10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2005

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

(Exact name of Registrant as specified in its charter)

DELAWARE	74-2747608
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
12212 TECHNOLOGY BLVD., AUSTIN, TEXAS	78727
(Address of principal executive offices)	(Zip Code)

(512) 219-8020
(Registrant’s telephone number, including area code)

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). Yes þ No o

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

     There were 31,634,880 shares of the Company’s Common Stock, par value $0.001 per share, outstanding on November 3, 2005.

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004		1
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004		2
Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2005 and 2004		3
Notes to Condensed Consolidated Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 3. Quantitative and Qualitative Disclosures about Market Risk		24
Item 4. Controls and Procedures		25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		26
Item 6. Exhibits		26
SIGNATURES and EXHIBITS		S-1
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

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PART I

ITEM 1. FINANCIAL STATEMENTS

LUMINEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

	September 30,			December 31,
	2005			2004
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,511		$	19,238
Short-term investments		10,942			12,891
Accounts receivable, net		5,842			5,864
Inventory, net		5,342			7,650
Other		823			841
Total current assets		44,460			46,484
Property and equipment, net		2,471			1,383
Long-term investments		6,181			3,991
Other		1,192			1,317
Total assets	$	54,304		$	53,175
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,228		$	1,642
Accrued liabilities		2,199			2,702
Deferred revenue		2,071			1,317
Total current liabilities		5,498			5,661
Deferred revenue		3,469			2,968
Total liabilities		8,967			8,629
Stockholders’ equity:
Common stock		32			31
Additional paid-in capital		135,099			131,833
Deferred stock compensation		(4,581	)		(3,335	)
Accumulated other comprehensive gain (loss)		1			(88	)
Accumulated deficit		(85,214	)		(83,895	)
Total stockholders’ equity		45,337			44,546
Total liabilities and stockholders’ equity	$	54,304		$	53,175

See the accompanying notes which are an integral part of these
Condensed Consolidated Financial Statements.

LUMINEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
	(unaudited)						(unaudited)
Revenue	$	10,764		$	8,359		$	30,736		$	26,825
Cost of revenue		5,294			4,818			14,066			15,895
Gross profit		5,470			3,541			16,670			10,930
Operating expenses:
Research and development		1,469			949			3,974			2,894
Selling, general and administrative		4,992			3,905			14,481			10,813
Total operating expenses		6,461			4,854			18,455			13,707
Loss from operations		(991	)		(1,313	)		(1,785	)		(2,777	)
Other income, net		337			162			799			365
Settlement of litigation		—			—			(322	)		—
Income taxes		(3	)		(5	)		(10	)		(13	)
Net loss	$	(657	)	$	(1,156	)	$	(1,318	)	$	(2,425	)
Net loss per share, basic and diluted	$	(0.02	)	$	(0.04	)	$	(0.04	)	$	(0.08	)
Shares used in computing net loss per share, basic and diluted		31,039			30,813			30,954			30,649

See the accompanying notes which are an integral part of these
Condensed Consolidated Financial Statements.

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LUMINEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
	(unaudited)						(unaudited)
Operating activities:
Net loss	$	(657	)	$	(1,156	)	$	(1,318	)	$	(2,425	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		274			218			756			664
Stock based compensation and other		462			257			1,050			482
Changes in operating assets and liabilities:
Accounts receivable, net		48			74			22			(205	)
Inventory, net		2,034			(2,086	)		2,308			(4,551	)
Prepaids and other		3			270			15			193
Accounts payable		(315	)		1,073			(414	)		1,272
Accrued liabilities		198			73			(503	)		(56	)
Deferred revenue		186			(380	)		1,255			(380	)
Net cash provided by (used in) operating activities		2,233			(1,657	)		3,171			(5,006	)
Investing activities:
Net purchases of held-to-maturity investments		—			—			(241	)		—
Purchase of property and equipment		(759	)		(216	)		(1,770	)		(428	)
Other investing activities		—			—			—			(33	)
Net cash used in investing activities		(759	)		(216	)		(2,011	)		(461	)
Financing activities:
Proceeds from issuance of common stock		499			233			1,023			2,312
Net cash provided by financing activities		499			233			1,023			2,312
Effect of foreign currency exchange rate on cash		—			19			90			(5	)
Change in cash and cash equivalents		1,973			(1,621	)		2,273			(3,160	)
Cash and cash equivalents, beginning of period		19,538			37,941			19,238			39,480
Cash and cash equivalents, end of period	$	21,511		$	36,320		$	21,511		$	36,320

See the accompanying notes which are an integral part of these
Condensed Consolidated Financial Statements.

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LUMINEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have been prepared by Luminex Corporation (the “Company”) in accordance with United States generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

NOTE 2 – INVESTMENTS

     Held-to-maturity securities as of September 30, 2005 consisted of $17,123,000 of federal agency debt securities. Amortized cost approximates fair value of these investments.

     The amortized costs of held-to-maturity debt securities at September 30, 2005, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

			Accrued		Amortized
	Cost		Interest		Cost
Due in one year or less	$	10,942	$	50	$	10,992
Due after one year through two years		6,181		59	$	6,240
	$	17,123	$	109	$	17,232

NOTE 3 — INVENTORY, NET

     Inventory consisted of the following (in thousands):

	September 30,			December 31,
	2005			2004
Parts and supplies	$	4,824		$	5,504
Work-in-progress		873			1,985
Finished goods		293			698
		5,990			8,187
Less: Allowance for excess and obsolete inventory		(648	)		(537	)
	$	5,342		$	7,650

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NOTE 4 — ACCRUED WARRANTY COSTS

     Sales of the Company’s systems are subject to a warranty. System warranties typically extend for a period of twelve months from the date of installation or no more than 15 months from the date of shipment. The Company estimates the amount of warranty claims on sold product that may be incurred based on current and historical data. The actual warranty expense could differ from the estimates made by the Company based on product performance. Warranty expenses are evaluated and adjusted periodically. Warranty expenses and accruals for the nine months ended September 30, 2005 were as follows (in thousands):

Accrued warranty costs at December 31, 2004	$	504
Warranty expenses		(598	)
Accrual for warranty costs		370
Accrued warranty costs at September 30, 2005	$	276

NOTE 5 — NET LOSS PER SHARE

     In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share,” basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period.

     The Company has excluded all potentially dilutive securities such as unvested restricted stock and outstanding stock options to purchase common stock from the calculation of diluted loss per common share because such securities are anti-dilutive due to the Company’s net loss for all periods presented. The total shares excluded from the calculations of diluted net loss per share, prior to application of the treasury stock method for options, were 1,462,231 and 1,551,374 for the three and nine months ended September 30, 2005, respectively, and 2,406,274 and 1,640,614 for the three and nine months ended September 30, 2004, respectively.

NOTE 6 — STOCK-BASED COMPENSATION

     The Company granted shares of restricted stock and options to purchase shares of common stock, and recorded stock compensation expense related to these issuances as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
Shares of restricted stock granted		8,750		—		305,928		312,116
Stock compensation expense related to issuance of restricted stock	$	476,000	$	211,000	$	1,094,000	$	361,000
Shares subject to options granted		—		6,000		23,000		870,298
Stock compensation expense related to issuance of options	$	—	$	58,000	$	45,000	$	167,000
Range of option exercise prices		N/A	$	7.13-$7.57	$	7.35-$7.90	$	7.13-$12.47

     The Company is expensing the cost of restricted stock on a straight-line basis over the vesting period of the stock.

     SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options. As allowed by SFAS No. 123, the Company has elected to continue to account for its employee stock-based compensation using the

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intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”).

     SFAS No. 123 allows companies to estimate the pro forma fair value of their stock-based compensation using a generally recognized option pricing model and provide those results in the form of footnote disclosure. The fair value of each option grant was estimated using the Black-Scholes Option-Pricing model based on the date of grant and the following weighted average assumptions at September 30:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected volatility		0.6			0.7			0.6			0.7
Risk-free rate of return		5.0	%		5.0	%		5.0	%		5.0	%
Expected life	7 yrs.			7 yrs.			7 yrs.			7 yrs.
Weighted average fair
value at grant date		N/A	[1]		N/A	[1]	$	4.68		$	7.06

^[1] No stock options were issued to employees during these periods.

     For purposes of pro forma disclosures, the estimated fair value of the options is expensed over the options’ vesting periods. Because, for pro forma purposes, the estimated fair value of the Company’s employee stock options is treated as if amortized to expense over the options’ vesting period, the effects of applying SFAS No. 123 for pro forma disclosure are not necessarily indicative of future amounts (in thousands, except per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss, as reported	$	(657	)	$	(1,156	)	$	(1,318	)	$	(2,425	)
Add: Stock-based employee compensation expense included in reported net loss		455			234			1,073			396
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(1,192	)		(1,325	)		(3,655	)		(4,062	)
Pro forma net loss	$	(1,394	)	$	(2,247	)	$	(3,900	)	$	(6,091	)
Earnings per share
Basic and Diluted — as reported	$	(0.02	)	$	(0.04	)	$	(0.04	)	$	(0.08	)
Basic and Diluted — pro forma	$	(0.04	)	$	(0.07	)	$	(0.13	)	$	(0.20	)

     The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, this option valuation model requires the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of the Company’s employee stock options.

NOTE 7 — COMPREHENSIVE LOSS

     In accordance with the disclosure requirements of SFAS No. 130, “Reporting Comprehensive Income,” the Company’s comprehensive loss is comprised of net loss and foreign currency translation. Comprehensive loss was approximately $657,000 and $1.2 million for the three and nine months ended September 30, 2005, respectively, and $1.1 million and $2.4 million for the three and nine months ended September 30, 2004, respectively.

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NOTE 8 – SETTLEMENT OF LITIGATION

     On November 18, 2004, Dynal Biotech, LLC (“Dynal”), filed a complaint in Federal Court in the Western District of Wisconsin against Luminex Corporation seeking a declaratory judgment to enjoin Luminex from interfering with an agreement between Dynal and one of Luminex’s partners, MiraiBio Corporation, which granted development and distribution rights to Dynal of certain Luminex technology. On January 18, 2005, we filed an answer to the complaint denying Dynal’s allegations and seeking dismissal and filed counterclaims against Dynal on the basis that Dynal improperly used Luminex technology and as a result, has damaged Luminex and its partner’s position in the marketplace. On June 30, 2005, the parties entered into a confidential settlement agreement, which was subsequently entered with the court on July 7, 2005, with a stipulation signed by the parties dismissing all claims with prejudice. Luminex recorded $322,000 of expense in the second quarter of 2005 related to Luminex’s portion of the settlement among Dynal Biotech, LLC, MiraiBio Corporation and Luminex Corporation.

NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the FASB revised SFAS No. 123, “Accounting for Stock-Based Compensation,” which established the fair-value-based method of accounting as preferable for share-based compensation awarded to employees and encouraged, but did not require entities to adopt it until July 1, 2005. On April 14, 2005, the Securities and Exchange Commission announced that it would provide for a phased-in implementation process that allowed non-small business registrants with a fiscal year ended December 31, 2005 an extension until January 31, 2006 to adopt SFAS No. 123(R). SFAS No. 123(R) eliminates the alternative to use APB Opinion No. 25, “Accounting for Stock Issued to Employees,” which allowed entities to account for share-based compensation arrangements with employees according to the intrinsic value method. SFAS No. 123(R) requires the measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render service. The Company plans to adopt SFAS No. 123(R) on January 1, 2006, requiring compensation cost to be recorded as expense for the portion of outstanding unvested awards, based on the grant-date fair value of those awards. We are currently evaluating the effect the adoption of SFAS No. 123(R) will have on our financial position or results of operation.

     In November 2004, the FASB issued SFAS No. 151, “Inventory Costs – An Amendment of ARB No. 43, Chapter 4,” which clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) be recognized as current period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We are currently evaluating the impact that the adoption of SFAS 151 will have on our results of operations or financial position.

     In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20, “Accounting Changes” (APB 20), and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements” (SFAS 154). APB 20 previously required that most voluntary changes in accounting principles be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in an accounting principle, such as a change in nondiscretionary profit-sharing payments resulting from an accounting change, should be recognized in the period of the accounting change. SFAS 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We will adopt the provisions of SFAS 154 effective January 1, 2006. The impact of SFAS 154 will depend on the accounting change, if any, in a future period.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following information should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included in Item 1 of this Report, the “Risk Factors” included in this Report and our Annual Report on Form 10-K for the year ended December 31, 2004.

SAFE HARBOR CAUTIONARY STATEMENT

     This Quarterly Report on Form 10-Q contains statements that are forward-looking statements as defined within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Forward-looking statements give our current expectations of forecasts of future events. All statements other than statements of current or historical fact contained in this report, including statements regarding our future financial position, business strategy, budgets, projected costs, and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “projects,” “will,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements are based on our current plans and actual future activities, and our results of operations may be materially different from those set forth in the forward-looking statements as a result of known or unknown risks and uncertainties, including, among other things:

• 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,

• fluctuations in quarterly results due to a lengthy and unpredictable sales cycle,

• 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 of the Company’s strategic operating plans, and

• the potential adverse outcome of any pending or future litigation against or by our Company.

     Any or all of our forward-looking statements in this report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and assumptions, including the risks, uncertainties and assumptions outlined above and described in the section titled “Risk Factors” below. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this report, including in “Risk Factors” below.

     Our forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report.

OVERVIEW

     During the three and nine months ended September 30, 2005, the primary factors that affected our financial performance as compared with the comparable periods ended September 30, 2004 were (i) an increased emphasis

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on product development and enhancement by our R&D group; (ii) increased selling, general and administrative expenses as a result of: (a) building our infrastructure to accommodate the expanded marketing and business development functions necessary to execute against our strategic plan; (b) professional fees and other expenses related to our intellectual property estate; and (c) a move towards the issuance of restricted stock in lieu of stock options as a form of long-term incentive compensation; and (iii) increased penetration of our target markets by our partners.

     Research and development expenses increased to $1.5 million for the three months ended September 30, 2005 from $949,000 for the comparable period in 2004 and increased to $4.0 million for the nine months ended September 30, 2005 from $2.9 million for the nine months ended September 30, 2004. The increase in the three and nine months ended September 30, 2005 is due to an increased focus on development of our system, consumable and software products. Our intent is to continue to expand our research and development efforts in the near-term. These efforts include the creation of our Luminex Biosciences Group to assist in the expansion of applications for use on our platforms and expanded focus on system, consumable and software product development.

     During the nine months ended September 30, 2005, expenses related to sales and marketing increased as a result of building our infrastructure to accommodate the expanded marketing and business development functions necessary to execute against our strategic plan. These expansions were initiated by the hiring of Greg Gosch, our Vice President of Marketing and Sales, in October 2004 and Russell Bradley, our Vice President of Business Development and Strategic Planning, in May 2005 and included the related increases of infrastructure in their organizations.

     During the nine months ended September 30, 2005 we incurred increased professional fees related to expanding, supporting and defending our intellectual property estate and strategic partnership relationships. For the nine months ended September 30, 2005, the Company incurred approximately $680,000 of additional professional fees over the comparable period during 2004, primarily attributable to the litigation settlements and other intellectual property matters. Additionally, as indicated in the Company’s financial statements for the nine months ended September 30, 2005, the Company settled a lawsuit with Dynal Biotech, LLC on June 30, 2005. The Company recorded $322,000 of expense related to its portion of the settlement among Dynal Biotech, LLC, MiraiBio Corporation and the Company.

     During the year ended 2004 we moved towards the issuance of restricted stock in lieu of stock options as a form of long-term incentive compensation for our directors and employees. The move was made for several reasons including extension of our existing equity plans and the impending implementation of SFAS No. 123(R), currently required to be implemented for public companies beginning January 1, 2006. During the nine months ended September 30, 2005 and 2004 the company recorded $1.1 million and $396,000 of stock compensation expense, respectively, related to restricted stock issuances to directors and employees of the company. As a result of the transition, stock compensation expense related to restricted stock issuances increased by approximately $677,000 for the nine months ended September 30, 2005 compared to the comparable prior year period. Had the company elected not to make the transition to restricted stock, no compensation expense would have been recorded for employee and director options issued at the prevailing market price on the date of issuance in accordance with SFAS No. 123.

     Our royalty revenue increased to $1.4 million and $3.8 million for the three and nine months ended September 30, 2005, respectively as compared to $870,000 and $2.2 million in the comparable periods of 2004. This represents approximately $23 million and $62 million in royalty bearing sales by our partners in the three and nine months ended September 30, 2005, respectively. As additional partners commercialize and expand their menu offerings, we would expect royalty revenues to continue to grow. We believe that the revenue increase over these periods is an indication of the acceptance and utilization of our technology over a broader base. In addition, another key indicator of technology acceptance is long-term consumable purchases. For the twelfth consecutive quarter, our twelve-month moving average of consumable sales has increased. At September 30, 2005, our twelve-month moving average of quarterly consumable sales was $3.3 million as compared with $2.9 million at June 30, 2005.

     The gross margin percentage increased to 51% for the three months ended September 30, 2005 from 42% for the three months ended September 30, 2004 and increased to 54% for the nine months ended September 30, 2005 from 41% for the nine months ended September 30, 2004. The significant increase in gross margin for the three and nine months ended September 30, 2005 was primarily attributable to a shift in revenue mix towards consumables and

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royalties, our highest margin items, and a corresponding decrease in the percentage of system sales, a lower margin item, as a percentage of total revenue. The increase in gross margin was also attributable to a lesser extent, to an increase in the average system sales price in both the three and nine months ended September 30, 2005 relative to the comparable periods in 2004. Consumables and royalties comprised 45% of revenue for the current quarter; 36% for the quarter ended September 30, 2004; 47% for the nine months ended September 30, 2005; and 33% for the nine months ended September 30, 2004.

     System sales for the third quarter of 2005 decreased slightly to 172 (170 LX Systems and 2 HTS) from 177 LX Systems in the corresponding prior year period. Although our total system sales are down relative to the prior year period, they fall within our expected range of 150 to 220 systems per quarter as previously disclosed and we currently expect our quarterly system sales to remain within this range. The breadth of the range is primarily a function of the timing of our partners’ purchases and our inability, in the aggregate, to provide a more precise estimate. During the three months ended September 30, 2005, the latest advancement of our line of microsphere-based multiplexed detection instrument, the Luminex 200 (LX200), became available. The LX200 is designed around the same xMAP technology as the Luminex 100 (LX100), enabling customers who convert to this system to continue to use applications validated on earlier Luminex Systems.

     Our ability to achieve profitability continues to depend upon our ability to establish and maintain successful strategic partnerships with companies that will develop and market products incorporating our technology and market and distribute our systems and consumables. Our strategic partners may develop application-specific bioassay kits for use on our systems that they will sell to their customers, may perform testing services for third parties using our technology or may buy our consumable products and then resell those products to their customers, all generating royalties. At September 30, 2005, we had 50 partners and 25 commercialized partners. Commercialized partners are those partners who have either released commercialized products based on the Luminex platform or are redistributing our products and are reporting royalties. As of September 30, 2005, our partners have obtained 25 510(k) clearances for 152 assays running on Luminex xMAP technology.

     As we continue to strive towards making xMAP technology a standard for performing bioassays within our key segments, we believe that we need to continue to concentrate on the following objectives: (i) enhance our focus on the segments of the life science and diagnostics markets where we believe we have a competitive advantage and substantial growth opportunities, (ii) forge key partnerships to broaden the use of and accelerate market acceptance of our technology, (iii) further enable our partners to design and develop tests using our technology, and (iv) expand the functionality of our xMAP technology based product line, including hardware, software and consumables. A critical component of these objectives will be to continually enhance our position via a customer-focused development process and a customer-focused service strategy.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are reviewed periodically. Actual results may differ from these estimates under different assumptions or conditions.

     Revenue on sales of our products is recognized when persuasive evidence of an agreement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. Generally, these criteria are met at the time our product is shipped. If the criteria for revenue recognition are not met at the time of shipment, the revenue is deferred until all criteria are met. Royalty revenue is generated when a partner sells products incorporating our technology, provides testing services to third parties using our technology or resells our consumables. Royalty revenue is recognized as it is reported to us by our partners; therefore, the underlying end-user sales may be related to prior periods. We also sell extended service contracts for maintenance and support of our products. Revenue for service contracts is recognized ratably over the term of the agreement.

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     Total deferred revenue as of September 30, 2005 was approximately $5.5 million and primarily consisted of (i) unamortized license fees for non-exclusive licenses and patent rights to certain Luminex technologies in the amount of $3.2 million, (ii) unamortized revenue related to extended service contracts in the amount of $1.5 million, and (iii) upfront payments from strategic partners to be used for the purchase of products or to be applied towards future royalty payments in the amount of $560,000. Upfront payments from our strategic partners are nonrefundable and will be recognized as revenue as our strategic partners purchase products or apply such amounts against royalty payments. Nonrefundable license fees are amortized into revenue over the estimated life of the license agreements.

     Inventories are valued at the lower of cost or market value and have been reduced by an allowance for excess and obsolete inventories. At September 30, 2005, the two major components of the allowance for excess and obsolete inventory were (i) a specific reserve for inventory items that we no longer use in the manufacture of our products or that no longer meet our specifications and (ii) a reserve against slow moving items for potential obsolescence. The total estimated allowance is reviewed on a regular basis and adjusted based on management’s review of inventories on hand compared to estimated future usage and sales.

     We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in product quality programs and processes, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required.

     We continuously monitor collections and payments from our customers and maintain allowances for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses historically have been within our expectations, there can be no assurance that we will continue to experience the same level of credit losses that we have in the past. A significant change in the liquidity or financial position of any one of our significant customers, or a deterioration in the economic environment, in general, could have a material adverse impact on the collectibility of our accounts receivable and our future operating results, including a reduction in future revenues and additional allowances for doubtful accounts.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2004

	Three Months Ended
	September 30,
	2005			2004
Revenue	$	10,764		$	8,359
Gross profit	$	5,470		$	3,541
Gross margin percentage		51	%		42	%
Operating expenses	$	6,461		$	4,854
Net loss	$	(657	)	$	(1,156	)

     Revenue. Total revenue increased to $10.8 million for the three months ended September 30, 2005 from $8.4 million for the comparable period in 2004. As previously disclosed in our Annual Report on Form 10-K, we continue to experience revenue concentration in a limited number of strategic partners. Two customers accounted for 35.4% of total revenue in the third quarter of 2005 (23.5% and 11.9%, respectively). No other customer accounted for more than 10% of total revenue in this quarter. For comparative purposes, these same two customers accounted for 30.2% of total revenue (18.3% and 11.9%, respectively) in the third quarter of 2004.

     A breakdown of revenue for the three months ended September 30, 2005 and 2004 is as follows (in thousands):

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	Three Months Ended
	September 30,
	2005		2004
System sales	$	4,625	$	4,267
Consumable sales		3,441		2,101
Royalty revenue		1,361		870
Service contracts		614		423
Other revenue		723		698
	$	10,764	$	8,359

     System and peripheral component sales increased to $4.6 million for the three months ended September 30, 2005 from $4.3 million for the third quarter of 2004. System sales for the third quarter of 2005 decreased to 172 (170 LX Systems and 2 HTS) from 177 LX Systems for the corresponding prior year period bringing total LX System sales to 3,194 as of September 30, 2005. Although our total system sales are down relative to the prior period, they fall within our expected range of 150 to 220 systems per quarter as previously disclosed. One of our partners accounted for 84, or 49%, of total system sales for the current quarter. This partner accounted for 74 or 42%, of total system sales in the comparable period of 2004. No other customer accounted for more than 10% of total system sales. System concentration continues to affect the variability of system sales revenue. As more of our partners commercialize, we expect to see some diffusion of this concentration and a reduction in the overall variability of system sales. See “Risk Factors” for a further discussion of our customer concentration risk.

     Consumable sales, comprised of microspheres and sheath fluid, increased to $3.4 million during the third quarter of 2005 from $2.1 million for the third quarter of 2004. The increase is primarily attributable to eight bulk purchases of consumables totaling approximately $2.4 million as compared with four bulk purchases totaling approximately $1.1 million in the corresponding prior year period. Bulk purchases are purchases of consumables by a single customer that in the aggregate are more than $100,000 in one quarter. Bulk purchases typically result when a customer seeks to produce or develop large quantities of product using the same lot of raw materials. These raw material purchases may last the customers for an extended period of time and may not repeat themselves which could cause fluctuations in our revenue and the related gross margin. The twelve-month moving average of consumable sales increased to approximately $3.3 million, up sequentially over the second quarter of 2005 by approximately $335,000 and up over the prior year period by approximately $1.2 million. This represents the twelfth consecutive quarterly increase in this metric which we believe is a result of the increased use and acceptance of our technology and the increased installed base of our systems. As the number of applications available on our platform expands, we expect to see the overall level of consumable sales continue to rise.

     Royalty revenue increased to $1.4 million for the three months ended September 30, 2005 from $870,000 for the three months ended September 30, 2004. This increase is primarily attributable to the increased use and acceptance of our technology. We had 25 commercialized partners submitting royalties for the three months ended September 30, 2005 and 21 commercialized partners in the three months ended September 30, 2004. One of our partners reported royalties totaling approximately $460,000, or 34% of the total royalties for the current quarter. No other customer accounted for more than 10% of total royalty revenue for the current quarter. Total royalty bearing sales by our partners were over $20 million for the quarter ended September 30, 2005 and over $90 million on an annualized basis, compared to over $10 million and over $50 million in the same periods of 2004, respectively.

     Service contracts, comprised of extended warranty contracts earned ratably over the term of the agreement, increased to $614,000 for the third quarter of 2005 from $423,000 for the third quarter of 2004. This increase is attributable to increased sales of extended service agreements, which are primarily a result of the increase in the commercial base of Luminex systems as compared to the prior year period. At September 30, 2005, we had 523 Luminex systems covered under extended service agreements and $1.5 million in deferred revenue related to those contracts. At September 30, 2004, we had 329 Luminex systems covered under extended service agreements and $997,000 in deferred revenue related to those contracts.

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     Other revenues, comprised of training revenue, shipping revenue, miscellaneous parts sales, amortized license fees and special project revenues, increased to $723,000 for the three months ended September 30, 2005 from $698,000 for the three months ended September 30, 2004. This increase is primarily the result of an increase in miscellaneous part sales and license fees. This increase was partially offset by a contractual adjustment of $182,000 related to unfulfilled purchase commitments by one of our partners that occurred in the three months ended September 30, 2004 that did not occur in the current quarter. For the quarter ended September 30, 2005, we had $419,000 of parts sales, $141,000 of shipping revenue, $112,000 of license revenue and $51,000 of other revenue.

     Gross profit. The gross margin rate (gross profit as a percentage of total revenue) increased to 51% for the three months ended September 30, 2005 from 42% for the three months ended September 30, 2004. Gross profit increased to $5.5 million for the three months ended September 30, 2005, as compared to $3.5 million for the three months ended September 30, 2004. The increase in gross margin was primarily attributable to the increase in the percentage of consumables and royalties, our highest margin items, as a percentage of total revenue and to a lesser extent an increase in the average system sales price. Consumables and royalties comprised 45% of revenue for the current quarter and 36% for the quarter ended September 30, 2004. We anticipate continued fluctuation in gross margin and related gross profit primarily as a result of partner bulk purchases.

     Research and development expense. Research and development expenses increased to $1.5 million for the three months ended September 30, 2005 from $949,000 for the comparable period in 2004. The increase was primarily related to additional personnel costs associated with the increase in employees to 40 at September 30, 2005 from 35 at September 30, 2004 and increased costs related to direct materials and consumable supplies utilized in the research and development process.

     Selling, general and administrative expense. Selling, general and administrative expenses increased to $5.0 million for the three months ended September 30, 2005 from $3.9 million for the comparable period in 2004. This significant increase was primarily attributable to building our infrastructure to accommodate the expanded marketing and business development functions necessary to execute against our strategic plan; increased professional fees related to the development and protection of our intellectual property estate; and increased stock compensation charges related to equity issuances to employees as a result of the transition to the issuances of restricted stock in lieu of stock options.

     Other income, net. Other income increased to $337,000 for the three months ended September 30, 2005 from $162,000 for the comparable period in 2004. The average rate earned on current invested balances increased to 3.3% at September 30, 2005 from 1.0% at September 30, 2004. This increase in the average rate earned is the result of an overall increase in market rates compared to the prior year period and a change in the Company’s investment policy allowing longer-term investments that are believed to be low risk and highly liquid.

NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2004

	Nine Months Ended
	September 30,
	2005			2004
Revenue	$	30,736		$	26,825
Gross profit	$	16,670		$	10,930
Gross margin percentage		54	%		41	%
Operating expenses	$	18,455		$	13,707
Net loss	$	(1,318	)	$	(2,425	)

     Revenue. Total revenue increased to $30.7 million for the nine months ended September 30, 2005 from $26.8 million for the comparable period in 2004. As previously disclosed in our Annual Report on Form 10-K, we continue to experience revenue concentration in a limited number of strategic partners. Two customers accounted for 41.2% of total revenue in the first nine months of 2005 (22.3% and 18.9%, respectively). No other customer accounted for more than 10% of total revenue in this period. For comparative purposes, for the nine months ended

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September 30, 2004, these same two customers accounted for 33.0% of total revenue (21.9% and 11.1%, respectively).

     A breakdown of revenue for the nine months ended September 30, 2005 and 2004 is as follows (in thousands):

	Nine Months Ended
	September 30,
	2005		2004
System sales	$	12,665	$	14,471
Consumable sales		10,811		6,746
Royalty revenue		3,761		2,180
Service contracts		1,724		1,114
Other revenue		1,775		2,314
	$	30,736	$	26,825

     System and peripheral component sales decreased to $12.7 million for the nine months ended September 30, 2005 from $14.5 million for the first half of 2004. System sales for the nine months ended September 30, 2005 decreased to 488 (485 LX Systems and 3 HTS) from 601 (597 LX Systems and 4 HTS) for the corresponding prior year period. During the nine months ended September 30, 2005, one of our partners accounted for 254, or 52%, of total system sales for the period. This partner accounted for 257, or 43%, of total system sales in the comparable period of 2004. No other customer accounted for more than 10% of total system sales. System concentration continues to affect the variability of system sales revenue. See “Risk Factors” for a further discussion of our customer concentration risk. As more of our partners commercialize, we expect to see some diffusion of this concentration and a reduction in the overall variability of system sales.

     Consumable sales increased to $10.8 million for the nine months ended September 30, 2005 from $6.7 million for the nine months ended September 30, 2004. The increase is primarily the result of 24 bulk purchases of consumables totaling approximately $8.0 million, with one purchaser accounting for approximately $3.1 million, as compared with 16 bulk purchases totaling approximately $4.2 million in the corresponding prior year period. As the number of applications available on our platform expands, we expect to see the overall level of consumable sales continue to rise.

     Royalty revenue increased to $3.8 million for the nine months ended September 30, 2005 from $2.2 million for the nine months ended September 30, 2004. We believe this increase is primarily the result of the increased use and acceptance of our technology. For the nine months ended September 30, 2005, we had 25 commercialized partners submitting royalties as compared with 22 for the nine months ended September 30, 2004. Two of our partners reported royalties totaling approximately $1.7 million, or 45% of the total royalties for the nine months ended September 30, 2005, with one partner accounting for approximately $1.3 million of this total. No other customers accounted for more than 10% of total royalty revenue for the nine months ending September 30, 2005. Total royalty bearing sales by our partners were approximately $62.2 million for the nine months ended September 30, 2005.

     Service contracts, comprised of extended warranty contracts earned ratably over the term of the agreement, increased to $1.7 million for the nine months ended September 30, 2005 from $1.1 million for the nine months ended September 30, 2004. This increase is attributable to increased sales of extended service agreements, which is primarily a result of the increase in the commercial base of Luminex systems as compared to the prior year period.

     Other revenues, comprised of training revenue, shipping revenue, miscellaneous parts sales, amortized license fees and special project revenues, decreased to $1.8 million for the nine months ended September 30, 2005 from $2.3 million for the nine months ended September 30, 2004. This decrease is primarily the result of non-recurring special project revenues of $343,000 and advanced royalty forfeitures of $228,000 in the nine months ended September 30, 2004. This decrease was partially offset by increased license fees in the nine months ended September 30, 2005. For the nine months ended September 30, 2005, we had $947,000 of parts sales, $373,000 of shipping revenue, $292,000 of license fees and $163,000 of other miscellaneous revenue.

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     Gross profit. The gross margin rate increased to 54% for the nine months ended September 30, 2005 from 41% for the nine months ended September 30, 2004. Gross profit increased to $16.7 million for the nine months ended September 30, 2005, as compared to $10.9 million for the nine months ended September 30, 2004. The increase in gross margin was primarily attributable to the increase in the percentage of consumables and royalties, our highest margin items, as a percentage of total revenue and to a lesser extent an increase in average system sales price. Consumables and royalties comprised 47% of revenue for the nine months ended September 30, 2005 and 33% for the nine months ended September 30, 2004.

     Research and development expense. Research and development expenses increased to $4.0 million for the nine months ended September 30, 2005 from $2.9 million for the comparable period in 2004. The increase was primarily the result of additional personnel costs associated with the increase in employees to 40 at September 30, 2005 from 35 at September 30, 2004 and increased costs related to direct materials and consumable supplies utilized in the research and development process.

     Selling, general and administrative expense. Selling, general and administrative expenses increased to $14.5 million for the nine months ended September 30, 2005 from $10.8 million for the comparable period in 2004. The increase was primarily attributable to building our infrastructure to accommodate the expanded marketing and business development functions necessary to execute against our strategic plan; increased professional fees related to the development and protection of our intellectual property estate; and an increase in incremental stock compensation charges related to equity issuances to employees as a result of the transition to the issuance of restricted stock in lieu of stock options.

     Other income, net. Other income increased to $799,000 for the nine months ended September 30, 2005 from $365,000 for the comparable period in 2004. The average rate earned on current invested balances increased to 3.3% at September 30, 2005 from 1.0% at September 30, 2004.

     Settlement of litigation. On November 18, 2004, Dynal Biotech, LLC (“Dynal”), filed a complaint in Federal Court in the Western District of Wisconsin against Luminex Corporation seeking a declaratory judgment to enjoin Luminex from interfering with an agreement between Dynal and one of Luminex’s partners, MiraiBio Corporation, which granted development and distribution rights to Dynal of certain Luminex technology. On January 18, 2005, we filed an answer to the complaint denying Dynal’s allegations and seeking dismissal and filed counterclaims against Dynal on the basis that Dynal improperly used Luminex technology and as a result, has damaged Luminex and its partner’s position in the marketplace. On June 30, 2005, the parties entered into a confidential settlement agreement, which was subsequently entered with the Court on July 7, 2005, with a stipulation signed by the parties dismissing all claims with prejudice. Luminex recorded $322,000 of expense related to Luminex’s portion of the settlement among Dynal Biotech, LLC, MiraiBio Corporation and Luminex Corporation.

LIQUIDITY AND CAPITAL RESOURCES

	September 30,		December 31,
	2005		2004
Cash and cash equivalents	$	21,511	$	19,238
Short-term investments		10,942		12,891
Long-term investments		6,181		3,991
	$	38,634	$	36,120

     At September 30, 2005, we held cash, cash equivalents, and short-term and long-term investments of $38.6 million and had working capital of $39.0 million. At December 31, 2004, we held cash, cash equivalents, and short-term and long-term investments of $36.1 million and had working capital of $40.8 million. We have funded our operations to date primarily through the issuance of equity securities. Our cash reserves are held directly or

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indirectly in a variety of short-term and long-term, interest-bearing instruments, including obligations of the United States government or agencies thereof and U.S. corporate debt securities.

     Cash provided by operations was $3.2 million for the nine months ended September 30, 2005, compared with cash used in operations of $5.0 million for the nine months ended September 30, 2004.

     Our research and development expenses during the nine months ended September 30, 2005 were $4.0 million. Research and development expenses related to the ongoing development of our xMAP technology and consumables are currently expected to be in the range of $1.5 to $2.5 million for the fourth quarter of 2005 and between $5.5 and $7.0 million for the full year 2005. Our expected increase in research and development expense for 2005 compared with 2004 is a result of the creation of our Luminex Biosciences Group to assist in the expansion of applications for use on our platforms and expanded focus on system, consumable and software product development.

     Our selling, general and administrative expenses during the nine months ended September 30, 2005 were $14.5 million. We currently expect total selling, general and administrative expenses to be in the range of $5.0 to $6.0 million for the fourth quarter of 2005 and $19.5 to $20.5 million for the full year 2005. The expected increase of selling, general and administrative expenses over those of 2004 is primarily a result of additional infrastructure expansion to support our market driven initiatives and optimization and development of our partner relationships.

     We presently outsource certain aspects of the assembly of our systems to contract manufacturers. Because of a long lead-time to delivery, we are required to place orders for a variety of items well in advance of scheduled production runs. We currently have approximately $3.4 million in non-cancelable obligations for the next 12 months. These obligations are included in our estimated cash usage described below.

	Payment Due By Period
			Less Than						More Than
Contractual Obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years
Non-cancelable rental obligations	$	4,465	$	936	$	1,948	$	1,581	$	—
Non-cancelable purchase obligations (1)		2,440		2,440		—		—		—
Total	$	6,905	$	3,376	$	1,948	$	1,581	$	—

⁽¹⁾ These obligations are primarily a result of normal inventory purchases. Purchase obligations do not extend beyond a year; however, we would expect future years to have purchase commitments that will arise in the ordinary course of business and will generally increase or decrease according to fluctuations in overall sales volume.

     Our future capital requirements will depend on a number of factors, including our success in developing and expanding markets for our products, payments under possible future strategic arrangements, continued progress of our research and development of potential products, the timing and outcome of regulatory approvals, the need to acquire licenses to new technology, the status of competitive products and potential cost associated with both protecting and defending our intellectual property. We believe, however, that our existing cash and cash equivalents are sufficient to fund our operating expenses, capital equipment requirements and other expected liquidity requirements through 2006. Based upon our current operating plan and structure, management anticipates cash, cash equivalents and investments at December 31, 2005 to be approximately equal to the total of cash, cash equivalents and investments at December 31, 2004.

     We have no credit facility or other committed sources of capital. To the extent our capital resources are insufficient to meet future capital requirements, we will have to raise additional funds to continue the development and deployment of our technologies. There can be no assurance that debt or equity capital will be available on favorable terms, if at all. To the extent that additional capital is raised through the sale of equity or convertible debt

16

securities, the issuance of those securities could result in dilution to our stockholders. Moreover, incurring debt financing could result in a substantial portion of our operating cash flow being dedicated to the payment of principal and interest on such indebtedness, could render us more vulnerable to competitive pressures and economic downturns and could impose restrictions on our operations. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds through entering into agreements on potentially unattractive terms.

RISK FACTORS

We have a history of losses and an accumulated deficit of approximately $85.2 million as of September 30, 2005.

     We have incurred significant net losses since our inception, including losses of $1.3 million for the nine months ended September 30, 2005, $3.6 million in 2004 and $4.2 million in 2003. At September 30, 2005, we had an accumulated deficit of approximately $85.2 million. To achieve profitability, we will need to generate and sustain substantially higher revenue while achieving reasonable cost and expense levels. If we fail to achieve profitability within the time frame expected by securities analysts or investors, the market price of our common stock may decline. Furthermore, as we continue to incur losses and utilize cash to support operations, we further decrease the cash available to the Company. As of September 30, 2005, cash, cash equivalents and investments totaled $38.6 million, an increase of $2.5 million from $36.1 million at December 31, 2004. We do not know when or if we will become profitable. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or an annual basis.

If our technology and products do not become widely used in the life sciences industry, it is unlikely that we will ever become profitable.

     Life sciences companies have historically conducted biological tests using a variety of technologies, including bead-based analysis. However, compared to certain other technologies, our xMAP technology is relatively new and unproven, and the use of our technology by life sciences companies is limited. The commercial success of our technology will depend upon its widespread adoption as a method to perform bioassays. In order to be successful, we must convince potential partners to utilize our system instead of competing technologies. Market acceptance will depend on many factors, including our ability to:

– 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.

Because of these and other factors, our products may not gain sufficient market acceptance to achieve profitability.

We expect our operating results to continue to fluctuate from quarter to quarter.

     The sale of bioassay testing devices typically involves a significant technical evaluation and commitment of capital by partners. Accordingly, the sales cycle associated with our products typically is lengthy and subject to a number of significant risks, including partners’ budgetary constraints, inventory management practices, regulatory approval and internal acceptance reviews, all of which are beyond our control. As a result of this lengthy and unpredictable sales cycle, our operating results have historically fluctuated significantly from quarter to quarter. We expect this trend to continue for the foreseeable future.

     The vast majority of our system sales are made to our strategic partners. Our partners typically purchase instruments in three phases during their commercialization cycle: first, instruments necessary to support internal

17

assay development; second, instruments for sales force demonstrations; and finally, instruments for resale to their customers. As a result, most of our system sales are highly dependent on the commercialization timetables of our strategic partners and can fluctuate from quarter to quarter as our strategic partners move from phase to phase. We expect this trend to continue for the foreseeable future.

     Because of the effect of bulk purchases, we continue to experience fluctuations in the percentage of our quarterly revenues derived from our highest margin items, consumables and royalties. Our gross margin is highly dependent upon the mix of revenue components each quarter. These fluctuations contribute to the variability and lack of predictability of both gross margin percentage and total gross profit from quarter to quarter. We expect this trend to continue for the foreseeable future.

Our success depends largely 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.

     The development and commercialization of our xMAP technology is highly dependent on our ability to establish successful strategic relationships with a number of partners. As of September 30, 2005, we had 25 strategic partners who were paying royalties and had either commercialized products using the Luminex platform or were reselling our products. Furthermore, for the nine months ended September 30, 2005, we had two partners who individually represented greater than 10% of the Company’s revenue and collectively represented 41.2% of total revenue (22.3% and 18.9%, respectively). For comparative purposes, we had two partners with individual revenue greater than 10% of our total revenue, representing 33.0% (21.9% and 11.0%, respectively) of our total revenue for the nine months ended September 30, 2004. The loss of any of our significant strategic partners, or any of our significant customers, could have a material adverse effect on our growth and future results of operations. Delays in implementation, delays in obtaining regulatory approval, changes in strategy or the financial difficulty of our strategic partners for any reason could have a material adverse effect on our business, financial condition and results of operations.

     Our ability to enter into agreements with additional strategic partners depends in part on convincing them that our technology can help achieve and accelerate their goals or efforts. We will expend substantial funds and management efforts with no assurance that any additional strategic relationships will result. We cannot assure you that we will be able to negotiate additional strategic agreements in the future on acceptable terms, if at all, or that current or future strategic partners will not pursue or develop alternative technologies either on their own or in collaboration with others. Some of the companies we are targeting as strategic partners offer products competitive with our xMAP technology, which may hinder or prevent strategic relationships. Termination of strategic relationships, or the failure to enter into a sufficient number of additional agreements on favorable terms, could reduce sales of our products, lower margins on our products and limit the creation of market demand and acceptance.

     In addition, we have entered into non-exclusive relationships with most of our existing strategic partners. The lack of exclusivity could deter existing strategic partners from commercializing xMAP technology and may deter new strategic partners from entering into agreements with Luminex.

     The majority of our future revenues will come from sales of our systems and the development and sale of bioassay kits utilizing our technology by our strategic partners and from use of our technology by our strategic partners in performing services offered to third parties. We believe that our strategic partners will have economic incentives to develop and market these products, but we cannot predict future sales and royalty revenues because most of our existing strategic partner agreements do not include minimum purchase requirements or royalty commitments. In addition, we do not have the right or ability to provide incentives to our strategic partners’ sales personnel to sell products based on xMAP technology or to control the timing of the release of products by our strategic partners. The amount of these revenues will depend on a variety of factors that are outside our control, including the amount and timing of resources that current and future strategic partners devote to develop and market products incorporating our technology. Further, the development and marketing of certain bioassay kits will require our strategic partners to obtain governmental approvals, which could delay or prevent their commercialization efforts. If our current or future strategic partners do not successfully develop and market products based on our technology and obtain necessary government approvals, our revenues from product sales and royalties will be significantly reduced.

18

Our limited operating history and reliance on strategic partners to market our products makes forecasting difficult.

     Because of our limited operating history and reliance on partner performance, it is difficult to accurately forecast future operating results. Our operating expenses are largely based on anticipated revenue trends, and a high percentage of our expenses are, and will continue to be, fixed in the short-term. The level of our revenues will depend upon the rate and timing of the adoption of our technology as a method to perform bioassays. Due to our limited operating history, predicting this timing and rate of adoption is difficult.

     In addition, we currently anticipate that the vast majority of future sales of our products and products incorporating our technology will be made by our strategic partners. For the following reasons, estimating the timing and amount of sales of these products that may be made by our strategic partners is particularly 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 Food and Drug Administration, 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.

– Certain strategic partners may fail to deliver products that satisfy market requirements, or such products may fail to operate 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 Luminex 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.

     We compete with companies in the United States and abroad that are engaged in the development and production of similar products. We will continue to face intense competition from existing competitors and other companies seeking to develop new technologies. Many of our competitors have access to greater financial, technical, scientific, research, marketing, sales, distribution, service and other resources than we do. These companies may develop technologies that are superior alternatives to our technologies or may be more effective at commercializing their technologies in products.

     The life sciences industry is characterized by rapid and continuous technological innovation. We may need to develop new technologies for our products to remain competitive. One or more of our current or future competitors could render our present or future products obsolete or uneconomical by technological advances. In addition, the introduction or announcement of new products by us or others could result in a delay of or decrease in sales of existing products, as we await regulatory approvals and as partners evaluate these new products. We may also encounter other problems in the process of delivering new products to the marketplace, such as those related to design, development or manufacturing of such products. Our future success will depend on our ability to compete effectively against current technologies, as well as to respond effectively to technological advances by developing and marketing products that are competitive in the continually changing technological landscape.

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Our success depends on our ability to service and support our products directly or in collaboration with our strategic partners.

     To the extent that the Company or its strategic partners fail to maintain a high quality level of the service and support for xMAP technology products, there is a risk that the perceived quality of our xMAP technology products will be diminished in the marketplace. Likewise, the Company may fail to provide the level, quantity or quality, of service expected by the marketplace. This could result in slower adoption rates and lower than anticipated utilization of xMAP products causing a material adverse affect on our business.

The intellectual 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.

     Our success will depend, in part, on our ability to obtain, protect and enforce patents on our technology and to protect our trade secrets. Any patents we own may not afford full protection for our technology and products. Others may challenge our patents and, as a result, our patents could be narrowed or invalidated. In addition, our current and future patent applications may not result in the issuance of patents in the United States or foreign countries. Competitors may develop products that are not covered by our patents. Further, there is a substantial backlog of patent applications at the U.S. Patent and Trademark Office, and the approval or rejection of patent applications may take several years.

     We have obtained 32 patents in the United States and one in each of Japan, Germany, United Kingdom, France, Italy, Hong Kong, Israel and Canada directed to various aspects and applications of our technology. We have 58 pending applications in the United States and foreign jurisdictions. In Japan, due to a procedural omission, we are unable to obtain patent protection for our method of “real time” detection and quantification of multiple analytes from a single sample similar to the protection we have obtained in the United States. Although we are pursuing patent protection in Japan for other aspects of our technology, we may not be able to prevent competitors from developing and marketing technologies similar to our xMAP technology in Japan.

     We require our employees, consultants, strategic partners and other third parties to execute confidentiality agreements. Our employees and third-party consultants also sign agreements requiring that they assign to us their interests in inventions and original expressions and any corresponding patents and copyrights arising from their work for us. In addition, the Company has implemented a patent process to file patent applications on its key technology. However, we cannot guarantee that these agreements or this patent process will provide us with adequate protection against improper use of our intellectual property or disclosure of confidential information. In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisors have prior employment or consulting relationships. Further, others may independently develop substantially equivalent proprietary technology and techniques, or otherwise gain access to our trade secrets. Our failure to protect our proprietary information and techniques may inhibit or limit our ability to exclude certain competitors from the market.

     In order to protect or enforce our patent rights, we may have to initiate legal proceedings against third parties, such as infringement suits or interference proceedings. These legal proceedings could be expensive, take significant time and/or divert management’s attention from other business concerns. These proceedings may cause us to lose the benefit of some of our intellectual property rights, the loss of which may inhibit or preclude our ability to exclude certain competitors from the market. We also may provoke these third parties to assert claims against us. The patent position of companies like ours generally is highly uncertain, involves complex legal and factual questions and has recently been the subject of much litigation. No consistent policy has emerged from the U.S. Patent and Trademark Office or the courts regarding the breadth of claims allowed or the degree of protection afforded under patents like ours.

Our success will depend partly on our ability to operate without infringing on or misappropriating the proprietary rights of others.

     We may be sued for infringing the intellectual property rights of others. In addition, we may find it necessary, if threatened, to initiate a lawsuit seeking a declaration from a court that we do not infringe on the proprietary rights of

20

others or that their rights are invalid or unenforceable. Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation could affect our profitability. Furthermore, litigation is time consuming and could divert management’s attention and resources away from our business. If we do not prevail in any litigation, we may have to pay damages and could be required to stop the infringing activity or obtain a license. Any required license may not be available to us on acceptable terms, if at all. Moreover, some licenses may be nonexclusive, and therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our products, which could have a material adverse affect on our business, financial condition and results of operations.

     We are aware of a European patent granted to Dr. Ioannis Tripatzis, which covered certain testing agents and certain methods of their use. Dr. Tripatzis has publicly stated his belief that his European patent covered aspects of our technology if practiced in Europe. This European patent expired in November 2004.

Our success will depend on our ability to attract and retain our management and staff.

     We depend on the principal members of our management and scientific staff, including our chief executive officer, marketing, research and development, technical support, technical service and sales staff. The loss of services of key members of management could delay or reduce our product development, marketing and sales and technical support efforts. In addition, recruiting and retaining qualified scientific and other personnel to perform research and development, technical support, technical service and marketing and sales work will be critical to our success. There is a shortage in our industry of qualified management and scientific personnel, and competition for these individuals is intense. There can be no assurance that we will be able to attract additional and retain existing personnel necessary to achieve our business objectives.

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.

     To date, we have produced our products in limited quantities compared to the quantities necessary to achieve desired revenue growth. We may not be able to produce sufficient quantities or maintain consistency between differing lots of consumables. If we encounter difficulties in scaling our manufacturing operations as a result of, among other things, quality control and quality assurance and availability of component and raw material supplies, we will likely experience reduced sales of our products, increased repair or re-engineering costs due to product returns and defects and increased expenses due to switching to alternate suppliers, any of which would reduce our revenues and gross margins.

     We presently outsource certain aspects of the assembly of our systems to contract manufacturers. Because of a long lead-time to delivery, we are required to place orders for a variety of items well in advance of scheduled production runs. We recently increased our flexibility to purchase strategic components within shorter lead times by entering into supply agreements with the suppliers of these components. Although we attempt to match our parts inventory and production capabilities to estimates of marketplace demand, to the extent system orders materially vary from our estimates, we may experience continued constraints in our systems production and delivery capacity, which could adversely impact revenue in a given fiscal period. Should the Company’s need for raw materials and components used in productions continue to fluctuate, we could incur additional costs associated with either expediting or postponing delivery of those materials.

     During the second quarter of 2004, we added a new primary supplier for a key component of our product line that resulted in an increase in our standard cost. The supplier may not be able to produce sufficient quantities or to maintain the consistency in quality of the other supplier and we may not be able to offset the increased component cost through a price increase, any of which would reduce our revenues and gross margins. In addition, certain key components of our product line are currently purchased from a limited number of outside sources and may only be available through a limited number of providers. We do not have agreements with all of our suppliers. Our reliance on our suppliers and contract manufacturers exposes us to risks including:

– 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 inability of our suppliers to obtain required components;

21

– the potential delays and expenses of seeking alternate sources of supply or manufacturing services;

– 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.

     Consequently, in the event that supplies of components or work performed by any of our assemblers are delayed or interrupted for any reason, our ability to produce and supply our products could be impaired.

The capital spending policies of our partners has a significant effect on the demand for our products.

     Our partners include clinical diagnostic, pharmaceutical, biotechnological, chemical and industrial companies, and the capital spending policies of these companies can have a significant effect on the demand for our products. These policies are based on a wide variety of factors, including governmental regulation or price controls, the resources available for purchasing research equipment, the spending priorities among various types of analytical equipment and the policies regarding capital expenditures during recessionary periods. Any decrease in capital spending by life sciences companies could cause our revenues to decline. As a result, we are subject to significant volatility in revenue. Therefore, our operating results can be materially affected (negatively and positively) by the spending policies and priorities of our partners.

If we fail to comply with government 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.

     The testing, production, labeling, distribution and marketing of our products for some purposes and products based on our technology expected to be produced by our strategic partners are subject to governmental regulation by the United States Food and Drug Administration (FDA) and by similar agencies in other countries. Some of our products and products based on our technology for in vitro diagnostic purposes are subject to approval or clearance by the FDA prior to marketing for commercial use. To date, eight strategic partners have obtained such approvals or clearances. Others are anticipated. The process of obtaining necessary FDA clearances or approvals can be time-consuming, expensive and uncertain. Further, clearance or approval may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed. In addition, because some of our products employ laser technology, we are also required to comply with FDA requirements relating to radiation performance safety standards (21 CFR 1040.1 and 1040.11).

     Approved or cleared medical device products are subject to continuing FDA requirements relating to, among others, manufacturing quality control and quality assurance, maintenance of records and documentation, registration and listing, import/export, adverse event and other reporting, distribution, labeling and promotion and advertising of medical devices. Our inability, or the inability of our strategic partners, to obtain required regulatory approval or clearance on a timely or acceptable basis could harm our business. In addition, failure to comply with applicable regulatory requirements could subject us or our strategic partners to regulatory enforcement action, including warning letters, product seizures, recalls, withdrawal of clearances or approvals, restrictions on or injunctions against marketing our products or products based on our technology, and civil and criminal penalties.

     Medical device laws and regulations are also in effect in many countries outside the United States. These range from comprehensive device approval requirements for some or all of our medical device products to requests for product data or certifications. As part of the Council Directive 2002/96 of February 13, 2003, Waste Electrical and Electronic Equipment (WEEE), we are expected to comply with certain requirements regarding the labeling and disposal of some of our products containing electronic devices beginning on August 13, 2005 in each of the EU member states where our regulated products are distributed. While we are taking steps to comply with the requirements of WEEE, we cannot be certain that we will comply with the national stage implementation of WEEE in all member states. Our products are currently exempt from the Council Directive 2002/95 of January 27, 2003, Restriction of Hazardous Substances (RoHS), which requires the removal of certain specified hazardous substances for certain products beginning July 1, 2006 in each of the member states. However, the European Union has indicated that it may include medical devices, including some of our products, under the jurisdiction of RoHS. The number and scope of these requirements are increasing. Failure to comply with applicable federal, state, local and foreign medical device laws and regulations may harm our business, financial condition and results of operations.

22

We are also subject to a variety of other laws and regulations relating to, among other things, environmental protection and work place safety.

     Our strategic partners and customers expect our organization to operate on an established quality management system compliant with FDA Quality System Regulations and industry standards, the In Vitro Diagnostic Directive 98/79/EC of 27 October 1998 (“Directive”) as implemented nationally in the EU member states and industry standards, such as ISO 9000. We became ISO 9001:2000 certified in March 2002 and self-declared our LX100 IS device is in conformity with Article 1, Article 9, Annex I (Essential Requirements), and Annex III, and the additional provisions of IVDD 98/79/EC as of December 7, 2003. Subsequent audits are carried out annually to ensure we maintain our system in substantial compliance with ISO and other applicable regulations and industry standards. We became ISO 13485:2003 and Canadian Medical Device Conformity Assessment System (CMDCAS) certified in July 2005. Failure to maintain compliance with FDA, CMDCAS and EU regulations and other medical device laws, or to obtain applicable registrations where required, could reduce our competitive advantage in the markets in which we compete and also decrease satisfaction and confidence levels with our partners.

If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage.

     Our business exposes us to potential product liability claims that are inherent in the testing, production, marketing and sale of human diagnostic and therapeutic products. Although we believe that we are reasonably insured against these risks and we have indemnity protections in our supplier agreements, there can be no assurance that we will be able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. A product liability claim in excess of our insurance coverage or claim that is outside or exceeds our indemnity protections in our supplier agreements or a recall of one of our products would have to be paid out of our cash reserves.

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.

     Third-party payors, such as government entities, health maintenance organizations and private insurers, are restricting payments for healthcare. These restrictions may decrease demand for our products and the price we can charge. Increasingly, Medicaid and other third-party payors are challenging the prices charged for medical services, including clinical diagnostic tests. They are also attempting to contain costs by limiting coverage and the reimbursement level of tests and other healthcare products. Without adequate coverage and reimbursement, consumer demand for tests will decrease. Decreased demand could cause sales of our products, and sales and services by our strategic partners, to fall. In addition, decreased demand could place pressure on us, or our strategic partners, to lower prices on these products or services, resulting in lower margins. Reduced sales or margins by us, or our strategic partners, would hurt our business, profitability and business prospects.

Our operating results may be affected by current economic and political conditions.

     With the continuing events in the Middle East and concern for future terrorist attacks, many economic and political uncertainties exist. These uncertainties could adversely affect our business and revenues in the short or long term in ways that cannot presently be predicted.

Our stock price has been and is likely to continue to be volatile.

     The trading price of our common stock has been and is likely to continue to be highly volatile and subject to wide fluctuations in price. This volatility is in response to various factors, many of which are beyond our control, including:

– general economic conditions and interest rates;

– instability in the United States and other financial markets and the ongoing and possible escalation of the war in Iraq, other armed hostilities or further acts or threats of terrorism in the United States or elsewhere;

23

– 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;

– changes in financial estimates by securities analysts;

– conditions or trends in the life science, biotechnology and pharmaceutical industries;

– announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

– additions or departures of key personnel;

– 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 National 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 National Market.

     In addition, the stock market in general, and The Nasdaq Stock Market and the market for technology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, there has been particular volatility in the market prices of securities of life sciences companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management’s attention and resources.

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.

     Our certificate of incorporation, bylaws and stockholder rights plan contain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. We are also subject to certain provisions of Delaware law that could delay, deter or prevent a change in control of us. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our interest income is sensitive to changes in the general level of domestic interest rates, particularly since our investments are in short-term and long-term instruments held to maturity. A 50 basis point fluctuation from average investment returns at September 30, 2005 would yield an approximate 15% variance in overall investment return. Due to the nature of our investments, we have concluded that there is no material market risk exposure. All payments for our products, including sales to foreign partners, are required to be made in U.S. dollars; therefore, we do not engage in any foreign currency hedging activities. Accordingly, our foreign currency market risk is limited.

24

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Under the supervision and with the participation of our senior management, including our President and Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on that evaluation, our senior management, including our President and Chief Executive Officer and Chief Financial Officer, concluded that as of the end of the period covered by this quarterly report our disclosure controls and procedures effectively and timely provide them with material information relating to the Company (and its consolidated subsidiaries) required to be disclosed in the reports the Company files or submits under the Exchange Act.

Changes in Internal Control over Financial Reporting

     There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

25

PART II

ITEM 1. LEGAL PROCEEDINGS

     On April 26, 2005, the Company was served with a complaint, filed by Rules Based Medicine, Inc. (“RBM”) in state district court in Travis County, Texas against the Company seeking a declaratory judgment that the formation of HealthMAP Laboratories, Inc. (subsequently renamed the Biophysical Corporation) did not constitute a usurpation of an RBM corporate opportunity and that RBM has the necessary contractual license rights under its existing agreement with the Company to perform certain testing services on behalf of BioPhysical. On May 19, 2005, Luminex filed an answer to this complaint denying all claims brought by RBM. On June 21, 2005, the parties entered into an agreement, which was subsequently entered with the court on June 22, 2005. Pursuant to this agreement, the parties agreed that RBM would not file any claims related to this matter against the Company until August 1, 2005, and that the Company would not file any claims related to this matter against RBM until August 16, 2005, in order to continue to pursue settlement negotiations. The parties were unable to reach agreement on the terms of settlement. RBM re-filed its lawsuit against Luminex on August 12, 2005, seeking a declaratory judgment against Luminex as set forth above. In response, Luminex re-filed its answer and counterclaims against RBM, as well as new claims against Mark Chandler and Craig Benson, on August 19, 2005. The parties are currently proceeding with discovery.

ITEM 6. EXHIBITS

     The following exhibits are filed herewith:

Exhibit
Number	Description of Documents
31.1	Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

26

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LUMINEX CORPORATION
Date: November 8, 2005
	By:	/s/HARRISS T. CURRIE
		Harriss T. Currie
		Chief Financial Officer (Principal Financial Officer)
	By:	/s/ PATRICK J. BALTHROP
		Patrick J. Balthrop
		President and Chief Executive Officer (Principal Executive Officer)

S-1

EX-31.1

                                                                    Exhibit 31.1

                                  CERTIFICATION

I, Patrick J. Balthrop, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of Luminex
Corporation;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

      b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

      c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      d) Disclosed in the quarterly report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date:  November 8, 2005

                                     By: /s/ Patrick J. Balthrop
                                         ---------------------------
                                         Patrick J. Balthrop
                                         President and Chief Executive Officer

EX-31.2

                                                                    Exhibit 31.2

                                  CERTIFICATION

I, Harriss T. Currie, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of Luminex
Corporation;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

      b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

      c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      d) Disclosed in the report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date:  November 8, 2005

                                     By: /s/ Harriss T. Currie
                                         --------------------------------------
                                         Harriss T. Currie
                                         Chief Financial Officer, Vice President
                                         - Finance and Treasurer

EX-32.1

                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Luminex Corporation (the "Company")
on Form 10-Q for the period ended September 30, 2005, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Patrick
J. Balthrop, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

            (1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

            (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

/s/ PATRICK J. BALTHROP
- ------------------------------------------
Patrick J. Balthrop
President and Chief Executive Officer
November 8, 2005

EX-32.2

                                                                    Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Luminex Corporation (the "Company")
on Form 10-Q for the period ended September 30, 2005, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Harriss
T. Currie, Vice President - Finance, Chief Financial Officer and Treasurer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
ss.906 of the Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

/s/ HARRISS T. CURRIE
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Harriss T. Currie
Vice President - Finance, Chief Financial Officer and Treasurer
November 8, 2005