##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGT0N, D.C. 20549
 
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 2007
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for 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
 
  Title of each class
    
    Name of exchange on which registeredCommon Stock, $0.001 par value
    
    The NASDAQ Global MarketRights to Purchase Series A Junior Participating Preferred Stock, $0.001 par value
    
    The NASDAQ Global Market
 NONE
 Yes o No þ
 Yes o No þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þNon-accelerated filer o (Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



LUMINEX CORPORATION
 FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2007
 TABLE OF CONTENTS
 PAGEPART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    16Item 1B.
    
    Unresolved Staff Comments
    
    
    26Item 2.
    
    Properties
    
    
    26Item 3.
    
    Legal Proceedings
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    27Executive Officers of the Registrant
    
    
    28PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    30Item 6.
    
    Selected Financial Data
    
    
    33Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    48Item 8.
    
    Financial Statements and Supplementary Data
    
    
    49Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    80Item 9A.
    
    Controls and Procedures
    
    
    81Item 9B.
    
    Other Information
    
    
    81PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    82Item 11.
    
    Executive Compensation
    
    
    82Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    82Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    83Item 14.
    
    Principle Accountant Fees and Services
    
    
    83PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    83Signatures and Certifications
    
    
    S-1Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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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, and
    
    risks and uncertainties associated with implementing our acquisition strategy and the
ability to integrate acquired companies, including Tm Bioscience, or selected assets into
our consolidated business operations, including the ability to recognize the benefits of
our acquisitions.




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PART I
 
 ITEM 1. BUSINESS
 Overview
      1




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www.luminexcorp.com http://www.sec.gov
 Industry Background
  
    
    measure the attraction, or affinity, between a chemical compound and a disease target for drug discovery and development;
    
    assist physicians in prescribing the appropriate tailored drug therapy based on the patients unique genetic makeup, a
process known as pharmacogenetics;
    
    detect genetic variations, such as single nucleotide polymorphisms; and
    
    measure the presence and quantity of biochemicals in a patients blood, other body fluid or tissue to assist physicians in
diagnosing, treating or monitoring disease conditions.
    2




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KEY TECHNOLOGIES
    
    DESCRIPTION
    
    MARKETS SERVEDBioChips/Microarrays
    
    High-density arrays of DNA fragments or
proteins attached to a flat glass or silicon
surface
    
    Biomedical research and
select clinical
diagnosticsAutomated Immunoassays
    
    Automated test tube-based instruments used
for detecting antibodies, proteins and other
analytes
    
    Clinical diagnosticsGels and blots
    
    Physical separation of molecules or analytes
for
visualization
    
    Clinical diagnostics
and biomedical researchReal-time PCR
    
    Quantitative tests which monitor the progress
of polymerase chain reaction (PCR) during
the amplification reaction instead of
post-reaction
    
    Nucleic acid testing in
clinical diagnostics
and biomedical researchMicrofluidics chips
    
    Miniaturized liquid handling system on
a chip
    
    Biomedical researchMicrotiter-plate based assays
    
    Plastic trays with discrete wells in which
different types of assays are fixed
    
    Drug discovery,
clinical diagnostics
and biomedical researchGenotyping technologies
    
    DNA primers or probes designed to identify
small differences between DNA targets using
methods such as ligation assays, cleavage
assays hybridization assays
    
    Drug discovery,
clinical diagnostics
and biomedical research
 Our xMAP Technology
  
    
    Multi-analyte/multi-formatxMAP technology has been designed to simultaneously perform up to 100
distinct bioassays in a single tube or well of a microtiter plate
using only a small amount of sample. Moreover, unlike most existing
technologies that are dedicated to only one type of bioassay, xMAP can
perform multiple types of assays including enzymatic, genetic and
immunologic tests on the same instrumentation platform.
    
    Flexibility/scalabilityxMAP technology allows flexibility in customizing test panels. Panels can be modified to include
new bioassays in the same tube by adding additional microsphere sets. It is also scalable,
meaning that there is no change in the manufacturing process and only minimal changes to the
required labor to produce a small or large number of microsphere-based tests.
    
    ThroughputOur technology is currently able to perform up to 100 tests in a single tube permitting up to
9,600 unattended tests to be detected in less than an hour with only a small amount of sample.
Rapid sample analysis permits efficient use for high-throughput applications.
  3




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
    
    Ease of useMost xMAP bioassays are simple to perform. A test sample is added to a solution containing
microspheres that have been coated with reagents. The solution is then processed through our
xMAP technology system which incorporates proprietary software to automate data acquisition and
analysis in real-time.
    
    Cost effectiveBy performing multiple assays at one time, xMAP technology is designed to be cost effective for
customers compared to competitive techniques such as enzyme-linked immunosorbent assay (ELISA)
or Real-time PCR. By analyzing only those assays in which a customer is interested, xMAP is also
more cost effective than most competing microarray technologies. In addition, microsphere-based
bioassays are inexpensive compared to other technologies such as biochips.
    Business Strategy
  
    
    Focus on key market segmentsThe key market segments identified as a result of our strategic studies have been (i) profile
oriented screening and secondary screening, (ii) RNA profiling and transcriptional screening,
(iii) genetic disease and molecular infectious disease testing, and (iv) immunodiagnostics. In
addition to the segments listed above, we have identified two potential market opportunities in
the fields of bio-defense, or bio-threat testing, and food safety and animal health testing. We
have dedicated our primary efforts towards these markets and will continue to employ a
partnership driven business model focused on these key segments and selectively pursue
potentially profitable opportunities in other segments.
  4




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We will continue to focus our commercialization efforts through strategic partners on large
sectors of the life sciences industry where Luminex believes it has distinct competitive
advantages over existing and emerging technologies and approaches. We define strategic partners
as companies in the life sciences industry that either
develop and distribute assays and tests on xMAP technology or may only distribute our xMAP
technology based systems and consumables. With our partners support, we have targeted major
pharmaceutical companies, large clinical laboratories, research institutions and major medical
institutions for our principal marketing efforts. We believe these customers provide the greatest
opportunity for maximizing the use of xMAP based products and continued adoption by these
industry leaders will promote wider market acceptance of our xMAP technology.
    
    Continue to develop strategic partnerships focused on our key market segmentsCurrently, 30 of our approximately 58 strategic partners have released commercialized
reagent-based products utilizing the Luminex platform and are submitting royalties. We also have
strategic partners who distribute Luminex products. The 30 strategic partners who have
commercialized reagent-based products accounted for approximately 64% of our total revenue in
2007 and all of our strategic partners represented approximately 81% of our total revenue. We
intend to broaden and accelerate market acceptance of xMAP technology through development,
marketing and distribution partnerships with leaders in the life sciences industry that we
believe can either convert core product lines to our technology or develop new applications on
the Luminex platform within their key market segments. By leveraging our strategic partners
market positions and utilizing their distribution channels and marketing infrastructure, we
believe we can continue to expand our installed instrument base. We also intend to penetrate
other key segments by developing and delivering assay kits.
    
    Develop next generation productsOur research and development group is pursuing projects such as the development of consumables,
automation, software and the expansion and enhancement of our multiplexing capabilities to
advance our xMAP technology and its market acceptance. We are also collaborating with industry
participants, biomedical research institutions and government entities to develop additional xMAP
products. We intend to launch our new instrument, FlexMAP 3D, in the second half of 2008, to
complement our current instrument offerings.
    
    Develop and deliver market-leading assay productsWe are focused on maximizing the value we provide our shareholders, partners and end-user
customers by developing internally and co-developing with partners content applications based on
customers needs in key market segments. We believe that by enhancing our partner driven model
with the delivery of value-added assay content, Luminex should be able to gain greater control
over product development, market penetration and commercialization. Luminex Molecular Diagnostics
will focus on achieving these goals in the DNA testing diagnostics market. The LBG will develop
assays in specialty markets in which our partners are not active. This approach resulted in the
commercial launch of several assay products in 2007.
    
    Opportunistically pursue acquisitions that could accelerate these strategiesWe have developed analysis tools and an evaluation template to assess potential acquisition
targets to accelerate our business strategies. This approach led to the acquisition of Tm
Bioscience in 2007. We are actively evaluating other opportunities to enhance our capabilities
or our access to markets or technologies, or provide us other advantages in executing our
business strategies in our key markets.
 Products
 Technology Segment
 Instruments
 Luminex® 100 and Luminex® 200.
  5




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Luminex® XYP (XY
Platform) Luminex® SD (Luminex Sheath Delivery System).
 Luminex HTS TM (High-Throughput System).
  Consumables
 Microspheres.
 MagPlex Microspheres.
 xTAG Microspheres.
 SeroMAP Microspheres.
 Calibration and Control Microspheres.
   6




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Software
 LXR.
 xPONENT®.
 Assay Segment
 Kits
  FlexmiR MicroRNA Labeling Kit.
 FlexmiR MicroRNA Human Panel.
 FlexmiR MicroRNA Mouse/Rat Extension Panel.
 FlexmiR Select.
 FlexmiR Reagent Pak.
 FlexmiR MicroRNA Control Set.
 Pneumococcal Assay.
 xTAG Respiratory Viral Panel.
  7




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xTAG Ashkenazi Jewish Panel.
 xTAG Cystic Fibrosis Kit.
 xTAG CFTR 70+6 Mutation Detection Kit
 xTAG Mutation Detection Products for Coagulation.
 xTAG Mutation Detection Kit for P450-2C19
 xTAG Mutation Detection Kit for P450-2C9
 xTAG Mutation Detection Kit for P450-2D6
 xTAG Mutation Detection Kit for P450-2C9 and VKORCI
  Sales and Marketing
   8




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Customers
  Technical Operations
  Remote Support
  Training
  Field Support
   9




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Research and Development
  
    
    Consumable developmentWe continue to develop and enhance our existing consumable product line and support introduction
of new product lines. These new products include calibrators, controls and microspheres with
additional performance characteristics.
    
    AutomationWe collaborate with our strategic partners and others to provide automation solutions that will
integrate our various xMAP instruments with sample handling equipment and laboratory information
systems to increase bioassay throughput and operational efficiencies and allow for walk-away
capability.
    
    SoftwareWe are maintaining and extending our system platform through our SDK as well as providing new
end-user applications.  Our SDK provides a straightforward platform for our strategic partners
and their customers to rapidly develop their own user interface software packages.  In addition,
our end-user applications will allow us to provide turn key solutions to partners.
    
    Technical ApplicationsIn order to allow customers to expedite the production of bioassays for use on our systems, we
have a technical applications group, based in Austin, Texas, that includes highly experienced
biological scientists. This group works closely with our customers in their development of
bioassays with the ultimate goal of faster technology adoption and commercialization.
    
    Expanding our multiple testing capabilitiesOur current bead utilizes three common chemistries for the immobilization of assays on its
surface. While these chemistries are well accepted in the industry, it is desirable to expand our
bead chemistry capability to enhance market penetration and adoption. We continue to work on
other surface chemistries to provide optimal performance in broader application areas.
    
    Enhancing bioassay performance and operational efficienciesOur scientists and engineers dedicate efforts to further enhance xMAP in the areas of assay
performance, such as sensitivity, precision, reliability and operational efficiencies. We are
actively collecting market and customer requirements that will allow us to provide optimal
features and benefits in current and future products.
    
    New product developmentOur research and development teams, including LBG and LMD, and marketing team are working closely
with both internal and external groups to design and develop products that will expand
capabilities of the xMAP-based technologies. We believe that these efforts will continue to
result in unique products. These unique products may include instrumentation, services, software
and consumables including assays.
  10




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Manufacturing
    Instruments
  Microspheres
  Kits
   11




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Competition
     Intellectual Property
     12




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Government Regulation
 Food and Drug Administration
       13




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WEEE
  European IVD Directive
   14




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Environmental
  Employees
  Segments
   15




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ITEM 1A. RISK FACTORS
 We have a limited history of profitability and an accumulated deficit of approximately $87.8
million as of December 31, 2007.
  We expect our operating results to continue to fluctuate from quarter to quarter
      Our success depends significantly on the establishment and maintenance of successful relationships
with our strategic partners. Currently, a limited number of strategic partners constitute a
majority of our revenue and the loss of any one of these partners could have a material adverse
effect on the Company.
  16




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If the FDA or other government agencies guidelines change in ways that we do not anticipate and we
fail to comply with those regulations that affect our business, we could be subject to enforcement
actions, injunctions and civil and criminal penalties that could delay or prevent marketing of our
products.
   17




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18




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If our technology and products do not become widely used in the life sciences industry, it is
unlikely that we can maintain or increase profitability.
  
    
    convince prospective strategic partners and customers that our technology is an attractive alternative to other
technologies for pharmaceutical, research, clinical and biomedical testing and analysis;
    
    encourage these partners to develop and market products using our technology;
    
    manufacture products in sufficient quantities with acceptable quality and at an acceptable cost;
    
    obtain and maintain sufficient pricing and royalties from partners on such Luminex products; and
    
    place and service sufficient quantities of our products, including the ability to provide the level of service required in
the mainstream clinical diagnostics market segment.
  Our reliance on strategic partners to market our products makes forecasting difficult .
  
    
    We have no control over the timing or extent of product development,
marketing or sale of our products by our strategic partners.
    
    Most of our strategic partners are not committed to minimum purchase
commitments, and we do not control the incentives provided by our
strategic partners to their sales personnel.
    
    A significant number of our strategic partners intend to produce
clinical diagnostic applications that may need to be approved by the
FDA, or other regulatory bodies in jurisdictions outside of the United
States.
    
    Certain strategic partners may have unique requirements for their
applications and systems. Assisting the various strategic partners
may strain our research and development and manufacturing resources.
To the extent that we are not able to timely assist our strategic
partners, the commercialization of their products will likely be
delayed.
  19




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
    
    Certain strategic partners may fail to deliver products that satisfy
market requirements, or such products may fail to perform properly.
    
    We have limited access to partner confidential corporate information.
A sudden unexpected change in ownership, strategy or other material
event could adversely impact partner purchases of our products.
 The life sciences industry is highly competitive and subject to rapid technological change, and we
may not have the resources necessary to compete successfully .
   Our success depends on our ability to service and support our products directly or in collaboration
with our strategic partners.
  The property rights we rely upon to protect the technology underlying our products may not be
adequate to maintain market exclusivity. Inadequate intellectual property protection could enable
third parties to exploit our technology or use very similar technology and could reduce our ability
to distinguish our products in the market.
    20




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Our success will depend partly on our ability to operate without infringing on or misappropriating
the proprietary rights of others.
   We have only produced our products in limited quantities, and we may experience problems in scaling
our manufacturing operations or delays or component shortages that could limit the growth of our
revenue.
   21




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
    
    the possibility that one or more of our suppliers or our assemblers that do not have supply agreements with the Company
could terminate their services at any time without penalty;
    
    the potential obsolescence and/or inability of our suppliers to obtain required components;
    
    the potential delays and expenses of seeking alternate sources of supply or manufacturing services;
    
    the inability to qualify alternate sources without impacting performance claims of our products;
    
    reduced control over pricing, quality and timely delivery due to the difficulties in switching to alternate suppliers or
assemblers; and
    
    increases in prices of raw materials and key components.
  The capital spending policies of our customers has a significant effect on the demand for our
products.
  If we become subject to product liability claims, we may be required to pay damages that exceed our
insurance coverage.
   22




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If third-party payors increasingly restrict payments for healthcare expenses or fail to adequately
pay for multi-analyte testing, we may experience reduced sales which would hurt our business and
our business prospects.
  We may in the future incur substantial debt that could restrict our operations.
  
    
    limiting our ability to compete and our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate;
    
    limiting our ability to borrow additional funds for working capital, capital and
research and development expenditures, acquisitions and general corporate or other
purposes; and
    
    exposing us to interest rate risk.
  We may be unsuccessful in implementing our acquisition strategy. We may face difficulties
integrating acquired entities with our existing businesses.
   
    
    we may not be able to accurately estimate the financial effect of acquisitions on our
business;
    
    future acquisitions may require us to assume liabilities, incur large and immediate
write-offs, issue capital stock potentially dilutive to our stockholders or spend
significant cash or may result in a decrease in our future operating income or operating
margins;
    
    we may be unable to realize the anticipated benefits and synergies from acquisitions as
a result of inherent risks and uncertainties, including difficulties integrating acquired
businesses or retaining their key personnel, partners, customers or other key
relationships, entering market segments in which we have no or limited experience, and
risks that acquired entities may not operate profitably or that acquisitions may not result
in improved operating performance; and
  23




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
    
    acquisitions and subsequent integration of these companies may disrupt our business and
distract our management from other responsibilities.
  
    
    disparate information technology, internal control, financial reporting and record-keeping systems;
    
    differences in accounting policies, including those requiring judgment or complex estimation processes;
    
    new partners or customers who may operate on terms and programs different than ours;
    
    additional employees not familiar with our operations;
    
    facilities or operations in remote locations or potentially foreign jurisdictions and
the inherent risks of operating in unfamiliar legal and regulatory environments; and
    
    new products, including the risk that any underlying intellectual property associated
with such products may not have been adequately protected or that such products may
infringe on the proprietary rights of others.
 We rely on the innovation and resources of larger industry participants and public programs to
advance genomic research and educate physicians/clinicians on genetic diagnostics.
  We are subject to evolving legislative, judicial and ethical standards on use of technology and
biotechnology.
  Our operating results may be affected by current economic and political conditions.
  International business operations create additional operational and legal risk.
  
    
    changes in or interpretations of foreign law that may adversely affect our ability
to sell our products, perform services or repatriate profits to the United States;
    
    the imposition of tariffs;
    
    hyperinflation or economic or political instability in foreign countries;
    
    imposition of limitations on or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries;
    
    conducting business in places where business practices and customs are unfamiliar
and unknown;
  24




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
    
    the imposition of restrictive trade policies, including export restrictions;
    
    worldwide political conditions;
    
    the imposition of inconsistent laws or regulations;
    
    the imposition or increase of investment requirements and other restrictions by
foreign governments;
    
    longer collection cycles for account receivables;
    
    uncertainties relating to foreign laws, including labor laws, and legal
proceedings;
    
    currency exchange rate risks;
    
    having to comply with a variety of U.S. laws, including the Foreign Corrupt
Practices Act;  and
    
    having to comply with U.S. export control regulations and policies that restrict our
ability to communicate with non-U.S. employees and supply foreign affiliates, partners
and customers.
 Our success will depend on our ability to attract and retain our management and staff.
  Our stock price has been and is likely to continue to be volatile.
  
    
    actual or anticipated variations in quarterly operating results from historical results or estimates of results prepared by
securities analysts;
    
    announcements of technological innovations or new products or services by us or our competitors;
    
    announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
    
    conditions or trends in the life science, biotechnology and pharmaceutical industries;
    
    additions or departures of key personnel;
    
    changes in financial estimates by securities analysts;
    
    general economic conditions and interest rates;
    
    instability in the United States and other financial markets and the ongoing and possible escalation of unrest in the
Middle East, other armed hostilities or further acts or threats of terrorism in the United States or elsewhere;
    
    sales of our common stock; and
    
    the potential adverse impact of the secondary trading of our stock on foreign exchanges which are subject to less
regulatory oversight than the Nasdaq Global Market, without our permission, and the activity of the market makers of our
stock on such exchanges, including the risk that such market makers may engage in naked short
sales and/or other deceptive trading practices which may artificially depress or otherwise affect
the price of our common stock on the Nasdaq Global Market.
  25




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Anti-takeover provisions in our certificate of incorporation, bylaws and stockholder rights plan
and Delaware law could make a third party acquisition of us difficult.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
    26




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   27




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Executive Officers of the Registrant as of March 12, 2008
 Name
    
    Age
    
    PositionPatrick J. Balthrop
    
    51
    
    President and Chief Executive OfficerDouglas C. Bryant
    
    50
    
    Executive Vice President and Chief Operating OfficerRussell W. Bradley
    
    44
    
    Vice President, Business Development and Strategic PlanningJeremy Bridge-Cook, Ph.D
    
    39
    
    Vice President, Luminex Molecular DiagnosticsJohn C. Carrano, Ph.D
    
    49
    
    Vice President, Research and DevelopmentHarriss T. Currie
    
    46
    
    Chief Financial Officer, Vice President, Finance and TreasurerGregory J. Gosch
    
    45
    
    Vice President, Luminex Bioscience GroupDavid S. Reiter
    
    41
    
    Vice President, General Counsel and Corporate Secretary
 Patrick J. Balthrop
 Douglas C. Bryant
 Russell W. Bradley
 Jeremy Bridge-Cook, Ph.D.
 John C. Carrano, Ph.D
  28




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Harriss T. Currie.
 Gregory J. Gosch.
 David S. Reiter. Phillips & Reiter, PLLC
  29




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PART II
 
 ITEM 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 Market Information
   2007
    
    High
    
    
    LowFirst Quarter
    
    $
    16.82
    
    
    $
    12.08Second Quarter
    
    $
    14.71
    
    
    $
    11.44Third Quarter
    
    $
    17.30
    
    
    $
    11.62Fourth Quarter
    
    $
    17.77
    
    
    $
    14.11
 2006
    
    High
    
    
    LowFirst Quarter
    
    $
    15.48
    
    
    $
    11.55Second Quarter
    
    $
    18.03
    
    
    $
    12.83Third Quarter
    
    $
    20.19
    
    
    $
    14.41Fourth Quarter
    
    $
    20.75
    
    
    $
    11.82
 Holders
  Dividends
  Recent Sales of Unregistered Securities
   30




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Performance Graph
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 *
    
    $100 invested on 12/31/02 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31. 2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007Luminex Corporation
    
    
    100.00
    
    
    
    228.22
    
    
    
    216.06
    
    
    
    282.73
    
    
    
    309.00
    
    
    
    395.13NASDAQ Composite
    
    
    100.00
    
    
    
    149.75
    
    
    
    164.64
    
    
    
    168.60
    
    
    
    187.83
    
    
    
    205.22NASDAQ Biotechnology
    
    
    100.00
    
    
    
    146.95
    
    
    
    164.05
    
    
    
    185.29
    
    
    
    183.09
    
    
    
    186.22
 Issuer Purchases of Equity Securities
   31




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ISSUER PURCHASES OF EQUITY SECURITIESTotal Number of Shares
    
    
    Appromixate 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
    
    
    Programs ($)10/1/07 - 10/31/07
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    11/1/07 - 11/30/07
    
    
    58
    
    
    $
    14.99
    
    
    
    
    
    
    
    12/1/07 - 12/31/07
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total Third Quarter
    
    
    58
    
    
    $
    14.99
    
    
    
    
    
    
    
    
 (1)
    
    Shares repurchased are attributable to the withholding of shares by Luminex to satisfy the
payment of tax obligations related to the vesting of restricted shares.  32




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands, except per share data)Consolidated Results of Operations Data:Total revenue
    
    $
    75,010
    
    
    $
    52,989
    
    
    $
    42,313
    
    
    $
    35,880
    
    
    $
    26,292Gross profit
    
    
    46,094
    
    
    
    32,252
    
    
    
    22,321
    
    
    
    14,722
    
    
    
    9,830Loss from operations
    
    
    (17,418
    )
    
    
    (581
    ) [1]
    
    
    (3,496
    )
    
    
    (4,164
    )
    
    
    (6,475
    )Net (loss) income
    
    
    (2,711
    )
    
    
    1,507
    [1]
    
    
    (2,666
    )
    
    
    (3,605
    )
    
    
    (4,209
    )Net (loss) income applicable to common stockholders
    
    $
    (2,711
    )
    
    $
    1,507
    
    
    $
    (2,666
    )
    
    $
    (3,605
    )
    
    $
    (4,209
    )Net (loss) income per common share, basic
    
    $
    (0.08
    )
    
    $
    0.05
    [1]
    
    $
    (0.09
    )
    
    $
    (0.12
    )
    
    $
    (0.14
    )Shares used in computing net (loss) income per
share, basic
    
    
    34,361
    
    
    
    31,434
    
    
    
    30,990
    
    
    
    30,698
    
    
    
    29,814Net (loss) income per common share, diluted
    
    $
    (0.08
    )
    
    $
    0.05
    [1]
    
    $
    (0.09
    )
    
    $
    (0.12
    )
    
    $
    (0.14
    )Shares used in computing net (loss) income per
share, diluted
    
    
    34,361
    
    
    
    32,988
    
    
    
    30,990
    
    
    
    30,698
    
    
    
    29,814
 At December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    27,233
    
    
    $
    27,414
    
    
    $
    25,206
    
    
    $
    19,238
    
    
    $
    39,480Short-term investments
    
    
    6,944
    
    
    
    10,956
    
    
    
    10,947
    
    
    
    12,891
    
    
    
    Long-term investments
    
    
    
    
    
    
    7,346
    
    
    
    5,466
    
    
    
    3,991
    
    
    
    Working capital
    
    
    40,801
    
    
    
    44,179
    
    
    
    39,364
    
    
    
    40,823
    
    
    
    45,522Total assets
    
    
    123,559
    
    
    
    66,696
    
    
    
    58,035
    
    
    
    53,175
    
    
    
    53,294Total stockholders equity
    
    
    103,480
    
    
    
    54,159
    
    
    
    44,710
    
    
    
    44,546
    
    
    
    44,835
 
 [1]
    
    As discussed in Note 14 to the consolidated financial statements, effective January 1, 2006,
we changed our method of accounting for stock-based compensation to conform to Statement of
Financial Accounting Standard No.123(R), Share-Based Payment.  33




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following information should be read in conjunction with the Consolidated Financial
Statements and the accompanying Notes included below in Item 8 and Risk Factors included above in
Item 1A of this Annual Report on Form 10-K . This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements.
 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 that buy prepared kits and have specific testing needs or testing
service companies that provide assay results to pharmaceutical research companies or
physicians.
    
    Assay revenue is generated from the sale of our kits which are a combination of chemical
and biological reagents and our proprietary bead technology used to perform diagnostic and
research assays on samples. For the year ended December 31, 2007, assay revenue includes
revenue since March 1, 2007 from LMD as
a result of our acquisition which was effective March 1, 2007. Assay revenue generated from
LBG is also classified here. Previously, assay revenue generated from LBG was recorded in
other revenue as it did not constitute as material amount of total revenue.
  34




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##### Table of Contents




    
    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.
    
    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.
 2007 Highlights
 
    
    Luminex grew total revenue by approximately 42% over 2006 revenue of $53.0 million
    
    Gross margin percentage of 61%, consistent with 2006
    
    Record system shipments of 862 for the year ended December 31, 2007
    
    U.S. Food and Drug Administration (FDA) clearance of xTAG TM Respiratory
Viral Panel (RVP), as of January 3, 2008
    
    Completion of the Tm Bioscience acquisition
    
    Cumulative world wide system sales to date of 4,979 systems
    
    Settlement of Rules Based Medicine, Inc. (RBM) litigation for total proceeds to the
Company of $12.5 million
 Acquisition of Tm Bioscience
  Change in Cash Position
  Segment Information
  Future Operations
   35




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Critical Accounting Policies
  Revenue Recognition.
   Inventory Valuation.
 Warranties.
  36




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##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts.
 Purchase Price Allocation, Intangibles and Goodwill.
     37




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Consolidated Results of Operations
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenue
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Cost of revenue
    
    
    39
    %
    
    
    39
    %
    
    
    47
    %Gross profit
    
    
    61
    %
    
    
    61
    %
    
    
    53
    %Operating expensesResearch and development
    
    
    21
    %
    
    
    16
    %
    
    
    13
    %Selling, general and administrative
    
    
    54
    %
    
    
    46
    %
    
    
    48
    %In-process research and development expense
    
    
    10
    %
    
    
    0
    %
    
    
    0
    %Total operating expenses
    
    
    85
    %
    
    
    62
    %
    
    
    61
    %Loss from operations
    
    
    (23
    )%
    
    
    (1
    )%
    
    
    (8
    )%Interest expense from long-term debt
    
    
    (1
    )%
    
    
    
    
    
    
    Other income, net
    
    
    2
    %
    
    
    4
    %
    
    
    3
    %Settlement of litigation
    
    
    15
    %
    
    
    
    
    
    
    (1
    )%Gain on settlement of liability
    
    
    3
    %
    
    
    
    
    
    
    Income taxes
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    (4
    )%
    
    
    3
    %
    
    
    (6
    )%
 Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Year Ended December 31,2007
    
    
    2006
    
    
    Variance ($)
    
    
    Variance (%)(in thousands)Revenue
    
    $
    75,010
    
    
    $
    52,989
    
    
    $
    22,021
    
    
    
    42
    %Gross profit
    
    $
    46,094
    
    
    $
    32,252
    
    
    $
    13,842
    
    
    
    43
    %Gross margin percentage
    
    
    61
    %
    
    
    61
    %
    
    
    0
    %
    
    
    N/AOperating expenses
    
    $
    63,512
    
    
    $
    32,833
    
    
    $
    30,679
    
    
    
    93
    %Net (loss) income
    
    $
    (2,711
    )
    
    $
    1,507
    
    
    $
    (4,218
    )
    
    
    280
    %
 Revenue.
  38




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##### Table of Contents



Consolidated
 Year Ended December 31,2007
    
    
    2006System sales
    
    $
    24,428
    
    
    $
    20,644Consumable sales
    
    
    19,199
    
    
    
    15,676Royalty revenue
    
    
    10,244
    
    
    
    8,228Assay revenue
    
    
    11,323
    
    
    
    19Service contracts
    
    
    4,431
    
    
    
    3,450Other revenue
    
    
    5,385
    
    
    
    4,972$
    75,010
    
    
    $
    52,989
  Gross Profit.
 Research and Development Expense.
 Selling, General and Administrative Expense.
 Other Income, net.
 Settlement of litigation.
 Gain on settlement of liability.
  39




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##### Table of Contents



Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Year Ended December 31,Variance
    
    
    Variance2006
    
    
    2005
    
    
    ($)
    
    
    (%)(in thousands)Revenue
    
    $
    52,989
    
    
    $
    42,313
    
    
    $
    10,676
    
    
    
    25
    %Gross profit
    
    $
    32,252
    
    
    $
    22,321
    
    
    $
    9,931
    
    
    
    44
    %Gross margin percentage
    
    
    61
    %
    
    
    53
    %
    
    
    8
    %
    
    
    N/AOperating expenses
    
    $
    32,833
    
    
    $
    25,817
    
    
    $
    7,016
    
    
    
    27
    %Net income (loss)
    
    $
    1,507
    
    
    $
    (2,666
    )
    
    $
    4,173
    
    
    
    157
    %
 Revenue.
  2006
    
    
    2005System sales
    
    $
    20,644
    
    
    $
    18,812Consumable sales
    
    
    15,676
    
    
    
    13,084Royalty revenue
    
    
    8,228
    
    
    
    5,255Assay revenue
    
    
    19
    
    
    
    Service contracts
    
    
    3,450
    
    
    
    2,444Other revenue
    
    
    4,972
    
    
    
    2,718$
    52,989
    
    
    $
    42,313
 Gross Profit.
 Research and Development Expense.
 Selling, General and Administrative Expense.
 Other Income, net.
  40




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##### Table of Contents



Segment Results of Operations
 Technology Segment
  Year Ended December 31,2007
    
    
    2006
    
    
    Variance ($)
    
    
    Variance (%)(in thousands)Revenue
    
    $
    62,436
    
    
    $
    52,970
    
    
    $
    9,466
    
    
    
    18
    %Gross profit
    
    $
    37,864
    
    
    $
    32,243
    
    
    $
    5,621
    
    
    
    17
    %Gross margin percentage
    
    
    61
    %
    
    
    61
    %
    
    
    0
    %
    
    
    N/AOperating expenses
    
    $
    38,391
    
    
    $
    30,793
    
    
    $
    7,598
    
    
    
    25
    %Net income
    
    $
    12,330
    
    
    $
    3,538
    
    
    $
    8,792
    
    
    
    249
    %
 Revenue.
  Year Ended December 31,2007
    
    
    2006System sales
    
    $
    23,320
    
    
    $
    20,644Consumable sales
    
    
    19,197
    
    
    
    15,676Royalty revenue
    
    
    10,213
    
    
    
    8,228Service contracts
    
    
    4,431
    
    
    
    3,450Assay revenue
    
    
    
    
    
    
    Other revenue
    
    
    5,275
    
    
    
    4,972$
    62,436
    
    
    $
    52,970
     41




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##### Table of Contents



Gross Profit.
 Operating expenses.
   42




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##### Table of Contents



Settlement of litigation.
 Assay Segment
  Year Ended December 31,2007
    
    
    2006
    
    
    Variance ($)
    
    
    Variance (%)(in thousands)Revenue
    
    $
    12,574
    
    
    $
    19
    
    
    $
    12,555
    
    
    
    66079
    %Gross profit
    
    $
    8,230
    
    
    $
    9
    
    
    $
    8,221
    
    
    
    91344
    %Gross margin percentage
    
    
    65
    %
    
    
    47
    %
    
    
    18
    %
    
    
    N/AOperating expenses
    
    $
    25,121
    
    
    $
    2,040
    
    
    $
    23,081
    
    
    
    1131
    %Net loss
    
    $
    (15,041
    )
    
    $
    (2,031
    )
    
    $
    (13,010
    )
    
    
    641
    %
 Revenue.
  Year Ended December 31,2007
    
    
    2006System sales
    
    $
    1,108
    
    
    $
    Consumable sales
    
    
    2
    
    
    
    Royalty revenue
    
    
    31
    
    
    
    Service contracts
    
    
    
    
    
    
    Assay revenue
    
    
    11,323
    
    
    
    19Other revenue
    
    
    110
    
    
    
    $
    12,574
    
    
    $
    19
  Operating expenses.
   43




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Gain on settlement of liability.
  Liquidity and Capital Resources
 December 31,
    
    
    December 31,2007
    
    
    2006Cash and cash equivalents
    
    $
    27,233
    
    
    $
    27,414Short-term investments
    
    
    6,944
    
    
    
    10,956Long-term investments
    
    
    
    
    
    
    7,346$
    34,177
    
    
    $
    45,716
       44




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45




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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
    
    $
    4,933
    
    
    $
    2,506
    
    
    $
    2,237
    
    
    $
    190
    
    
    $
    Non-cancelable purchase
obligations (1)
    
    
    3,194
    
    
    
    3,194
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
obligations (2)
    
    
    5,725
    
    
    
    134
    
    
    
    1,401
    
    
    
    4,190
    
    
    
    Capital lease obligations
    
    
    96
    
    
    
    37
    
    
    
    59
    
    
    
    
    
    
    
    Total
    
    $
    13,948
    
    
    $
    5,871
    
    
    $
    3,697
    
    
    $
    4,380
    
    
    $
    
 
 (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) $7.3 million 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 $4.3 million from
TPC which is expected to be repaid along with approximately $1.4 million of imputed
interest for a total of approximately $5.7 million.LMD has agreed to repay the TPC funding through a royalty on specific assay revenue related to
the funded product development. Royalty payments commenced 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.  46




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Inflation
  Recently Adopted Accounting Standards
  Recent Accounting Pronouncements
   
  47




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk.
  Foreign Currency Risk.
   48




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 PAGEReport of Independent Registered Public Accounting Firm
    
    
    50Report of Independent Registered Public Accounting Firm
    
    
    51Consolidated Balance Sheets
    
    
    52Consolidated Statements of Operations
    
    
    53Consolidated Statements of Cash Flows
    
    
    54Consolidated Statements of Changes in Stockholders Equity
    
    
    55Notes to Consolidated Financial Statements
    
    
    56
  49




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       .
  
  50




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
  51




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LUMINEX CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,233
    
    
    $
    27,414Short-term investments
    
    
    6,944
    
    
    
    10,956Accounts receivable, (net of allowance for doubtful accounts of
$356 and $301 at December 31, 2007 and 2006, respectively)
    
    
    11,827
    
    
    
    8,237Inventories, net
    
    
    6,508
    
    
    
    4,571Prepaids and other
    
    
    856
    
    
    
    1,917Total current assets
    
    
    53,368
    
    
    
    53,095Property and equipment, net
    
    
    12,673
    
    
    
    4,985Intangible assets, net
    
    
    16,919
    
    
    
    Long-term investments
    
    
    
    
    
    
    7,346Goodwill
    
    
    39,617
    
    
    
    Other
    
    
    982
    
    
    
    1,270Total assets
    
    $
    123,559
    
    
    $
    66,696LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,346
    
    
    $
    3,255Accrued liabilities
    
    
    6,811
    
    
    
    2,905Deferred revenue
    
    
    2,410
    
    
    
    2,756Total current liabilities
    
    
    12,567
    
    
    
    8,916Long-term debt
    
    
    2,976
    
    
    
    Deferred revenue
    
    
    4,536
    
    
    
    3,621Total liabilities
    
    
    20,079
    
    
    
    12,537Stockholders equity:Common stock, $.001 par value, 200,000,000 shares authorized; issued and
outstanding: 35,391,211 shares in 2007; 31,678,608 shares in 2006
    
    
    35
    
    
    
    32Preferred stock, $.001 par value, 5,000,000 shares authorized; none
issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    191,218
    
    
    
    139,116Accumulated other comprehensive loss
    
    
    (8
    )
    
    
    65Accumulated deficit
    
    
    (87,765
    )
    
    
    (85,054
    )Total stockholders equity
    
    
    103,480
    
    
    
    54,159Total liabilities and stockholders equity
    
    $
    123,559
    
    
    $
    66,696
   52




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LUMINEX CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenue
    
    $
    75,010
    
    
    $
    52,989
    
    
    $
    42,313Cost of revenue
    
    
    28,916
    
    
    
    20,737
    
    
    
    19,992Gross profit
    
    
    46,094
    
    
    
    32,252
    
    
    
    22,321Operating expenses:Research and development
    
    
    15,383
    
    
    
    8,673
    
    
    
    5,600Selling, general and administrative
    
    
    40,729
    
    
    
    24,160
    
    
    
    20,217In-process research and development
    
    
    7,400
    
    
    
    
    
    
    
    Total operating expenses
    
    
    63,512
    
    
    
    32,833
    
    
    
    25,817Loss from operations
    
    
    (17,418
    )
    
    
    (581
    )
    
    
    (3,496
    )Interest expense from long-term debt
    
    
    (513
    )
    
    
    
    
    
    
    Other income, net
    
    
    1,665
    
    
    
    2,108
    
    
    
    1,174Settlement of litigation
    
    
    11,500
    
    
    
    
    
    
    
    (322
    )Gain on settlement of liability
    
    
    2,345
    
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    (2,421
    )
    
    
    1,527
    
    
    
    (2,644
    )Income taxes
    
    
    (290
    )
    
    
    (20
    )
    
    
    (22
    )Net income (loss)
    
    $
    (2,711
    )
    
    $
    1,507
    
    
    $
    (2,666
    )Net income (loss) per share, basic
    
    $
    (0.08
    )
    
    $
    0.05
    
    
    $
    (0.09
    )Shares used in computing net income (loss) per share, basic
    
    
    34,361
    
    
    
    31,434
    
    
    
    30,990Net income (loss) per share, diluted
    
    $
    (0.08
    )
    
    $
    0.05
    
    
    $
    (0.09
    )Shares used in computing net income (loss) per share, diluted
    
    
    34,361
    
    
    
    32,988
    
    
    
    30,990
   53




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LUMINEX CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (2,711
    )
    
    $
    1,507
    
    
    $
    (2,666
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization expense
    
    
    5,063
    
    
    
    1,483
    
    
    
    1,048In-process research and development expense
    
    
    7,400
    
    
    
    
    
    
    
    Gain on settlement of liability
    
    
    (2,345
    )
    
    
    
    
    
    
    Amortization of deferred stock, restricted stock
and 
stock compensation expense
    
    
    6,593
    
    
    
    5,511
    
    
    
    1,675Imputed interest
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )Loss on disposal of assets
    
    
    88
    
    
    
    4
    
    
    
    83Other
    
    
    268
    
    
    
    (15
    )
    
    
    9Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (3,255
    )
    
    
    (1,657
    )
    
    
    (716
    )Inventories, net
    
    
    (129
    )
    
    
    (290
    )
    
    
    3,369Other assets
    
    
    1,019
    
    
    
    (1,009
    )
    
    
    (332
    )Accounts payable
    
    
    (2,958
    )
    
    
    (602
    )
    
    
    1,770Accrued liabilities
    
    
    (715
    )
    
    
    (307
    )
    
    
    137Deferred revenue
    
    
    75
    
    
    
    (566
    )
    
    
    2,658Net cash provided by operating activities
    
    
    8,393
    
    
    
    4,046
    
    
    
    7,022CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of held-to-maturity securities
    
    
    (6,325
    )
    
    
    (15,064
    )
    
    
    (15,450
    )Maturities of held-to-maturity securities
    
    
    17,717
    
    
    
    13,175
    
    
    
    15,919Purchase of property and equipment
    
    
    (6,685
    )
    
    
    (2,638
    )
    
    
    (2,830
    )Acquisition of business, net of cash acquired
    
    
    (2,686
    )
    
    
    
    
    
    
    Proceeds from sale of assets
    
    
    30
    
    
    
    45
    
    
    
    21Acquired intangible assets
    
    
    (10
    )
    
    
    
    
    
    
    Acquired technology rights
    
    
    (265
    )
    
    
    (25
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    1,776
    
    
    
    (4,507
    )
    
    
    (2,340
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments on debt
    
    
    (12,349
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    1,868
    
    
    
    2,622
    
    
    
    1,180Other
    
    
    13
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (10,468
    )
    
    
    2,622
    
    
    
    1,180Effect of foreign currency exchange rate on cash
    
    
    118
    
    
    
    47
    
    
    
    106Change in cash and cash equivalents
    
    
    (181
    )
    
    
    2,208
    
    
    
    5,968Cash and cash equivalents, beginning of year
    
    
    27,414
    
    
    
    25,206
    
    
    
    19,238Cash and cash equivalents, end of year
    
    $
    27,233
    
    
    $
    27,414
    
    
    $
    25,206Interest and penalties paid
    
    
    1,360
    
    
    
    
    
    
    
    SUPPLEMENTAL
DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:Purchase of leasehold improvements under trade
payable arrangement paid in 2007
    
    $
    
    
    
    $
    445
    
    
    $
    SUPPLEMENTAL
DISCLOSURE OF NON-CASH
EFFECT OF ACQUISITIONS:Purchase price
    
    
    (49,401
    )
    
    
    
    
    
    
    Common stock issued
    
    
    41,754
    
    
    
    
    
    
    
    Conversion of Tm options and warrants
    
    
    2,315
    
    
    
    
    
    
    
    Forgiveness of receivable from acquired company
    
    
    1,232
    
    
    
    
    
    
    
    Write-off of acquired technology rights
    
    
    473
    
    
    
    
    
    
    
    Cash acquired
    
    
    940
    
    
    
    
    
    
    
    Acquisition, net of cash acquired
    
    
    (2,687
    )
    
    
    
    
    
    
    
  54




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LUMINEX CORPORATION
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (In thousands, except per share data)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    Other
    
    
    Deferred
    
    
    
    
    
    
    TotalNumber of
    
    
    
    
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Stock
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Income/(Loss)
    
    
    Compensation
    
    
    Deficit
    
    
    EquityBalance at December 31, 2004
    
    
    31,169,692
    
    
    $
    31
    
    
    $
    131,833
    
    
    $
    (88
    )
    
    $
    (3,335
    )
    
    $
    (83,895
    )
    
    
    44,546Exercise of stock options
    
    
    204,837
    
    
    
    1
    
    
    
    1,179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,180Amortization of deferred stock and
stock compensation expense
    
    
    
    
    
    
    
    
    
    
    (325
    )
    
    
    
    
    
    
    312
    
    
    
    
    
    
    
    (13
    )Issuances of restricted stock, net
    
    
    307,428
    
    
    
    
    
    
    
    2,967
    
    
    
    
    
    
    
    (2,967
    )
    
    
    
    
    
    
    Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,606
    
    
    
    
    
    
    
    1,606Forfeiture of restricted stock
    
    
    (26,274
    )
    
    
    
    
    
    
    (214
    )
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    (49
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,666
    )
    
    
    (2,666
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    106Balance at December 31, 2005
    
    
    31,655,683
    
    
    
    32
    
    
    
    135,440
    
    
    
    18
    
    
    
    (4,219
    )
    
    
    (86,561
    )
    
    
    44,710Exercise of stock options
    
    
    422,499
    
    
    
    
    
    
    
    2,622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,622Issuances of restricted stock, net of
shares withheld for taxes
    
    
    144,539
    
    
    
    
    
    
    
    (242
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (242
    )Effect of adoption of FAS 123R
    
    
    (544,113
    )
    
    
    
    
    
    
    (4,220
    )
    
    
    
    
    
    
    4,219
    
    
    
    
    
    
    
    (1
    )Stock compensation
    
    
    
    
    
    
    
    
    
    
    5,516
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,516Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,507
    
    
    
    1,507Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    47Balance at December 31, 2006
    
    
    31,678,608
    
    
    
    32
    
    
    
    139,116
    
    
    
    65
    
    
    
    
    
    
    
    (85,054
    )
    
    
    54,159Exercise of stock options
    
    
    331,754
    
    
    
    
    
    
    
    1,868
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,868Issuances of restricted stock, net of
shares withheld for taxes
    
    
    178,815
    
    
    
    
    
    
    
    (425
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (425
    )Shares Exchanged in Tm Acquisition
    
    
    3,202,034
    
    
    
    3
    
    
    
    41,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,754Value of Tm options and warrants traded
    
    
    
    
    
    
    
    
    
    
    2,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,315Stock compensation
    
    
    
    
    
    
    
    
    
    
    6,593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,593Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,711
    )
    
    
    (2,711
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    (73
    )Balance at December 31, 2007
    
    
    35,391,211
    
    
    $
    35
    
    
    $
    191,218
    
    
    $
    (8
    )
    
    $
    
    
    
    $
    (87,765
    )
    
    $
    103,480
  55




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##### Table of Contents



LUMINEX CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Description of Business
  Principles of Consolidation
   Use of Estimates
  Cash and Cash Equivalents
  Investments
  Fair Value of Financial Instruments
   56




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##### Table of Contents



Concentration of Credit Risk
    Inventories
  Property and Equipment
  Intangible Assets
  Impairment of Long-Lived Assets
   57




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##### Table of Contents



Revenue Recognition and Allowance For Doubtful Accounts
    Warranty Programs
  Research and Development Costs
  Advertising Costs
  Incentive Compensation
   58




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##### Table of Contents



Income Taxes
  Accounting
for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Earnings Per Share
  Stock-Based Compensation
  Segment Reporting
  NOTE 2  BUSINESS COMBINATIONS
 Acquisition
   59




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60




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##### Table of Contents



Cash
    
    $
    940Other current assets
    
    
    3,157Other assets
    
    
    28Property and equipment
    
    
    3,518Purchased intangible assets
    
    
    18,800In-process research and development
    
    
    7,400Goodwill
    
    
    39,617Total assets
    
    $
    73,460Current portion of debt assumed
    
    $
    12,447Accrued severance assumed
    
    
    1,945Other current liabilities assumed
    
    
    7,148Long-term debt assumed
    
    
    2,294Other long-term liabilities assumed
    
    
    225Total liabilities
    
    
    24,059Purchase price
    
    $
    49,401
 Pro Forma Information
    Year EndedDecember 31,2007
    
    
    2006Revenues
    
    $
    75,328
    
    
    $
    60,361Net loss
    
    $
    (8,488
    )
    
    $
    (17,792
    )Net loss per share, basic and diluted
    
    $
    (0.25
    )
    
    $
    (0.51
    )
  61




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##### Table of Contents



In-process Research and Development (IPR&D)
   NOTE 3  INVESTMENTS
   December 31,2007
    
    
    2006Accrued
    
    
    Amortized
    
    
    
    
    
    
    Accrued
    
    
    AmortizedCost
    
    
    Interest
    
    
    Cost
    
    
    Cost
    
    
    Interest
    
    
    CostDue in one year or less
    
    $
    6,944
    
    
    $
    38
    
    
    $
    6,982
    
    
    $
    10,956
    
    
    $
    183
    
    
    $
    11,139Due after one year through two years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,346
    
    
    
    84
    
    
    
    7,430$
    6,944
    
    
    $
    38
    
    
    $
    6,982
    
    
    $
    18,302
    
    
    $
    267
    
    
    $
    18,569
 NOTE 4  ACCOUNTS RECEIVABLE
  2007
    
    
    2006Accounts receivable
    
    $
    12,183
    
    
    $
    8,538Less: Allowance for doubtful accounts
    
    
    (356
    )
    
    
    (301
    )$
    11,827
    
    
    $
    8,237
  62




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##### Table of Contents



Balance at December 31, 2004
    
    $
    278Reductions charged to costs and expenses
    
    
    90Write-offs of uncollectible accounts
    
    
    (2
    )Recoveries of uncollectible accounts
    
    
    Balance at December 31, 2005
    
    
    366Additions charged to costs and expenses
    
    
    (52
    )Write-offs of uncollectible accounts
    
    
    (13
    )Recoveries of uncollectible accounts
    
    
    Balance at December 31, 2006
    
    
    301Reductions charged to costs and expenses
    
    
    Write-offs of uncollectible accounts
    
    
    (1
    )Additions due to acquired accounts receivable
    
    
    56Recoveries of uncollectible accounts
    
    
    Balance at December 31, 2007
    
    $
    356
 NOTE 5  INVENTORY, NET
  2007
    
    
    2006Parts and supplies
    
    $
    3,613
    
    
    $
    3,504Work-in-progress
    
    
    1,632
    
    
    
    555Finished goods
    
    
    1,956
    
    
    
    9327,201
    
    
    
    4,991Less: Allowance for excess and obsolete inventory
    
    
    (693
    )
    
    
    (420
    )$
    6,508
    
    
    $
    4,571
   63




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##### Table of Contents



NOTE 6  PROPERTY AND EQUIPMENT
  2007
    
    
    2006Laboratory equipment
    
    $
    7,686
    
    
    $
    4,502Leasehold improvements
    
    
    6,089
    
    
    
    3,284Computer equipment
    
    
    1,944
    
    
    
    1,477Purchased software and intangibles
    
    
    4,463
    
    
    
    2,738Furniture and fixtures
    
    
    1,512
    
    
    
    574Assets on loan/rental
    
    
    1,341
    
    
    
    Capital lease equipment
    
    
    115
    
    
    
    23,150
    
    
    
    12,575Less: Accumulated amortization and depreciation
    
    
    (10,477
    )
    
    
    (7,590
    )$
    12,673
    
    
    $
    4,985
  NOTE 7  INTANGIBLE ASSETS
  Gross carrying
    
    
    Accumulated
    
    
    Weightedamount
    
    
    amortization
    
    

average lifeTechnology/trade secrets
    
    $
    17,400
    
    
    $
    1,570
    
    
    
    9Customer lists/contracts
    
    
    1,100
    
    
    
    61
    
    
    
    15Trade name
    
    
    300
    
    
    
    250
    
    
    
    1Total
    
    $
    18,800
    
    
    $
    1,881
  For the year endingDecember 31,2008
    
    
    2,0132009
    
    
    1,9632010
    
    
    1,9632011
    
    
    1,9632012
    
    
    1,963
  64




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##### Table of Contents



NOTE 8  OTHER ASSETS
  2007
    
    
    2006Purchased technology rights (net of accumulated amortization of
$108,000 and $416,000 in 2007 and 2006, respectively)
    
    $
    509
    
    
    $
    856Other
    
    
    587
    
    
    
    5311,096
    
    
    
    1,387Less: Current portion
    
    
    (114
    )
    
    
    (117
    )$
    982
    
    
    $
    1,270
  NOTE 9  ACCRUED WARRANTY COSTS
   Accrued warranty costs at December 31, 2004
    
    $
    504Warranty expenses
    
    
    (785
    )Accrual for warranty costs
    
    
    632Accrued warranty costs at December 31, 2005
    
    
    351Warranty expenses
    
    
    (635
    )Accrual for warranty costs
    
    
    595Accrued warranty costs at December 31, 2006
    
    
    311Warranty expenses
    
    
    (525
    )Accrual for warranty costs
    
    
    473Accrued warranty costs at December 31, 2007
    
    $
    259
 NOTE 10  INCOME TAXES
  2007
    
    
    2006
    
    
    2005Domestic
    
    
    12,164
    
    
    
    1,428
    
    
    
    (2,786
    )Foreign
    
    
    (14,585
    )
    
    
    99
    
    
    
    120Total
    
    
    (2,421
    )
    
    
    1,527
    
    
    
    (2,666
    )
  65




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    177
    
    
    $
    
    
    
    $
    Foreign
    
    
    84
    
    
    
    40
    
    
    
    22State
    
    
    29
    
    
    
    (20
    )
    
    
    Total current
    
    
    290
    
    
    
    20
    
    
    
    22Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Total deferred
    
    
    
    
    
    
    
    
    
    
    Total provision for income taxes
    
    $
    290
    
    
    $
    20
    
    
    $
    22
    66




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Deferred tax assets:Current deferred tax assetsAccrued liabilities and other
    
    $
    1,061
    
    
    $
    775
    
    
    $
    645Gross current deferred tax assets
    
    
    1,061
    
    
    
    775
    
    
    
    645Valuation allowance
    
    
    (1,059
    )
    
    
    (628
    )
    
    
    (425
    )Net current deferred tax assets
    
    
    2
    
    
    
    147
    
    
    
    220Noncurrent deferred tax assetsNet operating loss and credit carryforwards
    
    
    54,168
    
    
    
    34,155
    
    
    
    35,018Deferred revenue
    
    
    2,535
    
    
    
    2,342
    
    
    
    2,562Depreciation and amoritization
    
    
    7,902
    
    
    
    348
    
    
    
    279Investment basis
    
    
    
    
    
    
    1,637
    
    
    
    1,637Stock compensation and other
    
    
    1,981
    
    
    
    615Gross Noncurrent Deferred Tax Assets
    
    
    66,586
    
    
    
    39,097
    
    
    
    39,496Valuation allowance
    
    
    (60,944
    )
    
    
    (39,069
    )
    
    
    (39,496
    )Net noncurrent deferred tax assets
    
    
    5,642
    
    
    
    28
    
    
    
    Deferred tax liabilities:Current deferred tax liabilitiesPrepaid expenses
    
    
    
    
    
    
    (147
    )
    
    
    (220
    )Total current deferred tax liabilities
    
    
    
    
    
    
    (147
    )
    
    
    (220
    )Net current
deferred tax asset (liability)
    
    $
    2
    
    
    $
    
    
    
    $
    Noncurrent deferred tax liabilitiesAcquired intangibles
    
    $
    (5,521
    )
    
    $
    
    
    
    $
    Total noncurrent deferred tax liabilities
    
    $
    (5,521
    )
    
    $
    
    
    
    $
    Net
noncurrent deferred tax asset (liability)
    
    $
    121
    
    
    $
    28
    
    
    $
    Net deferred
tax assets (liabilities)
    
    $
    123
    
    
    $
    28
    
    
    $
    
     67




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005Statutory tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State taxes, net of federal benefit
    
    
    3.6
    %
    
    
    (2.7
    )%
    
    
    3.0
    %Permanent items
    
    
    (21.2
    )%
    
    
    3.3
    %
    
    
    (1.4
    )%Effect of foreign operations
    
    
    14.7
    %
    
    
    0.5
    %
    
    
    0.0
    %Research and incentive tax credit generated
    
    
    35.8
    %
    
    
    (22.0
    )%
    
    
    0.0
    %Canadian tax rate change
    
    
    (64.8
    )%
    
    
    0.0
    %
    
    
    0.0
    %Deferred assets not benefited
    
    
    (11.4
    )%
    
    
    (11.7
    )%
    
    
    (36.4
    )%(9.3
    )%
    
    
    1.4
    %
    
    
    (0.8
    )%
     NOTE 11  LONG-TERM DEBT
    68




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##### Table of Contents



2008
    
    $
    1342009
    
    
    5312010
    
    
    8702011
    
    
    1,9482012
    
    
    2,242Thereafter
    
    
    $
    5,725Less: Amount representing implied interest
    
    
    (1,345
    )Total principal repayments
    
    $
    4,380Revaluation of debt
    
    
    (1,404
    )$
    2,976
  NOTE 12  NET INCOME (LOSS) PER SHARE
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Numerator:Net (loss) income
    
    $
    (2,711
    )
    
    $
    1,507
    
    
    $
    (2,666
    )Denominator:Denominator for basic net income (loss) per share -
weighted average common stock outstanding
    
    
    34,361
    
    
    
    31,434
    
    
    
    30,990Effect of dilutive securities:Stock options and awards
    
    
    
    
    
    
    1,554
    
    
    
    Denominator for diluted net income (loss) per share -
weighted average shares outstanding - diluted
    
    
    34,361
    
    
    
    32,988
    
    
    
    30,990Basic net income (loss) per share
    
    $
    (0.08
    )
    
    $
    0.05
    
    
    $
    (0.09
    )Diluted net income (loss) per share
    
    $
    (0.08
    )
    
    $
    0.05
    
    
    $
    (0.09
    )
  69




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##### Table of Contents



NOTE 13  STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME/ LOSS
 Preferred Stock
  Stockholders Rights Plan
  Comprehensive Income/Loss
  NOTE 14  EMPLOYEE BENEFIT PLANS AND STOCK-BASED COMPENSATION
 Stock-Based Compensation
    70




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##### Table of Contents



Equity Incentive Plans
       71




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##### Table of Contents



Accounting for Stock Compensation
   2007
    
    
    2006
    
    
    2005Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.6Risk-free rate of return
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    5.0
    %Expected life
    
    4 yrs.
    
    
    6 yrs.
    
    
    7 yrs.Weighted average fair
value at grant date
    
    $
    4.70
    
    
    
    N/A
    [1]
    
    $
    4.68
 [1]
    
    No stock options were issued to employees during this period.   WeightedWeighted
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise
    
    
    Contractual
    
    
    ValueStock Options
    
    (in thousands)
    
    
    Price
    
    
    Life
    
    
    (in thousands)Outstanding at December 31, 2006
    
    
    3,163
    
    
    $
    9.76Granted
    
    
    823
    
    
    
    20.91Exercised
    
    
    (332
    )
    
    
    5.63Cancelled or expired
    
    
    (210
    )
    
    
    23.86Outstanding at December 31, 2007
    
    
    3,444
    
    
    $
    11.96
    
    
    
    4.88
    
    
    
    19,865Vested at December 31, 2007 and expected to vest
    
    
    3,437
    
    
    $
    11.95
    
    
    
    4.87
    
    
    
    19,837Exercisable at December 31, 2007
    
    
    3,186
    
    
    $
    11.83
    
    
    
    4.67
    
    
    
    18,873
   72




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##### Table of Contents



Weighted AverageShares
    
    
    Exercise PriceOptions outstanding, December 31, 2004
    
    
    4,066
    
    
    $
    9.76Granted
    
    
    53
    [1]
    
    $
    7.48Exercised
    
    
    (205
    )
    
    $
    5.76Surrendered
    
    
    (156
    )
    
    $
    12.32Options outstanding, December 31, 2005
    
    
    3,758
    
    
    $
    9.85Granted
    
    
    
    
    
    
    Exercised
    
    
    (423
    )
    
    $
    6.22Surrendered
    
    
    (172
    )
    
    $
    20.39Options outstanding, December 31, 2006
    
    
    3,163
    
    
    $
    9.76
 
 [1]
    
    This number has been adjusted to include options that were granted in
the period, but previously reflected as available for future issuance.  Weighted-AverageShares
    
    
    Grant-DateRestricted Stock Awards
    
    (in thousands)
    
    
    Fair ValueNon-vested at December 31, 2006
    
    
    798
    
    
    $
    13.54Granted
    
    
    776
    
    
    
    13.23Vested
    
    
    (209
    )
    
    
    13.48Cancelled or expired
    
    
    (32
    )
    
    
    13.53Non-vested at December 31, 2007
    
    
    1,333
    
    
    $
    13.37
     73




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005Cost of revenue
    
    $
    380
    
    
    $
    318
    
    
    $
    81Research and development
    
    
    810
    
    
    
    594
    
    
    
    116Selling, general and administrative
    
    
    5,403
    
    
    
    4,599
    
    
    
    1,478Stock-based compensation costs reflected
in net income (loss)
    
    $
    6,593
    
    
    $
    5,511
    
    
    $
    1,675
  Year EndedDecember 31,2005Net loss, as reported
    
    $
    (2,666
    )Add: Stock-based employee compensation expense
included in reported net loss
    
    
    1,575Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
    
    
    (4,834
    )Pro forma net loss
    
    $
    (5,925
    )Earnings per shareBasic and Diluted - as reported
    
    $
    (0.09
    )Basic and
Diluted - pro forma
    
    $
    (0.19
    )
  74




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##### Table of Contents



Reserved Shares of Common Stock
  Options / Warrants
    
    
    Shares Available
    
    
    Total SharesOutstanding
    
    
    for Future Issuance
    
    
    Reserved1996 Plan
    
    
    20,400
    
    
    
    
    
    
    
    20,4002000 Plan
    
    
    1,665,118
    
    
    
    
    
    
    
    1,665,1182001 Plan
    
    
    625,412
    
    
    
    
    
    
    
    625,4122006 Equity Incentive Plan
    
    
    129,173
    
    
    
    858,006
    
    
    
    987,1792006 Mangement Stock Purchase Plan
    
    
    
    
    
    
    500,000
    
    
    
    500,000Tm Plan
    
    
    90,592
    
    
    
    
    
    
    
    90,592Other *
    
    
    912,986
    
    
    
    
    
    
    
    912,9863,443,681
    
    
    
    1,358,006
    
    
    
    4,801,687
 *
    
    Balthrop Option and Tm Warrants Employee Savings Plans
  NOTE 15  COMMITMENTS AND CONTINGENCIES
 Lease Arrangements
   2008
    
    $
    2,5062009
    
    
    1,6522010
    
    
    5852011
    
    
    134Thereafter
    
    
    56Total
    
    $
    4,933
   75




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##### Table of Contents



Non-Cancelable Purchase Commitments
  Employment Contracts
  Gain on Settlement of Liability
  Legal Proceedings
  Unfunded Credit Facility
    76




---



##### Table of Contents



NOTE 16  GUARANTEES
  NOTE 17  SEGMENT AND GEOGRAPHIC INFORMATION
  Technology Segment 
 Assay Segment 
   Technology
    
    
    Assay
    
    
    IntersegmentSegment
    
    
    Segment
    
    
    Eliminations
    
    
    ConsolidatedRevenues from external customers
    
    $
    65,912
    
    
    $
    12,642
    
    
    $
    (3,544
    )
    
    $
    75,010Intersegment revenue
    
    
    3,476
    
    
    
    68
    
    
    
    (3,544
    )
    
    
    (3,544
    )Depreciation and amortization
    
    
    2,241
    
    
    
    3,049
    
    
    
    (227
    )
    
    
    5,063Segment profit (loss)
    
    
    15,651
    
    
    
    (18,236
    )
    
    
    (126
    )
    
    
    (2,711
    )Segment assets
    
    
    139,010
    
    
    
    65,635
    
    
    
    (81,086
    )
    
    
    123,559
  77




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##### Table of Contents



Sales to Customers
    
    
    Long-Term Assets2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Domestic
    
    $
    63,591
    
    
    $
    40,823
    
    
    $
    32,844
    
    
    
    10,863
    
    
    
    6,042
    
    
    
    4,234Foreign:Europe
    
    
    7,835
    
    
    
    5,760
    
    
    
    5,310
    
    
    
    501
    
    
    
    173
    
    
    
    151Asia
    
    
    739
    
    
    
    2,870
    
    
    
    1,123
    
    
    
    
    
    
    
    
    
    
    
    Canada
    
    
    846
    
    
    
    2,157
    
    
    
    2,061
    
    
    
    58,676
    (1)
    
    
    
    
    
    
    Other
    
    
    1,999
    
    
    
    1,379
    
    
    
    975
    
    
    
    
    
    
    
    
    
    
    
    $
    75,010
    
    
    $
    52,989
    
    
    $
    42,313
    
    
    $
    70,040
    
    
    $
    6,215
    
    
    $
    4,385
 (1)
    
    $39,617 of the $58,676 represents goodwill from the acquisition of LMD. NOTE 18  SETTLEMENT OF LITIGATION
  NOTE 19  RECENT ACCOUNTING PRONOUNCEMENTS
    78




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##### Table of Contents




   79




---



##### Table of Contents



SELECTED QUARTERLY RESULTS (UNAUDITED)
  Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2007
    
    
    2007
    
    
    2007
    
    
    2007Revenue
    
    $
    16,607
    
    
    $
    17,548
    
    
    $
    19,353
    
    
    $
    21,501Gross profit
    
    
    10,429
    
    
    
    10,337
    
    
    
    12,017
    
    
    
    13,310Income (loss) from operations
    
    
    (372
    )
    
    
    (12,244
    )
    
    
    (1,858
    )
    
    
    (2,943
    )Net income (loss)
    
    
    136
    
    
    
    (12,056
    )
    
    
    (1,852
    )
    
    
    11,061Basic income (loss) per share
    
    
    0.00
    
    
    
    (0.34
    )
    
    
    (0.05
    )
    
    
    0.31Diluted income (loss) per share
    
    
    0.00
    
    
    
    (0.34
    )
    
    
    (0.05
    )
    
    
    0.30
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2006
    
    
    2006
    
    
    2006
    
    
    2006Revenue
    
    $
    12,997
    
    
    $
    13,268
    
    
    $
    12,514
    
    
    $
    14,210Gross profit
    
    
    8,260
    
    
    
    7,660
    
    
    
    7,782
    
    
    
    8,550Income (loss) from operations
    
    
    113
    
    
    
    (267
    )
    
    
    (435
    )
    
    
    7Net income
    
    
    526
    
    
    
    271
    
    
    
    111
    
    
    
    599Basic income (loss) per share
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.00
    
    
    
    0.02Diluted income (loss) per share
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.00
    
    
    
    0.02
 
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   80




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##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
    Changes in Internal Control Over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
   81




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
  Securities Authorized for Issuance Under Equity Compensation Plans
  Number of Securities RemainingAvailable for Future IssuanceNumber of Securities to
    
    
    Weighted-Average
    
    
    Under Equity Compensation Plansbe Issued Upon Exercise
    
    
    Exercise Price of
    
    
    (Excluding Securities ReflectedPlan Category
    
    of Outstanding Options
    
    
    Outstanding Options
    
    
    in Column (A)) (1)(A)
    
    
    (B)
    
    
    (C)Equity compensation plans
approved by security
holders
    
    
    1,814,691
    
    
    $
    10.75
    
    
    
    1,358,006`Equity compensation plans
not approved by security
holders (2)
    
    
    1,628,990
    
    
    $
    13.30
    
    
    
    Total
    
    
    3,443,681
    
    
    
    
    
    
    
    1,358,006
 (1)
    
    In February 2001, our Board of Directors approved the 2001 Broad-Based Stock Option Plan (the
2001 Plan), a non-stockholder approved plan, for grants of stock options to employees who are not
directors or officers of the Company. Options may be granted to such employees at not less than
100% of the fair market value of the common stock on the date of grant. The options become
exercisable in whole or in such installments as determined by the Board of Directors and generally
expire 10 years after the grant date. Since approval of the Equity Incentive Plan in May 2006, no
securities are available for future issuances under this plan. For additional information
regarding the Companys 2001 Plan see Note 14 to the Consolidated Financial Statements.  82




---



##### Table of Contents



(2)
    
    Includes shares issuable upon the exercise of options granted under the Tm Bioscience
Corporation Share Option Plan assumed by Luminex in connection with the acquisition of Tm
Bioscience. These options have a weighted average exercise price of $21.54. No further grants
will be made pursuant to this plan. Also includes option to purchase 500,000 shares of the
Companys common stock issued to Patrick J. Balthrop, Sr. on May 15, 2004, in connection with his
hiring and outside of any stockholder approved equity incentive plan. The terms of this option,
together with the amendment to the related option agreement, are more fully described in Note 14 to
the Consolidated Financial Statements. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
  
 ITEM 14. PRINCIPLE ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
      (3)
    
    Exhibits:
  83




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF DOCUMENT2.1
    
    
    Merger Agreement, dated December 14, 2006, by and between the Company
and Tm Bioscience Corporation (Previously filed as an Exhibit to the
Companys Current Report on Form 8-K dated December 15, 2006).3.1
    
    
    Restated Certificate of Incorporation of the Company (Previously
filed as an Exhibit to the Companys Registration Statement on Form
S-1 (File No. 333-96317), filed February 7, 2000, as amended).3.2
    
    
    Amended and Restated Bylaws of the Company (Previously filed as an
Exhibit to the Companys Registration Statement on Form S-1 (File No.
333-96317), filed February 7, 2000, as amended).4.1
    
    
    Rights Agreement dated as of June 20, 2001 between Luminex
Corporation and Mellon Investor Services, LLC, as Rights Agent which
includes as Exhibit A the form of Certificate of Designations of
Series A Junior Participating Preferred Stock setting forth the terms
of the Series A Junior Participating Preferred Stock, as Exhibit B
the form of Rights Certificate and as Exhibit C the Summary of Rights
(Previously filed as Exhibit 4 to the Companys Current Report on
Form 8-K dated June 21, 2001).10.1#
    
    
    1996 Stock Option Plan of the Company, as amended (Previously filed
as an Exhibit to the Companys Registration Statement on Form S-1
(File No. 333-96317), filed February 7, 2000, as amended).10.2#
    
    
    Form of Stock Option Agreement for the 1996 Stock Option Plan
(Previously filed as an Exhibit to the Companys Registration
Statement on Form S-1 (File No. 333-96317), filed February 7, 2000,
as
amended).10.3#
    
    
    Form of Incentive Stock Option Agreement for the 1996 Stock Option
Plan (Previously filed as an Exhibit to the Companys Registration
Statement on Form S-1 (File No. 333-96317), filed February 7, 2000,
as amended).10.4#
    
    
    2000 Long-Term Incentive Plan of the Company, as amended (Previously
filed as an Exhibit to the Companys Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2002).10.5#
    
    
    Form of Stock Option Award Agreement for the 2000 Long-Term Incentive
Plan (Previously filed as an Exhibit to the Companys Registration
Statement on Form S-1 (File No. 333-96317), filed February 7, 2000,
as amended).10.6#
    
    
    2001 Broad-Based Stock Option Plan of the Company (Previously filed
as an Exhibit to the Companys Annual Report on Form 10-K for the
fiscal year ended December 30, 2001).10.7#
    
    
    Form of Option Grant Certificate for the 2001 Broad-Based Stock
Option Plan (Previously filed as an Exhibit to the Companys Annual
Report on Form 10-K for the fiscal year ended December 30, 2001).10.8+
    
    
    Development and Supply Agreement dated as of March 19, 1999 by and
between the Company and Bio-Rad Laboratories, Inc. (Previously filed
as an Exhibit to the Companys Registration Statement on Form S-1
(File No. 333-96317), filed February 7, 2000, as amended).10.9+
    
    
    Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Company and Bio-Rad Laboratories, Inc.
(Previously filed as an Exhibit to the Companys Registration
Statement on Form S-1 (File No. 333-96317), filed February 7, 2000,
as amended).10.10
    
    
    Second Amendment to Development and Supply Agreement dated as of June
12, 2000 by and between the Company and Bio-Rad Laboratories, Inc.
(Previously filed as an Exhibit to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2000).
  84




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF DOCUMENT10.11#
    
    
    Form of Amended and Restated Employment Agreement between the Company
and each of Randel S. Marfin and Oliver H. Meek (Previously filed as
an Exhibit to the Companys Quarterly Report on Form 10-Q for the
period ended June 30, 2002).10.12#
    
    
    Form of Indemnification Agreement dated May 22, 2002 between the
Company and each of the directors and officers of the Company
(Previously filed as an Exhibit to the Companys Quarterly Report on
Form 10-Q for the period ended June 30, 2002).10.13
    
    
    Lease Agreement between Aetna Life Insurance Company, as Landlord,
and Luminex Corporation, as Tenant, dated October 19, 2001
(Previously filed as an Exhibit to the Companys Form 10-Q for the
quarterly period ended September 30, 2001).10.14
    
    
    First Amendment to Lease Agreement between Aetna Life Insurance
Company, as Landlord, and Luminex Corporation as Tenant, dated July
25, 2002. (Previously filed as an Exhibit to the Companys Quarterly
Report on Form 10-Q for the period ended June 30, 2002).10.15
    
    
    Lease Amendment between McNeil 4 & 5 Investors, LP, as Landlord, and
Luminex Corporation, as Tenant, dated January 27, 2003 (Previously
filed as an Exhibit to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2002).10.16
    
    
    Sublease Agreement dated as of May 2, 2002 by and between the Company
and American Innovations, Ltd., for facilities situated at 12112
Technology Boulevard, Austin, Texas 78727 (Previously filed as an
Exhibit to the Companys Quarterly Report on Form 10-Q for the period
ended June 30, 2002).10.17#
    
    
    Employment Agreement, effective as of October 1, 2003, by and between
Luminex Corporation and Harriss T. Currie (Previously filed as an
Exhibit to the Companys Annual Report on form 10-K for the fiscal
year ended December 31, 2003).10.18#
    
    
    Employment Agreement effective as of October 1, 2003, by and between
Luminex Corporation and David S. Reiter (Previously filed as an
Exhibit to the Companys Annual Report on form 10-K for the fiscal
year ended December 31, 2003).10.19#
    
    
    Employment Agreement effective as of May 15, 2004, by and between
Luminex Corporation and Patrick J. Balthrop (Previously filed as an
Exhibit to the Companys Current Report on Form 8-K dated May 17,
2004).10.20#
    
    
    Employment Agreement effective as of October 25, 2004, by and between
Luminex Corporation and Gregory J. Gosch (Previously filed as an
Exhibit to the Companys Current Report on Form 8-K dated October 22,
2004).10.21#
    
    
    Employment Agreement effective as of May 23, 2005, by and between
Luminex Corporation and Russell W. Bradley (Previously filed as an
Exhibit to the Companys Current Report on Form 8-K dated May 23,
2005).10.22#
    
    
    Form of Restricted Stock Agreement for the 2000 Long-Term Incentive
Plan and 2001 Broad-Based Stock Option Plan (Previously filed as an
Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2004).10.23#
    
    
    Form of Non-Qualified Stock Option Agreement dated as of May 15,
2004, by and between Luminex Corporation and Patrick J. Balthrop
(Previously filed as an Exhibit to the Companys Current Report on
Form 8-K dated May 17, 2004).10.24#
    
    
    2006 Executive Officer Compensation Summary (Previously filed as an
Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2006).10.25#
    
    
    Form of Amendment to Executive Employment Agreements (Previously
filed as an Exhibit to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2006).10.26#
    
    
    Luminex Corporation 2006 Equity Incentive Plan (Previously filed as
Exhibit A to the Companys Proxy Statement for its Annual Meeting of
Shareholders held on May 25, 2006).
  85




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF DOCUMENT10.27#
    
    
    Form of Non-Qualified Stock Option Agreement for the 2006 Equity
Incentive Plan (Previously filed as an Exhibit to the Companys
Current Report on Form 8-K dated May 25, 2006).10.28#
    
    
    Form of Restricted Share Award Agreement for Officers & Employees for
the 2006 Equity Incentive Plan (Previously filed as an Exhibit to the
Companys Current Report on Form 8-K dated May 25, 2006).10.29#
    
    
    Form of Restricted Share Award Agreement for Directors for the 2006
Equity Incentive Plan (Previously filed as an Exhibit to the
Companys Current Report on Form 8-K dated May 25, 2006).10.30#
    
    
    Luminex Corporation 2006 Management Stock Purchase Plan (Previously
filed as Exhibit B to the Companys Proxy Statement for its Annual
Meeting of Shareholders held on May 25, 2006).10.31
    
    
    Credit Agreement, dated March 1, 2007, by and between the Luminex
Corporation and JPMorgan Chase Bank, N.A. (Previously filed as an
Exhibit to the Companys Current Report on Form 8-K dated March 1,
2007).10.32#
    
    
    Employment Agreement effective as of February 7, 2007, by and between
Luminex Corporation and John C. Carrano (Previously filed as an
Exhibit to the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2006).10.33#
    
    
    Employment Agreement effective as of March 1, 2007, by and between
Luminex Corporation, Tm Bioscience and Jeremy Bridge-Cook (Previously
filed as an Exhibit to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2006).10.34#
    
    
    Form of Restricted Stock Unit Agreement for the 2006 Equity Incentive
Plan (Previously filed as an Exhibit to the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2006).10.35#
    
    
    Amendment to Restricted Stock Agreement, dated as of March 25, 2007,
by and between Luminex Corporation and Patrick J. Balthrop, Sr.
(Previously filed as an Exhibit to the Companys Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2007).10.36#
    
    
    Amendment to Luminex Corporation 2000 Amended and Restated Long-Term
Incentive Plan dated as of May 24, 2007 (Previously filed as an
Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2007).10.37#
    
    
    Amendment to Luminex Corporation 2001 Broad-Based Stock Option Plan
dated as of May 24, 2007 (Previously filed as an Exhibit to the
Companys Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2007).10.38#
    
    
    Amendment to Luminex Corporation 2006 Management Stock Purchase Plan
dated as of May 24, 2007 (Previously filed as an Exhibit to the
Companys Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2007).10.39#
    
    
    Amendment to Luminex Corporation 2006 Equity Incentive Plan dated as
of May 24, 2007 (Previously filed as an Exhibit to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2007).10.40#
    
    
    Form of Amendments to Equity Award Agreements (Previously filed as an
Exhibit to the Companys Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2007).10.41#
    
    
    Employment Agreement, dated as of July 16, 2007, by and between
Luminex Corporation and Douglas C. Bryant (Previously filed as an
Exhibit to the Companys Current Report on Form 8-K filed July 18,
2007).10.42#
    
    
    Employment Agreement, effective as of September 30, 2007, by and
between Luminex Corporation and James W. Jacobson (Previously filed
as an Exhibit to the Companys Current Report on Form 8-K filed
September 19, 2007).21.1
    
    
    Subsidiaries of the Company.
  86




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF DOCUMENT23.1
    
    
    Consent of Independent Registered Public Accounting Firm.24.1
    
    
    Power of Attorney (incorporated in the signature page of this report).31.1
    
    
    Certification by CEO pursuant to Securities and Exchange Act Rules
13a-14(a) and 15d  14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification by CFO pursuant to Securities and Exchange Act Rules
13a-14(a) and 15d  14(a), as adopted 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 by CFO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 #
    
    Management contract or compensatory plan or arrangement.+
    
    Confidential treatment requested for certain portions of this Exhibit pursuant to Rule
406 promulgated under the Securities Act and Rule 24b-2 promulgated under the Securities
Exchange Act, which portions are omitted and filed separately with the Securities and Exchange
Commission.  87




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##### Table of Contents



SIGNATURES
  LUMINEX CORPORATIONBy:
    /s/ Patrick J. BalthropPatrick J. BalthropPresident and Chief Executive Officer POWER OF ATTORNEY
    S-1




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##### Table of Contents



SIGNATURES
    
    TITLE
    
    DATE/s/ Patrick J. Balthrop

Patrick J. Balthrop
    
    President and Chief Executive Officer, Director
(Principal Executive Officer)
    
    March 14, 2008/s/ Harriss T. Currie

Harriss T. Currie
    
    Chief Financial Officer, Vice President,
Finance and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
    
    March 14, 2008/s/ Robert J. Cresci

Robert J. Cresci
    
    Director
    
    March 14, 2008/s/ Thomas W. Erickson

Thomas W. Erickson
    
    Director
    
    March 14, 2008/s/ Fred C. Goad, Jr.

Fred C. Goad, Jr.
    
    Director
    
    March 14, 2008/s/ Jay B. Johnston

Jay B. Johnston
    
    Director
    
    March 14, 2008/s/ Jim D. Kever

Jim D. Kever
    
    Director
    
    March 14, 2008/s/ G. Walter Loewenbaum II

G. Walter Loewenbaum II
    
    Chairman of the Board of Directors Director
    
    March 14, 2008/s/ Kevin M. McNamara

Kevin M. McNamara
    
    Director
    
    March 14, 2008/s/ J. Stark Thompson

J. Stark Thompson
    
    Director
    
    March 14, 2008/s/ Gerard Vaillant

Gerard Vaillant
    
    Director
    
    March 14, 2008
  S-2




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description21.1
    
    
    Subsidiaries of the Company.23.1
    
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    
    Certification by CEO pursuant to Securities and Exchange Act Rules
13a-14(a) and 15d  14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification by CFO pursuant to Securities and Exchange Act Rules
13a-14(a) and 15d  14(a), as adopted 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 by CFO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.