producing many of our reagent products.**

Substantially all ourreagent products are produced in our Norcross facility. While we have reliablesupplies of most raw materials, our reagent production is highly dependent onthe uninterrupted and efficient operation of the Norcross facility, and wecurrently have no plans to develop a third-party reagent manufacturingcapability. Therefore, if a catastrophic event occurred at the Norcrossfacility, such as a fire or tornado, many of those products could not beproduced until the manufacturing portion of the facility was restored andcleared by the FDA. We maintain a disaster plan to minimize the effects of sucha catastrophe, and we have obtained insurance to protect against certainbusiness interruption losses. However, there can be no assurance that suchcoverage will be adequate or that such coverage will continue to remainavailable on acceptable terms, if at all.

**Unforeseen product performance problems couldprevent us from selling the affected products or even result in a recall ofpreviously-placed products.**

Our instruments, reagentsand other products are subject to regulation by governmental and privateagencies in the United States and abroad, which regulate the testing,manufacturing, packaging, labeling, distribution and marketing of medicalsupplies and devices. All of our products receive all required clearances fromthose agencies before we sell them. However, if any of our products failed toperform in the manner represented during this clearance process, particularlyconcerning safety issues, one or more of these agencies could require us tocease selling that product, or even recall previously-placed products, and toresubmit the product for clearance before we could sell it again. Depending onthe product, and the availability of acceptable substitutes, such an agencyaction could result in significantly reduced revenues and earnings for anindefinite period.

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**Anyunforeseen delays or costs relating to the planned closure of our Houstonfacility or difficulties in consolidating our manufacturing facilities couldadversely affect our business and operating results.**

In November 2005, weannounced plans to close our manufacturing facility located in Houston, Texasand to consolidate production at the facility into our Norcross, Georgia andHalifax, Nova Scotia manufacturing facilities. We expect that process to becompleted by December, 2007. Any major delays, including regulatory delays, orhigher than expected consolidation costs could limit or delay realization ofthe increased efficiencies that we expect to realize from this closure andcould negatively impact our operating results.

**We are highly dependent on our senior managementteam and other key employees, and the loss of one or more of these employeescould adversely affect our operations.**

Our success is dependentupon the efforts of our senior management and staff, including sales, technicaland management personnel, many of whom have very specialized industry andtechnical expertise that is not easily replaced. If key individuals leave us,we could be adversely affected if suitable replacement personnel are notquickly recruited. Our future success depends on our ability to continue toattract, retain and motivate qualified personnel. There is intense competitionfor medical technologists and in some markets there is a shortage of qualifiedpersonnel in our industry. If we are unable to continue to attract or retainhighly qualified personnel, the development, growth and future success of ourbusiness could be adversely affected.

**Our customers and potential customers may chooseto delay significant capital expenditures, which could have an adverse effecton the sales of our instruments.**

For many of the hospitals,blood banks and other institutions to which we offer our products, the purchaseof one of our instrument systems represents a significant capital expenditure. Someof these customers may choose to delay significant capital expenditures such asthe purchase of an instrument from us because of limited capital resources orfor other reasons. Because our business operates on a “razor/razorblade” model,any delays in purchasing our instruments would also result in delayed purchasesof our proprietary reagents. As a result, our revenues and financial results couldbe adversely affected.

**If customers delay integrating our instrumentsinto their blood banking operations, our operating results could be negativelyimpacted.**

From time to time in thepast, certain of our customers have experienced delays between the purchase ofour instruments and the successful integration of these instruments into theirexisting operations. These delays may be due to a number of factors, includingstaffing and training issues and interfacing our instruments with the customer’scomputer systems. As a result, we have experienced, with certain customers,significant delays between the time that an instrument is purchased and thetime that such instrument is brought “on line” by the customer. We have takensteps in the design of our next generation instruments intended to make iteasier for our customers to integrate the instruments into existing operations.However, because our business operates on a “razor/razorblade” model, suchintegration delays could also result in delayed purchases of our proprietaryreagents.

**Our business is concentrated in North America andin order to continue to successfully grow our business, we must expand sales ofour products outside North America.**

In recent yearsapproximately 80% of our revenues and 95% of our net income were generated fromsales in North America, and these sales have been at increasingly larger grossmargins. These results could be significantly and negatively impacted ifcurrent or new competitors increased their competition based on price, therebypotentially reducing our market share and gross margins. In order to mitigatethat risk, we must expand our sales profitably outside North America. Anintegral part of our strategy is to place our 

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instrumentsin additional markets, particularly in Japan. In furtherance of this strategy,we recently acquired the blood banking business of our former distributor inJapan. Our ability to grow successfully in Japan and other markets depends inpart on our ability to achieve product acceptance and customer loyalty in thesemarkets. Additionally, our operations in foreign countries present certainchallenges and are subject to certain risks not necessarily present in ourdomestic operations, such as fluctuations in currency exchange rates, shippingdelays, changes in applicable laws and regulations and various restrictions ontrade. These factors could impact our ability to compete successfully in thesemarkets, which could in turn negatively affect our international expansiongoals, and could have a material adverse effect on our operating results.

**Because we sell our products internationally, we couldbe adversely affected by fluctuations in foreign currency exchange rates.**

In the fiscal year endedMay 31, 2007, our foreign net sales, including net U.S. export sales tounaffiliated customers, accounted for approximately 29% of our total net sales.As a result, fluctuations in foreign currency exchange rates, particularly theEuro, Canadian Dollar and Yen against the U.S. Dollar, could make our productsless competitive and affect our sales and earnings levels. An increase in ourforeign sales would increase this exposure. We have not historically hedgedagainst currency exchange rate fluctuations, but may do so in the future if theexposure increases.

**We cannot predictthe outcome of pending governmental investigations and other pending legalmatters.**

As discussed under Item 3—LegalProceedings below, our Italian subsidiary and Dr. Gioacchino De Chirico,our CEO and the former president of the subsidiary, have been the subjects of acriminal investigation in Milan, Italy relating to payments to certain Italianphysicians and the SEC has also issued a formal investigative order relating tocertain of these matters. Our subsidiary settled the charges in Italy on termsthat were not material to our financial condition. Dr. De Chirico hascontested the charges against him, and they have been sent forward for trial.We expect the trial and related appeals to continue for an extended period oftime. The Company and Dr. De Chirico are still seeking to settle therelated SEC investigation in the near term. These investigations have resultedin, and may continue to result in, a diversion of our management’s time andattention, particularly Dr. De Chirico’s, and the incurrence of increasedcosts, as his case moves forward.

**Our financial performance is highly dependent on thetimely and successful introduction of new products and services.**

Our financial performancedepends in large part upon our ability to successfully develop and market nextgeneration and new instruments and other products in a rapidly changingtechnological and economic environment. If we fail to successfully identify newproduct opportunities and timely develop and introduce new instruments thatachieve market acceptance, we may lose our market share and our future revenueand earnings may suffer. We recently launched our Galileo® EchoTM instrumentmainly for small- to medium-sized hospitals. If the introduction of this orother next-generation instruments were to be delayed due to regulatory,development, or other obstacles, our revenues, earnings and market share couldbe negatively impacted. Additionally, our next generation instruments mustcompete with current and future instruments offered by our competitors.

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**We are dependent onsome single source suppliers.**

We purchase certaininstruments and reagents from single source suppliers. See “Business—Suppliers”.The disruption of such supply relationships could impair our ability toprocess, manufacture and test products or cause us to incur costs associatedwith the development of alternative sources. In addition, in some instances,FDA clearance would be required to replace or substitute a supplier orcomponent that we use. Any such disruption could result in delays in makingproduct shipments, which could have a material adverse effect on our financialcondition and results of operations.

**We may be unable toadequately protect our proprietary technology.**

Our ability to competedepends in part on our ability to maintain the proprietary nature of our ownedand licensed intellectual property. There can be no assurance as to the degreeof protection offered by our various patents or with regard to licensedintellectual property, that the licenses will not be terminated. Although oneof the two original patents on our proprietary solid-phase technology expiredin August 2003 and the other in September 2006, we believe ourremaining patents, together with our trade secrets and know-how, will preventany current or future competitors from successfully copying and distributingour solid phase products. In addition, the requirements to register productslike these with the FDA, and have them produced at an FDA-licensed facility,act as an additional barrier to entry into this market. However, there can beno assurance that competitors will not develop around the patented aspects ofany of our current or proposed products, independently develop technology orknow-how that is the same as or competitive with our technology and know-how orotherwise obtain access to our intellectual property. If we are unable tomaintain the proprietary nature of our intellectual property and oursignificant current or proposed products, our revenues and results ofoperations may be adversely affected.

***Risks Relating to our Industry***

**Governmentregulation may delay or prevent new product introduction.**

Our instruments, reagents and other products aresubject to regulation by governmental and private agencies in the United Statesand abroad, which regulate the testing, manufacturing, packaging, labeling,distribution and marketing of medical supplies and devices. Certaininternational regulatory bodies also impose import and tax restrictions, tariffregulations, and duties on imported products. Delays in agency review cansignificantly delay new product introduction and may result in a productbecoming “outdated” or losing its market opportunity before it can beintroduced. Also, the FDA and international agencies have the authority torequire a recall or modification of products in the event of a defect.

FDA clearance generally is required before we canmarket new instruments or reagents in the United States or make significantchanges to existing products. The process of obtaining marketing clearances andapprovals from regulatory agencies for new products can be time consuming andexpensive. There is no assurance that clearances or approvals will be grantedor that agency review will not involve delays that would adversely affect ourability to commercialize our products.

Federal, state and foreignregulations regarding the manufacture and sale of our products are subject tochange. We cannot predict what impact, if any, such changes might have on ourbusiness. In addition, there can be no assurance that regulation of ourproducts will not become more restrictive in the future and that any suchdevelopment would not have a material adverse effect on our business.

**The industry and market segment in which we operateare highly competitive, and we may not be able to compete effectively withlarger companies with greater financial resources than we have.**

Our industry and marketswe operate in are highly competitive. Some of our competitors have greaterfinancial resources than we do, making them better equipped to fund researchand development, 

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manufacturingand marketing efforts, or license technologies and intellectual property fromthird parties. Moreover, competitive and regulatory conditions in many marketsin which we operate restrict our ability to fully recoup our costs in thosemarkets. Our competitors can be expected to continue to improve the design andperformance of their products and to introduce new products with competitiveprice and performance characteristics. Although we believe that we have certaintechnological and other advantages over our competitors, maintaining theseadvantages will require us to continue to invest in research and development,sales and marketing and customer service and support. We cannot assure you thatwe will have sufficient resources to continue to make such investments atlevels that our larger competitors can make or that we will be successful inmaintaining such advantages.

**We may be exposedto product liability claims resulting from the use of products we sell and distribute.**

Although product liabilityclaims in our industry are infrequent, the expansion of our business in anincreasing litigious business environment may expose us to product liabilityclaims related to the products we sell. We maintain insurance that includesproduct liability coverage and we believe our insurance coverage is adequatefor our business. However, there can be no assurance that insurance coveragefor these risks will continue to be available or, if available, that it will besufficient to cover potential claims or that the present level of coverage willcontinue to be available at a reasonable cost. A partially or completelyuninsured successful claim against us could have a material adverse effect onus.

**Item 1B.—UnresolvedStaff Comments.**

Not applicable.

**Item 2.—Properties.**

Ourcorporate office and main manufacturing facilities along with laboratories andwarehouses are located in Norcross, a suburb of Atlanta, Georgia. In fiscal2007 we signed new leases for approximately 45,000 sq. ft. in Norcross tosupport services for the EchoTM and to address anticipated growth in businessand planned closure of our Houston facility. We are committed to leaseadditional 12,700 sq. ft. in Norcross in June 2009. We lease all ourproperties except the Houston plant, Canadian plant and the Belgiumdistribution center, none of which are encumbered as security for any loan.Listed below are the locations and other details of all the properties leasedand owned by us:

| ** **                 | ** ** | ** **           | ** ** | **Fiscal 2007**   | ** ** | ** **                                             | ** ** |
|----------------------------|------------|----------------------|------------|------------------------|------------|--------------------------------------------------------|------------|
| ** **                 | ** ** | **Square feet** | ** ** | **Lease Expense** | ** ** | **Expiration dates of the leases** | ** ** |
| Production facilities:     |       |                 |       |                   |       |                                                   |       |   |   |   |   |
| Norcross, US               |       |                 | 166,729    |                   |       |                                                   | $          | 923,000 |   |   | 7  buildings with leases expiring between fiscal 2008 & fiscal 2017 |   |
| Houston, US                |       |                 | 42,074     |                   |       |                                                   | n/a        |   |   | Company  owned |   |
| Halifax, Canada            |       |                 | 15,000     |                   |       |                                                   | n/a        |   |   | Company  owned |   |
| Distribution centers: |       |                 |       |                   |       |                                                   |       |   |   |   |   |
| Germany                    |       |                 | 7,106      |                   |       |                                                   | $          | 262,981 |   |   | April 2009 |   |
| Italy                      |       |                 | 2,789      |                   |       |                                                   | $          | 131,611 |   |   | Between  November 2007 & April 2012 |   |
| Belgium                    |       |                 | 4,593      |                   |       |                                                   | n/a        |   |   | Company  owned |   |
| Spain                      |       |                 | 1,030      |                   |       |                                                   | $          | 64,360 |   |   | September 2009 |   |
| Portugal                   |       |                 | 395        |                   |       |                                                   | $          | 24,549 |   |   | Between  November 2008 & May 2010 |   |
| Japan                      |       |                 | 1,545      |                   |       |                                                   | $          | 180,490 |   |   | January 2010 |   |

 

We believe that ourcurrent facilities are adequate for our current and anticipated needs and donot foresee any difficulty in renewing leases which are expiring in the nearterm.

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**Item 3.—LegalProceedings.**

As previously reported, our Italian subsidiary and Dr. GioacchinoDe Chirico, our Chief Executive Officer and the former President of thesubsidiary, have been the subjects of a criminal investigation in Milan, Italycentered on payments by several companies to certain Italian physiciansallegedly in exchange for favorable contract awards by their hospitals. Dr. DeChirico was charged as the former President of the subsidiary with directing a €13,500payment to one physician and payments totaling approximately $47,000 to anotherphysician, and the subsidiary was charged concerning the €13,500payment under an Italian law holding the subsidiary responsible for actionsallegedly taken by an officer. In January 2007 our Italian subsidiarysettled the charges in Italy on terms that were not material to our financialcondition. Dr. De Chirico has vigorously denied any wrongdoing and iscontesting the charges against him, which have been sent forward for trial. Thetrial is expected to begin sometime this fall and to continue well into 2008,and appeals of an unfavorable verdict could take several years.

An investigation into these matters by the AuditCommittee of our Board of Directors concluded that the €13,500payment to a physician as the organizer and chairman of a convention sponsoredby the Italian subsidiary was not improper, but the invoice for those servicesresulted in a violation of the books and records provisions of the ForeignCorrupt Practices Act. We reported this violation to the SEC, who thereafterissued a formal investigative order. The Company and Dr. De Chirico havebeen seeking to settle the SEC investigation, but no determination can yet bemade as to whether we will become subject to any fines, penalties and/or othercharges imposed by the SEC or any governmental authority, or any other damagesor costs that may arise in connection with these circumstances.

Between August 31 and October 19, 2005, aseries of ten class-action lawsuits were filed in the United States DistrictCourt for the Northern District of Georgia against us and certain of ourcurrent and former directors and officers alleging that our stock prices duringpart of 2004 and 2005 were inflated as a result of material misrepresentationsor omissions in our financial statements and other public announcements. Thesecases were consolidated under the caption *In re Immucor, Inc.Securities Litigation*, File No. 1:05-CV-2276-WSD.In May 2007 we entered into an agreement to settle these lawsuits. Underthe settlement agreement, our insurance carrier has agreed to pay $2.5 millionto the plaintiff class in consideration of an absolute and unconditionalrelease of all claims against us and the individual defendants. Our only costsare legal expenses, which have been expensed as incurred. The Court has givenits preliminary approval to the terms of the settlement. The settlement iscontingent upon various conditions, including but not limited to final approvalby the Court after notice to the class and a hearing scheduled for September 20,2007. It is not certain the settlement will receive final approval from theCourt nor be upheld if challenged on appeal.

Other than as set forthabove, 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 inthe ordinary course of business. We do not believe any on-going legalproceedings, including those summarized above, will have a material adverseeffect on our consolidated financial position or future results of operations.

**Item 4.—Submissionof Matters to a Vote of Security Holders.**

During the fourth quarterof fiscal year 2007, no matters were submitted to a vote of the securityholders.

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**PART II**

**Item 5.—Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities.**

Ourcommon stock trades on The Nasdaq Stock Market under the symbol: BLUD. Thefollowing table sets forth the quarterly high and low prices of the commonstock for the fiscal periods indicated as reported on The Nasdaq Stock Market.

| ** **                               | ** ** | **High**   | ** ** | **Low**    | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|
| **Fiscal Year Ended May 31,  2007** | ** ** | ** ** | ** ** | ** ** | ** ** |
| First Quarter                            |       | $          | 21.23      |       | $          | 16.86 |   |
| Second Quarter                           |       | 27.98      |       | 20.67      |       |
| Third Quarter                            |       | 34.07      |       | 26.55      |       |
| Fourth Quarter                           |       | 35.99      |       | 27.47      |       |
| **Fiscal  Year Ended May 31, 2006** | ** ** | ** ** | ** ** | ** ** | ** ** |
| First Quarter                            |       | $          | 24.00      |       | $          | 15.11 |   |
| Second Quarter                           |       | 18.90      |       | 14.37      |       |
| Third Quarter                            |       | 20.91      |       | 15.14      |       |
| Fourth Quarter                           |       | 21.56      |       | 16.03      |       |

 

As of June 30, 2007,there were 456****holders of record of our commonstock, which excludes shareholders whose shares were held by brokerage firms,depositories and other institutional firms in “street name” for theircustomers.

**Stock Split**

We distributed athree-for-two stock split on May 15, 2006 to the shareholders of record onApril 24, 2006 which resulted in the issuance of 22,685,368 shares ofcommon stock, net of 98 fractional shares which were paid in cash. The stocksplit was the eighth for the Company since its initial public offering in December 1985.

**Dividend Policy**

We have not declared anycash dividends with respect to our common stock during the previous two fiscalyears. We presently intend to continue to retain all earnings in connectionwith our business.

**Equity CompensationPlan Information**

In 2005 our Board of Directors adopted, and theshareholders approved, the Immucor, Inc. 2005 Long-Term Incentive Plan(the “2005 Plan”). The 2005 Plan replaces our 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 will be able to award stock appreciation rights, restrictedstock, deferred stock, and other performance-based awards as incentive andcompensation to employees. The number of shares of our common stock as to whichawards may be granted under the 2005 Plan is 3,600,000. The maximum number ofshares that may be used for awards other than stock options is 1,800,000 andfor grants of incentive stock options is also 1,800,000. Options are granted atthe closing market price on the date of the grant. Option awards generally vestequally over a four-year period and have a six-year contractual term.Restricted stock awards generally vest equally over a five-year period. The2005 Plan provides for accelerated vesting of option and restricted stockawards if there is a change in control, as defined in the plan.

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Thefollowing table provides information as of May 31, 2007 with respect tothe shares of our common stock that may be issued under our existing equitycompensation plans:

| ** **                                                     | ** ** | **Number of securities **           | ** ** | **Weighted average**             | ** ** | **Number of **          | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|
| ** **                                                     | ** ** | **to be issued upon exercise** | ** ** | **exercise price of ** | ** ** | **securities remaining**     | ** ** |
| ** **                                                     | ** ** | **of outstanding options,**              | ** ** | **outstanding options,**         | ** ** | **available for**            | ** ** |
| **Plan category**                                         | ** ** | ** **                                         | ** ** | **warrants and rights**     | ** ** | **warrants and rights** | ** ** | **future issuance ***** | ** ** |
| Equity  compensation plans approved by security holders *      |       |                                               | 2,317,962  |                                  |       |                              | $          | 8.08 |   |   |   | 3,175,847 |   |   |
| Equity  compensation plans not approved by security holders ** |       |                                               | 1,365,542  |                                  |       |                              | $          | 1.01 |   |   |   | — |   |   |
| Total                                                          |       |                                               | 3,683,504  |                                  |       |                              | $          | 5.46 |   |   |   | 3,175,847 |   |   |
|                                                                |            |                                                    |            |                                       |            |                                   |            |  |  |  |  |  |  |  |  |  |

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                 * Includes our 1998 Stock Option Plan, 2003 StockOption Plan and 2005 Long-Term Incentive Plan.

          ** Includes our 1990 Stock Option Plan and 1995Stock Option Plan.

   *** Number of securities available for future issuance representssecurities available under the 2005 Long-Term Incentive Plan. At May 31,2007, options had been granted under the 2005 Long-Term Incentive Plan topurchase 304,079 shares of common stock and 127,105 shares of restricted stockhad been granted; all of the 3,175,847 remaining shares, which include 7,031cancelled awards, are available for issue under the 2005 Long-Term IncentivePlan; 1,498,352 shares can be issued as stock options and 1,677,495 shares canbe issued as restricted stock or other non-option awards after May 31,2007. No securities are available for future issuance under any of the otherplans which were frozen when the 2005 Long-Term Incentive Plan was adopted. Fora description of the material features of these plans, see Note 11 to theconsolidated financial statements.

**Stock RepurchaseProgram**

We are currently authorized to repurchase in aggregateup to 9,375,000 shares of our common stock under the stock repurchase programinstituted in June 1998 with the initial authorization to repurchase up to6,075,000 shares of our common stock. Since 1998, we have repurchased shares ofour common stock having an aggregate value of approximately $50.9 million. Duringthe fiscal year ended May 31, 2007, we repurchased 281,969 shares forapproximately $4.9 million at an average per share price of $17.23, bringingthe aggregate number of shares to 8,232,944 repurchased under that programthrough May 31, 2007. As of May 31, 2007, 1,142,056 shares wereavailable for repurchase under the program.

We did not repurchase any shares of our common stockunder our stock repurchase plan during the three-month period ended May 31,2007.

20

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**Performance Graph**

The following performance graph compares thecumulative total shareholder return on an investment of $100 in our commonstock for the last five fiscal years with the total return of the S &P 500 and a Peer Group Index for our last five fiscal years. With theacquisition of Gamma Biologicals, Inc. during fiscal year ended May 31,1999, the only other public company engaged in the blood bank reagent businessis Johnson & Johnson through its Ortho-Clinical Diagnostics businessunit. Due to the size and diversity of Johnson and Johnson, we do not believeit to be a true peer. For this reason, the Peer Group is comprised of thefollowing publicly traded companies: (1) Biosite, Inc.; (2) MeridianBioscience, Inc.; (3) Gen Probe, Inc.; and (4) VentanaMedical Systems, Inc., which we consider peers because they are medicaltechnology companies without large pharmaceutical operations.

The Peer Group selected byus was revised this year to replace Alpha Innotech Corp. (formerly Xtrana, Inc.)with Gen Probe, Inc. and Ventana Medical Systems, Inc. because AlphaInnotech Corp. is no longer considered to be in a similar business as ours.There were no other changes made to the Peer Group. The peer group previouslyused by us, which includes (1) Alpha Innotech Corp. (formerly Xtrana, Inc.),(2) Biosite, Inc., and (3) Meridian Bioscience, Inc. (the “OldPeer Group”), is shown in the charts below for comparative purposes.

**COMPARISON OF 5YEAR CUMULATIVE TOTAL RETURN*Among Immucor, Inc., The S&P 500 Index,A New Peer Group And An Old Peer Group**

| ** **             | ** ** | **5/02** | ** ** | **5/03**   | ** ** | **5/04** | ** ** | **5/05**   | ** ** | **5/06** | ** ** | **5/07**   | ** ** |
|------------------------|------------|----------|------------|------------|------------|----------|------------|------------|------------|----------|------------|------------|------------|
| **Immucor, Inc.** | ** ** |     | **100.00** | ** ** |       |     | **165.04** | ** ** |       |     | **360.81** | ** ** |       |   | **872.21** | ** ** |   |   | **709.79** | ** ** |   |   | **1232.96** | ** ** |   |
| **S&P  500**       | ** ** |     | **100.00** | ** ** |       |     | **91.94**  | ** ** |       |     | **108.79** | ** ** |       |   | **117.75** | ** ** |   |   | **127.92** | ** ** |   |   | **157.08** | ** ** |   |
| **New  Peer Group**    | ** ** |     | **100.00** | ** ** |       |     | **127.17** | ** ** |       |     | **218.25** | ** ** |       |   | **263.83** | ** ** |   |   | **324.17** | ** ** |   |   | **389.00** | ** ** |   |
| **Old Peer Group**     | ** ** |     | **100.00** | ** ** |       |     | **136.57** | ** ** |       |     | **134.61** | ** ** |       |   | **197.67** | ** ** |   |   | **217.19** | ** ** |   |   | **377.44** | ** ** |   |

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* $100 invested on 5/31/02 in stock or index-includingreinvestment of dividends.

*The stockprice performance included in this graph is not necessarily indicative offuture stock price performance*

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**Item 6—SelectedFinancial Data.**

(All amounts are in thousands, except per shareamounts)

| ** **                            | ** ** | **For the Year Ended May 31,** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                            | ** ** | **2007**                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                            | ** ** | ** **                                              | ** ** | ** ** | ** ** | **(1)** | ** ** | **(1)(2)** | ** ** | **(1)(2)** | ** ** |
| **Statement  of Income Data:**        |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                             |       | $                                                       | 223,678    |   | $ | 183,506 |   | $ | 144,786 |   | $ | 112,558 |   |   | $ | 98,648 |   |   |
| Cost of sales                         |       | 65,923                                                  |       | 61,969 |   | 57,541 |   | 50,488 |   |   | 42,939 |   |   |
| Gross profit                          |       | 157,755                                                 |       | 121,537 |   | 87,245 |   | 62,070 |   |   | 55,709 |   |   |
| Operating expenses:                   |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Research and  development             |       | 6,354                                                   |       | 4,623 |   | 4,463 |   | 3,749 |   |   | 2,051 |   |   |
| Selling, general,  and administrative |       | 58,738                                                  |       | 51,185 |   | 45,530 |   | 36,619 |   |   | 31,354 |   |   |
| Restructuring  expenses               |       | 1,051                                                   |       | 2,689 |   | — |   | — |   |   | — |   |   |
| Total operating  expenses             |       | 66,143                                                  |       | 58,497 |   | 49,993 |   | 40,368 |   |   | 33,405 |   |   |
| Income from operations                |       | 91,612                                                  |       | 63,040 |   | 37,252 |   | 21,702 |   |   | 22,304 |   |   |
| Other:                                |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Interest income                       |       | 2,841                                                   |       | 978 |   | 624 |   | 41 |   |   | 127 |   |   |
| Interest expense                      |       | (432                                                    | )          | (516 | ) | (662 | ) | (881 | ) |   | (2,406 | ) |   |
| Other (expense)  income—net      |       | 133                                                     |       | (342 | ) | 767 |   | (598 | ) |   | 158 |   |   |
| Total other                           |       | 2,542                                                   |       | 120 |   | 729 |   | (1,438 | ) |   | (2,121 | ) |   |
| Income before income taxes            |       | 94,154                                                  |       | 63,160 |   | 37,981 |   | 20,264 |   |   | 20,183 |   |   |
| Income taxes                          |       | 34,086                                                  |       | 23,317 |   | 14,071 |   | 7,726 |   |   | 5,813 |   |   |
| Net income                            |       | $                                                       | 60,068     |   | $ | 39,843 |   | $ | 23,910 |   | $ | 12,538 |   |   | $ | 14,370 |   |   |
| Income per share:                     |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Per common share—Basic           |       | $                                                       | 0.88       |   | $ | 0.59 |   | $ | 0.35 |   | $ | 0.19 |   |   | $ | 0.23 |   |   |
| Per common share—Diluted         |       | $                                                       | 0.85       |   | $ | 0.56 |   | $ | 0.34 |   | $ | 0.18 |   |   | $ | 0.21 |   |   |
| Weighted average shares outstanding:  |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Common shares                         |       | 68,441                                                  |       | 68,004 |   | 67,699 |   | 66,387 |   |   | 63,458 |   |   |
| Common  shares—assuming dilution |       | 70,669                                                  |       | 71,401 |   | 71,350 |   | 70,491 |   |   | 68,210 |   |   |

 

| ** **                                   | ** ** | **May 31,** | ** ** |
|----------------------------------------------|------------|------------------|------------|
| ** **                                   | ** ** | **2007**         | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Balance Sheet Data:**                      |       |             |       |   |   |   |   |   |   |   |   |
| Working capital                              |       | $                | 162,865    |   | $ | 92,883 |   | $ | 70,945 |   | $ | 48,261 |   | $ | 40,872 |   |
| Total assets                                 |       | 275,478          |       | 191,687 |   | 157,613 |   | 124,417 |   | 116,886 |   |
| Long-term  obligations, less current portion |       | 3,488            |       | 3,980 |   | 2,991 |   | 7,216 |   | 18,231 |   |
| Retained earnings                            |       | 179,768          |       | 119,700 |   | 79,857 |   | 55,956 |   | 43,426 |   |
| Shareholders’ equity                    |       | 219,448          |       | 143,871 |   | 117,432 |   | 92,953 |   | 73,695 |   |
|                                              |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

  (1) All share and per share amounts have beenretroactively adjusted to reflect the May 2006, December 2004, July 2004,November 2003 and September 2002 three-for-two stock splits.

       (2) Certain salary expensesfor the years ended May 31, 2004 and 2003 have been reclassified toconform to the current year presentation; these reclassifications impact Costof sales and Selling, general and administrativeexpenses.

  (3) Nocash dividend was declared during any of the five years.

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**Item 7.—Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

*Refer to “ForwardLooking Statements” following the Index and Item 1A “Risk Factors” of thisForm 10-K*

**Overview**

*Our Business*

We develop, manufacture, and sell a complete line ofreagents and automated systems used primarily by hospitals, clinicallaboratories and blood banks in tests performed to detect and identify certainproperties of human blood prior to blood transfusion. We have manufacturingfacilities in the United States and Canada. We sell our products from thesefacilities and through our affiliates in Germany, Italy, Belgium, Spain,Portugal and Japan.

The FDA regulates all aspects of the immunohematologyindustry, including marketing of reagents and instruments used to detect andidentify blood properties. Our industry has been very labor intensive but inrecent years it has made noticeable advances in automating certain manualprocesses. We believe that companies that successfully introduced new technologiesand automated products have seen their profitability improve.

We have introduced severalinstruments in the past, and we continue to focus on developing new instrumentsand improving our existing instruments. In June 2007, we received FDAclearance to market our latest instrument, Galileo® EchoTM, which is a compactbench top, fully-automated walk-away instrument for small- and medium-sizedhospitals, blood banks and transfusion laboratories. EchoTM uses Capture products, our proprietary reagents, and offers an extensivetest menu and significant labor reduction while increasing productivity andpatient safety. We expect to increase our market share and revenues from thesale of EchoTM and Galileo® instruments and the sale of Capture products in thenear term. Instruments and Capture products currently account for approximately27% of our revenues.

*Performance*

In fiscal 2007 we continued to focus on increasingrevenue and improving gross margins, using the strategies we first implementedin fiscal 2005. We also concentrated our efforts on ensuring that the EchoTM wasready for submission to the FDA for clearance and would start generatingrevenue in fiscal 2008. As part of this effort, we made changes in ourorganization structure, and hired and trained additional sales and technicalpersonnel to ensure the smooth introduction of this new product. We alsocontinued to place Galileo® instruments in the market. During fiscal 2007, wereceived purchase orders for 114 Galileo® instruments.

Our overall gross margin increased to 71% for fiscalyear 2007 from 66% achieved in fiscal year 2006 and 60% achieved in fiscal2005. The 22% increase in revenue and a 6% improvement in overall gross marginduring the year ended May 31, 2007, as compared to the prior year period,were mainly attributable to the price increases introduced in fiscal 2006 and2007. Our reporting of revenue and gross margins is affected by the applicationof Emerging Issues Task Force (“EITF”) Issue No. 00-21, Accountingfor Revenue Arrangements with Multiple Deliverables. The accounting treatmentmandated by this pronouncement results in the deferral of certain revenue forsales agreements that have multiple deliverables while the related costs arerecorded up-front. As of May 31, 2007, May 31, 2006 and May 31,2005, we had deferred revenue liabilities of approximately $19.7 million, $16.1million and $7.6 million, respectively, and a major portion of these balancesrelated to the deferral of revenue from sale of instruments.

In fiscal 2007, we wereagain successful in containing operating expenses which rose by only 13% whilerevenues increased by 22%, which translated into a 51% increase in net incomecompared to the prior year. Increased revenues, improved gross margin, andcontainment of expenses contributed to our 

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achievinga third consecutive record year of growth in terms of revenue and net income.This is reflected in the increase in our cash resources and short-terminvestments from $55.7 million at May 31, 2006 to $113.6 million at May 31,2007.

*Business Outlook*

For fiscal 2008, our primary focus will be insuccessfully introducing and marketing our new instrument, the Galileo® Echo*TM* to small and medium-size customers. We will also continueto focus on placing Galileo® instruments with larger customers. Over the nextfew years, we expect our core business to shift gradually from being mainly asupplier of traditional reagents to being a major supplier of automatedinstruments that use our proprietary Capture technology and products.Simultaneously, we intend to increase our research and development efforts tointroduce the next version of the Galileo® with additional and improved features.However, with the probable change in sales mix as more instruments are sold, itcould be difficult to sustain the overall gross margin of 71% achieved infiscal 2007. The higher margins on the Capture reagents used on our instrumentsmay not be enough to offset the lower margins on the instruments themselves.Moreover, there is likely to be further pressure on our overall gross marginbecause we are required by EITF 00-21 to expense the cost of instrumentsup-front and then spread the revenue over the entire period of sale contractswith reagent price guarantees, and we will need to hire additional servicepersonnel to support the EchoTM launch. We expect to improve our margins onreagents but at a slower rate than those achieved in the last three years.

Listed below arethe key factors which we expect will drive revenue and improve reagent grossmargins in fiscal 2008:

·       *Introduction of Galileo® EchoTM*

Weexpect to further improve our competitive position going into fiscal 2008through the launch of the Galileo® EchoTM, which is being released in Europeanand U.S. markets in the first quarter of fiscal 2008. Galileo® EchoTM issignificantly smaller and faster than our ABS2000, and has substantially all ofthe features of our larger instrument, Galileo®, apart from lower throughput. Webelieve the Galileo® EchoTM will appeal to the small- to medium-sized hospitalmarket, the largest segment of our customers (approximately 5,000 to 6,000worldwide), to which our ABS2000 instrument was previously marketed. We expectto gradually increase our share in this market and increase revenues from salesof our Capture products.

·       *Increased market penetration by Galileo®*

Weexpect Capture revenues to increase in fiscal 2008, as we continue to increaseGalileo® placements. As of May 31, 2007, we have received purchase ordersfor 286 Galileo® instruments from European customers since introducing theGalileo® to the European market in the first quarter of fiscal 2003.Additionally, as of May 31, 2007: 177 Galileo® purchase orders have beenreceived from U.S. customers since FDA clearance was received in April 2004;16 Galileo® purchase orders have been received from Canadian customers sinceHealth Canada clearance was received in July 2004; and two purchase ordershave been received from Japanese customers since Ministry of Health clearancewas received in July 2004. As of May 31, 2007, 423 of theseinstruments were generating reagent revenues.

·       *Expanding our Customer Loyalty Program*

We continue to offer ourCustomer Loyalty Program to expand reagent utilization throughout our customerbase. The program promotes customer loyalty and higher sales volumes while partiallyshielding our more loyal customers from the effects of price increases.

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·       *Increasedmanufacturing efficiencies*

Our decision to consolidate manufacturing operationsin Norcross, Georgia and close the Houston, Texas facility by December 2007will further reduce overheads and improve margins and net income.

**Results ofOperations**

*Comparison of Years Ended May 31, 2007 and May 31,2006*

| ** **                | ** ** | **For the Year Ended May 31,**                          | ** ** | **Change**                                                                             | ** ** |
|---------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| ** **                | ** ** | **      2007      ** | ** ** | **      2006       ** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                | ** ** | **($ in thousands)**                                                   | ** ** | ** **                                                                             | ** ** | ** ** | ** ** |
| Net Sales                 |       |                                                                             | $          | 223,678                                                                                |       |   |   | $ | 183,506 |   |   | $ | 40,172 |   | 22 | % |
| Gross profit              |       |                                                                             | 157,755    |                                                                                   |       |   | 121,537 |   |   | 36,218 |   | 30 | % |
| Gross profit  percentage  |       |                                                                             | 71         | %                                                                                      |       |   | 66 | % |   | n/m |   | 6 | % |
| Operating  expenses       |       |                                                                             | 66,143     |                                                                                   |       |   | 58,497 |   |   | 7,646 |   | 13 | % |
| Income from  Operations   |       |                                                                             | 91,612     |                                                                                   |       |   | 63,040 |   |   | 28,572 |   | 45 | % |
| Non-operating  income     |       |                                                                             | 2,542      |                                                                                   |       |   | 120 |   |   | 2,422 |   | n/m |   |
| Income before  income tax |       |                                                                             | 94,154     |                                                                                   |       |   | 63,160 |   |   | 30,994 |   | 49 | % |
| Provision for  income tax |       |                                                                             | 34,086     |                                                                                   |       |   | 23,317 |   |   | 10,769 |   | 46 | % |
| Net income                |       |                                                                             | $          | 60,068                                                                                 |       |   |   | $ | 39,843 |   |   | $ | 20,225 |   | 51 | % |

 

Improved sales and margins, along with aproportionately lower increase in operating expenses, resulted in an increasein net income for fiscal 2007 of $20.2 million, 51% higher than fiscal 2006. Ofthe $7.6 million, or 13%, increase in operating expenses, stock compensation expenserelating to the adoption of Statement of Financial Accounting Standards No. 123R(“SFAS 123(R)”), effective June 1, 2006, accounted for $3.1 million andthe weakening of the U.S. Dollar against the Euro in fiscal 2007 accounted forapproximately $1.4 million. A large portion of the remaining increase wasrelated to the launch of EchoTM and the anticipated growth of our instrumentbusiness. The expense relating to the adoption of SFAS 123(R) and theimpact of the weakening of the U.S. Dollar against the Euro together accountedfor 59% of the $7.6 million increase in the operating expenses. Dilutedearnings per share totaled $0.85 for fiscal 2007, as compared to dilutedearnings per share of $0.56 for the prior year, an increase of 52%.

United States operationscontinue to generate a majority of our revenue and operating income. U.S.operations generated 73% and 89%, respectively, of our revenue and operatingincome in fiscal 2007 compared to 71% and 90%, respectively, in fiscal 2006.

*Net sales*

| ** **            | ** ** | **For the Year Ended May 31,**                          | ** ** | **Change**                                                                       | ** ** |
|-----------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **            | ** ** | **      2007      ** | ** ** | **      2006      ** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **            | ** ** | **($ in thousands)**                                                   | ** ** | ** **                                                                       | ** ** | ** ** | ** ** |
| Traditional  reagents |       |                                                                             | $          | 159,941                                                                          |       |   |   | $ | 132,745 |   |   | $ | 27,196 |   | 20 | % |
| Capture products      |       |                                                                             | 42,720     |                                                                             |       |   | 34,315 |   |   | 8,405 |   | 24 | % |
| Instruments           |       |                                                                             | 16,927     |                                                                             |       |   | 12,517 |   |   | 4,410 |   | 35 | % |
| Collagen              |       |                                                                             | 4,090      |                                                                             |       |   | 3,929 |   |   | 161 |   | 4 | % |
|                  |       |                                                                             | $          | 223,678                                                                          |       |   |   | $ | 183,506 |   |   | $ | 40,172 |   | 22 | % |

 

The 20% growth in traditional reagent revenue (i.e.products not using our patented Capture technology) in fiscal 2007 compared tofiscal 2006 occurred mainly as a result of price increases in the UnitedStates. Traditional reagent sales have historically been our primary source ofrevenue and still 

25

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constitute roughly 70% ofour revenue. We expect the significance of this line of products to graduallydecline as we place more instruments in the market and increase sales of ourCapture products.

Sales of Capture products increased by $8.4 million,or 24%, in fiscal 2007 compared to fiscal 2006 mainly due to volume increase($3.4 million) and price increases ($2.3 million) in the U.S., exchange rategains of $1.0 million due to strengthening of Euro against the U.S. Dollar andan increase of $1.7 million was attributable to our foreign affiliates. Salesof Capture products are largely dependent on the number of installedinstruments requiring the use of Capture reagents. As we succeed in placingmore instruments in the market, we expect revenue from Capture products toincrease.

Revenue from instruments increased by 35% in fiscal2007 compared to fiscal 2006. In fiscal 2007, $8.4 million of deferred revenuewas recognized from previously placed instruments compared to $5.5 millionrecognized in fiscal 2006. Most instrument sales in the United States arerecognized over the life of the underlying reagent contract, which is normallyfive years. In fiscal 2007 approximately $11.9 million of instrument sales andassociated service revenues were deferred in this manner, compared to $13.8million in fiscal 2006. As of May 31, 2007 and May 31, 2006, deferredinstrument and service revenues totaled $19.7 million and $16.1 million,respectively. We expect to place more Galileo® instruments in the market andbegin generating revenues from the sale of our new Galileo® EchoTM instrumentsfor which we received FDA clearance in June 2007.

Human collagen forms avery small part of our business, and we expect to discontinue this product infiscal 2009 when our manufacturing commitment expires.

*Gross margin*

| ** **            | ** ** | **For the Year Ended May 31,** | ** ** | ** **        | ** ** |
|-----------------------|------------|---------------------------------------------------------|------------|-------------------|------------|
| ** **            | ** ** | **2007**                                                | ** ** | **2006**          | ** ** | **Change** | ** ** |
| ** **            | ** ** | **Amount**                                              | ** ** | **Margin %** | ** ** | **Amount** | ** ** | **Margin %** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **            | ** ** | **(in ‘000)**                                 | ** ** | ** **        | ** ** | **(in ‘000)** | ** ** | ** ** | ** ** | **(in ‘000)** | ** ** | ** ** | ** ** |
| Traditional  reagents |       | $                                                       | 121,666    |              |       | 76 | % |   | $ | 95,106 |   |   | 72 | % |   | $ | 26,560 |   | 28 | % |
| Capture products      |       | 35,822                                                  |       |              | 84         | % |   | 27,662 |   |   | 81 | % |   | 8,160 |   | 29 | % |
| Instruments           |       | (549                                                    | )          |              | -3         | % |   | (2,480 | ) |   | -20 | % |   | 1,931 |   | 78 | % |
| Collagen              |       | 816                                                     |       |              | 20         | % |   | 1,249 |   |   | 32 | % |   | (433 | ) | -35 | % |
|                  |       | $                                                       | 157,755    |              |       | 71 | % |   | $ | 121,537 |   |   | 66 | % |   | $ | 36,218 |   | 30 | % |

 

Overall gross marginimproved during fiscal 2007 to 71%, up from 66% in fiscal 2006, due toimprovement in margins in all three main categories of our business. Grossmargin on traditional reagents improved by 4% to 76% primarily due to priceincreases. The gross margin on Capture products improved by 3% to 84% due tovolume and price increases. In the case of instruments, comparing gross marginfrom period to period can be misleading because of the way revenue and cost forcertain types of instrument sales are recorded. Where sales contracts haveprice guarantee clauses, instrument costs are expensed when the sale is made,but the related revenue is deferred and recorded as income over the term of theagreement. For fiscal 2007, the gross margin on instruments was a negative 3%and, for fiscal 2006, it was a negative 20%. In fiscal 2007, we deferred $1.9million less revenue ($11.9 million in fiscal 2007; $13.8 million in fiscal2006) from sales of instruments and recognized $2.9 million more revenue ($8.4million in fiscal 2007; $5.5 million in fiscal 2006) compared to fiscal 2006.Both these factors largely contributed towards the improvement of margin oninstruments. The gross margin on human collagen sales was 20% in fiscal 2007compared to 32% in fiscal 2006 due to an increase in costs.

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*Operating expenses*

| ** **                      | ** ** | **For the Year Ended May 31,**                                      | ** ** | **Change**                                                                                   | ** ** |
|---------------------------------|------------|----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **                      | ** ** | **       2007       ** | ** ** | **       2006       ** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                      | ** ** | **($ in thousands)**                                                               | ** ** | ** **                                                                                   | ** ** | ** ** | ** ** |
| Research and  development       |       |                                                                                         | $          | 6,354                                                                                        |       |   |   | $ | 4,623 |   |   | $ | 1,731 |   | 37 | % |
| Selling and  marketing          |       |                                                                                         | 26,595     |                                                                                         |       |   | 20,877 |   |   | 5,718 |   | 27 | % |
| Distribution                    |       |                                                                                         | 9,635      |                                                                                         |       |   | 8,004 |   |   | 1,631 |   | 20 | % |
| General and  administrative     |       |                                                                                         | 22,162     |                                                                                         |       |   | 21,963 |   |   | 199 |   | 1 | % |
| Restructuring  expense          |       |                                                                                         | 1,051      |                                                                                         |       |   | 2,689 |   |   | (1,638 | ) | -61 | % |
| Amortization  expense and other |       |                                                                                         | 346        |                                                                                         |       |   | 341 |   |   | 5 |   | 1 | % |
| Total operating expenses        |       |                                                                                         | $          | 66,143                                                                                       |       |   |   | $ | 58,497 |   |   | $ | 7,646 |   | 13 | % |

 

An increase in researchand development expenses of $1.7 million, or 37%, in fiscal 2007, compared tofiscal 2006, was mainly attributable to an increase in consultancy fees of $0.4million relating to the second generation Galileo®, an accrual for bonuses of$0.4 million, an increase in compensation cost of $0.3 million on adoption ofSFAS 123(R), an increase in salaries and payroll taxes of $0.3 million, anincrease in laboratory supplies of $0.2 million (primarily for EchoTM clinicaltrials), and an increase in depreciation charges of $0.1 million. In fiscal2006, no costs were recorded for SFAS 123(R), bonuses or the second generationGalileo®. As we reached the final phase of the development of the Galileo®EchoTM in fiscal 2007, the spending on this project was minimal compared to $0.8million spent in fiscal 2006.

An increase in selling andmarketing expenses of $5.7 million to $26.6 million, or 27%, over the priorfiscal year was largely due to an increase in salaries, payroll taxes and staffmoving expenses of $1.9 million, an increase in compensation cost of $0.7million on adoption of SFAS 123(R), an increase in travel and convention costsof $0.8 million, an accrual for bonuses of $0.5 million and an increase instaff commissions of $0.5 million. We increased our sales staff to 158 byhiring 15 additional sales personnel in preparation for the launch of the EchoTMand also to more aggressively market the Galileo®. This accounted for a majorportion of the increase in the personnel cost in fiscal 2007. The impact of theweakening of the U.S. Dollar against the Euro by about 7% in fiscal 2007accounted for an increase of approximately $0.6 million in selling andmarketing expenses of the European affiliates.

An increase indistribution expenses of $1.6 million, or 20%, in fiscal 2007 over fiscal 2006was mainly due to an increase in freight expenses of $0.7 million as a resultof increased shipments of instruments and setting up costs for centralizationof European operations in Germany, an increase in salaries of $0.3 million, anincrease in our new Japanese affiliate’s distribution costs of $0.4 million,and an increase in compensation cost of $0.1 million on adoption of SFAS123(R).

General and administrativeexpenses rose marginally in fiscal 2007 (by $0.2 million), or 1%, to $22.2million over fiscal 2006. In fiscal 2007, professional fees (legal, audit, SOXand tax) decreased by approximately $2.8 million, mainly due to a reduction inoutsourcing of certain work relating the documentation and testing of theinternal controls to ensure compliance with the Sarbanes-Oxley Act requirementsand a reduction in legal fees relating to the Italian investigation. Thesavings in professional fees was mostly off set by an increase in compensationcost of $1.6 million on adoption of SFAS 123(R), an increase in salaries,payroll taxes and bonus of $0.5 million, an increase in recruiting cost of $0.2million and an increase in consultancy fees of $0.2 million. The impact of theweakening of the U.S. Dollar against the Euro by about 7% in fiscal 2007accounted for approximately $0.3 million increase in general and administrativeexpenses of the European affiliates.

We are consolidating ourmanufacturing operations in Norcross, Georgia and closing the Houston plant.This action resulted in restructuring charges of $1.1 million in fiscal 2007.We spent $0.4 million for production consolidation, $0.3 million for retentionbonuses and $0.3 million for relocation expenses. In fiscal 2006, of the totalcharge of $2.7 million, $2.3 million was for the impairment of long-lived assetsat 

27

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theHouston facility. This plant closure is expected to be complete by December 2007.The total cost of restructuring is estimated at $4.7 million, of which $3.7million has already been incurred as of May 31, 2007. The future cashoutlay for the Houston plant closure, all of which is expected to occur infiscal 2008, is estimated at approximately $1.0 million.

*Non-operating income*

| ** **            | ** ** | **For the Year Ended May 31,**                                                  | ** ** | **Change**                                                                                   | ** ** |
|-----------------------|------------|----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **            | ** ** | **        2007        ** | ** ** | **       2006       ** | ** ** | **Amount** | ** ** |
| ** **            | ** ** | **($ in thousands)**                                                                           | ** ** | ** **                                                                                   | ** ** |
| Non-operating  income |       |                                                                                                     | $          | 2,542                                                                                        |       |   |   | $ | 120 |   |   |   | $ | 2,422 |   |   |
|                       |            |                                                                                                          |            |                                                                                              |            |  |  |  |  |  |  |  |  |  |  |  |

 

In fiscal 2007, we earned$1.9 million more interest income compared to fiscal 2006 due to the increasein our cash resources by $59 million; miscellaneous items accounted for thebalance of the increase of $0.5 million.

*Income taxes*

The provision for income taxes increased $10.8 millionin fiscal 2007 from the prior year, primarily due to higher pre-tax income,partially offset with a 1% decease in the overall effective tax rate to 36% forfiscal 2007, compared to 37% for fiscal 2006. Net deferred tax assets increasedby $3.7 million mainly due to an increase in deferred revenue of approximately$2.0 million and an increase of $1.8 million in reserves not currentlydeductible, off set by minor changes in other items resulting in a net decreaseof $0.1 million.

As a result of utilizingcompensation cost deductions arising from the exercise of nonqualified employeestock options for federal and state income tax purposes, we realized income taxbenefits of approximately $12.3 million in fiscal 2007 and $6.4 million infiscal 2006. As required by U.S. generally accepted accounting principles,these income tax benefits are recognized in our financial statements asadditions to additional paid-in capital rather than as reductions of therespective income tax provisions in the consolidated financial statementbecause the related compensation deductions are not recognized as compensationexpense for financial reporting purposes. Our income tax liability is reduced bythese amounts.

*Comparison of Years Ended May 31, 2006 and May 31,2005*

| ** **               | ** ** | **For the Year Ended May 31,**                          | ** ** | **Change**                                                                       | ** ** |
|--------------------------|------------|----------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **               | ** ** | **      2006      ** | ** ** | **      2005      ** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **               | ** ** | **($ in thousands)**                                                   | ** ** | ** **                                                                       | ** ** | ** ** | ** ** |
| Net Sales                |       |                                                                             | $          | 183,506                                                                          |       |   |   | $ | 144,786 |   |   | $ | 38,720 |   | 27 | % |
| Gross profit             |       |                                                                             | 121,537    |                                                                             |       |   | 87,245 |   |   | 34,292 |   | 39 | % |
| Gross profit percentage  |       |                                                                             | 66         | %                                                                                |       |   | 60 | % |   |   |   | 10 | % |
| Operating expenses       |       |                                                                             | 58,497     |                                                                             |       |   | 49,993 |   |   | 8,504 |   | 17 | % |
| Income from Operations   |       |                                                                             | 63,040     |                                                                             |       |   | 37,252 |   |   | 25,788 |   | 69 | % |
| Non-operating income     |       |                                                                             | 120        |                                                                             |       |   | 729 |   |   | (609 | ) | n/m |   |
| Income before income tax |       |                                                                             | 63,160     |                                                                             |       |   | 37,981 |   |   | 25,179 |   | 66 | % |
| Provision for income tax |       |                                                                             | 23,317     |                                                                             |       |   | 14,071 |   |   | 9,246 |   | 66 | % |
| Net income               |       |                                                                             | $          | 39,843                                                                           |       |   |   | $ | 23,910 |   |   | $ | 15,933 |   | 67 | % |

 

Improved sales and margins, along with aproportionately lower increase in operating expenses, resulted in net incomefor fiscal 2006 of $15.9 million, or 67%, higher than fiscal 2005. Of the $8.5million, or 17%, increase in the operating expenses, the acquisition of a newJapanese subsidiary in July 2005, accounted for $4.3 million and the restructuringexpenses relating to the planned closure of our Houston facility accounted for$2.7 million. These two expense items together accounted for 82% of the $8.5million 

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increase in the operatingexpenses. Diluted earnings per share totaled $0.56 for fiscal 2006, as comparedto diluted earnings per share of $0.34 for the prior year, an increase of 65%.

United States operationscontinued to generate a majority of our revenue and operating income. U.S.operations generated 71% and 90%, respectively, of our revenue and operatingincome in fiscal 2006 compared to 68% and 85%, respectively, in fiscal 2005.

*Net sales*

| ** **           | ** ** | **For the Year Ended May 31,**                                      | ** ** | **Change**                                                                                   | ** ** |
|----------------------|------------|----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **           | ** ** | **       2006       ** | ** ** | **       2005       ** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **           | ** ** | **($ in thousands)**                                                               | ** ** | ** **                                                                                   | ** ** | ** ** | ** ** |
| Traditional reagents |       |                                                                                         | $          | 132,745                                                                                      |       |   |   | $ | 99,230 |   |   | $ | 33,515 |   | 34 | % |
| Capture products     |       |                                                                                         | 34,315     |                                                                                         |       |   | 29,570 |   |   | 4,745 |   | 16 | % |
| Instruments          |       |                                                                                         | 12,517     |                                                                                         |       |   | 12,514 |   |   | 3 |   | 0 | % |
| Collagen             |       |                                                                                         | 3,929      |                                                                                         |       |   | 3,472 |   |   | 457 |   | 13 | % |
|                 |       |                                                                                         | $          | 183,506                                                                                      |       |   |   | $ | 144,786 |   |   | $ | 38,720 |   | 27 | % |

 

The 34% growth in traditional reagent revenue (i.e.products not using our patented Capture technology) occurred mainly as a resultof price increases, the effect of which was marginally offset (approximately$3.9 million) by a slight decrease in sales volume in the United States.

The 16% increase in Capture revenue is primarilyattributable to the change of marketing strategy in January 2005 fromselling products in kits to selling individual components and to priceincreases.

Sales of instruments were $12.5 million in fiscal 2006and fiscal 2005. Most instrument sales in the United States are recognized overthe life of the underlying reagent contract, which is normally five years. Infiscal 2006 approximately $13.8 million of instrument sales and associatedservice revenue were deferred in this manner, compared to $8.8 million infiscal 2005, a 57% increase. As of May 31, 2006 and May 31, 2005,deferred instrument and service revenues totaled $16.1 million and $7.6million, respectively. Revenue recognized from instrument sales and associated servicerevenue was approximately $5.5 million in fiscal 2006 and $2.9 million infiscal 2005, a 90% increase.

Sales of Human collagenwere $3.9 million in fiscal 2006, an increase of $0.5 million compared to theprior year.

*Gross margin*

| ** **           | ** ** | **For the Year Ended May 31,** | ** ** | ** **        | ** ** | ** **              | ** ** |
|----------------------|------------|---------------------------------------------------------|------------|-------------------|------------|-------------------------|------------|
| ** **           | ** ** | **2006**                                                | ** ** | **2005**          | ** ** | **Change**              | ** ** |
| ** **           | ** ** | **Amount**                                              | ** ** | **Margin %** | ** ** | **Amount**              | ** ** | **Margin %** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **           | ** ** | **(in ‘000)**                                 | ** ** | ** **        | ** ** | **(in ‘000)** | ** ** | ** ** | ** ** | **(in ‘000)** | ** ** | ** ** | ** ** |
| Traditional reagents |       | $                                                       | 95,106     |              |       | 72                      | %          |   | $ | 62,924 |   |   | 63 | % |   | $ | 32,182 |   | 51 | % |
| Capture products     |       | 27,662                                                  |       |              | 81         | %                       |       | 23,576 |   |   | 80 | % |   | 4,086 |   | 17 | % |
| Instruments          |       | (2,480                                                  | )          |              | -20        | %                       |       | (567 | ) |   | -5 | % |   | (1,913 | ) | n/m |   |
| Collagen             |       | 1,249                                                   |       |              | 32         | %                       |       | 1,312 |   |   | 38 | % |   | (63 | ) | -5 | % |
|                 |       | $                                                       | 121,537    |              |       | 66                      | %          |   | $ | 87,245 |   |   | 60 | % |   | $ | 34,292 |   | 39 | % |

 

Gross margin of 72% ontraditional reagents for fiscal 2006 was higher than the 63% achieved in theprior year, primarily due to benefits from higher prices and manufacturingefficiencies. For fiscal 2006, the gross margin on instruments was a negative20% and for fiscal 2005 it was a negative 5%. In fiscal 2006, we recorded morecost from sales of instruments but the growth in revenue recognized was at aslower rate. This resulted in negative gross margin increasing to 20% from 5%in fiscal 2005.

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*Operating expenses*

| ** **                      | ** ** | **For the Year Ended May 31,** | ** ** | **Change** | ** ** |
|---------------------------------|------------|---------------------------------------------------------|------------|------------|------------|
| ** **                      | ** ** | **2006**                                                | ** ** | **2005**   | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                      | ** ** | **($ in thousands)**                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Research and  development       |       | $                                                       | 4,623      |       | $          | 4,463 |   |   | $ | 160 |   |   | 4 | % |
| Selling and  marketing          |       | 20,877                                                  |       | 18,228     |       |   | 2,649 |   |   | 15 | % |
| Distribution                    |       | 8,004                                                   |       | 8,044      |       |   | (40 | ) |   | 0 | % |
| General and  administrative     |       | 21,963                                                  |       | 18,559     |       |   | 3,404 |   |   | 18 | % |
| Restructuring  expense          |       | 2,689                                                   |       | —     |       |   | 2,689 |   |   | n/m |   |
| Amortization  expense and other |       | 341                                                     |       | 699        |       |   | (358 | ) |   | -51 | % |
| Total operating expenses        |       | $                                                       | 58,497     |       | $          | 49,993 |   |   | $ | 8,504 |   |   | 17 | % |

 

Research and development expenses were $4.6 millionfor fiscal 2006, $0.2 million higher than those recorded in the prior fiscalyear. As we reached the final phase of the development of the Galileo® EchoTM,the new third generation instrument targeted for the small- to medium-sizedhospital market, the spending on this project decreased to $0.8 million infiscal 2006 from $1.6 million spent in fiscal 2005. Cost incurred on otherprojects accounted for a net increase of $0.2 million in the research anddevelopment expenses for fiscal 2006 compared to fiscal 2005.

Selling and marketing expenses increased byapproximately $2.6 million to $20.9 million, or 15% over the prior fiscal year.The Japanese affiliate, which was acquired in the first quarter of fiscal 2006,added $3.1 million to selling and marketing expenses in the current fiscalyear.

Distribution expenses for fiscal 2006 were $8.0million which was marginally less than the amount incurred in the prior fiscalyear. The Japanese affiliate added $0.2 million to distribution expenses infiscal 2006.

General and administrative expenses in fiscal 2006rose $3.4 million, or 18%, to $22.0 million over fiscal 2005. The increase wasattributable primarily to Sarbanes-Oxley compliance ($2.3 million), hiring ofnew personnel ($0.7 million) and severance cost ($0.4 million). The Japaneseaffiliate added $0.9 million to general and administration expenses in fiscal2006.

Our decision to consolidateour manufacturing operations in Norcross, Georgia resulted in restructuringcharges of $2.7 million in fiscal year 2006. Of the total charge of $2.7million, $2.3 million was for the impairment of long-lived assets at theHouston, Texas facility. No restructuring charges were recorded in fiscal year2005.

*Income taxes*

The provision for income taxes increased $9.2 millionin fiscal 2006 from the prior year, primarily due to higher pre-tax income withthe overall effective tax rate for fiscal 2006 and 2005 remaining at 37%. Deferredtax assets pertaining to operating loss carry-forwards increased byapproximately $2.8 million, of which approximately $1.9 million related to ourforeign affiliates (a major portion of it relating to the 2003 Europeanrestructure and to the operating loss incurred by the Japanese affiliateacquired in fiscal 2006) and approximately $0.9 million was for state operatinglosses relating to “unwinding” of the state and local tax structure implementedin 2003. It is more likely than not that these tax losses will not be used andas a result we have recorded deferred tax valuation allowances against theseassets. This is reflected in an increase in the deferred tax valuationallowances of $2.8 million.

As a result of utilizingcompensation cost deductions arising from the exercise of nonqualified employeestock options for federal and state income tax purposes, we realized income taxbenefits of approximately $6.4 million in fiscal 2006 and fiscal 2005. Asrequired by U.S. generally accepted 

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accountingprinciples, these income tax benefits are recognized in our financialstatements as additions to additional paid-in capital rather than asreductions of the respective income tax provisions in the consolidatedfinancial statements because the related compensation deductions are notrecognized as compensation expense for financial reporting purposes. Our incometax liability is reduced by these amounts.

**Liquidity andCapital Resources**

Ourprincipal source of liquidity is our operating cash flow. This cash-generatingcapability is one of our fundamental strengths and provides us with substantialfinancial flexibility in meeting operating, investing and financing needs. Wehave adequate working capital and sources of capital to carry on our currentbusiness and to meet our existing capital requirements. At May 31, 2007,we had working capital of $163.4 million, compared to $92.9 million of workingcapital at May 31, 2006. The following table shows the cash flows providedby or used in operating, investing and financing activities for fiscal years2007, 2006 and 2005, as well as the effect of exchange rates on cash and cashequivalents for those same years:

| ** **                                                    | ** ** | **For the Year Ended May 31,** | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                    | ** ** | **2007**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                    | ** ** | ** **                                              | ** ** | **(in thousands)** | ** ** | ** ** | ** ** |
| Net cash provided  by operating activities                    |       |                                                    | $          | 58,279 |   |   |   | $ | 62,716 |   |   |   | $ | 41,486 |   |   |
| Net cash used in  investing activities                        |       |                                                    | (9,245     | ) |   |   | (14,620 | ) |   |   | (7,116 | ) |   |
| Net cash provided  by (used in) financing activities          |       |                                                    | 10,175     |   |   |   | (31,045 | ) |   |   | (12,412 | ) |   |
| Effect of  exchange rate changes on cash and cash equivalents |       |                                                    | 239        |   |   |   | (56 | ) |   |   | (547 | ) |   |
| Increase in cash  and cash equivalents                        |       |                                                    | $          | 59,448 |   |   |   | $ | 16,995 |   |   |   | $ | 21,411 |   |   |

 

Our cash, cash equivalents and short-term investmentswere $113.6 million at May 31, 2007, as compared to $55.7 million at May 31,2006. In fiscal 2007, we spent $4.9 million to repurchase our stock, $19.9million less than the $24.8 million we spent in fiscal 2006. We also used $1.1million to repay long-term obligations in the current period, $7.0 million lessthan our cash outlay of $8.1 million in the previous fiscal year. Besides anincrease of $20.2 million in net income, these two factors, along with a $5.9million increase in tax benefits received from the exercise of stock options inthe current year compared to the previous year, significantly contributed tothe increase in the cash resources in fiscal 2007.

In fiscal 2006, we paid $4.7 million for the purchaseof Immucor-Kainos, repaid $8.1 million of long-term debt and capital leases andspent $24.8 million to repurchase shares of our common stock under the stockrepurchase plan. These significant and non-recurring payments were more thancompensated for by $62.7 million in cash generated through operating activitiesfor fiscal 2006, resulting in net improvement of $17.0 million in cash and cashequivalent balances in fiscal 2006.

*Operatingactivities—*Net cash generated by operating activitieswas $58.3 million for the year ended May 31, 2007, a $4.4 million decreaseover the $62.7 million generated in the year ended May 31, 2006. Theincrease in net income of $20.2 million (from $39.8 million for fiscal 2006 to$60.1 million for fiscal 2007) was offset by, among other things, an adjustmentof approximately $12.3 million for the tax benefit arising on exercise of stockoptions which is required to be disclosed as cash generated by financingactivities since our adoption of SFAS 123(R) effective June 1, 2006.We reported this tax benefit as cash provided by operating activities in fiscalyears 2006 and 2005. An increase in accounts receivable and inventory levels byapproximately $10.1 and $8.3 million, respectively, in fiscal 2007 alsoadversely impacted the cash generated by operating activities. Accountsreceivable increased due to higher revenues in fiscal 2007; approximately $6.0million of the inventory increase was due to the build up of inventory ofinstruments and related parts in anticipation of an increase in instrumentshipments in the near term.

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In fiscal 2006, net cashgenerated by operating activities was $62.7 million, a $21.2 million increaseover the $41.5 million generated in the year ended May 31, 2005. Thisincrease was primarily driven by a $17.7 million, or 54%, increase in netincome, adjusted for non-cash income statement items, in fiscal 2006 comparedto fiscal 2005. Positive movement in certain components of working capitalfurther improved the cash generated from operating activities; significantly,an increase in deferred revenue contributed $8.6 million of cash in fiscal2006 compared to $5.8 million in fiscal 2005. Another major factor in theincrease in cash generated from operating activities was the improvedmanagement of inventory, accounts receivable and accounts payable; additionalcapital required for these components of working capital during fiscal 2006 was$2.2 million compared to $10.9 million increase in fiscal 2005.

In fiscal 2005, net cashgenerated by operating activities was $41.5 million, an $18.8 million increaseover the $22.7 million generated in the year ended May 31, 2004. Thisincrease was primarily driven by a $9.7 million, or 45%, increase in netincome, adjusted for non-cash income statement items, and $9.1 million dueto reduction in net operating assets.

*Investing activities**—*In fiscal 2007, $9.2 million of cash was used in investingactivities, primarily for capital expenditures ($10.9 million), partly offsetby proceeds of $1.6 million received from sale of short-term investments. The$10.9 million in capital expenditures for fiscal 2007 consisted primarily of$6.9 million for building, machinery and equipment and furniture additionsand upgrades, $2.1 million for instruments used for demonstration purposes orplaced at customer sites under leasing arrangements, and $1.9 million forcomputer hardware and software enhancements and replacements. Planned capitalexpenditures for fiscal 2008 total $13.3 million, including $3.6 million forbuilding renovations, $3.5 million for instruments to be used for leasingcontracts, $3.3 million for upgrades of manufacturing, quality and supportsystems, $2.2 million in computer hardware and software expenditures forinfrastructure upgrades and $0.7 million for other miscellaneous items.

In fiscal 2006, $14.6million of cash was used in investing activities primarily for the acquisitionof Immucor-Kainos, Inc. ($4.7 million) and capital expenditures ($10.8million). The $10.8 million in capital expenditures for fiscal 2006 consistedprimarily of $7.3 million for building, machinery and equipment and furnitureadditions and upgrades, $2.0 million for computer hardware and softwareenhancements and replacements, and $1.5 million for instruments used fordemonstration purposes or placed at customer sites on reagent rentalagreements.

In fiscal 2005, $7.1million of cash was used in investing activities consisting primarily ofcapital expenditures totaling $6.6 million and investments in marketable debtsecurities totaling $2.0 million, partially offset by $1.3 million in proceedsfrom the sale of our long-term investment in Lionheart Technologies, Inc. The$6.6 million in capital expenditures for the year ended May 31, 2005consisted primarily of $2.8 million for instruments, $1.9 million for machineryand equipment upgrades for use primarily at our Norcross facility, and $1.1million for computer hardware and software enhancements of the enterprisesoftware system.

*Financing activities**—*Net cash provided by financing activities totaled $10.2million in fiscal 2007, compared to $31.0 million and $12.4 million of cashused in fiscal 2006 and fiscal 2005, respectively. In fiscal 2007, we used $4.9million to repurchase shares of our common stock, compared to the $24.8 millionand $8.0 million spent in fiscal 2006 and fiscal 2005, respectively. We had acash outlay of $1.1 million in fiscal 2007 to pay part of our acquisitionliability; while in fiscal 2006 and fiscal 2005, we repaid $8.1 million and$5.8 million of our long-term debt, respectively. We received $3.9 million,$2.1 million and $1.6 million from the exercise of employee stock options infiscal 2007, 2006 and 2005, respectively. In connection with our adoption ofSFAS 123R in fiscal year 2007, we reported $12.3 million of excess tax benefitsfrom share-based compensation as cash provided by financing activities, whichwas reported as cash provided by operating activities in fiscal years 2006($6.4 million) and 2005 ($6.4 million). Our cash position and cash generated byoperations allowed us to repay all capital lease obligations and long-termborrowings from financial institutions during fiscal 2006 and 2005.

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*Stock Repurchase Program*

During the fiscal yearended May 31, 2007, we repurchased 281,969 shares of common stock forapproximately $4.9 million at an average per share price of $17.23, bringingthe aggregate number of shares to 8,232,944 repurchased under that programthrough May 31, 2007. In fiscal 2006 and fiscal 2005, the total amountspent for the shares bought under this program amounted to $24.8 million and$8.0 million, respectively. Since the introduction of the plan in 1998, wehave repurchased shares of our common stock having an aggregate value ofapproximately $50.9 million. As of May 31, 2007, 1,142,056 shares wereavailable for repurchase under the program.

*Contingencies*

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. While we are currently involvedin certain legal proceedings, we do not believe these proceedings will have amaterial adverse effect on our consolidated financial position. It is possible,however, that future results of operations for any particular quarterly orannual period could be materially affected by changes in our assumptions or theeffectiveness of our strategies related to these proceedings. Contingentliabilities are described in Note 17 to the consolidated financial statements.

*Future Cash Requirements and Restrictions*

In July 2005, we paidKainos ¥459 million (approximately $4.1 million) in cash on signing of thepurchase agreements, and are required to pay an additional ¥300 million(approximately $2.7 million) over three years with minimum payments of ¥125million in each of the first two years and the remaining ¥50 million in thethird year. As of May 31, 2007, we have paid ¥252 million (approximately$2.1 million) of this liability. In addition, a final payment of ¥441 million(approximately $3.6 million) will be made after a three-year transition periodending on June 30, 2008, or earlier upon mutual agreement.

We expect that cash and cash equivalentsand cash flows from operations will be sufficient to support operations andplanned capital expenditures for the next 12 months. We have no long-term debtexcept the acquisition liability for the purchase of Immucor-Kainos. There areno restrictions on our foreign subsidiaries in the matter of sending dividends,or making loans or advances to the parent company. Contractual obligations andcommercial commitments, primarily for the next five years, are detailed in thetable below:

*Contractual Obligationsand Commercial Commitments*

| ** **                          | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations**    | ** ** | ** **                                | ** ** | **Total** | ** ** | **Less than 1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **After 5 years** | ** ** |
| ** **                          | ** ** | **(in thousands)**                   | ** ** |
| Long-Term Debt  and Lines of Credit |       | $                                         | —     |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Capital Lease  Obligations          |       | —                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Operating Leases                    |       | 14,774                                    |       |   | 2,307 |   |   |   | 3,543 |   |   |   | 2,720 |   |   |   | 6,204 |   |   |
| Purchase  Obligations(1)            |       | 28,168                                    |       |   | 28,101 |   |   |   | 67 |   |   |   | — |   |   |   | — |   |   |
| Other Long-Term  Obligations(2)     |       | 3,831                                     |       |   | 343 |   |   |   | 3,488 |   |   |   | — |   |   |   | — |   |   |
| Total Contractual Cash  Obligations |       | $                                         | 46,773     |   |   | $ | 30,751 |   |   |   | $ | 7,098 |   |   |   | $ | 2,720 |   |   |   | $ | 6,204 |   |   |
|                                     |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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       (1) Includes outstanding purchase commitments andcommitments to Celliance, Ltd. and Bio-Tek Instruments, Inc. as more fullydiscussed in Note 17 to the consolidated financial statements.

       (2) Represents Japan acquisition liability.

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*Off-Balance SheetArrangements*

We have no off-balancesheet financial arrangements as of May 31, 2007.

**Critical AccountingPolicies and Estimates**

*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 are discussed throughout Management’sDiscussion and Analysis of Financial Condition and Results of Operations wheresuch policies affect our reported and expected financial results. For adetailed discussion on the application of these and other accounting policies,see Note 1 to the consolidated financial statements in Item 8 of this AnnualReport on Form 10-K. Note that our preparation of this Annual Reporton Form 10-K requires us to make estimates and assumptions thataffect the reported amounts of assets and liabilities, the disclosure ofcontingent assets and liabilities at the date of our financial statements, andthe reported amounts of revenue and expenses during the reporting period.Actual results could differ from those estimates, and certain assumptions couldprove to be incorrect. Senior management has discussed the development andselection of critical accounting estimates and the related Management’sDiscussion and Analysis of Financial Condition and Results of Operationsdisclosure with the Audit Committee of our Board of Directors. We believe thatour most critical accounting policies and estimates relate to the following:

i.                   Revenuerecognition

ii.               Trade AccountsReceivables and Allowance for Doubtful Accounts

iii.           Inventory

iv.             Goodwill

v.                 Taxation

vi.             Stock-basedcompensation

*i) RevenueRecognition*

In accordance withthe Staff Accounting Bulletin No. 104, *Revenue Recognition*,guidance, we recognize revenue when the following fourbasic criteria have been met: (1) persuasive evidence of an arrangementexists; (2) delivery has occurred or services rendered; (3) the feeis fixed and determinable; and (4) collectibility is reasonably assured. Shouldchanges in conditions cause management to determine these criteria are not metfor certain future transactions, revenue recognized for any reporting periodcould be adversely affected.

·       *Reagent sales*

Revenuefrom the sale of our reagents to end users is recognized upon shipment whenboth title and risk of loss transfer to the customer, unless there are specificcontractual terms to the contrary. Revenue from the sale of our reagents todistributors is recognized FOB customs clearance when both title and risk ofloss transfer to the customer.

·       *Medical instrument sales*

Revenue from the sale ofour medical instruments without multiple deliverables is generally recognizedupon shipment and completion of contractual obligations. Revenue from rentalsof our medical instruments is recognized over the term of the rental agreement.Instrument service contract revenue is recognized over the term of thecontract.

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In cases of sales ofinstruments with multiple deliverables, we recognize revenue on the sale ofmedical instruments in accordance with Emerging Issues Task Force (“EITF”)Issue No. 00-21, *Accounting forRevenue Arrangements with Multiple Deliverables*. Our medicalinstrument sales contracts with multiple deliverables include the sale orrental of an instrument (including delivery, installation and training), theservicing of the instrument during the first year, and, in many cases, priceguarantees for consumables purchased during the contract period. We havedetermined the fair value of certain of these elements, such as training and firstyear service. The portion of the instrument sales price applicable to theinstrument itself is recognized upon shipment and completion of contractualobligations relating to training and/or installation. If the agreement does notinclude any price guarantees, the sales price in excess of the fair values oftraining and service is allocated to the instrument itself. The fair value of atraining session is recognized as revenue when services are provided. Ifmultiple training sessions are contractually provided, then additional trainingrevenue is recognized upon delivery. The fair value of first year service isrecognized over the first year of the contract. If the agreement contains priceguarantees, the entire arrangement consideration is deferred and recognizedover the related guarantee period due to the fair value of the price guaranteenot being determinable at the point of sale. The allocation of the totalconsideration, which is based on the estimated fair value of the units ofaccounting, requires judgment by management.

*ii) Trade AccountsReceivable and Allowance for Doubtful Accounts*

Tradereceivables at May 31, 2007, totaling $47.8 million, and at May 31,2006, totaling $37.2 million, are net of allowances for doubtful accounts of$1.7 million and $2.0 million, respectively. The allowance for doubtfulaccounts represents a reserve for estimated losses resulting from the inabilityof our customers to pay their debts. The collectibility of trade receivablebalances is regularly evaluated based on a combination of factors such ascustomer credit-worthiness, past transaction history with the customer, currenteconomic industry trends and changes in customer payment patterns. If it isdetermined 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.

*iii) Inventory*

Inventories are stated atthe lower of cost (first-in, first-out basis) or market (net realizable value).Cost includes material, labor and manufacturing overhead. We use a standardcost system as a tool to monitor production efficiency. The standard costsystem applies estimated labor and manufacturing overhead factors to inventorybased on budgeted production and efficiency levels, staffing levels and costsof operation, based on the experience and judgment of management. Actual costsand production levels may vary from the standard established and such variancesare charged to the consolidated statement of income as a component of cost ofsales. Since U.S. generally accepted accounting principles require that thestandard cost approximate actual cost, periodic adjustments are made to thestandard rates to approximate actual costs. The provision for obsolete and/orexcess inventory is reviewed on a quarterly basis or, if warranted bycircumstances, more frequently. In evaluating this reserve, managementconsiders technology changes, competition, customer demand, product shelf lifeand manufacturing quality. No material changes have been made to the inventorypolicy during fiscal 2007, 2006 or 2005.

*iv) Goodwill*

On adoption of SFAS No. 142, *Goodwill andOther Intangible Assets,* goodwill and indefinite lived intangibleassets are no longer amortized but are tested for impairment annually or morefrequently if 

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impairment indicatorsarise. Intangible assets that have finite lives are continuing to be amortizedover their useful lives.

Weevaluate the carrying value of goodwill as at the end of the third quarter ofeach year and between annual evaluations if events occur or circumstanceschange that would more likely than not reduce the fair value of the reportingunit below its carrying amount. Such circumstances could include, but are notlimited to: (1) a significant adverse change in legal factors or inbusiness climate, (2) unanticipated competition, or (3) an adverseaction or assessment by a regulator. When evaluating whether goodwill isimpaired, we compare the fair value of the reporting unit to which the goodwillis assigned to the reporting unit’s carrying amount, including goodwill. Thefair value of the reporting unit is estimated using primarily the income, ordiscounted cash flows, approach. If the carrying amount of a reporting unitexceeds its fair value, then the amount of the impairment loss must bemeasured. The impairment loss would be calculated by comparing the implied fairvalue of the reporting unit’s goodwill to its carrying amount. In calculatingthe implied fair value of the reporting unit’s goodwill, the fair value of thereporting unit is allocated to all of the other assets and liabilities of thatunit based on their fair values. The excess of the fair value of a reportingunit over the amount assigned to its other assets and liabilities is theimplied fair value of goodwill. An impairment loss would be recognized when thecarrying amount of goodwill exceeds its implied fair value. Our evaluation ofgoodwill completed during the year resulted in no impairment charges.

*v) Income Taxes*

Ourincome tax policy records the estimated future tax effects of temporarydifferences between the tax bases of assets and liabilities and amountsreported in the accompanying consolidated balance sheets, as well as operatingloss and tax credit carry-forwards. The value of our deferred tax assetsassumes that we will be able to generate sufficient future taxable income incertain tax jurisdictions, based on estimates and assumptions. If theseestimates and related assumptions change in the future, we may be required torecord additional valuation allowances against our deferred tax assetsresulting in additional income tax expense in our consolidated statements of income.In assessing the realizability of deferred tax assets, we consider whether itis more likely than not that some portion or all of the deferred tax assetswill not be realized, and we consider the scheduled reversal of deferred taxliabilities, projected future taxable income, carry-back opportunities, andtax-planning strategies in making this assessment. We assess the need foradditional valuation allowances quarterly. No material changes have been madeto the income tax policy during fiscal 2007. See Note 13 to the consolidatedfinancial statements.

*vi) Stock-basedEmployee Compensation*

In December 2004, the Financial AccountingStandards Board revised Statement of Financial Accounting Standards No. 123,“Accounting for Stock-Based Compensation” (“SFAS 123(R)”), requiring companiesto record share-based payments to employees as compensation expense at thegrant date fair value. We adopted SFAS 123(R) on June 1, 2006, usingthe modified prospective transition method, which requires that (i) compensationcosts be recorded as earned for all unvested stock options outstanding at thebeginning of the first fiscal year of adoption of SFAS 123(R) based on thegrant date fair value estimated in accordance with the original provisions ofSFAS 123, and (ii) for compensation costs for all share-based paymentsgranted or modified subsequent to the adoption be recorded, based on the grantdate fair value estimated in accordance with the provisions of SFAS 123(R). Inaccordance with the modified prospective transition method, we have notrestated the financial statements for prior periods and those statements do notinclude the impact of SFAS 123(R). In conjunction with the adoption ofSFAS 123(R), we elected to attribute the value of share-based compensationto expense using the straight-line method, which was previously used fordisclosing our pro forma information required under SFAS 123.

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Prior to adopting SFAS 123(R), we presented all taxbenefits resulting from the exercise of stock options as operating cash flowsin the consolidated statement of cash flows. SFAS 123(R) requires cashflows resulting from excess tax benefits to be classified as a part of cashflows from financing activities. Excess tax benefits are realized tax benefitsfrom tax deductions for exercised options in excess of the deferred tax assetattributable to stock compensation costs for such options.

We elected to value our share-based payment awardsusing the Black-Scholes option-pricing model (the “Black-Scholes model”), whichwas previously used for disclosing our pro forma information required underSFAS 123 for fiscal years 2006 and 2005. The Black-Scholes model was developedfor use in estimating the fair value of traded options that have no vestingrestrictions and are fully transferable. The Black-Scholes model requires theinput of certain assumptions. Our stock options have characteristicssignificantly different from those of traded options, and changes in theassumptions can materially affect the fair value estimates. See Note 11 of thenotes to the consolidated financial statements for a detailed discussion ofSFAS 123(R).

We have calculated our additional paid in capital pool(“APIC pool”) based on the actual income tax benefits received from exercisesof stock options granted after the effective date of SFAS 123 using the longmethod. The APIC pool is available to absorb any tax deficiencies subsequent tothe adoption of SFAS 123(R).

The adoption of Statement No. 123(R)’sfair value method negatively impacts our results of operations. The futureimpact of adoption of Statement No. 123(R) will depend on the levelof share-based payments granted in the future, expected volatilities andexpected useful lives, among other factors, present at the grant date. However,had Statement No. 123(R) been effective in prior periods, the impactof that standard would have approximated the impact of Statement No. 123as described in our disclosure of pro forma net income and net income per sharein Note 11 to our 2007consolidated financial statements included in Item 8 of this Form 10-K.As of June 1, 2006, the unrecognized compensation expense associated withthe remaining portion of the unvested outstanding awards was $4.5 million($2.9 million, net of tax). Statement No. 123(R) also requiresthe benefit of tax deductions in excess of recognized compensation cost to bereported as a financing cash flow, rather than as an operating cash flow aspreviously required.

**Impact of RecentlyIssued Accounting Standards**

In June 2006, the Financial Accounting StandardsBoard issued FASB Interpretation No. 48, Accounting for Uncertainty inIncome Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”). FIN48 clarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with FASB Statement No. 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 beeffective for us in the first quarter of fiscal 2008. We are in the process ofreviewing and evaluating FIN 48; however, the impact of its adoption toour financial condition, results of operations, or cash flows is not expectedto be material.

In September 2006, the Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”).Due to diversity in practice among registrants, SAB 108 expresses SEC staffviews regarding 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 

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application is encouraged.The adoption of SAB 108 did not have an impact on our results from operationsor financial position.

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 to measure assets andliabilities. This standard also responds to investors’ requests for expandedinformation about the extent to which companies measure assets and liabilitiesat fair value, the information used to measure fair value and the effect of fairvalue measurements on earnings. SFAS No. 157 applies whenever otherstandards require (or permit) assets or liabilities to be measured at fairvalue. The standard does not expand the use of fair value in any newcircumstances. SFAS No. 157 is effective for financial statements issuedfor fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years; therefore, we expect to adopt SFAS No. 157 inthe first quarter of fiscal 2009. We do not believe SFAS No. 157 willhave a material impact on our results from operations or financial position.

On February 15, 2007,the FASB issued SFAS No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities,” (“SFAS No.159”) which gives entities theoption to measure eligible financial assets, financial liabilities and firmcommitments at fair value (i.e., the fair value option), on aninstrument-by-instrument basis, that are otherwise not permitted to beaccounted for at fair value under other accounting standards. The election touse the fair value option is available when an entity first recognizes afinancial asset or financial liability or upon entering into a firm commitment.Subsequent changes in fair value must be recorded in earnings. SFAS No. 159is effective for financial statements issued for fiscal years beginning after November 15,2007 and is therefore effective for us in the first quarter of fiscal 2009. Weare currently assessing the effect of implementing this guidance, which isdependent upon the nature and extent of eligible items elected to be measuredat fair value upon initial application of the standard. However, we do notexpect the adoption of SFAS No. 159 to have a material impact on ourresults of operations and financial position.

**Item 7A.—Quantitativeand Qualitative Disclosures about Market Risk.**

We are exposed to market risks for foreign currencyexchange rates and to a lesser extent for interest rates that could adverselyimpact our results of operations and financial condition. We repaid all of ourinterest-bearing debts during fiscal 2006 and interest rate risk applies onlyto our cash and short-term investment portfolio. To manage these risks, weregularly evaluate our exposure and, if warranted, may enter into variousderivative transactions when appropriate. We do not hold or issue derivativeinstruments for trading or other speculative purposes. We are not currentlysubject to significant market risks for commodity prices or other relevantmarket price risks.

*ForeignCurrency Risk*—Fluctuations in foreign exchange rates,principally with the U.S. Dollar versus the Euro, Canadian Dollar and JapaneseYen, could impact our operating results. It has not been our practice toactively hedge our foreign subsidiaries’ assets or liabilities denominated inlocal currencies.

Operating income generated outside the United Statesas a percentage of total operating income was 11% in 2007, 10% in 2006 and 15%in 2005. In fiscal years 2007, 2006, and 2005, we recorded foreign currencytranslation gains of $1.1 million, $2.3 million and $0.6 million, respectively.During these years the foreign currency transaction gains were negligible. Infiscal 2007, a 7% increase compared to fiscal 2006 in the U.S.-Euro weightedaverage exchange rate increased net sales and net income by approximately$2.7 million and $0.2 million, respectively. In the case of the U.S.Dollar versus the Canadian Dollar, a 3% increase in fiscal 2007 compared tofiscal 2006 in the weighted average exchange rate increased net sales and netincome by approximately $0.3 million and $0.1 million, respectively.

A 10% change in the year-to-date weighted average Euroexchange rate would have had the effect of increasing or decreasing net salesand net income by approximately $4.1 million and $0.3 million, respectively. A10% change in the year-to-date weighted average Canadian Dollar exchange ratewould 

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have had the effect ofincreasing or decreasing net sales and net income by approximately $1.1 millionand $0.3 million, respectively.

*Interest Rate Risk**—*We place our cash, cash equivalents and marketablesecurities, which generally have a term of less than one year, withhigh-quality financial institutions and have investment guidelines relative todiversification and maturities designed to maintain safety and liquidity. As ofMay 31, 2007, we had cash, cash equivalents and marketable securitiestotaling $113.6 million. If, during fiscal 2007, average short-term interestrates decreased by 1.0% from fiscal 2006 average rates, based on our quarterlyaverage balance of cash, cash equivalents and marketable securities, ourprojected interest income from short-term investments would have decreased byapproximately $0.8 million.

**Item 8.—FinancialStatements and Supplementary Data.**

INDEX TO CONSOLIDATEDFINANCIAL STATEMENTS

|                                                                                                                                      | ** ** | **Page** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Reports of Grant Thornton,  LLP, Independent Registered Public Accounting Firm                                                       |       |     | 40         |   |   |
| Report  of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                 |       |     | 42         |   |   |
| Consolidated  Balance Sheets, May 31, 2007 and 2006                                                                             |       |     | 43         |   |   |
| Consolidated  Statements of Income for the Years Ended May 31, 2007, 2006 and 2005                                              |       |     | 44         |   |   |
| Consolidated  Statements of Shareholders’ Equity and Comprehensive Income for the Years  Ended May 31, 2007, 2006 and 2005 |       |     | 45         |   |   |
| Consolidated  Statements of Cash Flows for the Years Ended May 31, 2007, 2006 and 2005                                          |       |     | 46         |   |   |
| Notes  to Consolidated Financial Statements                                                                                          |       |     | 47         |   |   |
| Consolidated Financial Statement  Schedule                                                                                           |       |     | 71         |   |   |

 

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**REPORT OF GRANTTHORNTON, LLP,INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM,ON FINANCIAL STATEMENTS**

Board of Directors and Shareholders ofImmucor, Inc.

We have audited the accompanying consolidated balancesheets of Immucor, Inc. and subsidiaries as of May 31, 2007 and 2006,and the related consolidated statements of income, shareholders’ equity andcomprehensive income, and cash flows for the years then ended.**These financial statements are the responsibility of theCompany’s management.**Ourresponsibility is to express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).**Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are freeof material misstatement.**An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements.**An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.**We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Immucor, Inc. and subsidiaries as of May 31, 2007 and2006, and the results of their operations and their cash flows for each of theyears then ended in conformity with accounting principles generally accepted inthe United States of America.

As described in Notes 1 and 11 to the consolidatedfinancial statements, Immucor, Inc. adopted the provisions of Statement ofFinancial Accounting Standards No. 123 (Revised 2004), “Share BasedPayment” effective June 1, 2006.

Our audit was conducted for the purpose of forming anopinion on the basic financial statements taken as a whole. The Schedule II forthe years ended May 31, 2007 and 2006 is presented for purposes ofadditional analysis and is not a required part of the basic financialstatements. This schedule has been subjected to the auditing procedures appliedin the audit of the basic financial statements and, in our opinion, is fairly statedin all material respects in relation to the basic financial statements taken asa whole.

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the effectiveness of Immucor, Inc.’sinternal control over financial reporting as of May 31, 2007, based oncriteria established in Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (“COSO”) andour report dated July 27, 2007 expressed an unqualified opinion onmanagement’s assessment of, and the effective operation of, internal controlover financial reporting.

Atlanta, GAJuly 27, 2007

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**REPORT OF GRANT THORNTONLLP,INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM,ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

Board of Directorsand Shareholders ofImmucor, Inc.

Wehave audited management’s assessment included in the accompanying Management’sReport on Internal Control Over Financial Reporting that Immucor, Inc.maintained effective internal control over financial reporting as of May 31,2007, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission(“COSO”). Immucor, Inc.’s management is responsible for maintainingeffective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting. Ourresponsibility is to express an opinion on management’s assessment and anopinion on the effectiveness of the company’s internal control over financialreporting based on our audit.

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal controlover financial reporting, evaluating management’s assessment, testing andevaluating the design and operating effectiveness of internal control, andperforming such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for ouropinions.

Acompany’s internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

Inour opinion, management’s assessment that Immucor, Inc. maintainedeffective internal control over financial reporting as of May 31, 2007, isfairly stated, in all material respects, based on criteria established inInternal Control—Integrated Framework issued by the COSO. Also in our opinion,Immucor, Inc. maintained, in all material respects, effective internalcontrol over financial reporting as of May 31, 2007, based on criteriaestablished in Internal Control—Integrated Framework issued by the COSO.

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated balance sheets of Immucor, Inc. andsubsidiaries as of May 31, 2007 and 2006, and the related consolidatedstatements of income, shareholders’ equity and comprehensive income, and cashflows for the years then ended and our report dated July 27, 2007expressed an unqualified opinion on those financial statements.

Atlanta, GeorgiaJuly 27, 2007

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

ToBoard of Directors and Shareholders

Immucor, Inc.

We have audited the accompanying consolidatedstatements of income, shareholders’ equity, and cash flows of Immucor, Inc. andsubsidiaries (the “Company”) for the year ended May 31, 2005. Our audit alsoincluded the financial statement schedule listed in the Index at Item 15(a).These financial statements and schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements and schedule based on our audit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.

In our opinion, theCompany’s consolidated financial statements referred to above present fairly,in all material respects, the consolidated results of its operations and itscash flows for the year ended May 31, 2005, in conformity with U.S. generallyaccepted accounting principles. Also, in our opinion, the related financialstatement schedule, when considered in relation to the basic financialstatements taken as a whole, presents fairly in all material respects theinformation set forth therein.

/s/ Ernst & Young LLP

Atlanta,GeorgiaSeptember 13, 2005, except for the impact of the 3-for-2 stock split in fiscal 2006 as discussed in Note 1,as to which the date is July 28, 2006

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**A.**                FinancialStatements

**IMMUCOR,INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(Amountsin thousands, except share data)**

| ** **                                                                                                                                                                            | ** ** | **May 31, 2007** | ** ** | **May 31, 2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **ASSETS**                                                                                                                                                                            |       |                       |       |                       |       |   |   |   |   |
| CURRENT ASSETS:                                                                                                                                                                       |       |                       |       |                       |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                             |       |                       | $          | 113,551                    |       |   |   | $ | 54,103 |   |   |
| Short-term investments                                                                                                                                                                |       |                       | —     |                       |       |   | 1,640 |   |   |
| Trade accounts receivable, net of allowance for  doubtful accounts of $1,726 at May 31, 2007 and $1,950 at May 31,  2006                                                    |       |                       | 47,768     |                       |       |   | 37,199 |   |   |
| Inventories                                                                                                                                                                           |       |                       | 29,320     |                       |       |   | 20,651 |   |   |
| Deferred income tax assets, current portion                                                                                                                                           |       |                       | 3,614      |                       |       |   | 2,041 |   |   |
| Prepaid expenses and other current assets                                                                                                                                             |       |                       | 5,567      |                       |       |   | 5,158 |   |   |
| Total current assets                                                                                                                                                                  |       |                       | 199,820    |                       |       |   | 120,792 |   |   |
| PROPERTY AND EQUIPMENT, Net                                                                                                                                                           |       |                       | 30,245     |                       |       |   | 25,684 |   |   |
| GOODWILL                                                                                                                                                                              |       |                       | 34,763     |                       |       |   | 34,691 |   |   |
| OTHER INTANGIBLE ASSETS, Net                                                                                                                                                          |       |                       | 5,719      |                       |       |   | 6,532 |   |   |
| DEFERRED INCOME TAX ASSETS                                                                                                                                                            |       |                       | 4,225      |                       |       |   | 3,115 |   |   |
| OTHER ASSETS                                                                                                                                                                          |       |                       | 706        |                       |       |   | 873 |   |   |
| Total assets                                                                                                                                                                          |       |                       | $          | 275,478                    |       |   |   | $ | 191,687 |   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                        | ** ** |                       |       |                       |       |   |   |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                  |       |                       |       |                       |       |   |   |   |   |
| Accounts payable                                                                                                                                                                      |       |                       | $          | 8,056                      |       |   |   | $ | 7,271 |   |   |
| Accrued expenses and other current liabilities                                                                                                                                        |       |                       | 14,055     |                       |       |   | 9,470 |   |   |
| Income taxes payable                                                                                                                                                                  |       |                       | 7,180      |                       |       |   | 5,519 |   |   |
| Deferred revenue, current portion                                                                                                                                                     |       |                       | 7,321      |                       |       |   | 4,575 |   |   |
| Current portion of acquisition liability                                                                                                                                              |       |                       | 343        |                       |       |   | 1,074 |   |   |
| Total current liabilities                                                                                                                                                             |       |                       | 36,955     |                       |       |   | 27,909 |   |   |
| ACQUISITION LIABILITY                                                                                                                                                                 |       |                       | 3,488      |                       |       |   | 3,980 |   |   |
| DEFERRED REVENUE                                                                                                                                                                      |       |                       | 12,361     |                       |       |   | 11,500 |   |   |
| DEFERRED INCOME TAX LIABILITIES                                                                                                                                                       |       |                       | 1,275      |                       |       |   | 2,232 |   |   |
| OTHER LONG-TERM LIABILITIES                                                                                                                                                           |       |                       | 1,951      |                       |       |   | 2,195 |   |   |
| Total liabilities                                                                                                                                                                     |       |                       | 56,030     |                       |       |   | 47,816 |   |   |
| Commitments and contingencies  (Note 17)                                                                                                                                              |       |                       |       |                       |       |   |   |   |   |
| SHAREHOLDERS’ EQUITY:                                                                                                                                                            |       |                       |       |                       |       |   |   |   |   |
| Common stock, $0.10 par value; authorized 120,000,000  shares, issued and outstanding 69,086,652 and 67,926,206 shares at  May 31, 2007 and May 31, 2006, respectively |       |                       | 6,909      |                       |       |   | 6,793 |   |   |
| Additional paid-in capital                                                                                                                                                            |       |                       | 29,076     |                       |       |   | 14,752 |   |   |
| Retained earnings                                                                                                                                                                     |       |                       | 179,768    |                       |       |   | 119,700 |   |   |
| Accumulated other comprehensive income                                                                                                                                                |       |                       | 3,695      |                       |       |   | 2,626 |   |   |
| Total shareholders’ equity                                                                                                                                                       |       |                       | 219,448    |                       |       |   | 143,871 |   |   |
| Total liabilities  and shareholders’ equity                                                                                                                                      |       |                       | $          | 275,478                    |       |   |   | $ | 191,687 |   |   |

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

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**IMMUCOR,INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(Amounts in thousands, except pershare data)**

| ** **                      | ** ** | **For the year ended May 31,** | ** ** |
|---------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| NET SALES                       |       | $                                                       | 223,678    |   | $ | 183,506 |   | $ | 144,786 |   |
| COST OF SALES                   |       | 65,923                                                  |       | 61,969 |   | 57,541 |   |
| GROSS PROFIT                    |       | 157,755                                                 |       | 121,537 |   | 87,245 |   |
| OPERATING  EXPENSES             |       |                                                    |       |   |   |   |   |
| Research and development        |       | 6,354                                                   |       | 4,623 |   | 4,463 |   |
| Selling and marketing           |       | 26,595                                                  |       | 20,877 |   | 18,228 |   |
| Distribution                    |       | 9,635                                                   |       | 8,004 |   | 8,044 |   |
| General and administrative      |       | 22,162                                                  |       | 21,963 |   | 18,559 |   |
| Restructuring expenses          |       | 1,051                                                   |       | 2,689 |   | — |   |
| Amortization expense and other  |       | 346                                                     |       | 341 |   | 699 |   |
| Total operating expenses        |       | 66,143                                                  |       | 58,497 |   | 49,993 |   |
| INCOME FROM OPERATIONS          |       | 91,612                                                  |       | 63,040 |   | 37,252 |   |
| NON-OPERATING INCOME  (EXPENSE) |       |                                                    |       |   |   |   |   |
| Interest income                 |       | 2,841                                                   |       | 978 |   | 624 |   |
| Interest expense                |       | (432                                                    | )          | (516 | ) | (662 | ) |
| Other, net                      |       | 133                                                     |       | (342 | ) | 767 |   |
| Total non-operating income      |       | 2,542                                                   |       | 120 |   | 729 |   |
| INCOME BEFORE INCOME TAXES      |       | 94,154                                                  |       | 63,160 |   | 37,981 |   |
| PROVISION FOR  INCOME TAXES     |       | 34,086                                                  |       | 23,317 |   | 14,071 |   |
| NET INCOME                      |       | $                                                       | 60,068     |   | $ | 39,843 |   | $ | 23,910 |   |
| Earnings per  share:            |       |                                                    |       |   |   |   |   |
| Per common share—basic     |       | $                                                       | 0.88       |   | $ | 0.59 |   | $ | 0.35 |   |
| Per common share—diluted   |       | $                                                       | 0.85       |   | $ | 0.56 |   | $ | 0.34 |   |

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

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**IMMUCOR,INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME**

**(Amounts in thousands)**

| ** **                                       | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** **   | ** **        | ** ** | **Accumulated**         | ** **    | ** ** | ** ** |   |
|--------------------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|--------------|-------------------|------------|-------------------------|---------------|------------|------------|--------|
| ** **                                       | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** **   | ** **        | ** ** | **Other**               | ** **    | **Total**  | ** ** |   |
| ** **                                       | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Retained**   | ** **   | **Comprehensive** | ** ** | **Shareholders’**  | ** **    |       |
| ** **                                       | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**    | ** **   | **Earnings**      | ** ** | **Income (Loss)*** | ** **    | **Equity** | ** ** |   |
| BALANCE, MAY 31, 2004                            |       |                  | 67,897     |        |       |           | $ 6,789 |              |       |                    | $ 30,536 |       |       |   | $ 55,956 |   |   |   | $ (329 | ) |   |   | $ 92,952 |   |   |
| Shares issued under employee stock plan          |       |                  | 1,326      |        |       |           | 133          |              |       |                    | 1,425         |       |       |   | — |   |   |   | — |   |   |   | 1,558 |   |   |
| Stock-based compensation expense                 |       |                  | —     |        |       |           | —       |              |       |                    | 21            |       |       |   | — |   |   |   | — |   |   |   | 21 |   |   |
| Cash paid for fractional shares from stock split |       |                  | (1         | )           |       |           | —       |              |       |                    | —        |       |       |   | (9 | ) |   |   | — |   |   |   | (9 | ) |   |
| Stock repurchases and retirements                |       |                  | (934       | )           |       |           | (93          | )                 |       |                    | (7,934        | )          |       |   | — |   |   |   | — |   |   |   | (8,027 | ) |   |
| Tax benefits related to stock-based compensation |       |                  | —     |        |       |           | —       |              |       |                    | 6,367         |       |       |   | — |   |   |   | — |   |   |   | 6,367 |   |   |
| Comprehensive income (net  of taxes):            |       |                  |       |        |       |           |         |              |       |                    |          |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments         |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | — |   |   |   | 639 |   |   |   | 639 |   |   |
| Hedge loss reclassified into earnings            |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | — |   |   |   | 21 |   |   |   | 21 |   |   |
| Net income                                       |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | 23,910 |   |   |   | — |   |   |   | 23,910 |   |   |
| Total comprehensive income                       |       |                  |       |        |       |           |         |              |       |                    |          |       |       |   |   |   |   |   |   |   |   |   | 24,570 |   |   |
| BALANCE, MAY 31, 2005                            |       |                  | 68,288     |        |       |           | 6,829        |              |       |                    | 30,415        |       |       |   | 79,857 |   |   |   | 331 |   |   |   | 117,432 |   |   |
| Shares issued under employee stock plan          |       |                  | 1,218      |        |       |           | 122          |              |       |                    | 1,953         |       |       |   | — |   |   |   | — |   |   |   | 2,075 |   |   |
| Stock-based compensation expense                 |       |                  | —     |        |       |           | —       |              |       |                    | 720           |       |       |   | — |   |   |   | — |   |   |   | 720 |   |   |
| Cash paid for fractional shares from stock split |       |                  | —     |        |       |           | —       |              |       |                    | (3            | )          |       |   | — |   |   |   | — |   |   |   | (3 | ) |   |
| Stock repurchases and retirements                |       |                  | (1,580     | )           |       |           | (158         | )                 |       |                    | (24,684       | )          |       |   | — |   |   |   | — |   |   |   | (24,842 | ) |   |
| Tax benefits related to stock-based compensation |       |                  | —     |        |       |           | —       |              |       |                    | 6,351         |       |       |   | — |   |   |   | — |   |   |   | 6,351 |   |   |
| Comprehensive income (net  of taxes):            |       |                  |       |        |       |           |         |              |       |                    |          |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments         |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | — |   |   |   | 2,285 |   |   |   | 2,285 |   |   |
| Hedge loss reclassified into earnings            |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | — |   |   |   | 10 |   |   |   | 10 |   |   |
| Net income                                       |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | 39,843 |   |   |   | — |   |   |   | 39,843 |   |   |
| Total comprehensive income                       |       |                  |       |        |       |           |         |              |       |                    |          |       |       |   |   |   |   |   |   |   |   |   | 42,138 |   |   |
| BALANCE, MAY 31, 2006                            |       |                  | 67,926     |        |       |           | 6,793        |              |       |                    | 14,752        |       |       |   | 119,700 |   |   |   | 2,626 |   |   |   | 143,871 |   |   |
| Shares issued under employee stock plan          |       |                  | 1,443      |        |       |           | 144          |              |       |                    | 3,772         |       |       |   | — |   |   |   | — |   |   |   | 3,916 |   |   |
| Stock-based compensation expense                 |       |                  | —     |        |       |           | —       |              |       |                    | 3,123         |       |       |   | — |   |   |   | — |   |   |   | 3,123 |   |   |
| Stock repurchases and retirements                |       |                  | (282       | )           |       |           | (28          | )                 |       |                    | (4,844        | )          |       |   | — |   |   |   | — |   |   |   | (4,872 | ) |   |
| Tax benefits related to stock-based compensation |       |                  | —     |        |       |           | —       |              |       |                    | 12,273        |       |       |   | — |   |   |   | — |   |   |   | 12,273 |   |   |
| Comprehensive  income (net of taxes):            |       |                  |       |        |       |           |         |              |       |                    |          |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments         |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | — |   |   |   | 1,069 |   |   |   | 1,069 |   |   |
| Net income                                       |       |                  | —     |        |       |           | —       |              |       |                    | —        |       |       |   | 60,068 |   |   |   | — |   |   |   | 60,068 |   |   |
| Total comprehensive income                       |       |                  |       |        |       |           |         |              |       |                    |          |       |       |   |   |   |   |   |   |   |   |   | 61,137 |   |   |
| BALANCE, MAY 31,  2007                           |       |                  | 69,087     |        |       |           | $ 6,909 |              |       |                    | $ 29,076 |       |       |   | $ 179,768 |   |   |   | $ 3,695 |   |   |   | $ 219,448 |   |   |
|                                                  |            |                       |            |             |            |                |              |                   |            |                         |               |            |            |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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

The accompanying notes are an integral part of these Consolidated Financial Statements.

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**IMMUCOR, INC. ANDSUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Amounts in thousands)**

| ** **                                                                          | ** ** | **For the year ended May 31,** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **2007**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| OPERATING ACTIVITIES:                                                               |       |                                                    |       |   |   |   |   |
| Net income                                                                          |       | $                                                       | 60,068     |   | $ | 39,843 |   | $ | 23,910 |   |
| Adjustments to reconcile  net income to net cash provided by operating activities:  |       |                                                    |       |   |   |   |   |
| Depreciation and  amortization                                                      |       | 6,871                                                   |       | 6,929 |   | 7,442 |   |
| Accretion of  acquisition liabilities                                               |       | 179                                                     |       | 168 |   | — |   |
| Loss on retirement  of fixed assets                                                 |       | 132                                                     |       | 354 |   | 700 |   |
| Impairment and  other non-cash restructuring expenses                               |       | —                                                  |       | 2,322 |   | — |   |
| Provision for  doubtful accounts                                                    |       | 364                                                     |       | 254 |   | 942 |   |
| Gain on sale of  long-term investment                                               |       | —                                                  |       | — |   | (530 | ) |
| Stock-based  compensation expense                                                   |       | 3,123                                                   |       | 720 |   | 21 |   |
| Deferred income  taxes                                                              |       | (3,538                                                  | )          | (2,411 | ) | (1,635 | ) |
| Excess tax  benefits from share-based payment arrangements                          |       | (12,273                                                 | )          | — |   | — |   |
| Other                                                                               |       | —                                                  |       | — |   | 369 |   |
| Changes in operating  assets and liabilities, net of effects from acquired company: |       |                                                    |       |   |   |   |   |
| Accounts  receivable, trade                                                         |       | (10,168                                                 | )          | (2,077 | ) | (8,786 | ) |
| Income taxes                                                                        |       | 13,700                                                  |       | 8,437 |   | 11,195 |   |
| Inventories                                                                         |       | (8,315                                                  | )          | 1,044 |   | (2,015 | ) |
| Other current  assets                                                               |       | (207                                                    | )          | (1,407 | ) | (706 | ) |
| Other long-term  assets                                                             |       | 34                                                      |       | 9 |   | (241 | ) |
| Accounts payable                                                                    |       | 2,185                                                   |       | (1,107 | ) | (143 | ) |
| Deferred revenue                                                                    |       | 3,520                                                   |       | 8,623 |   | 5,768 |   |
| Accrued expenses  and other current liabilities                                     |       | 2,778                                                   |       | 645 |   | 4,249 |   |
| Other long-term  liabilities                                                        |       | (174                                                    | )          | 370 |   | 946 |   |
| Cash provided by  operating activities                                              |       | 58,279                                                  |       | 62,716 |   | 41,486 |   |
| INVESTING ACTIVITIES:                                                               |       |                                                    |       |   |   |   |   |
| Purchases of  property and equipment                                                |       | (10,893                                                 | )          | (10,824 | ) | (6,593 | ) |
| Proceeds from sale  of property and equipment                                       |       | —                                                  |       | — |   | 28 |   |
| Payment for net  assets of acquired company                                         |       | —                                                  |       | (4,738 | ) | — |   |
| Profit realized  during Japan acquisition negotiations                              |       | —                                                  |       | 574 |   | — |   |
| Surrender of life  insurance policy for cash                                        |       | —                                                  |       | — |   | 110 |   |
| Proceeds from  (purchase of) short-term investments, net                            |       | 1,648                                                   |       | 368 |   | (1,961 | ) |
| Proceeds from sale  of long-term investments                                        |       | —                                                  |       | — |   | 1,300 |   |
| Cash used in  investing activities                                                  |       | (9,245                                                  | )          | (14,620 | ) | (7,116 | ) |
| FINANCING ACTIVITIES:                                                               |       |                                                    |       |   |   |   |   |
| Repayments of line  of credit agreements, net                                       |       | —                                                  |       | (146 | ) | (152 | ) |
| Repayments of  long-term debt and capital leases                                    |       | (1,092                                                  | )          | (8,129 | ) | (5,805 | ) |
| Repurchase of  common stock                                                         |       | (4,872                                                  | )          | (24,842 | ) | (8,028 | ) |
| Payment for  fractional shares resulting from stock split                           |       | —                                                  |       | (3 | ) | (9 | ) |
| Proceeds from  exercise of stock options                                            |       | 3,866                                                   |       | 2,075 |   | 1,582 |   |
| Excess tax benefits  from share-based payment arrangements                          |       | 12,273                                                  |       | — |   | — |   |
| Cash provided by  (used in) financing activities                                    |       | 10,175                                                  |       | (31,045 | ) | (12,412 | ) |
| EFFECT OF EXCHANGE  RATES ON CASH AND CASH EQUIVALENTS                              |       | 239                                                     |       | (56 | ) | (547 | ) |
| INCREASE IN CASH  AND CASH EQUIVALENTS                                              |       | 59,448                                                  |       | 16,995 |   | 21,411 |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF YEAR                                     |       | 54,103                                                  |       | 37,108 |   | 15,697 |   |
| CASH AND CASH  EQUIVALENTS AT END OF YEAR                                           |       | $                                                       | 113,551    |   | $ | 54,103 |   | $ | 37,108 |   |
| SUPPLEMENTAL INFORMATION:                                                           |       |                                                    |       |   |   |   |   |
| Tax paid                                                                            |       | $                                                       | 23,235     |   | $ | 18,053 |   | $ | 5,353 |   |
| Interest paid                                                                       |       | $                                                       | 225        |   | $ | 478 |   | $ | 834 |   |
| NON-CASH INVESTING AND FINANCING ACTIVITIES:                                        |       |                                                    |       |   |   |   |   |
| Capital leases                                                                      |       | $                                                       | —     |   | $ | — |   | $ | 385 |   |
| Acquisition  obligation                                                             |       | $                                                       | —     |   | $ | 6,073 |   | $ | — |   |

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

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**IMMUCOR, INC. ANDSUBSIDIARIES**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**1.**                 NATUREOF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

*Natureof Business—**Founded*in 1982, Immucor, Inc., aGeorgia corporation (“Immucor” or the “Company”), develops, manufactures andsells a complete line of reagents and automated systems used primarily byhospitals, clinical laboratories and blood banks in a number of tests performedto detect and identify certain properties of the cell and serum components ofhuman blood prior to blood transfusion. The Company operates facilities inNorth America, Europe and Japan. The Company continues to place increasingemphasis on the development and sale of instruments and instrument systems thatuse the Company’s proprietary reagents, while also promoting increased sales ofits traditional reagent product line.

*ConsolidationPolicy—**The*consolidated financialstatements include the accounts of the Company and all its subsidiaries. Allsignificant inter-company balances and transactions have been eliminated inconsolidation.

*Useof Estimates—**The*preparation of financialstatements in conformity with generally accepted accounting principles in theU.S. requires management to make estimates and assumptions that affect theamounts reported in the financial statements and accompanying notes. Actualresults could differ from those estimates.

*Reclassifications—**The*consolidatedbalance sheets include retroactive adjustments of equity due to a three-for-twostock split in fiscal year 2006 and two three-for-two stock splits in fiscalyear 2005. These retroactive adjustments of equity also impacted theconsolidated statements of shareholders’ equity and earnings per sharecalculations, but had no impact on the consolidated statements of income or onthe consolidated statements of cash flows. In fiscal year 2005, besidesretroactive adjustments for stock splits, certain salary expenses werereclassified which had no impact on the consolidated balance sheets,consolidated statements of shareholders’ equity or consolidated statements ofcash flows, but did have an impact on certain captions on the consolidatedstatements of income.

*Stock-BasedCompensation—**In* December 2004, theFinancial Accounting Standards Board revised Statement of Financial AccountingStandards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123(R)”),requiring companies to record share-based payments to employees as compensationexpense at the grant date fair value. Effective June 1, 2006, the Companyadopted SFAS 123(R), using the modified prospective transition method, whichrequires that (i) compensation costs be recorded as earned for allunvested stock options outstanding at the beginning of the first fiscal year ofadoption of SFAS 123(R) based on the grant date fair value estimatedin accordance with the original provisions of SFAS 123, and (ii) forcompensation costs for all share-based payments granted or modified subsequentto the adoption to be recorded, based on grant date fair value estimated inaccordance with the provisions of SFAS 123(R).

In accordance with the modified prospective transitionmethod, the Company has not restated the financial statements for prior periodsand those statements do not include the impact of SFAS 123(R). Prior toadopting SFAS 123(R), the Company presented all tax benefits resulting from theexercise of stock options as operating cash flows in the consolidated statementof cash flows. SFAS 123(R) requires cash flows resulting from excess taxbenefits to be classified as a part of cash flows from financing activities.Excess tax benefits are realized tax benefits from tax deductions for exercisedoptions in excess of the deferred tax asset attributable to stock compensationcosts for such options.

In conjunction with the adoption of SFAS 123(R), theCompany elected to attribute the value of share-based compensation to expenseusing the straight-line method, which was previously used for its pro 

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forma information requiredunder SFAS 123. The Company elected to value its share-based payment awardsusing the Black-Scholes option-pricing model (the “Black-Scholes model”), whichwas previously used for its pro forma information required under SFAS 123. TheBlack-Scholes model was developed for use in estimating the fair value oftraded options that have no vesting restrictions and are fully transferable.The Black-Scholes model requires the input of certain assumptions. Immucor’sstock options have characteristics significantly different from those of tradedoptions, and changes in the assumptions can materially affect the fair valueestimates. See Note 11 of the notes to the consolidated financial statementsfor a detailed discussion of SFAS 123(R).

The Company has calculated its additional paid incapital pool (“APIC pool”) based on the actual income tax benefits receivedfrom exercises of stock options granted after the effective date of SFAS 123using the long method. The APIC pool is available to absorb any taxdeficiencies subsequent to the adoption of SFAS 123(R).

*Concentrationof Credit Risk—**Financial*instruments thatpotentially subject the Company to concentrations of credit risk consistprimarily of cash and cash equivalents and accounts receivable. The Companyplaces its cash and cash equivalents with high quality financial institutions.Cash and cash equivalents were $113.6 million and $54.1 million at May 31,2007 and 2006, respectively, 89% of it located in the U.S. The Company also hadshort-term investments in high-quality marketable investment securitiestotaling $1.6 million at May 31, 2006.

Concentrations of credit risk with respect to accountsreceivable are limited because a large number of geographically diversecustomers make up the Company’s customer base, thus spreading the trade creditrisk. At May 31, 2007, and May 31, 2006, no single group or customerrepresents more than 10% of total accounts receivable. The Company controlscredit risk through credit limits and monitoring procedures. At May 31,2007 and 2006, the Company’s accounts receivable balances were $47.8 millionand $37.2 million, respectively; about 48% of these accounts were of foreignorigin, predominantly European. Companies and government agencies in someEuropean countries require longer payment terms as a part of doing business. Thismay subject the Company to a higher risk of uncollectiblity. This risk isconsidered when the allowance for doubtful accounts is evaluated. The Companygenerally does not require collateral from its customers. Factoring of accountsreceivable is an additional method used by the Company in Italy to mitigate therisk of uncollectibility for certain customers who routinely take longer thanone year to pay. The Company has agreements with certain factoring companies tosell some of its trade receivables in non-recourse transactions. The tradereceivables were sold at a discount plus administrative and other fees. Salesof trade receivables were reflected as a reduction of accounts receivable inthe accompanying consolidated balance sheets. The proceeds were included asoperating activities in the consolidated statements of cash flows. Thefactoring companies retain a certain percentage of the collectible amount andthese amounts are disclosed as ‘prepaid expenses and other current assets’ inthe consolidated balance sheets. The outstanding retention amounts were $1.6million and $1.9 million as of May 31, 2007 and 2006, respectively. Thefactoring fee is charged against revenues on the consolidated statements ofincome. The factoring fee amounted to approximately $87,500, $75,000 and$72,000, respectively, for fiscal 2007, 2006 and 2005.

*Concentrationof production facilities—**Substantially*all ofthe Company’s reagent products are produced in its Norcross facility in theU.S.. While the Company has reliable supplies of most raw materials, itsreagent production is highly dependent on the uninterrupted and efficientoperation of the Norcross facility. Therefore, if a catastrophic event occurredat the Norcross facility, such as a fire or tornado or if there is a productiondisruption for an extended period for any other reason, many of those productscould not be produced until the manufacturing portion of the facility wasrestored and cleared by the FDA. The Company maintains a disaster plan tominimize the effects of such a catastrophe, and the Company has obtainedinsurance to protect against certain business interruption losses.

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*Cashand Cash Equivalents—**The*Company considers deposits thatcan be redeemed on demand and investments with an original maturity of threemonths or less when purchased to be cash and cash equivalents. Generally, cashand cash equivalents held at financial institutions are in excess of theFederal Deposit Insurance Corporation (FDIC) insurance limit. The Companylimits its exposure to credit loss by placing its cash and cash equivalents inliquid investments with high-quality financial institutions.

*Short-termInvestments—**As***partof its cash management program, the Company from time to time maintains aportfolio of marketable investment securities. The securities have aninvestment grade and a term to maturity generally of less than one year andinclude certificates of deposit. These securities are carried at cost, whichapproximates market.

*Inventories—**Inventories*arestated at the lower of cost (first-in, first-out basis) or market (netrealizable value). Cost includes material, labor and manufacturing overhead. TheCompany uses a standard cost system as a tool to monitor production efficiency.The standard cost system applies estimated labor and manufacturing overheadfactors to inventory based on budgeted production and efficiency levels,staffing levels and costs of operation, based on the experience and judgment ofmanagement. Actual costs and production levels may vary from the standardestablished, and variances are charged to the consolidated statement of incomeas a component of cost of sales. Since U.S. generally accepted accountingprinciples require that the standard cost approximate actual cost, periodicadjustments are made to the standard rates to approximate actual costs. Theprovision for obsolete and/or excess inventory is reviewed on a quarterly basisor, if warranted by circumstances, more frequently. In evaluating this reserve,management considers technology changes, competition, customer demand, productshelf life and manufacturing quality. No material changes have been made to theinventory policy during fiscal 2007, 2006 or 2005.

*FairValue of Financial Instruments—**The*carrying amountsreported in the consolidated balance sheets for cash and cash equivalents,accounts receivable, short-term investments and accounts payable approximatetheir fair values.

In accordance with the guidance provided in SFAS No. 141,Business Combinations, in fiscal 2006 the Company recorded its liability pertainingto the acquisition of Immucor-Kainos at the estimated fair value at the time ofacquisition, using a discount rate then prevailing, based on management’sestimate of the rate at which the Company would have been able to securefinancing with similar terms. As permitted by Accounting Principles BoardOpinion 21, the Company used the straight-line method to amortize the totalimputed interest over the life of the liability as the results were not likelyto be materially different from the interest method. The acquisition liabilityin the accompanying consolidated balance sheets is recorded at fair value usinga discount rate of 3.7% which was the market rate for similar securities at thetime of acquisition. See Note 2 below for details.

*Property,Plant and Equipment—**Property,*plant and equipment isstated at cost less accumulated depreciation. Expenditures for replacements arecapitalized, and the replaced items are retired. Normal maintenance and repairsare charged to operations. Major maintenance and repair activities thatsignificantly enhance the useful life of the asset are capitalized. Whenproperty and equipment are retired, sold, or otherwise disposed of, the asset’scarrying amount and related accumulated depreciation are removed from theaccounts and any gain or loss is included in operations. Depreciation iscomputed using the straight-line method over the estimated lives of therelated assets ranging from three to thirty years. Certain internal andexternal costs incurred in the development of computer software for internaluse are capitalized and included in property, plant and equipment in accordancewith Statement of Position 98-1, *Accounting for the Costsof Computer Software Developed or Obtained for Internal Use*.

*Goodwill—**On*adoption of SFAS No. 142,*Goodwill and Other Intangible Assets,*goodwill and indefinite lived intangible assets are no longer amortized but aretested for impairment annually or more 

49

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frequently if impairmentindicators arise. Intangible assets that have finite lives are continuing to beamortized over their useful lives.

The Company evaluates the carrying value of goodwillas at the end of the third quarter of each year and between annual evaluationsif events occur or circumstances change that would more likely than not reducethe fair value of the reporting unit below its carrying amount. Suchcircumstances could include, but are not limited to: (1) a significantadverse 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, the Company compares the fair value ofthe reporting 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 the reporting unit’s goodwillto its carrying amount. In calculating the implied fair value of the reportingunit’s goodwill, the fair value of the reporting unit is allocated to all ofthe other assets and liabilities of that unit based on their fair values. Theexcess of the fair value of a reporting unit over the amount assigned to itsother assets and liabilities is the implied fair value of goodwill. Animpairment loss would be recognized when the carrying amount of goodwillexceeds its implied fair value. The Company’s evaluation of goodwill completedduring the year resulted in no impairment charges.

*DeferredLicensing Costs—**Deferred*licensing costs withfinite lives are amortized over their useful lives. In certain situations thedeferred licensing costs are considered to have indefinite lives such as in thecountries where the law and regulations are such that the barriers to obtaininga new license are very severe and upfront costs are high but, once the licensesare acquired, effort and costs required to maintain such licenses are minimal.The carrying values of assets with indefinite lives are not amortized but theyare tested annually for impairment. Carrying values of licensing costs are alsotested if any triggering event which may impair the value of the asset occurs.

*CustomerLists—**Customer*lists are amortized overtheir useful lives. Carrying values of customer lists are tested for impairmentannually or more frequently if impairment indicators arise.

*Net SalesRelating to Foreign Operations—**Sales*to customersoutside the United States approximated 29% of net sales in fiscal 2007 and 31%of net sales in fiscal 2006.

*ForeignCurrency Translation—**The*financial statements of foreignsubsidiaries have been translated into U.S. Dollars in accordance with SFAS No. 52,*Foreign Currency Translation*. The financial position andresults of operations of the Company’s foreign subsidiaries are measured usingthe foreign subsidiary’s local currency as the functional currency. Revenuesand expenses of such subsidiaries have been translated into U.S. Dollars ataverage exchange rates prevailing during the period. Assets and liabilitieshave been translated at the rates of exchange on the balance sheet date. Theresulting translation gain and loss adjustments are recorded directly as aseparate component of shareholders’ equity, unless there is a sale or completeliquidation of the underlying foreign investments. Foreign currency translationadjustments resulted in a gain of $1.1 million, $2.3 million and $0.6 millionin fiscal 2007, 2006 and 2005, respectively.

Transaction gains and losses that arise from exchangerate fluctuations on transactions denominated in a currency other than thefunctional currency are included in the results of operations as incurred. Netforeign currency transaction gains included in operations were $0.4 million infiscal 2007, negligible in fiscal 2006 and $0.5 million in fiscal 2005, and areincluded in ‘other income (loss)’ in the consolidated statements of income.

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*RevenueRecognition—**In*accordance with the StaffAccounting Bulletin No. 104, *Revenue Recognition*,guidance, the Company recognizes revenue when thefollowing four basic criteria have been met: (1) persuasive evidence of anarrangement exists; (2) delivery has occurred or services rendered; (3) thefee is fixed and determinable; and (4) collectibility is reasonablyassured.

·       *Reagent sales*

Revenue from the sale ofthe Company’s reagents to end users is recognized upon shipment when both titleand risk of loss transfer to the customer, unless there are specificcontractual terms to the contrary. Revenue from the sale of the Company’sreagents to distributors is recognized FOB customs clearance when both titleand risk of loss transfer to the customer.

·       *Humancollagen and collagen by-product sales*

Revenuefrom the sale of the Company’s human collagen product and its by-products isrecognized upon passage of a 10-day inspection period (or, forby-products of collagen, passage of a 30-day inspection period) orearlier upon receipt of notification of customer acceptance. In accordance witha revenue-sharing agreement between the Company and the Company’s sole humancollagen customer, revenue from the sale of collagen by-products is allocated66.7% to the Company and 33.3% to the collagen customer.

·       *Medical instrument sales*

Revenue from the sale ofthe Company’s medical instruments without multiple deliverables is generallyrecognized upon shipment and completion of contractual obligations. Revenuefrom rentals of the Company’s medical instruments is recognized over the termof the rental agreement. Instrument service contract revenue is recognized overthe term of the contract.

In cases of sales ofinstruments with multiple deliverables, the Company recognizes revenue on thesale of medical instruments in accordance with Emerging Issues Task Force (“EITF”)Issue No. 00-21, *Accounting forRevenue Arrangements with Multiple Deliverables*. The Company’sinstrument sales contracts with multiple deliverables include the sale orrental of an instrument (including delivery, installation and training), theservicing of the instrument during the first year, and, in many cases, priceguarantees for consumables purchased during the contract period. The Companyhas determined the fair value of certain of these elements, such as trainingand first year service. The portion of the instrument sales price applicable tothe instrument itself is recognized upon shipment and completion of contractualobligations relating to training and/or installation. If the agreement does notinclude any price guarantees, the sales price in excess of the fair values oftraining and service is allocated to the instrument itself. The fair value of atraining session is recognized as revenue when services are provided. Ifmultiple sessions of training are contractually provided for, additionaltraining revenue is recognized upon delivery. The fair value of first yearservice is recognized over the first year of the contract. The Company believesit is not possible to determine the fair value of price guarantees. If theagreement contains price guarantees, the entire the arrangement considerationis deferred and recognized over the related guarantee period. The allocation ofthe total consideration, which is based on the estimated fair value of theunits of accounting, requires judgment by management.

Inlimited situations involving third-party lease arrangements, the Company hasentered into repurchase agreements whereby if the consignee customer terminatesthe lease, the Company has agreed to repurchase the instrument for a purchaseprice equal to the remaining unpaid lease payments. The Company recognizes therevenue over the lease term if persuasive evidence exists that the consigneecustomer has not terminated the lease. In prior periods, the Company deferredthe corresponding cost of these instrument sales and recognized the costs overthe same period as the related revenue. During the fiscal quarter ended February 28,2005, the Company started 

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recognizingthe instrument costs in these deferral situations when the instrument isinstalled and accepted by the customer. Accordingly, during the fiscal quarterended February 28, 2005, the Company recorded additional cost of salestotaling approximately $327,000, which was related to prior quarters.

·       *Sales subject to a plan of factoring*

Salessubject to a plan of factoring are recorded at net realizable value (defined asgross sales less the annual estimated cost of factoring the sale). Should thefactored sale remain uncollected by the factor at the end of one year, anestimate of the additional factoring discount is made and recorded monthly asan additional reduction of sales revenue.

*Shipping and HandlingCharges and Sales Tax—**The*amounts billed to customers forshipping and handling of orders are classified as revenue and reported in thestatements of income as net sales. The cost of handling customer orders and thecost of shipments are reported in the operating expense section of thestatements of income as distribution expense. The cost of handling customerorders and the cost of shipments were approximately $9.6 million for the yearended May 31, 2007 and $8.0 million for each of the years ended May 31,2006 and 2005. Sales taxes invoiced to customers and payable to governmentagencies are recorded on a net basis with the sales tax portion of a salesinvoice directly credited to a liability account and the balance of the invoicecredited to a revenue account.

*EarningsPer Share—**All* earnings per share amountsreflect the May 2006, December 2004 and July 2004 three-for-twostock splits. See Note 14 to the consolidated financial statements.

*TradeAccounts Receivable and Allowance for Doubtful Accounts—**Trade*receivables at May 31,2007, totaling $47.8 million, and at May 31, 2006, totaling $37.2 million,are net of allowances for doubtful accounts of $1.7 million and $2.0 million,respectively. The allowance for doubtful accounts represents a reserve forestimated losses resulting from the inability of the Company’s customers to paytheir debts. The collectibility of trade receivable balances is regularlyevaluated based on a combination of factors such as customer credit-worthiness,past transaction history with the customer, current economic industry trendsand changes in customer payment patterns. If it is determined that a customerwill be unable to fully meet its financial obligation, such as in the case of abankruptcy filing or other material events impacting its business, a specificallowance for doubtful accounts is recorded to reduce the related receivable tothe amount expected to be recovered.

*AdvertisingCosts—**Advertising*costs are expensed asincurred and are classified as selling and marketing operating expenses. Advertisingexpenses were $0.4 million for each of the years ended May 31, 2007, 2006and 2005.

*Researchand Development costs—**The* research and development costsare expensed as incurred and are disclosed as a separate line item in theconsolidated income statement.

*Losscontingencies—**Certain*conditions may exist as ofthe date the financial statements are issued which may result in a loss to theCompany but which will only be resolved when one or more future events occur orfail to occur. The Company’s management and its legal counsel assess suchcontingent liabilities, and such assessment inherently involves an exercise ofjudgment. In assessing loss contingencies related to legal proceedings that arepending against the Company or unasserted claims that may result in suchproceedings, the Company’s legal counsel evaluates the perceived merits of anylegal proceedings or unasserted claims as well as the perceived merits of theamount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that itis probable that a material loss is likely to occur and the amount of theliability can be estimated, then the estimated liability would be accrued inthe Company’s financial statements. If the assessment indicates that a potentiallymaterial loss contingency is 

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not probable, but isreasonably possible, or is probable but cannot be estimated, then the nature ofthe contingent liability, together with an estimate of the range of possibleloss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally notdisclosed unless they involve guarantees, in which case the nature of theguarantee would be disclosed. Legal costs relating to loss contingencies areexpensed as incurred.

*IncomeTaxes—**The*Company’s income tax policyrecords the estimated future tax effects of temporary differences between thetax bases of assets and liabilities and amounts reported in the accompanyingconsolidated balance sheets, as well as operating loss and tax credit carry-forwards.The value of the Company’s deferred tax assets assumes that the Company will beable to generate sufficient future taxable income in certain tax jurisdictions,based on estimates and assumptions. If these estimates and related assumptionschange in the future, the Company may be required to record additionalvaluation allowances against its deferred tax assets resulting in additionalincome tax expense in the Company’s consolidated statements of income. Inassessing the realizability of deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred taxassets will not be realized, and the Company considers the scheduled reversalof deferred tax liabilities, projected future taxable income, carry-backopportunities, and tax-planning strategies in making this assessment. Managementassesses the need for additional valuation allowances quarterly. No materialchanges have been made to the income tax policy during fiscal 2007. See Note 13to the consolidated financial statements.

*Impactof Recently Issued Accounting Standards—**In*June 2006,the Financial Accounting Standards Board issued FASB Interpretation No. 48,“Accounting for Uncertainty in Income Taxes, an interpretation of FASBStatement No. 109” (“FIN 48”). FIN 48 clarifies the accounting foruncertainty in income taxes recognized in an enterprise’s financial statementsin accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN48 describes a recognition threshold and measurement attribute for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return and also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure and transition. FIN 48 will be effective for the Company inthe first quarter of fiscal 2008. The Company is in the process of reviewingand evaluating FIN 48; however, the impact of its adoption to the Company’sfinancial condition, results of operations, or cash flows is not expected to bematerial.

In September 2006, the Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin No. 108, “Consideringthe effects of Prior Year Misstatements when Quantifying Misstatements inCurrent Year Financial Statements” (“SAB 108”). Due to diversity in practiceamong registrants, SAB 108 expresses SEC staff views regarding the process bywhich misstatements in financial statements are evaluated for purposes ofdetermining whether financial statement restatement is necessary. SAB 108requires registrants to quantify misstatements using both the balance sheet andincome statement approaches and to evaluate whether either approach results inquantifying an error that is material in light of relative quantitative andqualitative factors. The adoption of SAB 108 did not have a material impact onthe Company’s results from operations or financial position.

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 to measure assets andliabilities. This standard also responds to investors’ requests for expandedinformation about the extent to which companies measure assets and liabilitiesat fair value, the information used to measure fair value and the effect offair value measurements on earnings. SFAS No. 157 applies whenever otherstandards require (or permit) assets or liabilities to be measured at fairvalue. The standard does not expand the use of fair value in any newcircumstances. SFAS No. 157 is effective for financial statements 

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issued for fiscal yearsbeginning after November 15, 2007, and interim periods within those fiscalyears; therefore, the Company expects to adopt SFAS No. 157 in the firstquarter of fiscal 2009. The Company does not believe SFAS No. 157 willhave a material impact on the Company’s results from operations or financialposition.

On February 15, 2007,the FASB issued SFAS No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities,” (“SFAS No.159”) which gives entities theoption to measure eligible financial assets, financial liabilities and firmcommitments at fair value (i.e., the fair value option), on aninstrument-by-instrument basis, that are otherwise not permitted to beaccounted for at fair value under other accounting standards. The election touse the fair value option is available when an entity first recognizes afinancial asset or financial liability or upon entering into a firm commitment.Subsequent changes in fair value must be recorded in earnings. SFAS No. 159is effective for financial statements issued for fiscal years beginning after November 15,2007 and is therefore effective for the Company in the first quarter of fiscal2009. The Company is currently assessing the effect of implementing thisguidance, which is dependent upon the nature and extent of eligible itemselected to be measured at fair value upon initial application of the standard.However, the Company does not expect the adoption of SFAS No. 159 to havea material impact on the Company’s results of operations and financialposition.

**2.**                 ACQUISITION

On July 5, 2005, in an effort to expand itspresence in Japan, the Company acquired a 100% interest in Immucor-Kainos, Inc.—anewly-formed company to which Kainos Laboratories, Inc. (“Kainos”), theCompany’s former distributor of Immucor products in Japan, spun off itsblood-banking division. Immucor paid Kainos ¥459 million (approximately $4.1million) in cash on signing of the purchase agreements. As of May 31,2007, the Company has paid ¥252 million of the additional ¥300 million(approximately $2.7 million) of the purchase consideration which ispayable over the three years from the date of the agreement. A final payment of¥441 million will be made after a three-year transition period ending on June 30,2008, or earlier upon mutual agreement. On concluding the transaction, theCompany recorded ¥741 million (with an approximate present value of ¥678million and $6.1 million, using a discount rate of approximately 3.7% perannum), as a liability. As of May 31, 2007, the Company owes ¥489 million($3.8 million) for this acquisition. Immucor-Kainos, Inc. has beenconsolidated as a wholly owned subsidiary in these financial statements.

Thefollowing table summarizes the allocation of acquisition cost, includingprofessional fees and other related acquisition costs to the assets acquiredbased on their fair values (in thousands):

| Tangible assets acquired    |   | $     | 102    |   |
|-----------------------------|--------|-------|--------|--------|
| Intangible assets  acquired |   | 4,928 |   |
| Goodwill acquired           |   | 5,702 |   |
| Total acquisition cost      |   | $     | 10,732 |   |

 

No pro formainformation regarding revenue and income for the acquired business is providedas the effect of the acquisition on the consolidated financial statements wasnot material. Goodwill and intangible assets are considered not deductible fortax purposes in accounting for this acquisition. The results of operations ofthe acquired subsidiary have been included from July 5, 2005 onwards, thedate of acquisition. See Note 15 for segment information for Japan.

As of May 31, 2007,Immucor-Kainos owed Kainos $0.3 million for products and Kainos owed Immucor$0.4 million for products supplied to Kainos from the United States.

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**3.**                 INVENTORY

Inventoriesare stated at the lower of cost (first-in, first-out basis) or market (netrealizable value):

| ** **                  | ** ** | **May 31,**        | ** ** |
|-----------------------------|------------|-------------------------|------------|
| ** **                  | ** ** | **2007**                | ** ** | **2006** | ** ** |
| ** **                  | ** ** | **(in thousands)** | ** ** |
| Raw materials and  supplies |       | $                       | 6,364      |   | $ | 4,341 |   |
| Work in process             |       | 4,829                   |       | 3,495 |   |
| Finished goods              |       | 18,127                  |       | 12,815 |   |
|                        |       | $                       | 29,320     |   | $ | 20,651 |   |

 

Management increasedinstrument inventory levels from $6.2 million at the end of fiscal 2006 to$12.1 million at the end of fiscal 2007 in anticipation of the launch ofthe EchoTM in the first quarter of fiscal 2008, for which FDA clearance wasreceived in June 2007, and also to have adequate inventory of Galileo®instruments to support the marketing plan for fiscal 2008.

**4.**                 PROPERTY ANDEQUIPMENT

| ** **                              | ** ** | **May 31,**        | ** ** |
|-----------------------------------------|------------|-------------------------|------------|
| ** **                              | ** ** | **2007**                | ** ** | **2006** | ** ** |
| ** **                              | ** ** | **(in thousands)** | ** ** |
| Assets owned:                           |       |                    |       |   |   |
| Land                                    |       | $                       | 345        |   | $ | 343 |   |
| Buildings and  improvements             |       | 7,715                   |       | 7,643 |   |
| Leasehold  improvements                 |       | 7,226                   |       | 4,452 |   |
| Furniture and  fixtures                 |       | 1,948                   |       | 1,704 |   |
| Machinery and  equipment                |       | 45,573                  |       | 39,241 |   |
|                                    |       | 62,807                  |       | 53,383 |   |
| Less accumulated  depreciation          |       | (32,562                 | )          | (27,699 | ) |
| Property, plant and  equipment—net |       | $                       | 30,245     |   | $ | 25,684 |   |

 

*Depreciation**—*Depreciation expense was $6.5 million in fiscal year 2007,$6.6 million in fiscal year 2006, and $7.0 million in fiscal year 2005.

*HoustonImpairment—**In*fiscal 2006, the Company decided to close its Houstonmanufacturing facility in December 2007. Under a restructuring plan, theCompany will continue to use the long-lived assets of the Houston facilityuntil December 2007, the estimated completion date for consolidating themanufacturing operations in Norcross, Georgia. The impairment review in fiscal2006 indicated that estimated undiscounted cash flows expected to result fromthe remaining use of the Houston facility’s long-lived assets, primarily abuilding, were insufficient to recover their carrying value. Accordingly, basedon an independent third party appraisal, the Company reduced the carrying valueof these long-lived assets to their estimated fair value resulting in non-cashimpairment loss of $2.3 million in fiscal 2006. The non-cash impairment chargesare included with restructuring expenses in the accompanying consolidatedstatements of income. Based upon the Company’s decision to continue tomanufacture and use the building in Houston until the transfer of themanufacturing operations to Norcross is complete, the Company continues todepreciate the adjusted carrying value of the building.

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**5.**                 GOODWILL

Changesin the carrying amount of goodwill for the year ended May 31, 2007 and2006 were as follows:

| ** **                                         | ** ** | **May 31,**        | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|
| ** **                                         | ** ** | **2007**                | ** ** | **2006** | ** ** |
| ** **                                         | ** ** | **(in thousands)** | ** ** |
| Balance at  beginning of year                      |       | $                       | 34,691     |   | $ | 28,826 |   |
| Foreign currency  translation adjustment           |       | 72                      |       | 1,070 |   |
| Goodwill on  acquisition of Immucor-Kainos (Japan) |       | —                  |       | 4,795 |   |
| Balance at end of year                             |       | $                       | 34,763     |   | $ | 34,691 |   |

 

On July 5, 2005, the Company acquiredImmucor-Kainos, Inc., including goodwill amounting to $5.7 million,reduced by approximately $574,000 for profit realized during acquisitionnegotiations and approximately $332,000 for the reversal of deferred revenuerelating to an advance payment of distribution fees under a five-yeardistribution agreement with Kainos which was canceled on signing of theacquisition agreement. EITF 04-01, “Accounting or PreexistingRelationships between the Parties to a Business Combination”, requires that thefair value of a reacquired right should be recorded and disclosed as a separateintangible asset. However, given the relative immateriality of the amount thatwould have been assigned to a separate intangible asset on the date ofacquisition (approximately $332,000), the Company did not record this amount asan intangible asset apart from goodwill.

Goodwill is tested forimpairment as at the end of the third quarter of each fiscal year or earlier ifa triggering event occurs. Testing of impairment of goodwill confirmed that thecarrying value of goodwill was not impaired, and consequently no impairmentcharges were recorded in the years ended May 31, 2007 and May 31,2006.

**6.**                 OTHER INTANGIBLEASSETS

| ** **                                      | ** ** | ** **              | ** ** | **May 31, 2007** | ** ** | **May 31, 2006** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                                      | ** ** | **Weighted**            | ** ** | ** **                 | ** ** | **Accumulated**            | ** ** | ** ** | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | **Average Life**   | ** ** | **Cost**                   | ** ** | **Amortization**           | ** ** | **Net** | ** ** | **Cost** | ** ** | **Amortization** | ** ** | **Net** | ** ** |
| ** **                                      | ** ** | **(in thousands)** | ** ** |
| Intangible assets  subject to amortization:     |       |                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred  licensing costs                       |       |                    | 5 yrs      |                       |       | $                          | 569        |   |   | $ | (464 | ) |   | $ | 105 |   | $ | 551 |   |   | $ | (464 | ) |   | $ | 87 |   |
| Distribution  rights                            |       |                    | 10 yrs     |                       |       | 1,970                      |       |   | (1,724 | ) |   | 246 |   | 2,078 |   |   | (1,526 | ) |   | 552 |   |
| Customer lists                                  |       |                    | 20 yrs     |                       |       | 2,932                      |       |   | (848 | ) |   | 2,084 |   | 3,036 |   |   | (706 | ) |   | 2,330 |   |
| Total amortizable assets                        |       |                    |       |                       |       | 5,471                      |       |   | (3,036 | ) |   | 2,435 |   | 5,665 |   |   | (2,696 | ) |   | 2,969 |   |
| Intangible assets not  subject to amortization: |       |                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred  licensing costs                       |       |                    |       |                       |       | 3,284                      |       |   | — |   |   | 3,284 |   | 3,563 |   |   | — |   |   | 3,563 |   |
| Total non-amortizable assets                    |       |                    |       |                       |       | 3,284                      |       |   | — |   |   | 3,284 |   | 3,563 |   |   | — |   |   | 3,563 |   |
| Total other  intangible assets                  |       |                    |       |                       |       | $                          | 8,755      |   |   | $ | (3,036 | ) |   | $ | 5,719 |   | $ | 9,228 |   |   | $ | (2,696 | ) |   | $ | 6,532 |   |

 

During the year ended May 31, 2006, the Companyacquired a customer list with the acquisition of Immucor-Kainos, which wasvalued at $1.3 million with a useful life of 20 years, and licensing andregulatory permits, which were assumed to have infinite lives and were valuedat $3.6 million. The customer list is being amortized over 20 years, and thelicensing and regulatory permits are not amortized but are evaluated forimpairment annually in the fourth quarter of each fiscal year.

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Amortizationof intangible assets amounted to $0.3 million for the years ended May 31,2007 and May 31, 2006 and $0.4 million for the year ended May 31,2005. The following table presents our estimate of amortization expense foreach of the five next succeeding fiscal years (in thousands):

| **Year Ending May 31:** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|------------|------------|------------|
| 2008                                   |       | $          | 346        |       |
| 2009                                   |       | 211        |       |
| 2010                                   |       | 162        |       |
| 2011                                   |       | 162        |       |
| 2012                                   |       | 162        |       |
| Thereafter                             |       | 1,392      |       |
|                                   |       | $          | 2,435      |       |

 

**7.**                 ACCRUED EXPENSESAND OTHER CURRENT LIABILITIES

| ** **                                      | ** ** | **May 31,**        | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|
| ** **                                      | ** ** | **2007**                | ** ** | **2006** | ** ** |
| ** **                                      | ** ** | **(in thousands)** | ** ** |
| Sales and other  taxes payable                  |       | $                       | 3,182      |   | $ | 1,152 |   |
| Salaries and  wages                             |       | 5,858                   |       | 3,231 |   |
| Professional fees                               |       | 1,812                   |       | 2,027 |   |
| Dealer  commissions                             |       | 625                     |       | 675 |   |
| Royalties                                       |       | 127                     |       | 506 |   |
| Accruals for  pricing discounts to dealers      |       | 218                     |       | 415 |   |
| Other accruals                                  |       | 2,233                   |       | 1,464 |   |
| Accrued expenses and  other current liabilities |       | $                  | 14,055     |   | $ | 9,470 |   |

 

**8.**                 DEFERREDREVENUE

Asdescribed in Note 1, many of the Company’s medical instrument sales contractsinvolve multiple deliverables with price guarantees, and revenues from thesecontracts are deferred and recognized over the term of the agreements which aregenerally five years. The Company also defers revenue from service contractsover the term of the service agreements. The additions to and recognition ofdeferred revenue for the year ended May 31, 2007 and May 31, 2006were as follows:

| ** **                                        | ** ** | **May 31,**        | ** ** |
|---------------------------------------------------|------------|-------------------------|------------|
| ** **                                        | ** ** | **2007**                | ** ** | **2006** | ** ** |
| ** **                                        | ** ** | **(in thousands)** | ** ** |
| Balance at  beginning of year                     |       | $                       | 16,075     |   | $ | 7,559 |   |
| Foreign currency  translation adjustment          |       | 89                      |       | 224 |   |
| Additions to  deferred revenue from new contracts |       | 11,943                  |       | 13,772 |   |
| Revenue  recognized during the year               |       | (8,425                  | )          | (5,480 | ) |
|                                              |       | 19,682                  |       | 16,075 |   |
| Less: Deferred  Revenue—current portion      |       | (7,321                  | )          | (4,575 | ) |
| Balance at end of year                            |       | $                       | 12,361     |   | $ | 11,500 |   |

 

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**9.**                 OTHER LONG TERMLIABILITIES

| ** **                                | ** ** | **May 31,**        | ** ** |
|-------------------------------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **2007**                | ** ** | **2006** | ** ** |
| ** **                                | ** ** | **(in thousands)** | ** ** |
| Severence  indemnity for employees        |       | $                       | 710        |   | $ | 558 |   |
| Deferred leasehold  improvement incentive |       | 1,383                   |       | 1,438 |   |
| Restructuring  provision                  |       | 443                     |       | 342 |   |
|                                      |       | 2,536                   |       | 2,338 |   |
| Less current  portion                     |       | (585                    | )          | (143 | ) |
| Other long term  liabilities              |       | $                       | 1,951      |   | $ | 2,195 |   |

 

The Company creditsleasehold improvement incentives received from the landlord to rent expenseover the term of the lease agreement.

**10.**          COMMONSTOCK

*Stock split*

Immucor distributed athree-for-two stock split on May 15, 2006 to the shareholders of record onApril 24, 2006 which resulted in the issuance of 22,685,368 shares ofcommon stock, net of 98 fractional shares which were paid in cash. Immucor hadalso distributed three-for-two stock splits on July 16, 2004 and December 13,2004 which resulted in the issuance of 10,066,940 and 15,061,379 shares ofcommon stock, respectively. These stock splits were the sixth, seventh andeighth for the Company since its initial public offering in December 1985.

*Reserved shares*

At May 31, 2007,3,683,504 shares of common stock were reserved for future issuance for theoutstanding awards issued under the Immucor, Inc. 2005 Long-Term IncentivePlan and previous plans.

*Stock repurchases*

The Company instituted a stock repurchase program in June 1998for up to 6,075,000 shares of its common stock. On June 1, 2004, August 2,2004 and December 13, 2005, the Board of Directors authorized the Companyto repurchase up to an additional 675,000, 1,125,000 and 1.5 million shares,respectively.

During the year ended May 31,2007, the Company repurchased 281,969 shares at an average per share price of$17.23. In fiscal 2007, the total amount spent for the shares bought under thisprogram amounted to $4.9 million, compared to $24.8 million and $8.0 millionspent in fiscal 2006 and fiscal 2005, respectively. An aggregate of 1,142,056shares were available for repurchase under the program as of May 31, 2007.

**11.**          STOCK—BASEDCOMPENSATION

All references tohistorical awards, outstanding awards and availability of shares for futuregrants under Immucor’s stock plans, as described below, and related prices pershare have been retroactively adjusted, for comparability purposes, to reflectall applicable previous stock splits.

58

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*Impact of adoptionof SFAS 123(R)*

On adoption of SFAS 123(R) as of June 1,2006, the unrecognized compensation expense associated with the remainingportion of the unvested outstanding awards was $4.5 million ($2.9 million, netof taxes). This compensation expense is expected to be recognized throughMay 2010 on a straight-line basis over the weighted-average vesting periodof approximately 1.75 years.

As aresult of adopting SFAS 123(R), the Company’s financial results were lower thanunder the Company’s previous accounting method for share-based compensation bythe following amounts:

| ** **                         | ** ** | **For the Year Ended** | ** ** |
|------------------------------------|------------|---------------------------------------|------------|
| ** **                         | ** ** | **May 31, 2007**            | ** ** |
| ** **                         | ** ** | **(in thousands)**               | ** ** |
| Income before  income taxes        |       |                                  | $          | 3,123 |   |   |
| Net income                         |       |                                  | $          | 2,225 |   |   |
| Basic earnings  per common share   |       |                                  | $          | 0.03 |   |   |
| Diluted earnings per  common share |       |                                  | $          | 0.03 |   |   |

 

As aresult of adopting SFAS 123(R), excess tax benefits realized by the Company onoptions exercised by employees have been classified as a financing cash inflow.Previously, such tax benefits were netted against income taxes payable and weredisclosed in the working capital section of operating activities. As permittedby SFAS 123(R), the cash flow statements for fiscal 2005 and 2006 have not beenrestated to reflect the 6.4 million of excess tax benefit realized in each ofthose years as cash provided by financing activities. For the year ended May 31,2007, the impact of excess tax benefits on the consolidated cash flow statementwas as follows:

| ** **                            | ** ** | **For the Year Ended** | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|
| ** **                            | ** ** | **May 31, 2007**            | ** ** |
| ** **                            | ** ** | **(in thousands)**               | ** ** |
| Increase (decrease) on:               |       |                                  |       |   |   |
| Cash flows from  operating activities |       |                                  | $          | (12,273 | ) |   |
| Cash flows from  financing activities |       |                                  | $          | 12,273 |   |   |

 

Thefollowing table shows total stock-based compensation expense for the year endedMay 31, 2007, included in the consolidated statements of income:

| ** **                      | ** ** | **For the Year Ended** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|
| ** **                      | ** ** | **May 31, 2007**            | ** ** |
| ** **                      | ** ** | **(in thousands)**               | ** ** |
| Cost of sales                   |       |                                  | $          | 446 |   |   |
| Research and  development       |       |                                  | 290        |   |   |
| Selling and  marketing          |       |                                  | 709        |   |   |
| Distribution                    |       |                                  | 114        |   |   |
| General and  administrative     |       |                                  | 1,564      |   |   |
| Total stock-based  compensation |       |                                  | $          | 3,123 |   |   |

 

*Pro formainformation under SFAS 123 for the prior years*

SFAS 123(R) requires the Company to present proforma information for the comparative period prior to the adoption as if it hadaccounted for all of its stock options under the fair value method of SFAS 123.

59

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Thefollowing table illustrates the pro forma information regarding the effect onnet earnings and net earnings per share if the Company had accounted for theshare-based employee compensation under the fair value method of accounting:

| ** **                                                      | ** ** | **For the Year Ended  May 31,**                        | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2006**                                                                   | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(amount in thousands,  except per share data)** | ** ** |
| Net income as  reported                                         |       | $                                                                          | 39,843     |   | $ | 23,910 |   |
| Stock based employee  compensation reported in earnings, net of |       |                                                                       |       |   |   |
| taxes under APB  No. 25                                    |       | 562                                                                        |       | — |   |
| Stock-based employee  compensation expense determined under     |       |                                                                       |       |   |   |
| fair value based  method for all awards, net of taxes           |       | (4,261                                                                     | )          | (2,067 | ) |
| Pro forma net income                                            |       | $                                                                          | 36,144     |   | $ | 21,843 |   |
| Earnings per  share as reported:                                |       |                                                                       |       |   |   |
| Per common share—Basic                                     |       | $                                                                          | 0.59       |   | $ | 0.35 |   |
| Per common share—Diluted                                   |       | $                                                                          | 0.56       |   | $ | 0.34 |   |
| Pro forma  earnings per share:                                  |       |                                                                       |       |   |   |
| Per common share—Basic                                     |       | $                                                                          | 0.53       |   | $ | 0.32 |   |
| Per common share—Diluted                                   |       | $                                                                          | 0.51       |   | $ | 0.31 |   |

 

*Valuation method used and assumptions*

The Company estimates thefair value of stock options using a Black-Scholes valuation model, consistentwith the provisions of SFAS 123(R), Securities and Exchange Commission StaffAccounting Bulletin 107 (“SAB 107”) and the Company’s prior pro formadisclosures of net earnings, including the fair value of stock-basedcompensation.

Keyinput assumptions used to estimate the fair value of stock options include theexpected term until the exercise of the option, the expected volatility of theCompany’s stock, risk-free rates of return and dividend yields, if any. Thefair value for these options was estimated at the date of grant with thefollowing weighted average assumptions:

| ** **                  | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|
| Risk-free  interest rate(1) |       | 4.87     | %          | 4.36     | %          | 4.00     | %          |
| Expected  volatility(2)     |       | 47.10    | %          | 64.90    | %          | 68.40    | %          |
| Expected life  (years)(3)   |       | 4.25     |       | 7.30     |       | 8        |       |
| Expected dividend  yield(4) |       | —   |       | —   |       | —   |       |

----

       (1) Based on the U.S. Treasury yield curve in effect at the time ofgrant.

       (2) Expected stock price volatility is based on the average historicalvolatility of the Company’s shares during the period corresponding to theexpected life of the options.

       (3) Represents the period of time options are expected to remainoutstanding. The weighted average expected option term was determined using the“simplified method” as allowed by SAB 107. The “simplified method” calculatesthe expected term as the average of the vesting term and original contractualterm of the options. Beginning June 1, 2006, the contractual life ofawards granted was reduced from 10 years to 6 years which, besides the impactof adoption of the simplified method, accounted for the reduction in expectedlife in fiscal year 2007.

       (4) The Company has not paid dividends on its common stock and does notexpect to pay dividends on its common stock in the near future.

60

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*Plan summary*

At an annual meeting ofthe Company’s shareholders held on December 13, 2005, the shareholdersapproved establishment of the Immucor, Inc. 2005 Long-Term Incentive Plan(the “2005 Plan”). The 2005 Plan replaced the Company’s preexisting stockoption plans which have been frozen and remain in effect only to the extent ofawards outstanding under these plans. Under the 2005 Plan, besides grantingstock options, management is able to award stock appreciation rights,restricted stock, deferred stock, and other performance-based awards asincentive and compensation to employees. The number of shares of the Company’scommon stock as to which awards may be granted under the 2005 Plan is3,600,000. The maximum number of shares that may be used for awards other thanstock options is 1,800,000 and for grants of incentive stock options is also1,800,000. Options are granted at the closing market price on the date of thegrant. 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 provides for accelerated vesting of option andrestricted stock awards if there is a change in control, as defined in theplan.

*Stock optionactivity*

Compensationcosts for stock options with tiered vesting terms are recognized evenly overthe vesting periods. Activity for the Company’s option plans was as follows forthe years ended May 31, 2007, 2006 and 2005:

| ** **                                                    | ** ** | ** **         | ** ** | ** **   | ** ** | **Weighted**          | ** ** | ** **                  | ** ** |
|---------------------------------------------------------------|------------|--------------------|------------|--------------|------------|-----------------------|------------|-----------------------------|------------|
| ** **                                                    | ** ** | ** **         | ** ** | **Weighted** | ** ** | **Average**           | ** ** | ** **                  | ** ** |
| ** **                                                    | ** ** | ** **         | ** ** | **Average**  | ** ** | **Remaining**         | ** ** | ** **                  | ** ** |
| ** **                                                    | ** ** | **Number of** | ** ** | **Exercise** | ** ** | **Contractual**       | ** ** | **Aggregate**               | ** ** |
| ** **                                                    | ** ** | **Shares**         | ** ** | **Price**    | ** ** | **Life (years)** | ** ** | **Intrinsic Value(1)** | ** ** |
| ** **                                                    | ** ** | ** **         | ** ** | ** **   | ** ** | ** **            | ** ** | **(in thousands)**     | ** ** |
| Outstanding at  May 31, 2004                             |       | 7,608,279          |       |         | $          | 2.07                  |       |                        |       |   |   |   |   |   |   |   |
| Granted                                                       |       | 421,982            |       |         | $          | 18.94                 |       |                        |       |   |   |   |   |   |   |   |
| Exercised                                                     |       | (1,353,932         | )          |         | $          | 1.11                  |       |                        |       |   |   |   |   |   |   |   |
| Forfeited                                                     |       | (196,610           | )          |         | $          | 2.91                  |       |                        |       |   |   |   |   |   |   |   |
| Expired                                                       |       | (218,314           | )          |         | $          | 0.79                  |       |                        |       |   |   |   |   |   |   |   |
| Outstanding at  May 31, 2005                             |       | 6,261,405          |       |         | $          | 3.41                  |       |                        |       | 6.5 |   |   |   | $ | 118,530 |   |   |
| Granted                                                       |       | 158,583            |       |         | $          | 18.66                 |       |                        |       |   |   |   |   |   |   |   |
| Exercised                                                     |       | (1,222,116         | )          |         | $          | 1.76                  |       |                        |       |   |   |   |   |   |   |   |
| Forfeited                                                     |       | (248,598           | )          |         | $          | 6.82                  |       |                        |       |   |   |   |   |   |   |   |
| Expired                                                       |       | (56,317            | )          |         | $          | 1.37                  |       |                        |       |   |   |   |   |   |   |   |
| Outstanding at  May 31, 2006                             |       | 4,892,957          |       |         | $          | 4.14                  |       |                        |       | 5.4 |   |   |   | $ | 68,697 |   |   |
| Granted                                                       |       | 222,716            |       |         | $          | 20.66                 |       |                        |       |   |   |   |   |   |   |   |
| Exercised                                                     |       | (1,432,500         | )          |         | $          | 2.73                  |       |                        |       |   |   |   |   |   |   |   |
| Forfeited                                                     |       | (23,074            | )          |         | $          | 12.61                 |       |                        |       |   |   |   |   |   |   |   |
| Expired                                                       |       | (89,185            | )          |         | $          | 6.29                  |       |                        |       |   |   |   |   |   |   |   |
| Outstanding at  May 31, 2007                             |       | 3,570,914          |       |         | $          | 5.63                  |       |                        |       | 4.9 |   |   |   | $ | 92,665 |   |   |
| Exercisable at May 31, 2007                              |       | 2,925,692          |       |         | $          | 3.91                  |       |                        |       | 4.5 |   |   |   | $ | 80,961 |   |   |
| Shares available  for future grants at May 31, 2007 |       | 1,498,352          |       |         |       |                  |       |                        |       |   |   |   |   |   |   |

----

       (1) The aggregate intrinsic value in the above table represents thetotal pre-tax intrinsic value (the difference between the Company’s closingstock price on the last trading day of the respective fiscal year and theexercise price, multiplied by the number of options.)

61

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       (2) The weighted-average grant-date fair value ofshare options granted during fiscal years 2007 and 2006 was $8.99 and $12.39,respectively. The total intrinsic value of share options exercised duringfiscal years 2007, 2006 and 2005 was $34.9 million, $20.3 million and $19.5million, respectively.

At May 31, 2007,2006, and 2005, options for 2,925,692, 3,942,959 and 3,035,282 shares of commonstock, respectively, were exercisable, at weighted average exercise prices of$3.91, $3.18 and $1.11, respectively. In fiscal 2007, all options were grantedat market value. In fiscal 2005 and in also fiscal 2006, the Company awardedgrants with exercise price equal to the closing price on the business dayimmediately prior to the grant date; therefore in these cases, the exerciseprice may be higher or lower than the fair value of the shares at the date ofgrant. Consequently, the weighted average grant date fair value of optionsgranted during fiscal 2006 was $13.34 for those granted at market value, $10.83for those granted at above market value, and $13.03 for those granted at belowmarket value. The weighted average grant date fair value of options grantedduring fiscal 2005 was $8.49 for those granted at market value, $10.91 forthose granted above market value, and $9.37 for those granted at below marketvalue.

Thefollowing table as of May 31, 2007 sets forth by group of exercise priceranges, the number of options outstanding, weighted average exercise prices andweighted average remaining contractual lives of options outstanding, and thenumber and weighted average exercise prices of options currently exercisable.

| ** **                              | ** **             | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|-----------------------------------------|------------------------|------------------------------|------------|------------------------------|------------|
| ** **                              | ** **             | ** **                   | ** ** | **Weighted   Average**  | ** ** | **Weighted   Average** | ** ** | ** ** | ** ** | **Weighted   Average** | ** ** |
| **Range of  Exercise Prices** | ** **             | **Number of  Shares**   | ** ** | **Exercise   Price**    | ** ** | **Contractual   Life** | ** ** | **Number of  Shares** | ** ** | **Exercise   Price** | ** ** |
| $0.01 –                            | $  0.50      |                         |       | 55,798                       |       |   |   | $ | 0.36 |   |   |   | 4.1 |   |   |   | 55,798 |   |   |   | $ | 0.36 |   |   |
| 0.51 –                             |    1.00 |                         |       | 1,157,358                    |       |   |   | 0.89 |   |   |   | 4.5 |   |   |   | 1,157,358 |   |   |   | 0.89 |   |   |
| 1.01 –                             |    2.00 |                         |       | 712,979                      |       |   |   | 1.21 |   |   |   | 1.4 |   |   |   | 712,979 |   |   |   | 1.21 |   |   |
| 2.01 –                             |    5.00 |                         |       | 206,693                      |       |   |   | 3.33 |   |   |   | 5.6 |   |   |   | 156,067 |   |   |   | 3.03 |   |   |
| 5.01 –                             |  10.00            |                         |       | 801,609                      |       |   |   | 6.11 |   |   |   | 6.6 |   |   |   | 556,882 |   |   |   | 6.11 |   |   |
| 10.01 –                            |  20.00            |                         |       | 309,241                      |       |   |   | 17.79 |   |   |   | 6.4 |   |   |   | 37,706 |   |   |   | 17.15 |   |   |
| 20.01 –                            |  35.00            |                         |       | 327,236                      |       |   |   | 21.71 |   |   |   | 7.5 |   |   |   | 248,902 |   |   |   | 20.08 |   |   |
|                                    |                   |                         | 3,570,914  |                         |       |   | $ | 5.63 |   |   |   | 4.9 |   |   |   | 2,925,692 |   |   |   | $ | 3.91 |   |   |

 

*Restricted stock activity*

TheCompany granted restricted stock awards to its employees for the first time infiscal 2007. The following is a summary of the changes in unvested restrictedstock for the fiscal year ended May 31, 2007:

| ** **                                               | ** ** | ** **                     | ** ** | **Weighted-Average**     | ** ** |
|----------------------------------------------------------|------------|--------------------------------|------------|--------------------------|------------|
| ** **                                               | ** ** | ** **                     | ** ** | **Grant-Date Fair** | ** ** |
| ** **                                               | ** ** | **Number of Shares** | ** ** | **Value**                | ** ** |
| Nonvested stock outstanding  at May 31, 2006        |       |                           | —     |                     |       |   | $ | — |   |   |
| Granted                                                  |       |                           | 127,105    |                     |       |   | 17.51 |   |   |
| Vested                                                   |       |                           | (9,915     | )                        |       |   | 17.51 |   |   |
| Forfeited                                                |       |                           | (4,600     | )                        |       |   | 17.51 |   |   |
| Expired                                                  |       |                           | —     |                     |       |   | — |   |   |
| Nonvested stock  outstanding at May 31, 2007        |       |                           | 112,590    |                     |       |   | $ | 17.51 |   |   |
| Shares available for  future grants at May 31, 2007 |       |                           | 1,677,495  |                     |       |   |   |   |   |

 

As of May 31, 2007,there was $5.1 million of total unrecognized compensation cost related tonon-vested share-based compensation arrangements. This compensation cost isexpected to be recognized through June 6, 2011 based on existing vestingterms with the weighted average remaining expense recognition period beingapproximately 2.91 years.

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**12.**          RESTRUCTURINGEXPENSES

On October 31, 2005, the Board of Directors ofthe Company approved a plan to close the Company’s Houston, Texas manufacturingfacility. The decision to close the facility was driven by a number of factorsincluding, in particular, the expense of operating two separate FDA licensedmanufacturing facilities. This closure, which is subject to certain regulatoryclearances, is scheduled to be completed by December 2007.

During fiscal years 2007and 2006, the Company recorded charges of approximately $1.1 million and $2.7million, respectively, in connection with this planned closure. The expense forfiscal 2007 consisted primarily of product consolidation expenses, retentionbonuses and relocation expenses. The expense for fiscal 2006 includedapproximately $2.3 million for impairment of long-lived assets based on anindependent valuation, and approximately $0.4 million for severance pay,retention bonuses and other expenses. The Company expects to incurapproximately $1.0 million of additional costs in fiscal 2008 to close thisfacility.

**13.**          INCOMETAXES

Sourcesof income before income taxes are summarized below (in thousands):

| ** **           | ** ** | **Year Ended May 31,** | ** ** |
|----------------------|------------|---------------------------------------|------------|
| ** **           | ** ** | **2007**                              | ** ** | **2006** | ** ** | **2005** | ** ** |
| Domestic  Operations |       | $                                     | 83,729     |   | $ | 56,459 |   | $ | 31,711 |   |
| Foreign Operations   |       | 10,425                                |       | 6,701 |   | 6,270 |   |
| Total                |       | $                                     | 94,154     |   | $ | 63,160 |   | $ | 37,981 |   |

 

The provision for income taxes is summarized asfollows (in thousands):

| ** **   | ** ** | **Year Ended May 31,** | ** ** |
|--------------|------------|---------------------------------------|------------|
| ** **   | ** ** | **2007**                              | ** ** | **2006** | ** ** | **2005** | ** ** |
| Current:     |       |                                  |       |   |   |   |   |
| Federal      |       | $                                     | 31,701     |   | $ | 20,963 |   | $ | 12,979 |   |
| Foreign      |       | 4,257                                 |       | 3,593 |   | 1,908 |   |
| State        |       | 1,769                                 |       | 1,218 |   | 1,377 |   |
|         |       | 37,727                                |       | 25,774 |   | 16,264 |   |
| Deferred:    |       |                                  |       |   |   |   |   |
| Federal      |       | (2,938                                | )          | (1,707 | ) | (2,617 | ) |
| Foreign      |       | (494                                  | )          | (752 | ) | 505 |   |
| State        |       | (209                                  | )          | 2 |   | (81 | ) |
|         |       | (3,641                                | )          | (2,457 | ) | (2,193 | ) |
| Income taxes |       | $                                     | 34,086     |   | $ | 23,317 |   | $ | 14,071 |   |

 

Deferred income taxes reflect the net tax effects of: (a) temporarydifferences between the carrying amounts of assets and liabilities forfinancial reporting purposes and income tax purposes; and (b) operatingloss carry-forwards. Valuation allowances are established when necessary toreduce deferred tax assets to the amounts expected to be realized. Based onassessments of all available evidence including, but not limited to, theoperating history and lack of profitability of certain subsidiaries, theCompany is uncertain as to the ability to realize the subsidiaries’ netoperating loss carry-forwards and tax benefits and, as a result, deferred taxvaluation allowances have been recorded against these deferred tax assets asfollows:  Belgium, $0.8 million; Japan,$0.9 million; France, $0.1 million and Spain, $0.1 million. The Company hasalso established a valuation allowance against state operating losscarry-forwards of $0.7 million. Net operating loss carry-forwards forFrance and Belgium do not expire; other operating loss carry-forwards expirebeginning in 2013.

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Thetax effects of significant items comprising the Company’s net deferred taxliability at May 31, 2007 and 2006 are as follows (in thousands):

| ** **                         | ** ** | **Year Ended May 31,** | ** ** |
|------------------------------------|------------|---------------------------------------|------------|
| ** **                         | ** ** | **2007**                              | ** ** | **2006** | ** ** |
| Deferred tax liabilities:          |       |                                  |       |   |   |
| Amortization                       |       | $                                     | (1,744     | ) | $ | (1,707 | ) |
| Depreciation                       |       | (309                                  | )          | (557 | ) |
| Prepaids and other                 |       | (1,175                                | )          | (488 | ) |
| Deferred tax assets:               |       |                                  |       |   |   |
| Reserves not currently  deductible |       | 8,664                                 |       | 4,908 |   |
| Operating loss  carry-forwards     |       | 2,600                                 |       | 2,938 |   |
| Uniform capitalization             |       | 1,172                                 |       | 859 |   |
|                               |       | 9,208                                 |       | 5,953 |   |
| Valuation allowance                |       | (2,643                                | )          | (3,029 | ) |
| Net deferred tax assets            |       | $                                     | 6,565      |   | $ | 2,924 |   |

 

Net deferred tax assetsincreased by $3.7 million mainly due to an increase in deferred revenue ofapproximately $2.0 million and an increase of $1.8 million in reserves notcurrently deductible, off set by minor changes in other items resulting in anet decrease of $0.1 million. Deferred taxes are not provided for temporarydifferences of approximately $16.5 million, $11.7 million and $8.4 million asof May 31, 2007, 2006 and 2005, respectively, representing earningsof non-U.S. subsidiaries that are intended to be permanently reinvested.Computation of the potential deferred tax liability associated with theseundistributed earnings is not practicable.

The Company’s effective tax rate differs from thefederal statutory rate as follows:

| ** **                                                   | ** ** | **Year Ended May 31,** | ** ** |
|--------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                   | ** ** | **2007**                              | ** ** | **2006** | ** ** | **2005** | ** ** |
| Federal statutory tax  rate                                  |       |                                  | 35         | % |   |   | 35 | % |   |   | 35 | % |   |
| State income taxes, net  of federal tax benefit              |       |                                  | 3          |   |   |   | 3 |   |   |   | 3 |   |   |
| Extraterritorial income  exclusion and PAD                   |       |                                  | (1         | ) |   |   | (2 | ) |   |   | (1 | ) |   |
| Difference in effective  income tax rates of other countries |       |                                  | —     |   |   |   | — |   |   |   | 1 |   |   |
| Research and development  credits                            |       |                                  | —     |   |   |   | — |   |   |   | (1 | ) |   |
| Change in deferred tax  valuation allowance                  |       |                                  | —     |   |   |   | 1 |   |   |   | — |   |   |
| Other                                                        |       |                                  | (1         | ) |   |   | — |   |   |   | — |   |   |
|                                                         |       |                                  | 36         | % |   |   | 37 | % |   |   | 37 | % |   |

 

As a result of utilizingcompensation cost deductions arising from the exercise of nonqualified employeestock options for federal and state income tax purposes, the Company realizedincome tax benefits of $12.3 million in fiscal 2007, and $6.4 million in eachof fiscal 2006 and 2005. These income tax benefits are recognized in theaccompanying financial statements as additions to additional paid-incapital rather than as reductions of the respective income tax provisionsbecause the related compensation deductions are not recognized as compensationexpense for financial reporting purposes.

In fiscal 2004, a true upof the estimated tax benefit of the 2003 European restructure and adjustmentsfor misapplication of Texas franchise tax rules for fiscal years 2002 and2003 added $0.1 million and $0.3 million, respectively, to income tax expense. Inaddition, a reserve of $0.2 million was established to recognize theincreasingly conservative positions taken by the various state taxingauthorities with respect to the related party transactions. The Company addedapproximately $0.9 million to this reserve in fiscal 2005. In fiscal 2006, theCompany added approximately $26,000 to this reserve, representing estimatedinterest expense. In fiscal 2007, the Company added approximately $0.7 millionto this reserve, which includes $53,000 of estimated interest expense.

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In fiscal 2005, the Company claimed credits forqualified research and development activities performed during the years 2001through 2005 of approximately $0.6 million. In fiscal 2006, the Company claimedapproximately $0.3 million in credits for qualified research and developmentactivities. In fiscal 2007, the Company claimed approximately $0.3 million incredits for qualified research and development activities performed duringfiscal 2007. The Company has recorded reserves of $0.4 million, approximately30% of the total credits claimed for all years.

In July 2006, the FinancialAccounting Standards Board issued interpretation No. (“FIN”) 48, “Accountingfor Uncertainty in Income Taxes”, which is effective for the Company for thefiscal year beginning June 1, 2007. The purpose of FIN 48 is to clarifyand set forth consistent rules for accounting for uncertain tax positionsin accordance with SFAS 109, “Accounting for Income Taxes”. The cumulativeeffect of applying the provisions of this interpretation are required to bereported separately as an adjustment to the opening balance of retained earningin the year of adoption. The Company is in the process of reviewing andevaluating FIN 48; however, the impact of its adoption to the Company’sfinancial condition, results of operations, or cash flows is not expected to bematerial.

**14.**          EARNINGSPER SHARE

Thefollowing table sets forth the computation of earnings per common share andcommon share—assuming dilution in accordance with SFAS No. 128, *Earnings per Share:*

| ** **                                                                                   | ** ** | **Year Ended May 31,**                                                                                | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **         2007         ** | ** ** | **         2006         ** | ** ** | **         2005         ** | ** ** |
| ** **                                                                                   | ** ** | **(Shares and $ in thousands, except per share data)**                       | ** ** |
| Numerator for basic and  diluted earnings per share:                                         |       |                                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Income available  to common shareholders                                                     |       |                                                                                                                 | $          | 60,068 |   |   |   | $ | 39,843 |   |   |   | $ | 23,910 |   |   |
| Denominator:                                                                                 |       |                                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| For basic earnings per share—weighted average shares  basis                             |       |                                                                                                                 | 68,441     |   |   |   | 68,004 |   |   |   | 67,699 |   |   |
| Effect of dilutive stock options                                                             |       |                                                                                                                 | 2,228      |   |   |   | 3,397 |   |   |   | 3,651 |   |   |
| Denominator for diluted earnings per share—adjusted  weighted average shares basis |       |                                                                                                                 | 70,669     |   |   |   | 71,401 |   |   |   | 71,350 |   |   |
| Earnings per common share—basic                                                         |       |                                                                                                                 | $          | 0.88 |   |   |   | $ | 0.59 |   |   |   | $ | 0.35 |   |   |
| Earnings per  common share—diluted                                                      |       |                                                                                                                 | $          | 0.85 |   |   |   | $ | 0.56 |   |   |   | $ | 0.34 |   |   |

 

The effect of 36,916, 429,949 and 44,324out-of-the-money options was excluded from the above calculation as inclusionof these securities would be anti-dilutive for the years ended May 31,2007, 2006 and 2005, respectively.

On June 8, 2007, theCompany, under an annual group award, issued options to employees to purchase415,818 shares of common stock at an exercise price of $29.23 per share, whichwas the closing price on the date of the grant. The Company also issued 48,055shares of restricted stock. These options and restricted stock are excluded incalculating the above diluted earnings per share but will have a dilutiveeffect on the future earnings per share calculations.

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**15.**          DOMESTICAND FOREIGN OPERATIONS

The Company’s operationsand segments are organized around geographic areas. Immucor’s “Other” segmentincludes the operations of Belgium, Portugal and Spain. The foreign locationsprincipally function as distributors of products developed and manufactured bythe Company in the United States and Canada. The accounting policies applied inthe preparation of the Company’s consolidated financial statements are appliedconsistently across the segments.

Segmentinformation concerning the Company’s domestic and foreign operations for theyears ended May 31, 2007, 2006 and 2005 is summarized below (inthousands):

| ** **                                           | ** ** | **For the Year Ended May 31, 2007** | ** ** |
|------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                           | ** ** | **U.S.**                                                          | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan(1)** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent revenues:                                |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                              |       | $                                                                 | 149,278    |   |   | $ | 11,192 |   |   | $ | 13,956 |   |   | $ | 10,345 |   |   |   | $ | 8,044 |   |   | $ | 9,846 |   | $ | — |   |   | $ | 202,661 |   |   |
| Affiliates                                           |       | 11,622                                                            |       |   | 3,781 |   |   | — |   |   | 276 |   |   |   | — |   |   | 138 |   | (15,817 | ) |   | — |   |   |
| Total                                                |       | 160,900                                                           |       |   | 14,973 |   |   | 13,956 |   |   | 10,621 |   |   |   | 8,044 |   |   | 9,984 |   | (15,817 | ) |   | 202,661 |   |   |
| Net instrument revenues:                             |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                              |       | 10,335                                                            |       |   | 2,999 |   |   | 1,219 |   |   | 612 |   |   |   | 57 |   |   | 1,705 |   | — |   |   | 16,927 |   |   |
| Affiliates                                           |       | 2,827                                                             |       |   | 5,015 |   |   | — |   |   | — |   |   |   | — |   |   | — |   | (7,842 | ) |   | — |   |   |
| Total                                                |       | 13,162                                                            |       |   | 8,014 |   |   | 1,219 |   |   | 612 |   |   |   | 57 |   |   | 1,705 |   | (7,842 | ) |   | 16,927 |   |   |
| Net collagen revenues:                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                              |       | 4,090                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 4,090 |   |   |
| Affiliates                                           |       | —                                                            |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | — |   |   |
| Total                                                |       | 4,090                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 4,090 |   |   |
| Net Sales                                            |       | 178,152                                                           |       |   | 22,987 |   |   | 15,175 |   |   | 11,233 |   |   |   | 8,101 |   |   | 11,689 |   | (23,659 | ) |   | 223,678 |   |   |
| Income (loss) from  operations                       |       | 81,393                                                            |       |   | (201 | ) |   | 3,474 |   |   | 4,856 |   |   |   | (117 | ) |   | 995 |   | 1,212 |   |   | 91,612 |   |   |
| Depreciation                                         |       | 3,256                                                             |       |   | 693 |   |   | 1,356 |   |   | 192 |   |   |   | 176 |   |   | 852 |   |   |   |   | 6,525 |   |   |
| Amortization                                         |       | 282                                                               |       |   | — |   |   | — |   |   | — |   |   |   | 64 |   |   |   |   |   |   |   | 346 |   |   |
| Restructuring  expenses                              |       | 1,051                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 1,051 |   |   |
| Income tax  (benefit) expense                        |       | 30,323                                                            |       |   | 20 |   |   | 1,824 |   |   | 1,972 |   |   |   | — |   |   | 65 |   | (118 | ) |   | 34,086 |   |   |
| Interest income                                      |       | 2,035                                                             |       |   | 25 |   |   | 631 |   |   | 105 |   |   |   | 1 |   |   | 44 |   | — |   |   | 2,841 |   |   |
| Capital  expenditures                                |       | 8,119                                                             |       |   | 453 |   |   | 911 |   |   | 103 |   |   |   | 174 |   |   | 1,133 |   | — |   |   | 10,893 |   |   |
| Property &  equipment—net, at year end |       | 20,875                                                            |       |   | 2,285 |   |   | 2,772 |   |   | 1,287 |   |   |   | 577 |   |   | 2,449 |   | — |   |   | 30,245 |   |   |
| Goodwill                                             |       | 17,803                                                            |       |   | 3,296 |   |   | 1,060 |   |   | 8,176 |   |   |   | 4,393 |   |   | 35 |   | — |   |   | 34,763 |   |   |
| Total assets at  year end                            |       | 240,468                                                           |       |   | 16,284 |   |   | 23,142 |   |   | 18,528 |   |   |   | 13,157 |   |   | 11,044 |   | (47,145 | ) |   | 275,478 |   |   |
|                                                      |            |                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                          | ** ** | **For the Year Ended May 31, 2006** | ** ** |
|-----------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                          | ** ** | **U.S.**                                                          | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan(1)** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent revenues:                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                             |       | $                                                                 | 119,145    |   |   | $ | 10,775 |   |   | $ | 12,077 |   |   | $ | 9,252 |   |   |   | $ | 7,372 |   |   | $ | 8,439 |   | $ | — |   |   | $ | 167,060 |   |   |
| Affiliates                                          |       | 10,504                                                            |       |   | 1,938 |   |   | — |   |   | 206 |   |   |   | — |   |   | 197 |   | (12,845 | ) |   | — |   |   |
| Total                                               |       | 129,649                                                           |       |   | 12,713 |   |   | 12,077 |   |   | 9,458 |   |   |   | 7,372 |   |   | 8,636 |   | (12,845 | ) |   | 167,060 |   |   |
| Net instrument revenues:                            |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                             |       | 7,263                                                             |       |   | 1,984 |   |   | 1,191 |   |   | 345 |   |   |   | 15 |   |   | 1,719 |   | — |   |   | 12,517 |   |   |
| Affiliates                                          |       | 802                                                               |       |   | 3,095 |   |   | 1 |   |   | — |   |   |   | — |   |   | 2 |   | (3,900 | ) |   | — |   |   |
| Total                                               |       | 8,065                                                             |       |   | 5,079 |   |   | 1,192 |   |   | 345 |   |   |   | 15 |   |   | 1,721 |   | (3,900 | ) |   | 12,517 |   |   |
| Net collagen revenues:                              |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                             |       | 3,929                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 3,929 |   |   |
| Affiliates                                          |       | —                                                            |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | — |   |   |
| Total                                               |       | 3,929                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 3,929 |   |   |
| Net Sales                                           |       | 141,643                                                           |       |   | 17,792 |   |   | 13,269 |   |   | 9,803 |   |   |   | 7,387 |   |   | 10,357 |   | (16,745 | ) |   | 183,506 |   |   |
| Income (loss) from  operations                      |       | 56,728                                                            |       |   | 745 |   |   | 1,678 |   |   | 3,856 |   |   |   | (433 | ) |   | 681 |   | (215 | ) |   | 63,040 |   |   |
| Depreciation                                        |       | 3,196                                                             |       |   | 748 |   |   | 1,566 |   |   | 216 |   |   |   | 104 |   |   | 672 |   | — |   |   | 6,502 |   |   |
| Amortization                                        |       | 360                                                               |       |   | — |   |   | — |   |   | — |   |   |   | 60 |   |   | 7 |   | — |   |   | 427 |   |   |
| Restructuring  expenses                             |       | 2,689                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 2,689 |   |   |
| Income tax  (benefit) expense                       |       | 20,477                                                            |       |   | 367 |   |   | 842 |   |   | 1,563 |   |   |   | — |   |   | 147 |   | (79 | ) |   | 23,317 |   |   |
| Interest income                                     |       | 441                                                               |       |   | 18 |   |   | 505 |   |   | — |   |   |   | — |   |   | 13 |   | — |   |   | 977 |   |   |
| Capital  expenditures                               |       | 8,964                                                             |       |   | 684 |   |   | 453 |   |   | 286 |   |   |   | 78 |   |   | 359 |   | — |   |   | 10,824 |   |   |
| Property & equipment—net, at year end |       | 16,057                                                            |       |   | 2,508 |   |   | 3,080 |   |   | 1,344 |   |   |   | 605 |   |   | 2,090 |   | — |   |   | 25,684 |   |   |
| Goodwill                                            |       | 17,803                                                            |       |   | 3,144 |   |   | 1,011 |   |   | 7,934 |   |   |   | 4,766 |   |   | 33 |   | — |   |   | 34,691 |   |   |
| Total assets at  year end                           |       | 165,102                                                           |       |   | 12,139 |   |   | 20,026 |   |   | 14,249 |   |   |   | 14,125 |   |   | 9,382 |   | (43,336 | ) |   | 191,687 |   |   |
|                                                     |            |                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                          | ** ** | **For the Year Ended May 31, 2005** | ** ** |
|-----------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                          | ** ** | **U.S.**                                                          | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan(1)** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent  revenues                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                             |       | $                                                                 | 88,616     |   |   | $ | 11,674 |   |   | $ | 11,637 |   |   | $ | 8,095 |   |   |   | $ | — |   |   | $ | 8,778 |   | $ | — |   |   | $ | 128,800 |   |   |
| Affiliates                                          |       | 9,237                                                             |       |   | 2,199 |   |   | — |   |   | 245 |   |   |   | — |   |   | 139 |   | (11,820 | ) |   | — |   |   |
| Total                                               |       | 97,853                                                            |       |   | 13,873 |   |   | 11,637 |   |   | 8,340 |   |   |   | — |   |   | 8,917 |   | (11,820 | ) |   | 128,800 |   |   |
| Net instrument  revenues:                           |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                             |       | 6,250                                                             |       |   | 2,578 |   |   | 927 |   |   | 170 |   |   |   | — |   |   | 2,589 |   | — |   |   | 12,514 |   |   |
| Affiliates                                          |       | 937                                                               |       |   | 4,612 |   |   | 15 |   |   | — |   |   |   | — |   |   | 2 |   | (5,566 | ) |   | — |   |   |
| Total                                               |       | 7,187                                                             |       |   | 7,190 |   |   | 942 |   |   | 170 |   |   |   | — |   |   | 2,591 |   | (5,566 | ) |   | 12,514 |   |   |
| Net collagen  revenues:                             |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers                             |       | 3,472                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 3,472 |   |   |
| Affiliates                                          |       | —                                                            |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | — |   |   |
| Total                                               |       | 3,472                                                             |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 3,472 |   |   |
| Net Sales                                           |       | 108,512                                                           |       |   | 21,063 |   |   | 12,579 |   |   | 8,510 |   |   |   | — |   |   | 11,508 |   | (17,386 | ) |   | 144,786 |   |   |
| Income (loss) from  operations                      |       | 31,548                                                            |       |   | 2,169 |   |   | (11 | ) |   | 3,217 |   |   |   | — |   |   | 355 |   | (26 | ) |   | 37,252 |   |   |
| Depreciation                                        |       | 3,231                                                             |       |   | 970 |   |   | 1,657 |   |   | 259 |   |   |   | — |   |   | 898 |   | — |   |   | 7,015 |   |   |
| Amortization                                        |       | 378                                                               |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | 378 |   |   |
| Restructuring  expenses                             |       | —                                                            |       |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   | — |   |   | — |   |   |
| Income tax  (benefit) expense                       |       | 11,650                                                            |       |   | 862 |   |   | 243 |   |   | 1,213 |   |   |   | — |   |   | 95 |   | 8 |   |   | 14,071 |   |   |
| Interest income                                     |       | 31                                                                |       |   | 36 |   |   | 567 |   |   | — |   |   |   | — |   |   | 3 |   | (13 | ) |   | 624 |   |   |
| Capital  expenditures                               |       | 3,397                                                             |       |   | 249 |   |   | 1,881 |   |   | 217 |   |   |   | — |   |   | 849 |   | — |   |   | 6,593 |   |   |
| Property & equipment—net, at year end |       | 12,754                                                            |       |   | 2,473 |   |   | 4,240 |   |   | 1,182 |   |   |   | — |   |   | 2,386 |   | — |   |   | 23,035 |   |   |
| Goodwill                                            |       | 17,803                                                            |       |   | 3,025 |   |   | 973 |   |   | 6,993 |   |   |   | — |   |   | 32 |   |   |   |   | 28,826 |   |   |
| Total assets at  year end                           |       | 140,319                                                           |       |   | 13,730 |   |   | 16,814 |   |   | 11,881 |   |   |   | — |   |   | 10,054 |   | (35,185 | ) |   | 157,613 |   |   |
|                                                     |            |                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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       (1) Results of operations for Japan are included from July 5, 2005onwards, the date on which the Company acquired Immucor-Kainos, Inc.

During the years ended May 31,2007, 2006 and 2005, the Company’s U.S. operations made net export sales tounaffiliated customers of approximately $5.4 million, $4.3 million and $6.9million, respectively. The Company’s German operations made net export sales tounaffiliated customers of $4.7 million, $4.3 million and $5.5 million forthe years ended May 31, 2007, 2006, and 2005, respectively. The 

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Company’sCanadian operations made net export sales to unaffiliated customers of $1.8million, $2.1 million and $1.9 million for the years ending May 31,2007, 2006, and 2005, respectively. Product sales to affiliates are valuedat market prices.

**16.**          RETIREMENTPLAN

The Company maintains a 401(k) retirement plancovering its U.S. employees who meet the plan requirements. The Company matchesa portion of employee contributions to the plan. During the years ended May 31,2007, 2006 and 2005, the Company’s matching contributions to the plan wereapproximately $0.6 million, $0.5 million and $0.3 million, respectively. EffectiveJanuary 1, 2005, employees vest immediately in the Company’s matchingcontributions. Prior to this date, vesting in the Company’s matchingcontributions was based on years of continuous service.

The Company’s Canadianaffiliate maintains a defined contribution pension plan covering all Canadianemployees, except temporary employees. The Company matches a portion ofemployee contributions to the plan, and each employee vests in the Company’smatching contributions once they have been a participant continuously for twoyears. During the years ended May 31, 2007, 2006 and 2005, the Company’smatching contributions to the plan were approximately $76,000, $80,000 and$58,000, respectively.

**17.**          COMMITMENTSAND CONTINGENCIES

*Lease Commitments*

The Company leases office, warehousing andmanufacturing facilities in the United States under several operating leaseagreements expiring at various dates through fiscal 2017 with a right to renewfor an additional term in the case of most of the leases. In fiscal 2007, dueto changes in ownership of several warehouses, new leases had to replace amaster lease; however, no major changes occurred in terms of the rent chargesand periods of lease. One of the leases contains a leasehold improvementincentive allowing for a maximum reimbursement of $1.5 million, of which $1.4million has been reimbursed as of May 31, 2007. These reimbursements duefrom the landlord were accrued as receivables and are included in prepaidexpenses and other assets with corresponding credits recorded as deferred rentand amortized as reductions of rent expense over the term of the lease. TheCompany leases foreign office, manufacturing and warehouse facilities andautomobiles under operating lease agreements expiring at various dates throughfiscal 2012. The total leasing expenses, including leasing of properties,office equipment and associated service charges for the Company was $2.6million in fiscal 2007, $ 2.5 million in fiscal 2006 and $2.2 million in fiscal2005.

Thefollowing is a schedule of approximate future annual lease payments under alloperating leases that have initial or remaining non-cancelable lease terms inexcess of one year as of May 31, 2007 (in thousands):

| **Year Ending May 31:** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------|------------|------------|------------|------------|------------|
| 2008                                   |       | $          | 2,307      |       |
| 2009                                   |       | 2,142      |       |
| 2010                                   |       | 1,401      |       |
| 2011                                   |       | 1,296      |       |
| 2012                                   |       | 1,424      |       |
| Thereafter                             |       | 6,204      |       |
|                                   |       | $          | 14,774     |       |

 

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*Other Commitments*

The Company entered into an instrument purchaseagreement with Bio-Tek Instruments, Inc. for the development of Galileo®EchoTM on January 19, 2004 and accepted the manufacturer’s engineeringmodel in fiscal 2005. The Company received FDA clearance in June 2007 andlaunched the instrument in Europe and the U.S. in the first quarter of fiscal2008. At May 31, 2007, the Company had unfulfilled purchase orders issuedto Bio-Tek for EchoTM instruments amounting to approximately $14.3 million.

In September 2003,the Company entered into a five-year purchase agreement to purchase productsfrom Celliance Ltd (“Celliance”) (a subsidiary of Millipore Corporation). TheCompany will supply Celliance with a 12-month rolling forecast ofpurchases that constitute a binding purchase order. In return, Celliance willsupply the products at the price specified in the purchase agreement withprices to increase annually beginning January 1, 2004. Celliance willsupply products at the listed prices and at reduced performance prices ifcertain sales volume has been reached. The agreement also provides for apreferential treatment for supply of products in relation to Celliance’s salesorders from other customers. At May 31, 2007, the Company’s commitmentsunder this arrangement are $1.1 million for fiscal 2008.

*Contingencies*

As previously reported, the Company’s Italiansubsidiary and Dr. Gioacchino De Chirico, the Company’s Chief ExecutiveOfficer and the former President of the subsidiary, have been the subjects of acriminal investigation in Milan, Italy centered on payments by severalcompanies to certain Italian physicians allegedly in exchange for favorablecontract awards by their hospitals. Dr. De Chirico was charged as theformer President of the subsidiary with directing a €13,500payment to one physician and payments totaling approximately $47,000 to anotherphysician, and the subsidiary was charged concerning the €13,500payment under an Italian law holding the subsidiary responsible for actionsallegedly taken by an officer. In January 2007 the Company’s Italiansubsidiary settled the charges in Italy on terms that were not material to theCompany’s financial condition. Dr. De Chirico has vigorously denied anywrongdoing, and is contesting the charges against him, which have been sentforward for trial. The trial is expected to begin sometime this fall and tocontinue well into 2008, and appeals of an unfavorable verdict could takeseveral years.

An investigation into these matters by the AuditCommittee of the Company’s Board of Directors concluded that the €13,500payment to a physician as the organizer and chairman of a convention sponsoredby the Italian subsidiary was not improper, but the invoice for those servicesresulted in a violation of the books and records provisions of the ForeignCorrupt Practices Act. The Company reported this violation to the SEC, whothereafter issued a formal investigative order. The Company and Dr. De Chiricohave been seeking to settle the SEC investigation, but no determination can yetbe made as to whether we will become subject to any fines, penalties and/orother charges imposed by the SEC or any governmental authority, or any otherdamages or costs that may arise in connection with these circumstances.

Between August 31 and October 19, 2005, aseries of ten class-action lawsuits were filed in the United States DistrictCourt for the Northern District of Georgia against the Company and certain ofits current and former directors and officers alleging that the Company’s stockprices during part of 2004 and 2005 were inflated as a result of materialmisrepresentations or omissions in the Company’s financial statements and otherpublic announcements. These cases were consolidated under the caption *In re Immucor, Inc. Securities Litigation*, File No. 1:05-CV-2276-WSD.In May 2007 the Company entered into an agreement to settle these lawsuits.Under the settlement agreement, the Company’s insurance carrier has agreed topay $2.5 million to the plaintiff class in consideration of an absolute andunconditional release of all claims against the Company and the individualdefendants. The Company’s only costs are legal expenses, which have beenexpensed as incurred. The Court has given its preliminary approval to the termsof the 

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settlement. The settlementis contingent upon various conditions, including but not limited to finalapproval by the Court after notice to the class and a hearing scheduled for September 20,2007. It is not certain the settlement will receive final approval from theCourt nor be upheld if challenged on appeal.

Other than as set forthabove, the Company is not currently subject to any material legal proceedings,nor, to the Company’s knowledge, is any material legal proceeding threatenedagainst the Company. However, from time to time, the Company may become aparty to certain legal proceedings in the ordinary course of business. Managementdoes not believe any on-going legal proceedings, including those summarizedabove, will have a material adverse effect on the Company’s consolidatedfinancial position or future results of operations.

**18.****          RELATEDPARTY TRANSACTIONS**

Michael S. Goldman joinedthe Company’s Board of Directors effective May 15, 2006. Mr. Goldmanis a Managing Director and founding principal of TM Capital Corp., a New Yorkand Atlanta based investment bank which has represented the Company in a numberof transactions prior to Mr. Goldman becoming a director of the Company. TheCompany paid fees to TM Capital Corp. totaling $120,000, $470,000 and $60,000in fiscal years 2007, 2006 and 2005, respectively.

**19.**          SELECTEDQUARTERLY FINANCIAL DATA (UNAUDITED)

| ** **                      | ** ** | ** **                                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** **          | ** ** | **Earnings Per**  | ** ** |
|---------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|---------------------|------------|------------------------|------------|
| ** **                      | ** ** | ** **                                                            | ** ** | ** ** | ** ** | **Income** | ** ** | ** **        | ** ** | **Earnings**        | ** ** | **Common Share-** | ** ** |
| ** **                      | ** ** | **Net**                                                               | ** ** | **Gross**  | ** ** | **from**   | ** ** | **Net**           | ** ** | **Per Common** | ** ** | **Assuming**           | ** ** |
| **Fiscal Year Ended** | ** ** | ** **                                                            | ** ** | **Sales**  | ** ** | **Profit** | ** ** | **Operations(2)** | ** ** | **Income**          | ** ** | **Share(1)**           | ** ** | **Dilution(1)** | ** ** |
| ** **                      | ** ** | **(In thousands, except per share amounts)** | ** ** |
| **May 31, 2007**           |       |                                                                  |       |       |       |       |       |              |       |                |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                   |       |                                                                  | $          | 51,040     |       |       |       | $                 | 34,536     |                |       |                   | $          | 19,766 |   |   |   | $ | 12,733 |   |   |   | $ | 0.19 |   |   |   | $ | 0.18 |   |   |
| Second Quarter                  |       |                                                                  | 54,426     |       |       |       | 37,843     |              |       |                | 21,341     |                   |       |   | 14,102 |   |   |   | $ | 0.21 |   |   |   | $ | 0.20 |   |   |
| Third Quarter                   |       |                                                                  | 57,091     |       |       |       | 40,353     |              |       |                | 23,057     |                   |       |   | 15,019 |   |   |   | $ | 0.22 |   |   |   | $ | 0.21 |   |   |
| Fourth Quarter                  |       |                                                                  | 61,121     |       |       |       | 45,023     |              |       |                | 27,448     |                   |       |   | 18,214 |   |   |   | $ | 0.26 |   |   |   | $ | 0.26 |   |   |
|                            |       |                                                                  | $          | 223,678    |       |       |       | $                 | 157,755    |                |       |                   | $          | 91,612 |   |   |   | $ | 60,068 |   |   |   | $ | 0.88 |   |   |   | $ | 0.85 |   |   |
| **May 31,  2006**          |       |                                                                  |       |       |       |       |       |              |       |                |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter                   |       |                                                                  | $          | 42,434     |       |       |       | $                 | 26,695     |                |       |                   | $          | 12,481 |   |   |   | $ | 8,006 |   |   |   | $ | 0.12 |   |   |   | $ | 0.12 |   |   |
| Second Quarter                  |       |                                                                  | 44,025     |       |       |       | 28,541     |              |       |                | 12,766     |                   |       |   | 8,055 |   |   |   | $ | 0.12 |   |   |   | $ | 0.11 |   |   |
| Third Quarter                   |       |                                                                  | 47,090     |       |       |       | 32,134     |              |       |                | 19,079     |                   |       |   | 11,721 |   |   |   | $ | 0.17 |   |   |   | $ | 0.16 |   |   |
| Fourth Quarter                  |       |                                                                  | 49,957     |       |       |       | 34,167     |              |       |                | 18,714     |                   |       |   | 12,061 |   |   |   | $ | 0.18 |   |   |   | $ | 0.17 |   |   |
|                            |       |                                                                  | $          | 183,506    |       |       |       | $                 | 121,537    |                |       |                   | $          | 63,040 |   |   |   | $ | 39,843 |   |   |   | $ | 0.59 |   |   |   | $ | 0.56 |   |   |
|                                 |            |                                                                       |            |            |            |            |            |                   |            |                     |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

       (1) All share and per share amounts have been retroactively adjusted toreflect the May 2006, December 2004 and July 2004 three-for-twostock splits.

       (2) Income from operations for the second quarterof the year ended May 31, 2006 includes a one-time charge amounting toapproximately $2,457,000 for restructuring expenses pertaining to the proposedclosure of the Houston manufacturing facilities.

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**Item 8.—FinancialStatements and Supplementary Data (Continued).**

**B**.               **Supplementary Financial Information**

**ConsolidatedFinancial Schedule**

**ScheduleII—Valuation and Qualifying AccountsYear ended May 31, 2007, 2006 and 2005**

| ** **                               | ** ** | ** **    | ** ** | **Charged to** | ** ** | ** **     | ** ** | ** **  | ** ** |
|------------------------------------------|------------|---------------|------------|---------------------|------------|----------------|------------|-------------|------------|
| ** **                               | ** ** | **Beginning** | ** ** | **Costs and**  | ** ** | ** **     | ** ** | **Ending**  | ** ** |
| ** **                               | ** ** | **Balance**   | ** ** | **Expense**         | ** ** | **Deductions** | ** ** | **Balance** | ** ** |
| 2007                                     |       |          |       |                |       |           |       |        |       |   |   |   |   |   |   |   |   |
| Allowance for doubtful accounts          |       |          | $          | 1,950               |       |           |       | $           | 364        |   |   |   | $ | (588 | ) |   |   | $ | 1,726 |   |   |
| Provision for restructuring expense      |       |          | $          | 342                 |       |           |       | $           | 358        |   |   |   | $ | (257 | ) |   |   | $ | 443 |   |   |
| Deferred income tax valuation allowance  |       |          | $          | 3,029               |       |           |       | $           | —     |   |   |   | $ | (386 | ) |   |   | $ | 2,643 |   |   |
| 2006                                     |       |          |       |                |       |           |       |        |       |   |   |   |   |   |   |   |   |
| Allowance for doubtful accounts          |       |          | $          | 1,874               |       |           |       | $           | 254        |   |   |   | $ | (178 | ) |   |   | $ | 1,950 |   |   |
| Provision for restructuring expense      |       |          | $          | —              |       |           |       | $           | 342        |   |   |   | $ | — |   |   |   | $ | 342 |   |   |
| Deferred income tax valuation allowance  |       |          | $          | 123                 |       |           |       | $           | 2,906      |   |   |   | $ | — |   |   |   | $ | 3,029 |   |   |
| 2005                                     |       |          |       |                |       |           |       |        |       |   |   |   |   |   |   |   |   |
| Allowance for doubtful accounts          |       |          | $          | 1,330               |       |           |       | $           | 942        |   |   |   | $ | (398 | ) |   |   | $ | 1,874 |   |   |
| Deferred income  tax valuation allowance |       |          | $          | 266                 |       |           |       | $           | —     |   |   |   | $ | (143 | ) |   |   | $ | 123 |   |   |

 

Note 1:       “Deductions”for the “Allowance for doubtful accounts” represent accounts written off duringthe period less recoveries of accounts previously written off and exchangedifferences generated.

**Item 9.—Changes inand Disagreements with Accountants on Accounting and Financial Disclosure.**

Not applicable.

**Item 9A.—Controlsand Procedures.**

*(a) Evaluationof Disclosure Controls and Procedures*

The Company, under the supervision and with theparticipation of its management, including the Chief Executive Officer and theChief Financial Officer, evaluated the effectiveness of the design andoperation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e)promulgated under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”).

Based on their evaluationas of May 31, 2007, the Chief Executive Officer and Chief FinancialOfficer have concluded that the Company’s disclosure controls and proceduresare effective to ensure that the information required to be disclosed by theCompany in the reports that it files or submits under the Exchange Act isrecorded, processed, summarized and reported within the time periods specifiedin SEC rules and forms and that such information is accumulated andcommunicated to our management, including our Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosures.

*(b) Changes inInternal Controls*

There were no changes inour internal control over financial reporting during the quarter ended May 31,2007 that have materially affected, or are reasonably likely to have materiallyaffect, our internal control over financial reporting.

71

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*(c) Management’sReport on Internal Control over Financial Reporting*

The management of Immucor is responsible forestablishing and maintaining adequate internal control over financialreporting, as such is defined in Rules 13a-15(f) promulgatedunder the Securities Exchange Act of 1934, as amended, and for performing anassessment of the effectiveness of internal control over financial reporting asof May 31, 2007. The Company’s internal control over financial reportingis a process that is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples.

Internal control systems, no matter how well designed,have inherent limitations. Therefore, even those systems determined to beeffective can provide only reasonable assurance with respect to financialstatement preparation and presentation, and may not prevent or detectmisstatements. In addition, projections of any evaluation of effectiveness tofuture periods are subject to risks that controls may become inadequate becauseof changes in conditions, or that the degree of compliance with policies orprocedures may deteriorate.

Immucor’s management performed an assessment of theeffectiveness of the Company’s internal control over financial reporting as of May 31,2007, using the criteria described in “Internal Control—Integrated Framework”issued by the Committee of Sponsoring Organizations of the Treadway Commission(“COSO”). The objective of this assessment is to determine whether the Company’sinternal control over financial reporting was effective as of May 31,2007. Immucor’s management has concluded that, as of May 31, 2007, itsinternal control over financial reporting was effective based on thesecriteria.

Immucormanagement’s assessment of the effectiveness of its internal control overfinancial reporting as of May 31, 2007 has been audited by Grant ThorntonLLP, the independent registered public accounting firm that audited ourfinancial statements included in Part II, Item 8 of this report.  Grant Thornton, LLP has audited andreported on management’s assessment of the Company’s internal control overfinancial reporting, which is also included in Part II, Item 8 of thisreport.
| /s/ dr. gioacchino dechirico      |   | /s/ Patrick  D. Waddy                         |   |
|----------------------------------------|--------|-----------------------------------------------|--------|
| Dr. Gioacchino DeChirico          |   | Patrick D. Waddy                              |   |
| President and  Chief Executive Officer |   | Vice President—  Chief Financial Officer |   |

 

**Item 9B.—Other Information.**

Not applicable.

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**PART III**

We will file a definitiveProxy Statement for our 2007 Annual Meeting of Shareholders with the SEC,pursuant to Regulation 14A, not later than 120 days after the end of our fiscalyear. Accordingly, certain information required by Part III has beenomitted under General Instruction G (3) to Form 10-K. Onlythose sections of our definitive Proxy Statement that specifically address theitems set forth herein are incorporated by reference.

**Item 10.—Directorsand Executive Officers of the Registrant.**

The information requiredby Item 10 is hereby incorporated by reference from the Company’sdefinitive Proxy Statement relating to the Company’s 2007 Annual Meeting ofShareholders, to be filed with the Securities and Exchange Commission within120 days following the end of the Company’s fiscal year.

**Item 11.—ExecutiveCompensation.**

The information requiredby Item 11 is hereby incorporated by reference from the Company’sdefinitive Proxy Statement relating to the Company’s 2007 Annual Meeting ofShareholders, to be filed with the Securities and Exchange Commission within120 days following the end of the Company’s fiscal year.

**Item 12.—SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters.**

The information requiredby Item 12 is hereby incorporated by reference from the Company’sdefinitive Proxy Statement relating to the Company’s 2007 Annual Meeting ofShareholders, to be filed with the Securities and Exchange Commission within120 days following the end of the Company’s fiscal year.

**Item 13.—CertainRelationships and Related Transactions.**

The information requiredby Item 13 is hereby incorporated by reference from the Company’sdefinitive Proxy Statement relating to the Company’s 2007 Annual Meeting ofShareholders, to be filed with the Securities and Exchange Commission within120 days following the end of the Company’s fiscal year.

**Item 14.—PrincipalAccountant Fees and Services.**

The information requiredby Item 14 is hereby incorporated by reference from the Company’sdefinitive Proxy Statement relating to the Company’s 2007 Annual Meeting ofShareholders, to be filed with the Securities and Exchange Commission within120 days following the end of the Company’s fiscal year.

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**PART IV**

**Item 15.—Exhibitsand Financial Statement Schedules.**

(a)           Documentsfiled as part of this report:

| 1.     |   | Consolidated Financial Statements.                                                                                                                                               |   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |   | The Consolidated Financial Statements, Notes  thereto, and Report of Independent Registered Public Accounting Firm thereon  are included in Part II, Item 8 of this report. |   |
| 2.     |   | Consolidated Financial Statement Schedule included  in Part II, Item 8 of this report .                                                                                     |   |
|   |   | Schedule II—Valuation and Qualifying Accounts.                                                                                                                              |   |
|   |   | Other financial statement schedules are omitted as  they are not required or not applicable.                                                                                     |   |
| 3.     |   | Exhibits.                                                                                                                                                                        |   |
|   |   | See Item 15(b) below.                                                                                                                                                       |   |

 

(b)          Exhibits

Thefollowing exhibits are filed as part of this report or hereby incorporated byreference to exhibits previously filed with the SEC:

| 3.1    |   | Amended and Restated Articles of Incorporation dated  September 7, 2006 (incorporated by reference to Exhibit 3.1 to  Immucor, Inc.’s Quarterly Report on Form 10-Q filed on  January 5, 2007).                                                                                         |   |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 3.2    |   | Amended and Restated  Bylaws (incorporated by reference to Exhibit 3.1 to Immucor, Inc.’s  Current Report on Form 8-K filed on September 13, 2006).                                                                                                                                                         |   |
| 4.1    |   | Amended and Restated  Shareholder Rights Agreement dated as of November 20, 2001 between  Immucor, Inc. and EquiServe Trust Company, N.A. as Rights Agent  (incorporated by reference to Exhibit 4.1 to Immucor, Inc.’s  quarterly report on Form 10-Q filed on January 14, 2002). |   |
| 10.1   |   | Standard Industrial  Lease, dated July 21, 1982, between the Company and Colony Center, Ltd.  (incorporated by reference to Exhibit 10.2 to Immucor, Inc.’s  Annual Report on Form 10-K for the fiscal year ended May 31,  1985).                                                       |   |
| 10.1-1 |   | Lease Amendment dated  June 28, 1989, between the Company and Colony Center, Ltd. (incorporated  by reference to Exhibit 10.1-1 to Immucor, Inc.’s Annual  Report on Form 10-K for the fiscal year ended May 31, 1989).                                                                 |   |
| 10.1-2 |   | Lease Amendment dated  November 8, 1991, between the Company and Colony Center, Ltd.  (incorporated by reference to Exhibit 10.1-1 to  Immucor, Inc.’s Annual Report on Form 10-K for the fiscal  year ended May 31, 1992).                                                             |   |
| 10.1-3 |   | Lease Agreement, dated  February 2, 1996, between the Company and Connecticut General Life  Insurance Company (incorporated by reference to Exhibit 10.1-3 to  Immucor, Inc.’s Annual Report on Form 10-K for the fiscal  year ended May 31, 1996).                                     |   |
| 10.1-4 |   | Lease Amendment, dated  March 8, 1998, between the Company and Connecticut General Life  Insurance Company (incorporated by reference to Exhibit 10.1-4 to  Immucor, Inc.’s Annual Report on Form 10-K for the fiscal  year ended May 31, 1998).                                        |   |

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| 10.1-5    |   | Lease Amendment, dated  August 11, 1999, between the Company and Connecticut General Life  Insurance Company (incorporated by reference to Exhibit 10.1-5 to  Immucor, Inc.’s Annual Report on Form 10-K for the fiscal  year ended May 31, 1999).                                                   |   |
|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 10.1-6**  |   | Lease Amendment, dated  August 8, 2002, between the Company and Crocker Realty Trust, L.P.,  successor in interest to Connecticut General Life Insurance Company.                                                                                                                                                             |   |
| 10.1-7**  |   | Amended and Restated  Lease Amendment, dated January 18, 2005, between the Company and  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company.                                                                                 |   |
| 10.1-8**  |   | Lease Amendment, dated  March 31, 2006, between the Company and AP-Southeast Realty LP, successor  by name change to Crocker Realty Trust, L.P., successor in interest to  Connecticut General Life Insurance Company.                                                                                                        |   |
| 10.1-9**  |   | Amended and Restated  Office Lease Agreement [2975 Building], dated January 26, 2007, between  the Company and Business Park Investors Group, successor in interest to  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company. |   |
| 10.1-10** |   | Amended and Restated  Office Lease Agreement [2985 Building], dated January 26, 2007, between  the Company and Business Park Investors Group, successor in interest to  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company. |   |
| 10.1-11** |   | Amended and Restated  Office Lease Agreement [2990 Building], dated January 26, 2007, between  the Company and Business Park Investors Group, successor in interest to  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company. |   |
| 10.1-12** |   | Amended and Restated  Office Lease Agreement [3130 Building], dated January 26, 2007, between  the Company and Business Park Investors Group, successor in interest to AP-Southeast  Realty LP, successor by name change to Crocker Realty Trust, L.P., successor  in interest to Connecticut General Life Insurance Company. |   |
| 10.1-13** |   | Amended and Restated  Office Lease Agreement [3150 Building], dated January 26, 2007, between  the Company and Business Park Investors Group, successor in interest to  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company. |   |
| 10.1-14** |   | Amended and Restated Office  Lease Agreement [7000 Building], dated January 26, 2007, between the  Company and Business Park Investors Group, successor in interest to  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company. |   |
| 10.2**    |   | Industrial Multi-Tenant  Lease between the Company and AMB Property, L.P., dated December 29,  2005.                                                                                                                                                                                                                          |   |
| 10.3      |   | United States Department  of Health and Human Services Establishment License dated December 28,  1982, for the manufacture of biological products (incorporated by reference  to Exhibit 10.12 to Registration Statement No. 33-966 on  Form S-1).                                                             |   |
| 10.4      |   | United States Department  of Health and Human Services Product License dated December 28, 1982,  for the manufacture and sale of reagent red blood cells (incorporated by  reference to Exhibit 10.13 to Registration Statement No. 33-966  on Form S-1).                                                      |   |

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| 10.5     |   | United States Department  of Health and Human Services Product License dated May 20, 1983, for the  manufacture and sale of blood grouping sera (incorporated by reference to  Exhibit 10.14 to Registration Statement No. 33-966 on  Form S-1).        |   |
|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 10.6     |   | United States Department  of Health and Human Services Product License date November 18, 1983, for  the manufacture and sale of anti-human serum (incorporated by reference to  Exhibit 10.15 to Registration Statement No. 33-966 on  Form S-1).       |   |
| 10.7*    |   | Immucor, Inc. 2005  Long-Term Incentive Plan (incorporated by reference to Exhibit 4.2 to  Immucor, Inc.’s Registration Statement No. 333-131902 filed  on April 5, 2006).                                                                    |   |
| 10.8*    |   | 2003 Stock Option Plan  (incorporated by reference to Exhibit 10.8 to Immucor, Inc.’s  Annual Report on Form 10-K filed on August 16, 2004).                                                                                                       |   |
| 10.8-1*  |   | Amended and Restated  2003 Stock Option Plan, amended and restated as of November 10, 2004  (incorporated by reference to Exhibit 10.8-1 to Immucor, Inc’s  Annual Report on Form 10-K filed on October 19, 2005).                                 |   |
| 10.9*    |   | Amended and Restated  1998 Stock Option Plan (incorporated by reference to Exhibit 10.9 to  Immucor, Inc.’s Annual Report on Form 10-K filed on  August 16, 2004).                                                                                 |   |
| 10.10*   |   | Amended and Restated  1995 Stock Option Plan (incorporated by reference to Exhibit 10.10 to  Immucor, Inc.’s Annual Report on Form 10-K filed on  August 16, 2004).                                                                                |   |
| 10.11*   |   | 1990 Stock Option Plan,  including form of Stock Option Agreement used thereunder (incorporated by  reference to Exhibit 10.15 to Immucor, Inc.’s Annual Report on  Form 10-K for the fiscal year ended May 31, 1995).                             |   |
| 10.12*   |   | Employment Agreement  dated October 13, 1998, between the Company and Patrick D. Waddy  (incorporated by reference to Exhibit 10.12 to Immucor, Inc’s Annual  Report on Form 10-K filed on October 19, 2005).                                 |   |
| 10.13*   |   | Form of  indemnification agreement between the Company and certain directors  (incorporated by reference to Exhibit 10.22 to Immucor, Inc.’s  quarterly report on Form 10-Q filed January 14, 2002).                                          |   |
| 10.14    |   | Loan Agreement among  Immucor, Inc., as borrower, and SunTrust Bank, as lender, dated as of  December 18, 2003 (incorporated by reference to Exhibit 10.1 to  Immucor, Inc.’s quarterly report on Form 10-Q filed on  April 14, 2004).   |   |
| 10.15    |   | Human Extracellular  Matrix Mesh Supply Agreement dated June 30, 2003, between the Company  and Inamed Corporation (incorporated by reference to Exhibit 10.18 to  Immucor, Inc.’s Annual Report on Form 10-K filed on  August 16, 2004).     |   |
| 10.16*   |   | Employment Agreement  dated May 1, 2004, between the Company and Edward L. Gallup  (incorporated by reference to Exhibit 10.19 to Immucor, Inc.’s  Annual Report on Form 10-K filed on August 16, 2004).                                      |   |
| 10.16-1* |   | Amendment No. 1 to  Employment Agreement, dated May 22, 2006, by and between the Company and  Edward L. Gallup (incorporated by reference to Exhibit 10.2 to  Immucor, Inc.’s Current Report on Form 8-K filed on  May 25, 2006).        |   |
| 10.16-2* |   | Amended and Restated  Employment Agreement dated September 7, 2006, by and between the Company  and Edward L. Gallup (incorporated by reference to Exhibit 10.1 to  Immucor, Inc.’s Current Report on Form 8-K filed on  September 13, 2006). |   |

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| 10.17*   |   | Consulting Agreement  dated March 1, 2007 by and between the Company and Edward L. Gallup  (incorporated by reference to Exhibit 10.1 to Immucor, Inc.’s  Current Report on Form 8-K filed on March 6, 2007).                                 |   |
|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 10.18*   |   | Employment Agreement  dated May 1, 2004, between the Company and Ralph A. Eatz (incorporated  by reference to Exhibit 10.20 to Immucor, Inc.’s Annual Report on  Form 10-K filed on August 16, 2004).                                         |   |
| 10.18-1* |   | Amendment No. 1 to  Employment Agreement, dated May 22, 2006, by and between the Company and  Ralph A. Eatz (incorporated by reference to Exhibit 10.4 to  Immucor, Inc.’s Current Report on Form 8-K filed on  May 25, 2006).           |   |
| 10.18-2* |   | Amendment No. 2 to  Employment Agreement, dated June 1, 2007, by and between the Company and  Ralph A. Eatz (incorporated by reference to Exhibit 10.5 to  Immucor, Inc.’s Current Report on Form 8-K filed on  June 25, 2007).          |   |
| 10.19*   |   | Employment Agreement,  dated December 1, 2003, by and between the Company and Gioacchino De  Chirico (incorporated by reference to Exhibit 10.21/A to  Immucor, Inc.’s amended Annual Report on Form 10-K/A filed on  December 6, 2006).      |   |
| 10.19-1* |   | Amendment No. 1 to Employment  Agreement, dated May 1, 2004, by and between the Company and  Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.22  to Immucor, Inc.’s Annual Report on Form 10-K filed on August  16, 2004). |   |
| 10.19-2* |   | Amendment to Employment  Agreement, dated June 1, 2007, by and between the Company and  Dr. Gioacchino De Chirico (incorporated by reference to  Exhibit 10.2 to Immucor, Inc.’s Current Report on Form 8-K  filed on June 25, 2007).    |   |
| 10.20*   |   | Employment Agreement  dated July 28, 2003, between the Company and Didier Lanson (incorporated  by reference to Exhibit 10.23 to Immucor, Inc’s Annual Report on  Form 10-K filed on October 19, 2005).                                            |   |
| 10.21*   |   | Employment Agreement  dated April 1, 2007, between the Company and Philip H. Moïse  (incorporated by reference to Exhibit 10.1 to Immucor, Inc.’s  Quarterly Report on Form 10-Q filed on April 5, 2007).                                |   |
| 10.22*   |   | Fiscal Year 2008 Bonus  Plan and Fiscal Year 2008 Long-Term Incentive Awards Plan (incorporated by  reference to Immucor, Inc.’s Current Report on Form 8-K filed  on May 31, 2007).                                                                    |   |
| 21**     |   | Subsidiaries of the  Registrant.                                                                                                                                                                                                                                            |   |
| 23.1**   |   | Consent of Grant  Thornton LLP, Independent Registered Public Accounting Firm.                                                                                                                                                                                              |   |
| 23.2**   |   | Consent of  Ernst & Young LLP, Independent Registered Public Accounting Firm.                                                                                                                                                                                      |   |
| 31.1**   |   | Certification of  Principal Executive Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                              |   |
| 31.2**   |   | Certification of  Principal Financial Officer Pursuant to Rule 13a-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.                                                                                                                                                                  |   |

----

*                    Denotes amanagement contract or compensatory plan or arrangement.

**             Filed or furnishedherewith

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(c)           Financial StatementSchedule

No financial statement schedules are filed herewithbecause (1) such schedules are not required or (2) the information hasbeen presented in the aforementioned financial statements.

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**SIGNATURES**

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

**IMMUCOR,INC.**
| By:    | /s/ Dr. GIOACCHINO  DE CHIRICO                                    |   |
|--------|------------------------------------------------------------------------|--------|
|   | Dr. Gioacchino De Chirico, President and Chief  Executive Officer |   |
|   | (Principal Executive Officer)                                          |   |
|   | July 27, 2007                                                     |   |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
| /s/ Dr. Gioacchino  DeChirico                                            |   |
|-------------------------------------------------------------------------------|--------|
| Dr. Gioacchino De Chirico, President and Chief  Executive Officer        |   |
| (Principal Executive Officer)                                                 |   |
| July 27, 2007                                                            |   |
| /s/ Patrick D. Waddy                                                          |   |
| Patrick D. Waddy, Vice President - Chief Financial  Officer                   |   |
| (Principal Financial and Accounting Officer)                                  |   |
| July 27, 2007                                                            |   |
| /s/ Roswell S. Bowers                                                         |   |
| Roswell S. Bowers, Director                                                   |   |
| July 27, 2007                                                            |   |
| /s/ Ralph A. Eatz                                                             |   |
| Ralph A. Eatz, Director, Senior Vice President—Chief  Scientific Officer |   |
| July 27, 2007                                                            |   |
| /s/ Michael Goldman                                                           |   |
| Michael Goldman, Director                                                     |   |
| July 27, 2007                                                            |   |
| /s/ Jack Goldstein                                                            |   |
| Jack Goldstein, Director                                                      |   |
| July 27, 2007                                                            |   |
| /s/ John A. Harris                                                            |   |
| John A. Harris, Director                                                      |   |
| July 27, 2007                                                            |   |
| /s/ Joseph E. Rosen                                                           |   |
| Joseph E. Rosen, Director                                                     |   |
| July 27, 2007                                                            |   |

 

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**EXHIBITINDEX**

| Number | ** ** | **Description** |
|--------|------------|-----------------|
|   | 10.1-6     |            | Lease Amendment, dated  August 8, 2002, between the Company and Crocker Realty Trust, L.P.,  successor in interest to Connecticut General Life Insurance Company. |
|   | 10.1-7     |            | Amended and Restated  Lease Amendment, dated January 18, 2005, between the Company and  AP-Southeast Realty LP, successor by name change to Crocker Realty Trust,  L.P., successor in interest to Connecticut General Life Insurance Company. |
|   | 10.1-8     |            | Lease Amendment,  dated March 31, 2006, between the Company and AP-Southeast Realty LP,  successor by name change to Crocker Realty Trust, L.P., successor in interest  to Connecticut General Life Insurance Company. |
|   | 10.1-9     |            | Amended and  Restated Office Lease Agreement [2975 Building], dated January 26, 2007,  between the Company and Business Park Investors Group, successor in interest  to AP-Southeast Realty LP, successor by name change to Crocker Realty  Trust, L.P., successor in interest to Connecticut General Life Insurance  Company. |
|   | 10.1-10    |            | Amended and  Restated Office Lease Agreement [2985 Building], dated January 26, 2007,  between the Company and Business Park Investors Group, successor in interest  to AP-Southeast Realty LP, successor by name change to Crocker Realty  Trust, L.P., successor in interest to Connecticut General Life Insurance  Company. |
|   | 10.1-11    |            | Amended and  Restated Office Lease Agreement [2990 Building], dated January 26, 2007,  between the Company and Business Park Investors Group, successor in interest  to AP-Southeast Realty LP, successor by name change to Crocker Realty  Trust, L.P., successor in interest to Connecticut General Life Insurance  Company. |
|   | 10.1-12    |            | Amended and  Restated Office Lease Agreement [3130 Building], dated January 26, 2007,  between the Company and Business Park Investors Group, successor in interest  to AP-Southeast Realty LP, successor by name change to Crocker Realty  Trust, L.P., successor in interest to Connecticut General Life Insurance  Company. |
|   | 10.1-13    |            | Amended and  Restated Office Lease Agreement [3150 Building], dated January 26, 2007,  between the Company and Business Park Investors Group, successor in interest  to AP-Southeast Realty LP, successor by name change to Crocker Realty  Trust, L.P., successor in interest to Connecticut General Life Insurance  Company. |
|   | 10.1-14    |            | Amended and  Restated Office Lease Agreement [7000 Building], dated January 26, 2007,  between the Company and Business Park Investors Group, successor in interest  to AP-Southeast Realty LP, successor by name change to Crocker Realty  Trust, L.P., successor in interest to Connecticut General Life Insurance  Company. |
|   | 10.2       |            | Industrial  Multi-Tenant Lease between the Company and AMB Property, L.P., dated  December 29, 2005. |
|   | 21         |            | Subsidiaries of  the Registrant. |
|   | 23.1       |            | Consent of Grant  Thornton LLP, Independent Registered Public Accounting Firm. |
|   | 23.2       |            | Consent of  Ernst & Young LLP, Independent Registered Public Accounting Firm. |
|   | 31.1       |            | Certification of  Principal Executive Officer Pursuant to Rule 13a-14(a). |
|   | 31.2       |            | Certification of  Principal Financial Officer Pursuant to Rule 13a-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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