UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
March 31, 2004

OR

/  / 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)

(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 /X/  No / /

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

     There were 30,721,126 shares of the Company’s Common Stock, par value $.001 per share, outstanding on May 5, 2004.

INDEX

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PART I

ITEM 1. FINANCIAL STATEMENTS

LUMINEX CORPORATION

The accompanying notes are an integral part of these condensed consolidated financial statements.

LUMINEX CORPORATION

The accompanying notes are an integral part of these condensed consolidated financial statements.

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LUMINEX CORPORATION

The accompanying notes are an integral part of these condensed consolidated financial statements.

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LUMINEX CORPORATION

NOTE 1	- BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have been prepared by Luminex Corporation (the “Company”) in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States 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 months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. 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, 2003.

NOTE 2	- INVENTORY, NET

     Inventory consisted of the following (in thousands):

NOTE 3	- 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. The Company estimates the amount of warranty claims on sold product that may be incurred based on current and historical data and includes this reserve in accrued liabilities. 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 three months ended March 31, 2004 were as follows (in thousands):

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NOTE 4 - BUSINESS RESTRUCTURING COSTS

     In November 2002, the Company’s management approved a business restructuring plan to reduce headcount and infrastructure. As of September 30, 2003, the Company had completed the business restructuring plan and no other expenditures are expected. During the quarter ended March 31, 2003, the Company had cash expenditures of $1.6 million and non-cash expenditures of $100,000 under the restructuring plan.

NOTE 5	- SETTLEMENT OF LITIGATION

     As a result of a procedural omission, the Company is unable to pursue a patent in Japan, which corresponds to some of the Company’s issued U.S. patents related to the Company’s method of “real time” detection and quantification of multiple analytes from a single sample. On January 31, 2000, the Company filed a lawsuit in Travis County, Texas state district court alleging negligence and breach of contract on the part of the defendants in this matter. On March 7, 2003, the parties executed a full, final and complete release regarding such action, without an admission of liability or wrongdoing on the part of the defendants. As consideration in connection with the settlement and release, the Company received approximately $1.8 million, net of legal and related costs and expenses.

NOTE 6	- 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 restricted stock, outstanding stock options and outstanding warrants 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 and warrants, were 1,389,662 for the three months ended March 31, 2004, and 1,079,088 for the three months ended March 31, 2003.

NOTE 7	– 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:

The Company plans to expense the cost of restricted stock on a straight-line basis over the vesting period of the stock of two or four years.

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

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     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 March 31:

     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):

     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 its employee stock options.

NOTE 8	- 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 for the three months ended March 31, 2004 was $153,000 and comprehensive loss for the three months ended March 31, 2003 was approximately $931,000.

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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, our Annual Report on Form 10-K for the year ended December 31, 2003 and “Risk Factors” included in this Report.

SAFE HARBOR CAUTIONARY STATEMENT

     All statements in this Report that do not discuss past results are forward-looking statements. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will” and similar expressions identify forward-looking statements. All statements which address our outlook for our businesses and their respective markets, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends and other matters are forward-looking statements. It is important to note that our actual results or performance could differ materially from those projected in such forward-looking statements. Forward-looking statements are based on management’s current expectations and are therefore subject to certain risks and uncertainties, including those discussed under the section herein titled “Risk Factors”. Specific uncertainties which could cause our actual results to differ materially from those projected include, among others, risks and uncertainties relating to market demand and acceptance, the 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 up manufacturing operations, potential shortages of components, competition, the timing of regulatory approvals and any modification of the Company’s operating plan in response to its ongoing evaluation of its business and search for a new chief executive officer. We expressly disclaim any intent, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this Report to reflect any change in our expectations with regard to such statements or any change in events, conditions or circumstances on which any such statements are based.

OVERVIEW

     Our financial and operational improvement for the quarter ended March 31, 2004 was primarily attributable to: (i) operational focus provided by the completion of our strategic study concluded in the spring of 2003; (ii) effort expended on the contractual relationships with our partners and supply agreements with key suppliers; and (iii) the scalability of our business model.

     We completed our strategic study in the spring of 2003. The results of the study provided valuable information regarding target market opportunities and the size of those market segments. We have focused our resources and adjusted our strategies and tactics towards the identified segments, which has provided growth opportunities for the Company. One element of our resource focus was a commitment to assisting our partners in their commercial development efforts. Our strategy of increasing the assistance we provided to our partners coupled with the discontinuation of our direct sales efforts enabled our partners to focus on commercialization and avert concerns that we were going to compete directly with them. We are in the process of expanding our field service staff to better serve our customer base and to offer a more diverse menu of service choices. We believe the additional service offerings should facilitate the penetration of our technology into the mainstream diagnostic market. We also believe that these adjustments coupled with the maturation of our technology in the marketplace contributed to the growth that we have experienced.

     Additionally, significant effort was expended during 2003 both strengthening our contractual relationships with our partners and solidifying supply agreements with key suppliers. As the commercialization efforts of our partners have increased and opportunities were afforded to modify the contracts with them, we strengthened our contractual positions by including minimum purchase requirements. These requirements serve to encourage our partner’s allocation of resources to development and commercialization of the technology and enhance our ability to predict revenue patterns. Furthermore, we were able to execute supplier agreements with many of our key suppliers to ensure a flexible supply of raw materials to better meet our production demands, while limiting our exposure to supply failures. We also identified alternate supply sources for several key components.

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     The focus provided from the results of our strategic study has directed our efforts towards the markets in which we believe we have the highest level of sustainable competitive advantage. The market concentration and resulting direction of efforts has contributed to the relative flatness of our operating expenses over the past five quarters. Over the course of the past 12 months, we have sustained our core research and development efforts with a concentration on continued improvements to our technology and product offerings. Additionally, we have focused our business development efforts on our identified strengths in order to keep our partner and content pipeline active. All of these additional efforts have taken place with relatively constant use of resources and have resulted in 82% revenue growth, 14% gross margin growth and improvement to the bottom line that brings us very close to profitability.

     Our ability to achieve sustained profitability continues to depend upon our ability to establish successful strategic partnership arrangements with companies that will develop and market products incorporating our technology and market and distribute our systems and consumables. Strategic partners will develop application-specific bioassay kits for use on our systems that they will sell to their customers generating royalties for us. Strategic partners may also perform testing services for third parties using our technology that will result in royalties for us. Some strategic partners will also buy our products and then resell those products to their customers. At March 31, 2004, we had 19 strategic partners who had either released commercialized products based on the Luminex platform or were redistributing our products and were reporting royalties. These 19 strategic partners constituted 69% of total revenues for the first quarter of 2004.

     Finally, as of the date of this report we have not hired a successor to Tom Erickson, our interim chief executive officer. We believe Mr. Erickson has been and continues to be an effective leader in focusing our management team on fundamental improvements to our Company’s strategy and operations. Mr. Erickson is currently under contract with us through June 30, 2004 and upon hiring a new chief executive officer, his agreement is cancelable with ten days notice by Luminex. We have identified a lead candidate for chief executive officer and hope to fill this position in the near future. As indicated in our proxy statement dated April 15, 2004, Mr. Erickson is standing for election to our Board of Directors at the upcoming annual meeting of stockholders. His election to the Board of Directors should provide continuity of leadership upon the hiring of a new chief executive officer.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     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. 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.

     Total deferred revenue as of March 31, 2004 was $4.4 million and primarily consisted of (i) unamortized license fees for non-exclusive licenses and patent rights to certain Luminex technologies in the amount of $2.5 million, (ii) 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 $897,000 and (iii) unamortized revenue related to extended service contracts in the amount of $960,000. 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.

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     Inventories are valued at the lower of cost or market value and have been reduced by an allowance for excess and obsolete inventories. At March 31, 2004, there were two major components of the allowance for excess and obsolete inventory. First, the Company has a specific reserve for inventory components that we no longer use in the manufacture of our systems. Second, we have 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. The Company believes that its inventory is properly valued based on current market conditions.

     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 MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31, 2003

     Revenue. Total revenue increased to $9.3 million for the three months ended March 31, 2004 from $5.1 million for the comparable period in 2003. The increase was primarily attributable to increased productivity of our partners efforts resulting in increased system placements and corresponding increase in all other revenue line items. As previously disclosed in our Annual Report on Form 10-K, we continue with revenue concentration in a limited number of strategic partners, as one customer accounted for 24.6% of total revenue in the first quarter. No other customer accounted for more than 10% of total revenue.

     A breakdown of revenue for the three months ended March 31, 2004 and 2003 is as follows (in thousands):

     System and peripheral component sales increased to $4.9 million for the three months ended March 31, 2004 from $3.0 million for the first quarter of 2003. System placements for the first quarter of 2004 increased to 206 from 131 for the corresponding prior year period bringing total system placements to 2,125 as of March 31, 2004. During the current quarter five of our partners accounted for 141 system placements or 68% of the total system placements for the quarter. These five partners purchased only 82 systems in the comparable period of 2003. Of the total 2,125 systems placed through March 31, 2004, we estimate that 40% have been sold in the clinical diagnostics market and 60% in the life sciences market.

     Consumable sales, comprised of microspheres and sheath fluid, increased to $2.5 million during the first quarter of 2004 up from $1.2 million for the first quarter of 2003. We believe the increase is primarily the result of the increase of use and acceptance of our technology. Partners with commercial applications available accounted for $1.6 million or 63% of total consumable sales for the quarter ended March 31, 2004. In addition, during the quarter

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we had seven bulk purchases of consumables totaling approximately $1.8 million as compared with one bulk purchase of approximately $176,000 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. 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 $605,000 during the three months ended March 31, 2004 from $219,000 for the three months ended March 31, 2003. This increase is attributable to increased sales of royalty bearing commercial products by our partners and an increase in the commercial base of Luminex Systems as compared to the prior year. For the three months ended March 31, 2004, we had 19 commercial partners submit royalties as compared with 14 for the three months ended March 31, 2003. Additionally, the 14 partners for whom we recognized $219,000 in royalties for the first quarter of 2003 represented approximately $550,000 of the first quarter 2004 total, an increase of approximately 151% over their prior year payments. Three of our partners reported royalties totaling approximately $338,000 or 56% of the total royalties for the current period. Total royalty bearing sales by our partners were approximately $9.7 million for the quarter ended March 31, 2004.

     Service contracts, comprised of extended warranty contracts earned ratably over the term of the agreement, increased to $319,000 during the first quarter of 2004 from $254,000 for the first quarter of 2003. This increase is attributable to increased sales of extended service agreements, which is a direct result of the increase in the commercial base of Luminex Systems as compared to the prior year period. At March 31, 2004, we had 257 Luminex Systems covered under extended service agreements and $960,000 in deferred revenue related to those contracts.

     Other revenues, comprised of training revenue, shipping revenue, miscellaneous parts sales, amortized license fees and special project revenues, increased to $989,000 for the three months ended March 31, 2004 from $411,000 for the three months ended March 31, 2003. This increase is primarily the result of an increase in parts sales to our partners who have assumed the field service obligation on our systems and an increase in special project revenues. For the quarter ended March 31, 2004 we had $370,000 of parts sales, $335,000 of special projects and $284,000 of other miscellaneous revenue.

     Gross profit. The gross margin rate (gross profit as a percentage of total revenue) increased to 43% for the three months ended March 31, 2004 from 29% for the three months ended March 31, 2003. Gross profit increased to $4.0 million for the three months ended March 31, 2004, as compared to $1.5 million for the three months ended March 31, 2003. The rate increase in gross margin was primarily attributable to the scalability of the fixed cost component of our cost of sales and a shift in the percentage of consumables and royalties, our high margin items, as a percentage of total revenue. Consumables and royalties comprised 27% of revenue for the quarter ended March 31, 2003 and 34% for the current quarter.

     Research and development expense. Research and development expenses increased to $958,000 for the three months ended March 31, 2004 from $831,000 for the comparable period in 2003. The increase was primarily attributable to increases of personnel costs of $155,000 associated with the net addition of nine employees over our March 31, 2003 headcount of 24. Of these nine additions, five were reassignments from other departments to better align research and development activities. The four new hires were added to support product development including our next generation product development activities.

     Selling, general and administrative expense. Selling, general and administrative expenses decreased by 6% to $3.3 million for the three months ended March 31, 2004 from $3.5 million for the comparable period in 2003. The decrease was primarily attributable to reductions in legal and professional fees, partially offset by increases in personnel costs and expenses associated with our search for a new chief executive officer. The decrease in legal and professional fees is associated with the settlement of our previously outstanding litigation in the first quarter of 2003. We believe that our selling, general and administrative expenses are highly leverageable and can support additional revenue with minimal additions.

     Other income, net. Other income was essentially flat at $109,000 for the three months ended March 31, 2004 and $110,000 for the comparable period in 2003. The average rate on current invested balances decreased to 0.8% at March 31, 2004 from 1.2% at March 31, 2003.

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     Settlement of litigation. On January 31, 2000, the Company filed a lawsuit in Travis County, Texas state district court alleging negligence and breach of contract on the part of the Company’s prior patent counsel regarding a procedural omission whereby the Company is unable to pursue a patent in Japan, which corresponds to some of the Company’s issued U.S. patents related to the Company’s method of “real time” detection and quantification of multiple analytes from a single sample.. On March 7, 2003, the parties executed a full, final and complete release regarding such action, without an admission of liability or wrongdoing on the part of the defendants. As consideration in connection with the settlement and release, the Company received approximately $1.8 million, net of legal and related costs and expenses.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2004, we held cash and cash equivalents of $37.5 million and had working capital of $46.6 million. At December 31, 2003, we held cash and cash equivalents of $39.5 million and had working capital of $45.5 million. We have funded our operations to date primarily through the issuance of equity securities. Our cash reserves are held directly or indirectly in a variety of short-term, interest-bearing instruments, including obligations of the United States government or agencies thereof and U.S. corporate debt securities.

Cash used in operations was $3.0 million for the three months ended March 31, 2004, compared with $1.3 million for the three months ended March 31, 2003.

     Our research and development expenses during the three months ended March 31, 2004 were $958,000. Research and development expenses related to the ongoing development of our xMap technology and consumables are currently expected to be in the range of $1.0 to $1.5 million per quarter in 2004 and between $4.0 and $6.0 million on an annual basis for 2004.

     Selling, general and administrative expenses for 2004 should increase relative to 2003 primarily as a result of specific strategic additions to support the execution of our business model. We currently expect total selling, general and administrative expenses to be in the range of $3.5 to $4.0 million per quarter in 2004 and $14.0 to $16.0 million for 2004.

     We presently outsource certain aspects of the assembly of our systems to contract manufacturers. We have non-cancellable purchase requirements with certain of our component suppliers which require us to take delivery of a minimum number of component parts for our products or the cost per unit will increase, which would adversely impact our gross margin. We are not otherwise committed to scheduled purchase requirements. However, 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 $4.4 million in non-cancellable obligations for the remainder of 2004. These obligations are included in our estimated cash usage during 2004.

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

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     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 and the status of competitive products. Additionally, actions taken based on recommendations from our strategic consulting study could result in expenditures not currently contemplated in our estimates for 2004. We believe, however, that our existing cash and cash equivalents are sufficient to fund our operating expenses and capital equipment requirements through 2004. Based upon our current operational structure, management anticipates total cash use for 2004 to be approximately $6.0 to $8.0 million, giving us an anticipated balance at December 31, 2004 of $31.0 to $33.0 million.

     We have no credit facility or other committed sources of capital. To the extent capital resources are insufficient to meet future capital requirements, we will have to raise additional funds to continue the development of our technologies and to fund operations. 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 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 $80.4 million as of March 31, 2004.

     We have incurred significant net losses since our inception, including losses of $143,000 for the three months ended March 31, 2004, $4.2 million in 2003 and $24.9 million in 2002. At March 31, 2004, we had an accumulated deficit of approximately $80.4 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 will likely 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 March 31, 2004, cash and cash equivalents totaled $37.5 million, a decrease of $2.0 million from $39.5 million at December 31, 2003. 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 customers 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;
-		manufacture products in sufficient quantities with acceptable quality and at an acceptable cost; and

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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.

Our success depends largely on the establishment 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 partner 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 March 31, 2004, we had 19 strategic partners who were paying royalties and had either commercialized products using the Luminex platform or were reselling our products. Furthermore, for the three months ended March 31, 2004, one customer individually represented greater than 10% of the Company’s revenue (24.6%). In addition, we had six customers who individually represented 5% or more of our total revenue and collectively represented 63% of our total revenue for the three months ended March 31, 2004. For comparative purposes, we had four customers with individual revenue greater than 10% of our total revenue and collectively representing 57% of our total revenue for the three months ended March 31, 2003. The loss of any of our significant strategic partners, or any of our significant customers, would 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.

     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.

     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.

     The vast majority of our future revenues will come from sales of our systems, from 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.

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

     Because of our limited operating history, 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:

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We have no control over the timing or extent of product development, marketing or sale of our products by our strategic partners.

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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.

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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.

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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.

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

The life sciences industry is highly competitive and subject to rapid technological change and we may not have the resources necessary to successfully compete.

     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, as well as 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 by others could result in a delay of or decrease in sales of existing products, as customers evaluate these new products. Our future success will depend on our ability to compete effectively against current technologies, as well as to respond effectively to technological advances.

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 level, quantity or quality of the service and support for xMAP products, there is a risk that the perceived quality of our xMAP products will be diminished in the marketplace. Likewise, Luminex 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.

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

     We are actively seeking a new Chief Executive Officer and have been engaged in this process since the fourth quarter of 2002. Thomas W. Erickson was hired in September 2002 to serve as Interim President and Chief Executive Officer while the Management Evaluation and Search Committee sought a new chief executive officer. Mr. Erickson is currently under contract with us through June 30, 2004 and upon hiring a new chief executive officer, his agreement is cancellable with ten days notice by Luminex. In the fall of 2002, we engaged a nationally known search firm to assist the board of directors in selecting a new chief executive officer and since September 2003, the Company has had two search firms engaged in the search. The results of the strategic study completed in 2003 coupled with a refinement and focus of efforts have provided a more concise framework from which to identify qualified candidates. Although no assurances can be given, we have identified a lead candidate for chief executive officer and hope to fill this position in the near future.

     We depend on the principal members of our management and scientific staff, including our 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, 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 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 expect our operating results to continue to fluctuate significantly from quarter to quarter.

     The sale of bioassay testing devices typically involves a significant technical evaluation and commitment of capital by customers. Accordingly, the sales cycle associated with our products typically is lengthy and subject to a number of significant risks, including customers’ budgetary constraints, regulatory approval and internal acceptance reviews that 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 assay development; second, instruments for sales force demonstrations; and finally, instruments for resale to their customers. As a result, most of our system placements 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.

We have only produced our products in limited quantities and we may experience problems in scaling up 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 up 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. We have non-cancellable purchase requirements with certain of our components suppliers which require us to take delivery of a minimum number of component parts for our products or the cost per unit will increase, which would adversely impact our gross margin. We are not otherwise committed to scheduled purchase requirements. However, 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. The effort to manage our inventory, coupled with increasing sales during 2003, placed a constraint on our ability to adequately and timely produce systems for sale. We recently increased our flexibility to purchase strategic components within shorter lead times by entering into supply agreements with the suppliers of these

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components. We have taken steps to increase our manufacturing capacity, primarily by increasing the size of our component orders, in response to the increase in demand for our systems. While 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 production continue to fluctuate, we could incur additional costs associated with either expediting or postponing delivery of those materials.

     We have recently 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:

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the possibility that one or more of our suppliers or our assemblers that do not have supply agreements with the Company could terminate their services at any time without penalty;

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the potential inability of our suppliers to obtain required components;

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

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reduced control over pricing, quality and timely delivery due to the difficulties in switching to alternate suppliers or assemblers; and

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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.

Because we receive revenues principally from life sciences companies, the capital spending policies of these entities have a significant effect on the demand for our products.

     Our customers 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 customers.

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 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.

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     We have obtained 19 patents in the United States and one in Japan directed to various aspects and applications of our technology. We have 24 pending applications in the United States and 23 in 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 new 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 divert management’s attention from other business concerns. If we lose, we may 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 on 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 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 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 covers certain testing agents and certain methods of their use. Dr. Tripatzis has publicly stated his belief that his European patent covers aspects of our technology if practiced in Europe. This European patent expires in November 2004. We cannot assure you that a dispute with Dr. Tripatzis will not arise involving our European activities or that any dispute with him will be resolved in our favor.

If we fail to comply with the extensive 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 Food and Drug Administration in the United States and by similar agencies in other countries. Some of our products and products based on our technology expected to be produced by our strategic partners for in vitro

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diagnostic purposes are subject to approval or clearance by the FDA prior to marketing for commercial use. To date, only four strategic partners have obtained such approvals or clearances. 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, we are also required to comply with FDA requirements relating to laser safety.

     Approved or cleared products are subject to continuing FDA requirements relating to, among others, quality control and quality assurance, maintenance of records and documentation, adverse event and other reporting, and labeling and promotion 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 enforcement action, including 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. The number and scope of these requirements are increasing. Failure to comply with applicable federal, state and foreign medical device laws and regulations may harm our business, financial condition and results of operations. 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 Council Directive 98/79 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 Council Directive IVDD 98/79/EC as of December 7, 2003. Subsequent audits are carried out at six month intervals to ensure we maintain our system in substantial compliance with ISO standards. Failure to maintain compliance with FDA and EU regulations and ISO registration and other medical device laws 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. While 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.

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

     With the current events in the Middle East and continuing concern for future terrorist attacks, there exist many economic and political uncertainties. 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:

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general economic conditions and interest rates;

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instability in the United States and other financial markets and the possibility of war, other armed hostilities or further acts of terrorism in the United States or elsewhere;

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actual or anticipated variations in quarterly operating results from historical results or estimates of results prepared by securities analysts;

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announcements of technological innovations or new products or services by us or our competitors;

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changes in financial estimates by securities analysts;

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

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

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additions or departures of key personnel; and

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sales of our common stock.

     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.

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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 the majority of our investments are in short-term instruments held to maturity. A 50 basis point fluctuation from average investment returns at March 31, 2004 yields an approximate 50% variance in overall investment return. Due to the nature of our short-term investments, we have concluded that there is no material market risk exposure. All payments for our products, including sales to foreign customers, 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.

ITEM 4. CONTROLS AND PROCEDURES

     Under the supervision and with the participation of our senior management, including our Interim President and Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Report. Based on that evaluation, our Interim President and Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures effectively and timely provide them with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Exchange Act. There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 2. CHANGES IN SECURITIES; USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY SHARES

     (c) During the first quarter of 2004, we issued 280,424 shares of the Company’s common stock pursuant to the exercise of options granted to our directors, employees and consultants pursuant to our 1996 Stock Option Plan for exercise prices ranging from $3.92 to $5.88 per share. These shares were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933 set forth in Section 4(2) or Rule 701 thereof.

     (e) No repurchases of equity shares were made during the quarter covered by this report.

ITEM 5. OTHER INFORMATION

Audit Committee Matters.

Section 10A(i)(1) of the Exchange Act, as added by Section 202 of the Sarbanes-Oxley Act of 2002, requires that the Company’s Audit Committee (or one or more designated members of the Audit Committee who are independent directors of the Company’s board of directors) pre-approve all audit and non-audit services provided to the Company by its external auditor, Ernst & Young LLP. Section 10A(i)(2) of the Exchange Act further requires that the Company disclose in its periodic reports required by Section 13(a) of the Exchange Act and non-audit services approved by the Audit Committee to be performed by Ernst & Young.

Consistent with the foregoing requirements, during the first quarter, the Company’s Audit Committee pre-approved the engagement of Ernst & Young for audit and audit-related services, as defined by the SEC, for assistance with (1) the audit of the Company’s financial statements and internal controls for the year ended December 31, 2004; and (2) the review of the Company’s financial statements for the first three quarters of 2004. During the first quarter, the Company’s Audit Committee also pre-approved non-audit-related services to be provided by Ernst & Young comprised of tax compliance and consulting services.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits:

(b)

Reports on Form 8-K:

     A Current Report on Form 8-K was filed on February 4, 2004 relating to the Company’s February 4, 2004 press release announcing the Company’s financial results for the quarter ended December 31, 2003.

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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, on May 10, 2004.

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