##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934for the
quarterly period ended September 30,
2007or
 o
    
    Transition Report Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934for
the transition period from  to .
  Commission File No. 000-30109
 
 LUMINEX CORPORATION
  DELAWARE
    
    74-2747608(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 12212 TECHNOLOGY BLVD., AUSTIN, TEXAS
    
    78727(Address of principal executive offices)
    
    (Zip Code)
 (512) 219-8020
 
 þ o
  o þ o
 o þ




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##### 



INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006
    
    
    1Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Cash Flows for the three and nine months ended
September 30, 2007 and 2006
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 6. Exhibits
    
    
    30SIGNATURES and EXHIBITS
    
    
    S-1Ex-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32.1 Section 906 Certification of the CEOEx-32.2 Section 906 Certification of the CFO
  ii




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 LUMINEX CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
 September 30,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,725
    
    
    $
    27,414Short-term investments
    
    
    3,281
    
    
    
    10,956Accounts receivable, net
    
    
    12,355
    
    
    
    8,237Inventory, net
    
    
    7,602
    
    
    
    4,571Other
    
    
    1,693
    
    
    
    1,917Total current assets
    
    
    34,656
    
    
    
    53,095Property and equipment, net
    
    
    12,335
    
    
    
    4,985Intangible assets, net
    
    
    17,480
    
    
    
    Long-term investments
    
    
    5,311
    
    
    
    7,346Goodwill
    
    
    39,599
    
    
    
    Other
    
    
    1,433
    
    
    
    1,270Total assets
    
    $
    110,814
    
    
    $
    66,696LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,286
    
    
    $
    3,255Accrued liabilities
    
    
    8,635
    
    
    
    2,905Deferred revenue and other
    
    
    2,590
    
    
    
    2,756Total current liabilities
    
    
    14,511
    
    
    
    8,916Long-term debt
    
    
    2,940
    
    
    
    Deferred revenue and other
    
    
    3,754
    
    
    
    3,621Total liabilities
    
    
    21,205
    
    
    
    12,537Stockholders equity:Common stock
    
    
    35
    
    
    
    32Additional paid-in capital
    
    
    188,235
    
    
    
    139,116Accumulated other comprehensive (loss) gain
    
    
    165
    
    
    
    65Accumulated deficit
    
    
    (98,826
    )
    
    
    (85,054
    )Total stockholders equity
    
    
    89,609
    
    
    
    54,159Total liabilities and stockholders equity
    
    $
    110,814
    
    
    $
    66,696




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LUMINEX CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(unaudited)
    
    
    (unaudited)Revenue
    
    $
    19,353
    
    
    $
    12,514
    
    
    $
    53,508
    
    
    $
    38,779Cost of revenue
    
    
    7,336
    
    
    
    4,732
    
    
    
    20,724
    
    
    
    15,077Gross profit
    
    
    12,017
    
    
    
    7,782
    
    
    
    32,784
    
    
    
    23,702Operating expenses:Research and development
    
    
    4,464
    
    
    
    2,348
    
    
    
    11,035
    
    
    
    6,335Selling, general and administrative
    
    
    10,011
    
    
    
    5,869
    
    
    
    28,823
    
    
    
    17,956In-process research and development expense
    
    
    (600
    )
    
    
    
    
    
    
    7,400
    
    
    
    Total operating expenses
    
    
    13,875
    
    
    
    8,217
    
    
    
    47,258
    
    
    
    24,291Income (loss) from operations
    
    
    (1,858
    )
    
    
    (435
    )
    
    
    (14,474
    )
    
    
    (589
    )Interest expense from long-term debt
    
    
    (253
    )
    
    
    
    
    
    
    (685
    )
    
    
    Other income, net
    
    
    309
    
    
    
    544
    
    
    
    1,350
    
    
    
    1,511Income taxes
    
    
    (50
    )
    
    
    2
    
    
    
    37
    
    
    
    (14
    )Net income (loss)
    
    $
    (1,852
    )
    
    $
    111
    
    
    $
    (13,772
    )
    
    $
    908Net income (loss) per share, basic
    
    $
    (0.05
    )
    
    $
    0.00
    
    
    $
    (0.40
    )
    
    $
    0.03Shares used in computing net income (loss)
per share, basic
    
    
    35,097
    
    
    
    31,507
    
    
    
    34,043
    
    
    
    31,358Net income (loss) per share, diluted
    
    $
    (0.05
    )
    
    $
    0.00
    
    
    $
    (0.40
    )
    
    $
    0.03Shares used in computing net income (loss)
per share, diluted
    
    
    35,097
    
    
    
    33,155
    
    
    
    34,043
    
    
    
    32,682
 
 2




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LUMINEX CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(unaudited)

    
    
    (unaudited)Operating activities:Net income (loss)
    
    $
    (1,852
    )
    
    $
    111
    
    
    $
    (13,772
    )
    
    $
    908Adjustments to reconcile net income to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    1,067
    
    
    
    339
    
    
    
    3,445
    
    
    
    1,086In-process research and development expense
    
    
    (600
    )
    
    
    
    
    
    
    7,400
    
    
    
    Stock-based compensation and other
    
    
    1,744
    
    
    
    1,433
    
    
    
    4,843
    
    
    
    3,857Loss (gain) on disposal of assets
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    25Other
    
    
    1
    
    
    
    (2
    )
    
    
    3
    
    
    
    (12
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (741
    )
    
    
    (240
    )
    
    
    (2,398
    )
    
    
    (1,716
    )Inventory, net
    
    
    (503
    )
    
    
    (318
    )
    
    
    (1,223
    )
    
    
    (180
    )Prepaids and other
    
    
    361
    
    
    
    (113
    )
    
    
    242
    
    
    
    (84
    )Accounts payable
    
    
    (342
    )
    
    
    (27
    )
    
    
    (4,159
    )
    
    
    (1,532
    )Accrued liabilities
    
    
    536
    
    
    
    457
    
    
    
    (1,817
    )
    
    
    (378
    )Deferred revenue
    
    
    (545
    )
    
    
    (150
    )
    
    
    (402
    )
    
    
    (374
    )Net cash (used in) provided by operating activities
    
    
    (874
    )
    
    
    1,490
    
    
    
    (7,750
    )
    
    
    1,600Investing activities:Maturities (purchases) of held-to-maturity investments
    
    
    33
    
    
    
    (1,364
    )
    
    
    9,743
    
    
    
    (2,409
    )Purchase of property and equipment
    
    
    (2,002
    )
    
    
    (442
    )
    
    
    (5,331
    )
    
    
    (1,970
    )Acquisition of business, net of cash acquired
    
    
    50
    
    
    
    
    
    
    
    (2,686
    )
    
    
    Acquired technology rights
    
    
    
    
    
    
    
    
    
    
    (265
    )
    
    
    Proceeds from sale of assets
    
    
    (5
    )
    
    
    17
    
    
    
    (5
    )
    
    
    24Other investing activities
    
    
    
    
    
    
    (25
    )
    
    
    30
    
    
    
    (25
    )Net cash (used in) provided by investing activities
    
    
    (1,924
    )
    
    
    (1,814
    )
    
    
    1,486
    
    
    
    (4,380
    )Financing activities:Payments on debt
    
    
    (4
    )
    
    
    
    
    
    
    (12,349
    )
    
    
    Proceeds from issuance of common stock
    
    
    459
    
    
    
    1,000
    
    
    
    632
    
    
    
    2,434Other
    
    
    4
    
    
    
    
    
    
    
    13
    
    
    
    Net cash provided by (used in) financing activities
    
    
    459
    
    
    
    1,000
    
    
    
    (11,704
    )
    
    
    2,434Effect of foreign currency exchange rate on cash
    
    
    228
    
    
    
    4
    
    
    
    279
    
    
    
    26Change in cash and cash equivalents
    
    
    (2,111
    )
    
    
    680
    
    
    
    (17,689
    )
    
    
    (320
    )Cash and cash equivalents, beginning of period
    
    
    11,836
    
    
    
    24,206
    
    
    
    27,414
    
    
    
    25,206Cash and cash equivalents, end of period
    
    $
    9,725
    
    
    $
    24,886
    
    
    $
    9,725
    
    
    $
    24,886Supplemental disclosure of cashflow information:Interest and penalties paid
    
    $
    1
    
    
    $
    
    
    
    $
    1,336
    
    
    $
    Supplemental disclosure of non-cash effect of acquisitions:Purchase price
    
    $
    (1,182
    )
    
    $
    
    
    
    $
    (48,928
    )
    
    $
    Common stock issued
    
    
    
    
    
    
    
    
    
    
    41,755
    
    
    
    Conversion of Tm options and warrants
    
    
    
    
    
    
    
    
    
    
    2,315Forgiveness
of receivable from acquired company
    
    
    1,232
    
    
    
    
    
    
    
    1,232
    
    
    
    Cash acquired
    
    
    
    
    
    
    
    
    
    
    940
    
    
    
    Acquisition, net of cash acquired
    
    $
    50
    
    
    $
    
    
    
    $
    (2,686
    )
    
    $
    
 3




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LUMINEX CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)
 NOTE 1  BASIS OF PRESENTATION
    NOTE 2  BUSINESS COMBINATIONS
 Acquisition
    4




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
     Cash
    
    $
    940Other current assets
    
    
    3,157Other assets
    
    
    28Property and equipment
    
    
    3,518Purchased
intangible assets
    
    
    18,800In-process research and development
    
    
    7,400Goodwill
    
    
    39,599Total assets
    
    $
    73,442Current portion of debt assumed
    
    $
    12,447Accrued severance assumed
    
    
    2,120Other current liabilities assumed
    
    
    7,418Long-term debt assumed
    
    
    2,295Other long-term liabilities assumed
    
    
    234Total liabilities
    
    
    24,514Purchase price
    
    $
    48,928
 5




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Pro Forma Information
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenues
    
    $
    19,353
    
    
    $
    13,934
    
    
    $
    53,827
    
    
    $
    43,835Net loss
    
    $
    (1,852
    )
    
    $
    (5,790
    )
    
    $
    (20,149
    )
    
    $
    (13,913
    )Net loss per share, basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.17
    )
    
    $
    (0.58
    )
    
    $
    (0.40
    )
 Purchased Intangible Assets
  Gross carrying
    
    
    Accumulated
    
    
    Weightedamount
    
    
    amortization
    
    
    average lifeTechnology/trade secrets
    
    $
    17,400
    
    
    $
    1,102
    
    
    
    9Customer lists/contracts
    
    
    1,100
    
    
    
    43
    
    
    
    15Trade name
    
    
    300
    
    
    
    175
    
    
    
    1Total
    
    $
    18,800
    
    
    $
    1,320
  6




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 For the yearending December31,2007
    
    $
    1,8862008
    
    
    2,0132009
    
    
    1,9632010
    
    
    1,9632011
    
    
    1,9632012
    
    
    1,963
 In-process Research and Development (IPR&D)
   NOTE 3  INVESTMENTS
   7




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Cost
    
    
    Accrued Interest
    
    
    Amortized CostDue in one year or less
    
    $
    3,281
    
    
    $
    37
    
    
    $
    3,318Due after one year through two years
    
    
    5,311
    
    
    
    90
    
    
    
    5,401$
    8,592
    
    
    $
    127
    
    
    $
    8,719
 NOTE 4  INVENTORY, NET
  September 30,
    
    
    December 31,2007
    
    
    2006Parts and
supplies
    
    $
    4,338
    
    
    $
    3,504Work-in-progress
    
    
    2,104
    
    
    
    555Finished
goods
    
    
    1,826
    
    
    
    9328,268
    
    
    
    4,991Less: Allowance for excess and obsolete
inventory
    
    
    (666
    )
    
    
    (420
    )$
    7,602
    
    
    $
    4,571
 NOTE 5  EARNINGS PER SHARE
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income (loss)
    
    $
    (1,852
    )
    
    $
    111
    
    
    $
    (13,772
    )
    
    $
    908Denominator:Denominator for basic net income (loss) per share 
weighted average common stock
outstanding
    
    
    35,097
    
    
    
    31,507
    
    
    
    34,043
    
    
    
    31,358Dilutive common stock equivalents  common stock
options and awards
    
    
    
    
    
    
    1,648
    
    
    
    
    
    
    
    1,324Demominator
for diluted net income (loss) per share  weighted average
common stock outstanding and dilutive common stock equivalents
    
    
    35,097
    
    
    
    33,155
    
    
    
    34,043
    
    
    
    32,682Basic net income (loss) per share
    
    $
    (0.05
    )
    
    $
    0.00
    
    
    $
    (0.40
    )
    
    $
    0.03Diluted net income (loss) per share
    
    $
    (0.05
    )
    
    $
    0.00
    
    
    $
    (0.40
    )
    
    $
    0.03
 8




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  NOTE 6  STOCK-BASED COMPENSATION
      9




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Risk-free rate of return
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    5.0
    %Expected life
    
    7 yrs.
    
    6 yrs.
    
    4 yrs.
    
    6 yrs.Weighted average fair value at grant date
    
    $
    7.40
    
    
    
    N/A
    [1]
    
    $
    4.70
    
    
    
    N/A
    [1]
 
 [1]
    
    No stock options were issued to employees during these periods.  WeightedAverageShares
    
    
    ExerciseStock Options
    
    (in thousands)
    
    
    PriceOutstanding at December 31,
2006
    
    
    3,163
    
    
    $
    9.76Granted
    
    
    822
    (1)
    
    
    20.91Exercised
    
    
    (117
    )
    
    
    5.38Cancelled or
expired
    
    
    (147
    )
    
    
    25.68Outstanding at September 30,
2007
    
    
    3,721
    
    
    $
    11.73
 
 (1)
    
    Includes shares reserved with respect to the Tm options assumed in the acquisition.   Weighted-AverageShares
    
    
    Grant-DateRestricted Stock Awards
    
    (in thousands)
    
    
    Fair ValueNon-vested at December 31,
2006
    
    
    798
    
    
    $
    12.46Granted
    
    
    775
    
    
    
    13.23Vested
    
    
    (199
    )
    
    
    13.46Cancelled or
expired
    
    
    (11
    )
    
    
    13.58Non-vested at September 30,
2007
    
    
    1,363
    
    
    $
    13.37
  10




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Cost of revenue
    
    $
    105
    
    
    $
    68
    
    
    $
    253
    
    
    $
    226Research and development
    
    
    216
    
    
    
    155
    
    
    
    558
    
    
    
    394Selling, general and
administrative
    
    
    1,423
    
    
    
    1,210
    
    
    
    4,027
    
    
    
    3,237Total stock-based compensation
costs
    
    $
    1,744
    
    
    $
    1,433
    
    
    $
    4,838
    
    
    $
    3,857
 NOTE 7  SEGMENT INFORMATION
   IntersegmentTechnology Group
    
    Assay Group
    
    Eliminations
    
    ConsolidatedRevenues from external
customers
    
    $
    16,769
    
    
    $
    3,349
    
    
    $
    
    
    
    $
    20,118Intersegment revenue
    
    
    742
    
    
    
    23
    
    
    
    (765
    )
    
    
    (765
    )Depreciation and
amortization
    
    
    576
    
    
    
    610
    
    
    
    (75
    )
    
    
    1,111Segment profit (loss)
    
    
    1,220
    
    
    
    (3,296
    )
    
    
    224
    
    
    
    (1,852
    )Segment assets
    
    
    58,308
    
    
    
    66,135
    
    
    
    (13,629
    )
    
    
    110,814
  11




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##### Table of Contents



LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Technology
    
    Assay
    
    IntersegmentGroup
    
    Group
    
    Eliminations
    
    ConsolidatedRevenues from external customers
    
    $
    47,329
    
    
    $
    8,549
    
    
    $
    
    
    
    $
    55,878Intersegment revenue
    
    
    2,322
    
    
    
    48
    
    
    
    (2,370
    )
    
    
    (2,370
    )Depreciation and amortization
    
    
    1,514
    
    
    
    2,124
    
    
    
    (161
    )
    
    
    3,477Segment profit (loss)
    
    
    2,894
    
    
    
    (16,504
    )
    
    
    (162
    )
    
    
    (13,772
    )Segment assets
    
    
    58,308
    
    
    
    66,135
    
    
    
    (13,629
    )
    
    
    110,814
 NOTE 8  INCOME TAXES
     NOTE 9
 RECENT ACCOUNTING PRONOUNCEMENTS
   12




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LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 NOTE
10  SUBSEQUENT EVENT
  13




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  SAFE HARBOR CAUTIONARY STATEMENT
  
    
    risks and uncertainties relating to market demand and acceptance of our products and
technology,
    
    dependence on strategic partners for development, commercialization and distribution of
products,
    
    concentration of the Companys revenue in a limited number of strategic partners,
    
    fluctuations in quarterly results due to a lengthy and unpredictable sales cycle and
bulk purchases of consumables,
    
    our ability to scale manufacturing operations and manage operating expenses, gross
margins and inventory levels,
    
    potential shortages of components,
    
    competition,
    
    the timing of regulatory approvals,
    
    the implementation, including any modification, of the Companys strategic operating
plans,
    
    risks and uncertainties associated with implementing our acquisition strategy and the
ability to integrate acquired companies, including LMD, or selected assets into our
consolidated business operations, including the ability to recognize the benefits of our
acquisitions,
    
    our ability to develop, manufacture and commercialize products within our Assay Segment,
and
    
    the current status of the credit markets generally, which could effect our ability to
obtain debt or equity funds on favorable terms, if at all.
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##### Table of Contents



OVERVIEW
    
    
    System revenue is generated from the sale of our xMap systems and peripherals.
Currently, system revenue is derived from the sale of the Luminex 100 and 200 analyzers,
often coupled with an optional XY Platform and/or Sheath Delivery System. We currently
expect the average system price to be between $25,000 and $30,000 in a given reporting
period. This metric includes all configurations of our xMAP systems including refurbished
systems, demonstration systems and modular components.
    
    Consumable revenue is generated from the sale of our dyed polystyrene microspheres and
sheath fluid. Our larger commercial and development partners often purchase these
consumables in bulk to minimize the number of incoming qualification events and to allow
for longer development and production runs.
    
    Royalty revenue is generated when a partner sells a kit incorporating our proprietary
microspheres to an end user or when a partner utilizes a kit to provide a testing result to
a user. End users can be facilities such as testing labs, development facilities and
research facilities who buy prepared kits and have specific testing needs or testing
service companies that provide assay results to pharmaceutical research companies or
physicians.
    
    Service revenue is generated when a partner or other owner of a system purchases a
service contract from us after the warranty has expired. Service contract revenue is
amortized over the life of the contract and the costs associated with those contracts are
recognized as incurred.
    
    Assay revenue is generated from the sale of our kits which is a combination of chemical
and biological reagents and our proprietary bead technology used to perform diagnostic and
research assays on samples. For the nine months ended September 30, 2007, assay revenue
includes revenue since March 1, 2007 from Luminex Molecular Diagnostics, or LMD, formerly
Tm Bioscience Corporation, or Tm, as a result of our acquisition which was effective March
1, 2007. Assay revenue generated from the Luminex Bioscience Group, or LBG, is also
classified here. Previously, assay revenue generated from the LBG was recorded in other
revenue as it did not constitute a material amount of total revenue.
    
    Other revenue consists of items such as training, shipping, parts sales, license
revenue, grant revenue, contract research and development fees and milestone revenue and
other items that individually amount to less than 5% of total revenue.
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##### Table of Contents



Third Quarter 2007 Highlights
 
    
    Consolidated total revenue of $19.4 million, a 55 percent increase year-over-year
    
    System shipments surpass 200 for the quarter, for an installed base total in excess of
4,700, up 20 percent from a year ago
    
    Consumables and royalty revenue up 64 and 22 percent, respectively, from the prior year
period. On a pro forma basis, adjusting for the acquisition of Tm, royalties grew by over
35% over the third quarter of 2006
    
    Consolidated gross profit margin of 62 percent
    
    Fifth Annual Planet XMap Europe, our European end-user symposium in Amsterdam attracted
over 400 participants
 Acquisition of TM Bioscience
  Segment Information
  Future Operations
   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  16




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##### Table of Contents



Revenue Recognition.
  Inventory Valuation.
 Warranties.
 Accounts Receivable and Allowance for Doubtful Accounts.
 Purchase Price Allocation, Intangibles and Goodwill.
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RESULTS OF OPERATIONS
 THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2006
 Consolidated
 Three Months EndedSeptember 30,2007
    
    2006Revenue
    
    $
    19,353
    
    
    $
    12,514Gross profit
    
    $
    12,017
    
    
    $
    7,782Gross profit margin percentage
    
    
    62
    %
    
    
    62
    %Operating expenses
    
    $
    13,875
    
    
    $
    8,217Net operating (loss) income
    
    $
    (1,858
    )
    
    $
    (435
    )
   18




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##### Table of Contents



Technology Segment
  Three Months EndedSeptember 30,2007
    
    2006Revenue
    
    $
    16,027
    
    
    $
    12,514Gross profit
    
    $
    10,085
    
    
    $
    7,782Gross profit margin
    
    
    63
    %
    
    
    62
    %Operating expenses
    
    $
    9,875
    
    
    $
    7,758Net operating income
    
    $
    210
    
    
    $
    24
 Revenue.
  Three Months EndedSeptember 30,2007
    
    
    2006System sales
    
    $
    5,148
    
    
    $
    4,924Consumable sales
    
    
    5,655
    
    
    
    3,455Royalty revenue
    
    
    2,667
    
    
    
    2,193Service contracts
    
    
    1,167
    
    
    
    928Other revenue
    
    
    1,390
    
    
    
    1,014$
    16,027
    
    
    $
    12,514
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Gross profit
 Operating expenses
  20




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Assay Segment
  Three Months EndedSeptember 30,2007
    
    2006Revenue
    
    $
    3,326
    
    
    $
    Gross profit
    
    $
    1,932
    
    
    $
    Gross profit margin
    
    
    58
    %
    
    $
    Operating expenses
    
    $
    4,000
    
    
    $
    459Net operating loss
    
    $
    (2,068
    )
    
    $
    (459
    )
  Three Months EndedSeptember 30,2007
    
    
    2006Assays
    
    $
    2,945
    
    
    $
    Other revenue
    
    
    381
    
    
    
    $
    3,326
    
    
    $
    
 Revenue.
 Operating Expenses.
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NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2006
 Consolidated
 Nine Months EndedSeptember 30,2007
    
    2006Revenue
    
    $
    53,508
    
    
    $
    38,779Gross profit
    
    $
    32,784
    
    
    $
    23,702Gross profit margin percentage
    
    
    61
    %
    
    
    61
    %Operating expenses
    
    $
    47,258
    
    
    $
    24,291Net operating (loss) income
    
    $
    (14,474
    )
    
    $
    (589
    )
  Technology Segment
  Nine Months EndedSeptember 30,2007
    
    2006Revenue
    
    $
    45,007
    
    
    $
    38,765Gross profit
    
    $
    27,527
    
    
    $
    23,690Gross profit margin
    
    
    61
    %
    
    
    61
    %Operating expenses
    
    $
    28,092
    
    
    $
    22,880Net
operating income (loss)
    
    $
    (565
    )
    
    $
    810
 Revenue.
  22




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##### Table of Contents



Nine Months EndedSeptember 30,2007
    
    
    2006System sales
    
    $
    16,236
    
    
    $
    14,727Consumable sales
    
    
    13,771
    
    
    
    12,010Royalty revenue
    
    
    7,409
    
    
    
    5,984Service contracts
    
    
    3,257
    
    
    
    2,547Other revenue
    
    
    4,334
    
    
    
    3,497$
    45,007
    
    
    $
    38,765
      Gross profit
 23




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Operating expenses
  Assay Segment
  Nine Months EndedSeptember 30,2007
    
    2006Revenue
    
    $
    8,501
    
    
    $
    14Gross profit
    
    $
    5,257
    
    
    $
    12Gross profit margin
    
    
    62
    %
    
    
    86
    %Operating expenses
    
    $
    19,166
    
    
    $
    1,411Net
operating (loss)
    
    $
    (13,909
    )
    
    $
    (1,399
    )
  Nine Months EndedSeptember 30,2007
    
    
    2006Assays
    
    $
    7,826
    
    
    $
    14Other revenue
    
    
    675
    
    
    
    $
    8,501
    
    
    $
    14
 Revenue.
 Operating Expenses.
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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 September 30,
    
    
    December 31,2007
    
    
    2006(in thousands)
    
    
    (in thousands)Cash and cash equivalents
    
    $
    9,725
    
    
    $
    27,414Short-term investments
    
    
    3,281
    
    
    
    10,956Long-term investments
    
    
    5,311
    
    
    
    7,346$
    18,317
    
    
    $
    45,716
     25




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Contractual Obligations
  Payment Due By PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsNon-cancelable rental
obligations
    
    $
    4,812
    
    
    $
    2,327
    
    
    $
    2,485
    
    
    $
    
    
    
    $
    Non-cancelable purchase
obligations (1)
    
    
    4,169
    
    
    
    3,568
    
    
    
    601
    
    
    
    
    
    
    
    Long-term debt
obligations (2)
    
    
    7,376
    
    
    
    145
    
    
    
    2,728
    
    
    
    4,503
    
    
    
    Total
    
    $
    16,357
    
    
    $
    6,040
    
    
    $
    5,814
    
    
    $
    4,503
    
    
    $
    
 
 (1)
    
    Purchase obligations include contractual arrangements in the form of purchase
orders primarily a result of normal inventory purchases or minimum payments due resulting
when minimum purchase commitments are not met. Purchase obligations relating to purchase
orders do not extend beyond a year; however, we would expect future years to have these
purchase commitments that will arise in the ordinary course of business and will
generally increase or decrease according to fluctuations in overall sales volume.(2)
    
    On December 12, 2003, LMD entered into an agreement with the Ministry of
Industry of the Government of Canada under which the Government agreed to invest up to
Canadian (Cdn) $7,300,000 relating to the development of several genetic tests. Funds
were advanced from Technology Partnerships Canada (TPC), a special operating program.
The actual payments received by the Company were predicated on eligible expenditures made
during the project period which ended July 31, 2006. LMD has received Cdn. $5,739,000
from TPC which is expected to be repaid along with approximately Cdn. $1,577,000 of
imputed interest for a total of approximately Cdn. $7,316,000.LMD has agreed to repay the TPC funding through a royalty on specific assay revenue related
to the funded product development. Royalty payments commence in 2007 at a rate of 1% of
assay revenue and at a rate of 2.5% for 2008 and thereafter. Aggregate royalty repayment
will continue until total advances plus imputed interest has been repaid or until April 30,
2015, whichever is earlier. The repayment obligation expires on April 30, 2015 and any
unpaid balance will be cancelled and forgiven on that date. Should the term of repayment
be shorter than we expect due to higher than expected assay revenue, the effective interest
rate would increase as repayment is accelerated. Repayments denominated in U.S. Dollars
are currently projected to be as shown in the table above, but actual future sales
generating a repayment obligation will vary from this projection and are subject to the
risks and uncertainties described elsewhere in this report, including under Risk Factors
and Safe Harbor Cautionary Statement. Furthermore, payment reflected in U.S. Dollars is
subject to adjustment based upon applicable exchange rates as of the reporting date. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk.
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Foreign
Currency Risk.
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   28




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ISSUER PURCHASES OF EQUITY SECURITIESTotal Number of Shares
    
    
    Approximate Dollar Value ofTotal Number of
    
    
    Average Price
    
    
    Purchased as Part of
    
    
    Shares that May Yet BeShares
    
    
    Paid per Share
    
    
    Publicly Announced
    
    
    Purchased Under the Plans orPeriod
    
    Purchased
    
    
    (1)($)
    
    
    Plans of Programs
    
    
    Programs07/01/07 - 07/31/07
    
    
    1,030
    
    
    
    12.31
    
    
    
    
    
    
    
    08/01/07 - 08/31/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    09/01/07 - 09/30/07
    
    
    1,216
    
    
    
    15.71
    
    
    
    
    
    
    
    Total Third Quarter
    
    
    2,246
    
    
    
    14.15
    
    
    
    
    
    
    
    
 
 (1)
    
    Shares purchased are attributable to the withholding of shares by Luminex to satisfy the payment of tax obligations related to the vesting of restricted shares. 29




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ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description of Documents31.1
    
    Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 30




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SIGNATURES
  LUMINEX CORPORATIONDate: November 9, 2007
    By:
    /s/ HARRISS T. CURRIEHarriss T. CurrieVice President, Finance and Chief
Financial Officer (Principal Financial Officer) By:
    /s/ PATRICK J. BALTHROPPatrick J. BalthropPresident and Chief Executive Officer
(Principal Executive Officer) S-1