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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


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, 2003

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 Number: 0-27316

Molecular Devices Corporation

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 94-2914362
(I.R.S. Employer Identification No.)

1311 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices, including zip code)

(408) 747-1700
(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   o

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

As of  9, 2003, 15,294,995 shares of the Registrants Common Stock, $.001
par value, were outstanding.





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TABLE OF CONTENTS



|                              |                                                                    |  |  |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|ITEM 1. FINANCIAL STATEMENTS 
|                              | CONDENSED CONSOLIDATED BALANCE SHEETS                             
|                              | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                   
|                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                   
|                              | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS              
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|                              | ITEM 4. CONTROLS AND PROCEDURES.                                  
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                         
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                          
|SIGNATURE                    
|CERTIFICATIONS               
|EXHIBIT INDEX                
|EXHIBIT 99.1                 



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MOLECULAR DEVICES CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003

INDEX

|               |  |                                                      |  |  |    |        |    | 
|-------------- |  | ---------------------------------------------------- |  |  | -- | ------ | -- | 
|               |  |                                                      |  |  |    | PAGE  
|               |  |                                                      |  |  |    | NUMBER
|               |  |                                                      |  |  |    |       
|PART I         |  | FINANCIAL INFORMATION                                |  |  |    |       
|ITEM 1         |  | FINANCIAL STATEMENTS                                 |  |  |    |       
|               |  | CONDENSED CONSOLIDATED BALANCE SHEETS                |  |  |    |       
|               |  | March 31, 2003 and December 31, 2002                 |  |  | 3  |       
|               |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS      |  |  |    |       
|               |  | Three Months Ended March 31, 2003 and 2002           |  |  | 4  |       
|               |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      |  |  |    |       
|               |  | Three Months Ended March 31, 2003 and 2002           |  |  | 5  |       
|               |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |  |  | 6  |       
|ITEM 2         |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL    |  |  |    |       
|               |  | CONDITION AND RESULTS OF OPERATIONS                  |  |  | 11 |       
|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 AND REPORTS ON FORM 8-K        |  |  | 26 |       
|SIGNATURE      |  |                                                      |  |  |    |        | 27 | 
|CERTIFICATIONS |  |                                                      |  |  |    |        | 28 | 

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts, unaudited)

|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                                                                                                                                             |                                            |                           |         | March 31, |         | December 31,
|                                     |                                                                                                                                                                                                             |                                            |                           |         | 2003      |         | 2002        
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |             
|ASSETS:                              |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |        
|                                     | Current assets:                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |        
|                                     |                                                                                                                                                                                                             | Cash and cash equivalents                  |                           | $       | 46,090    |         |              | $       | 43,733  |        
|                                     |                                                                                                                                                                                                             | Short-term investments                     |                           |         | 9,218     |         |              |         | 10,050  |        
|                                     |                                                                                                                                                                                                             | Accounts receivable, net                   |                           |         | 23,074    |         |              |         | 26,443  |        
|                                     |                                                                                                                                                                                                             | Inventories                                |                           |         | 17,216    |         |              |         | 17,722  |        
|                                     |                                                                                                                                                                                                             | Deferred tax assets                        |                           |         | 4,956     |         |              |         | 5,230   |        
|                                     |                                                                                                                                                                                                             | Other current assets                       |                           |         | 2,155     |         |              |         | 1,770   |        
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        
|                                     |                                                                                                                                                                                                             |                                            | Total current assets      |         |           | 102,709 |              |         |         | 104,948 | 
|                                     | Equipment and leasehold improvements, net                                                                                                                                                                   |                                            |                           | 10,803  |           |         |              | 10,943  |        
|                                     | Goodwill                                                                                                                                                                                                    |                                            |                           | 26,017  |           |         |              | 26,017  |        
|                                     | Other assets                                                                                                                                                                                                |                                            |                           | 20,506  |           |         |              | 20,993  |        
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        
|                                     |                                                                                                                                                                                                             |                                            | Total assets              |         | $         | 160,035 |              |         | $       | 162,901 | 
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |        
|                                     | Current liabilities:                                                                                                                                                                                        |                                            |                           |         |           |         |              |         |        
|                                     |                                                                                                                                                                                                             | Accounts payable                           |                           | $       | 2,414     |         |              | $       | 2,863   |        
|                                     |                                                                                                                                                                                                             | Accrued liabilities                        |                           |         | 7,106     |         |              |         | 12,971  |        
|                                     |                                                                                                                                                                                                             | Deferred revenue                           |                           |         | 4,563     |         |              |         | 4,263   |        
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        
|                                     |                                                                                                                                                                                                             |                                            | Total current liabilities |         |           | 14,083  |              |         |         | 20,097  | 
|Stockholders equity:                |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |        
|                                     | Preferred stock, $.001 par value; 3,000,000 shares
authorized, no shares issued or outstanding at
March 31, 2003 and December 31, 2002, respectively                                                        |                                            |                           |        |           |         |              |        |        
|                                     | Common stock, $.001 par value; 60,000,000 shares
authorized; 15,607,192 and 15,555,190 shares
issued and 15,364,894 and 15,312,892 shares
outstanding at March 31, 2003 and December 31,
2002, respectively |                                            |                           | 15      |           |         |              | 15      |        
|                                     | Additional paid-in capital                                                                                                                                                                                  |                                            |                           | 184,264 |           |         |              | 181,773 |        
|                                     | Treasury stock, at cost; 242,298 shares at March 31,
2003 and December 31, 2002                                                                                                                             |                                            |                           | (4,632  | )         |         |              | (4,632  | )      
|                                     | Accumulated deficit                                                                                                                                                                                         |                                            |                           | (33,128 | )         |         |              | (33,848 | )      
|                                     | Accumulated other comprehensive loss                                                                                                                                                                        |                                            |                           | (567    | )         |         |              | (504    | )      
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        
|                                     |                                                                                                                                                                                                             | Total stockholders equity                 |                           |         | 145,952   |         |              |         | 142,804 |        
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        
|                                     |                                                                                                                                                                                                             | Total liabilities and stockholders equity |                           | $       | 160,035   |         |              | $       | 162,901 |        
|                                     |                                                                                                                                                                                                             |                                            |                           |         |           |         |              |         |         |        

The accompanying notes are an integral part of these statements.

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MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)

|                                                      |                                     |                          |        |                    |        |      |        |       |        | 
|----------------------------------------------------- | ----------------------------------- | ------------------------ | ------ | ------------------ | ------ | ---- | ------ | ----- | ------ | 
|                                                      |                                     |                          |        | Three Months Ended
|                                                      |                                     |                          |        | March 31,         
|                                                      |                                     |                          |        |                   
|                                                      |                                     |                          |        | 2003               |        | 2002
|                                                      |                                     |                          |        |                    |        |     
|REVENUES                                              |                                     | $                        | 24,550 |                    |        | $    | 20,625 |      
|COST OF REVENUES                                      |                                     |                          | 9,528  |                    |        |      | 8,050  |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|GROSS PROFIT                                          |                                     |                          | 15,022 |                    |        |      | 12,575 |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|OPERATING EXPENSES:                                   |                                     |                          |        |                    |        |      |        |      
|                                                      | Research and development            |                          |        | 4,659              |        |      |        | 4,121 |       
|                                                      | Selling, general and administrative |                          |        | 9,639              |        |      |        | 7,584 |       
|                                                      |                                     |                          |        |                    |        |      |        |      
|                                                      |                                     | Total operating expenses |        |                    | 14,298 |      |        |       | 11,705 | 
|                                                      |                                     |                          |        |                    |        |      |        |      
|INCOME FROM OPERATIONS                                |                                     |                          | 724    |                    |        |      | 870    |      
|Other income, net                                     |                                     |                          | 306    |                    |        |      | 296    |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|INCOME BEFORE INCOME TAXES                            |                                     |                          | 1,030  |                    |        |      | 1,166  |      
|Income tax provision                                  |                                     |                          | (309   | )                  |        |      | (443   | )    
|                                                      |                                     |                          |        |                    |        |      |        |      
|NET INCOME                                            |                                     | $                        | 721    |                    |        | $    | 723    |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|BASIC NET INCOME PER SHARE                            |                                     | $                        | 0.05   |                    |        | $    | 0.05   |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|DILUTED NET INCOME PER SHARE                          |                                     | $                        | 0.05   |                    |        | $    | 0.05   |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|SHARES USED IN COMPUTING BASIC NET INCOME PER SHARE   |                                     |                          | 15,343 |                    |        |      | 15,432 |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|SHARES USED IN COMPUTING DILUTED NET INCOME PER
SHARE |                                     |                          | 15,402 |                    |        |      | 15,576 |      
|                                                      |                                     |                          |        |                    |        |      |        |      

The accompanying notes are an integral part of these statements.

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MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

|                                                                                  |  |                                                                                |                          |   |                    |        |        |   |     |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------ | ------------------------ | - | ------------------ | ------ | ------ | - | --- | ------ | -
|                                                                                  |  |                                                                                |                          |   | Three Months Ended
|                                                                                  |  |                                                                                |                          |   | March 31,         
|                                                                                  |  |                                                                                |                          |   |                   
|                                                                                  |  |                                                                                |                          |   | 2003               |        | 2002  
|                                                                                  |  |                                                                                |                          |   |                    |        |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                                                                |                          |   |                    |        |        |  
|Net income                                                                        |  | $                                                                              | 721                      |   |                    | $      | 723    |  
|Adjustments to reconcile net income to net
cash provided by operating activities: |  |                                                                                |                          |   |                    |        |        |  
|                                                                                  |  | Depreciation and amortization                                                  |                          |   | 1,274              |        |        |   | 876 |       
|                                                                                  |  | Amortization of deferred compensation                                          |                          |   |                   |        |        |   | 27  |       
|                                                                                  |  | Amortization of developed technology and patents                               |                          |   | 95                 |        |        |   | 47  |       
|                                                                                  |  | Income tax benefit realized as a result of employee
exercises of stock options |                          |   | 1,886              |        |        |   |    |       
|                                                                                  |  | (Increase) decrease in assets:                                                 |                          |   |                    |        |        |   |    
|                                                                                  |  |                                                                                | Accounts receivable, net |   |                    | 3,379  |        |   |     | 2,065  |  
|                                                                                  |  |                                                                                | Inventories              |   |                    | 102    |        |   |     | (9     | )
|                                                                                  |  |                                                                                | Deferred tax assets      |   |                    | 272    |        |   |     | 719    |  
|                                                                                  |  |                                                                                | Other current assets     |   |                    | (383   | )      |   |     | 28     |  
|                                                                                  |  | Increase (decrease) in liabilities:                                            |                          |   |                    |        |        |   |    
|                                                                                  |  |                                                                                | Accounts payable         |   |                    | (438   | )      |   |     | (85    | )
|                                                                                  |  |                                                                                | Accrued liabilities      |   |                    | (5,879 | )      |   |     | (2,040 | )
|                                                                                  |  |                                                                                | Deferred revenue         |   |                    | 311    |        |   |     | (379   | )
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|Net cash provided by operating activities                                         |  |                                                                                | 1,340                    |   |                    |        | 1,972  |  
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                                                                |                          |   |                    |        |        |  
|Purchases of short-term investments                                               |  |                                                                                | (3,365                   | ) |                    |        | (5,981 | )
|Proceeds from sales and maturities of short-term investments                      |  |                                                                                | 4,197                    |   |                    |        | 4,965  |  
|Capital expenditures                                                              |  |                                                                                | (737                     | ) |                    |        | (852   | )
|(Increase)
decrease in other assets                                               |  |                                                                                | 393                      |   |                    |        | (68    | )
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|Net cash provided by (used in) investing activities                               |  |                                                                                | 488                      |   |                    |        | (1,936 | )
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                                                                |                          |   |                    |        |        |  
|Issuance of common stock, net                                                     |  |                                                                                | 605                      |   |                    |        | 128    |  
|Purchase of treasury stock                                                        |  |                                                                                |                         |   |                    |        | (4,472 | )
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|Net cash provided by (used in) financing activities                               |  |                                                                                | 605                      |   |                    |        | (4,344 | )
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                           |  |                                                                                | (76                      | ) |                    |        | 376    |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                                                                | 2,357                    |   |                    |        | (3,932 | )
|Cash and cash equivalents at beginning of period                                  |  |                                                                                | 43,733                   |   |                    |        | 56,372 |  
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  
|Cash and cash equivalents at end of period                                        |  | $                                                                              | 46,090                   |   |                    | $      | 52,440 |  
|                                                                                  |  |                                                                                |                          |   |                    |        |        |  

The accompanying notes are an integral part of these statements.

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MOLECULAR DEVICES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Description of Business and Basis of Presentation

Molecular Devices Corporation (Molecular Devices, we, or our), a Delaware
corporation, is principally involved in the design, development, manufacture,
sale and service of bioanalytical measurement systems for life sciences and
drug discovery applications. The principal markets for our products include
leading pharmaceutical and biotechnology companies as well as medical centers,
universities, government research laboratories and other institutions
throughout the world.

We operate in a single industry segment: the design, development, sale and
service of bioanalytical measurement systems for drug discovery and life
sciences research applications.

The condensed consolidated financial statements included herein have been
prepared in accordance with the published rules and regulations of the
Securities and Exchange Commission (SEC) applicable to interim financial
information. Certain information and footnote disclosures included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in these interim statements as allowed by such SEC
rules and regulations. However, we believe that the disclosures are adequate to
make the information presented not misleading. The unaudited condensed
consolidated financial statements included in this Form 10-Q should be read in
conjunction with the audited consolidated financial statements and notes
thereto for the fiscal year ended December 31, 2002, included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, filed with the
SEC on March 27, 2003.

The unaudited condensed consolidated financial statements include the accounts
of Molecular Devices and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. The unaudited condensed
consolidated financial statements contained herein reflect all adjustments
(which include only normal, recurring adjustments), which are, in the opinion
of management, necessary to state fairly the results for the periods presented.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. The results for the three-month period ended March 31, 2003 are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2003.

Note 2. Recent Accounting Pronouncements

In November 2002, the FASB released FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 establishes new
disclosure and liability-recognition requirements for direct and indirect debt
guarantees with specified characteristics. The initial measurement and
recognition requirements of FIN 45 are effective prospectively for guarantees
issued or modified after December 31, 2002. However, the disclosure
requirements are effective for interim and annual financial-statement periods
ending after December 15, 2002. We have adopted the disclosure provisions
effective December 31, 2002 and do not expect the full adoption of FIN 45 to
have a material impact on our financial position or results of operations.
(See Note 9).

Note 3. Stock Based Compensation

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS No. 123 (SFAS
148). This statement amends SFAS 123 to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The transition and annual disclosure requirements of SFAS 148 were
first effective for

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our 2002 fiscal year. The interim disclosure requirements are effective for the
first quarter of fiscal year 2003. We continue to account for stock-based
compensation using APB 25 and have not adopted the recognition provisions of
SFAS 123, as amended by SFAS 148. We do not expect the adoption of SFAS 148 to
have material impact on our financial position or results of operations. If we
had elected to recognize compensation cost based on the fair value of the
options granted at the grant date as prescribed by SFAS 123, net income and
earnings per share would have been reduced to the pro forma amounts indicated
in the table below (in thousands, except per share amounts):

|                                                                                    |                        |   |                    |       |      |   |        |       |  
|----------------------------------------------------------------------------------- | ---------------------- | - | ------------------ | ----- | ---- | - | ------ | ----- | -
|                                                                                    |                        |   | Three Months Ended
|                                                                                    |                        |   | March 31,         
|                                                                                    |                        |   |                   
|                                                                                    |                        |   | 2003               |       | 2002
|                                                                                    |                        |   |                    |       |     
|Net income  as reported                                                            |                        | $ | 721                |       |      | $ | 723    |      
|Stock based compensation expense determined
using the fair value method, net of tax |                        |   | 2,131              |       |      |   | 1,972  |      
|                                                                                    |                        |   |                    |       |      |   |        |      
|Net loss  pro forma                                                                |                        | $ | (1,410             | )     |      | $ | (1,249 | )    
|                                                                                    |                        |   |                    |       |      |   |        |      
|Net income/(loss) per share:                                                        |                        |   |                    |       |      |   |        |      
|                                                                                    | Basic  as reported    |   | $                  | 0.05  |      |   | $      | 0.05  |  
|                                                                                    | Basic  pro forma      |   | $                  | (0.08 | )    |   | $      | (0.08 | )
|                                                                                    | Diluted   as reported |   | $                  | 0.05  |      |   | $      | 0.05  |  
|                                                                                    | Diluted   pro forma   |   | $                  | (0.09 | )    |   | $      | (0.08 | )

The fair value of each option is estimated on the date of grant using Black
Scholes option-pricing model with the following assumptions:

|                                |  |                    |           |      |  |  |           |  
|------------------------------- |  | ------------------ | --------- | ---- |  |  | --------- | -
|                                |  | Three Months Ended
|                                |  | March 31,         
|                                |  |                   
|                                |  | 2003               |           | 2002
|                                |  |                    |           |     
|Expected dividend yield         |  |                    | 0         | %    |  |  | 0         | %
|Expected stock price volatility |  |                    | 82        | %    |  |  | 92        | %
|Risk-free interest rate         |  |                    | 3.06      |      |  |  | 4.42      |  
|Expected life of options        |  |                    | 6.2 years |      |  |  | 5.4 years |  

Note 4. Balance Sheet Components
(in thousands)

|                     |                                            |   |           |       |              |   |        |       | 
|-------------------- | ------------------------------------------ | - | --------- | ----- | ------------ | - | ------ | ----- | 
|                     |                                            |   | March 31, |       | December 31,
|                     |                                            |   | 2003      |       | 2002        
|                     |                                            |   |           |       |             
|Inventories:         |                                            |   |           |       |              |   |        |      
|                     | Raw materials                              |   | $         | 6,260 |              |   | $      | 6,462 | 
|                     | Work-in-process                            |   |           | 1,406 |              |   |        | 1,840 | 
|                     | Finished goods and demonstration equipment |   |           | 9,550 |              |   |        | 9,420 | 
|                     |                                            |   |           |       |              |   |        |       | 
|                     |                                            | $ | 17,216    |       |              | $ | 17,722 |      
|                     |                                            |   |           |       |              |   |        |       | 
|Accrued liabilities: |                                            |   |           |       |              |   |        |      
|                     | Accrued income tax                         |   | $         | 594   |              |   | $      | 3,060 | 
|                     | Warranty accrual                           |   |           | 1,276 |              |   |        | 1,295 | 
|                     | Accrued compensation                       |   |           | 2,298 |              |   |        | 4,610 | 
|                     | Other                                      |   |           | 2,938 |              |   |        | 4,006 | 
|                     |                                            |   |           |       |              |   |        |       | 
|                     |                                            | $ | 7,106     |       |              | $ | 12,971 |      
|                     |                                            |   |           |       |              |   |        |       | 

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Note 5. Goodwill and Purchased Intangible Assets

There were no changes in goodwill during the three months ended March 31, 2003.
Purchased intangible assets not subject to amortization are comprised of
tradename, valued at $707,000 at March 31, 2003 and December 31, 2002.

Purchased intangible assets subject to amortization consist of patents and
developed technology. The net carrying value of the patents was $1,140,000 and
$1,174,000 at March 31, 2003 and December 31, 2002, respectively. The net
carrying value of developed technology was $1,358,000 and $1,395,000 at March
31, 2003 and December 31, 2002, respectively.

The estimated future amortization expense of purchased intangible assets as of
March 31, 2003 was as follows (in thousands):

|                                  |  |              |       | 
|--------------------------------- |  | ------------ | ----- | 
|                                  |  | Amortization
|For the years ending December 31, |  | Expense     
|                                  |  |             
|2003 (remaining nine months)      |  | $            | 213   | 
|2004                              |  |              | 284   | 
|2005                              |  |              | 284   | 
|2006                              |  |              | 284   | 
|2007                              |  |              | 284   | 
|2008                              |  |              | 284   | 
|Thereafter                        |  |              | 865   | 
|                                  |  |              |       | 
|                                  |  | $            | 2,498 | 
|                                  |  |              |       | 

Note 6. Net Income Per Share

Basic net income per share is computed using the weighted average number of
shares of common stock outstanding and diluted net income per share is computed
using the weighted average number of shares of common stock outstanding and
dilutive common equivalent shares from outstanding stock options (using the
treasury stock method), when dilutive. Computation of earnings per share is as
follows (in thousands, except per share amounts):

|                                                                                                                 |  |                    |        |      |  |   |        | 
|---------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                                                                                                 |  | Three Months Ended
|                                                                                                                 |  | March 31,         
|                                                                                                                 |  |                   
|                                                                                                                 |  | 2003               |        | 2002
|                                                                                                                 |  |                    |        |     
|Net income                                                                                                       |  | $                  | 721    |      |  | $ | 723    | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|Denominator for basic earnings per share  weighted average common
shares outstanding                            |  |                    | 15,343 |      |  |   | 15,432 | 
|Effect of dilutive securities  employee stock options                                                           |  |                    | 59     |      |  |   | 144    | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|Denominator for diluted earnings per share  weighted average common
shares outstanding plus dilutive securities |  |                    | 15,402 |      |  |   | 15,576 | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|Basic net income per share                                                                                       |  | $                  | 0.05   |      |  | $ | 0.05   | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|Diluted net income per share                                                                                     |  | $                  | 0.05   |      |  | $ | 0.05   | 
|                                                                                                                 |  |                    |        |      |  |   |        | 

For the three month periods ended March 31, 2003 and 2002, the total number of shares excluded
from the calculations of diluted net income per share was 2,657,788 and 2,064,084, respectively, as the
weighted-average exercise price of outstanding stock

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options was greater than the average market price of the common shares and,
therefore, the effect would have been anti-dilutive.

Note 7. Comprehensive Income

Comprehensive income, net of tax, was approximately $784,000 and $1.0 million
for the three-month periods ended March 31, 2003 and 2002, respectively. The
differences between reported net income and comprehensive income are
principally comprised of changes in accumulated foreign currency translation,
which is recorded in stockholders equity.

Note 8. Legal Proceeding

On April 16, 2002, Caliper Technologies Corporation (Caliper) filed a patent
infringement lawsuit against us alleging that our IMAP assay kits infringe U.S.
patents held by Caliper. We believe that none of our products infringe any
claim of the Caliper patents. On  8, 2002, we filed an answer and
counter-claim to Calipers lawsuit denying all allegations of infringement,
setting forth certain affirmative defenses and making a counter-claim for
declaratory relief that, among other things, we are not infringing and have not
infringed any valid and enforceable claim of the Caliper patents and that the
Caliper patents are invalid. Caliper has also brought a motion for preliminary
injunction, expected to be decided in the second half of 2003 after the claims
of the Caliper patents are construed by the court. We have filed our
opposition to this motion. If Caliper were to prevail in this motion, we may be
prohibited from selling IMAP assay kits until completion of the litigation,
which may take several additional months. If we do not prevail in litigation,
we may be prohibited permanently from selling IMAP assay kits.

Note 9. Guarantees

Under our charter, we have agreed to indemnify any person who is made a party
to any action or threatened with any action as a result of such persons
serving or having served as an officer or director of Molecular Devices or
having served, at our request, as an officer or director of another company.
The indemnification does not apply if the person is determined not to have
acted in good faith in the reasonable belief that his or her actions were in
the best interests of Molecular Devices. The maximum potential amount of
future payments that we could be required to make under the charter provision
and the corresponding indemnification agreements is unlimited; however, we have
Director and Officer insurance policies that, in most cases, would limit our
exposure and enable us to recover a portion of any future amounts paid. The
estimated fair value of these indemnification provisions is minimal. Most of
these indemnification provisions were grandfathered under the provisions of FIN
45 as they were in effect prior to December 31, 2002. Accordingly, we have no
liabilities recorded for these provisions as of March 31, 2003.

We enter into indemnification provisions under our agreements with other
companies in the ordinary course of business, typically with business partners,
contractors, clinical sites and customers. Under these provisions we generally
indemnify and hold harmless the indemnified party for losses suffered or
incurred by the indemnified party as a result of our activities. These
indemnification provisions generally survive termination of the underlying
agreement. The maximum potential amount of future payments we could be
required to make under these indemnification provisions is unlimited. We have
not incurred material costs to defend lawsuits or settle claims related to
these indemnification agreements. As a result, the estimated fair value of
these agreements is minimal. Accordingly, we have no liabilities recorded for
these agreements as of March 31, 2003.

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At the time of sale, we record an estimate for warranty costs that may be
incurred under product warranties. Warranty expense and activity are estimated
based on historical experience. The warranty accrual is evaluated periodically
and adjusted for changes in experience. Changes in the warranty liability
during the three months ended March 31, 2003 were as follows (in thousands):

|                                                   |  |   |       |  
|-------------------------------------------------- |  | - | ----- | -
|Balance December 31, 2002                          |  | $ | 1,295 |  
|New warranties issued during the period            |  |   | 281   |  
|Cost of warranties incurred during the period      |  |   | (300  | )
|Changes in liabilities for pre existing warranties |  |   |      |  
|                                                   |  |   |       |  
|Balance March 31, 2003                             |  | $ | 1,276 |  
|                                                   |  |   |       |  

Note 10. Subsequent Event

In  2003, we repurchased
approximately 105,000 shares of our common stock for approximately
$1.5 million.

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

Except for the historical information contained herein, the following
discussion contains forward-looking statements. For this purpose, any
statements that are not statements of historical fact may be deemed to be
forward-looking statements. Words such as believes, anticipates, plans,
predicts, expects, estimates, intends, will, continue, may,
potential, should and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause our results to differ materially from those indicated by these
forward-looking statements, including, among others, those discussed below and
under the caption Factors that  Affect Future Results, as well as those
identified in our Annual Report on Form 10-K for the year ended December 31,
2002 filed with the SEC on March 27, 2003.

The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part
I  Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Managements Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
2002 contained in our Annual Report on Form 10-K for the year ended December
31, 2002 filed with the SEC on March 27, 2003, including, in particular, the
discussion of Critical Accounting Policies included therein. The results for
the first three months of 2003 are not necessarily indicative of the results to
be expected for the entire fiscal year ending December 31, 2003.

RESULTS OF OPERATIONS  THREE MONTHS ENDED MARCH 31, 2003 AND 2002

REVENUES. Revenues for the first quarter of 2003 were $24.6 million, an
increase of $4.0 million, or 19%, as compared to the first quarter of 2002.
Our revenues are split into two product families. The Drug Discovery product
family, which includes cell analysis and high-throughput screening, or HTS,
systems, consists of IonWorks HT, FLIPR®, CLIPR, Analyst®, Discovery-1 and
Cytosensor® systems. The Life Sciences Research product family, which includes
bench top detection and liquid handling products, consists of Maxline,
Skatron, MetaMorph and Threshold® products. The Drug Discovery product family
experienced an increase in revenues of 20% compared with the first quarter of
2002 due to increases in the FLIPR and Analyst product lines, as well as the
IonWorks and Discovery-1 contributions that were not present in the first
quarter of 2002. The Life Sciences Research product family generated an 18%
increase in revenues compared with the first quarter of 2002, primarily due to
contributions from the MetaMorph product line that were not present in the
first quarter of 2002, as well as growth in Threshold products.

GROSS MARGIN. Gross margin was flat at 61% for the quarters ended March 31,
2003 and 2002.

RESEARCH AND DEVELOPMENT. Research and development expenses in the first
quarter of 2003 increased by 13% to $4.7 million (19% of revenues) from $4.1
million (20% of revenues) in the first quarter of 2002. This increase was
primarily due to the inclusion of the research and development activities of
Universal Imaging Corporation (UIC), which we acquired in June 2002.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses in the first quarter of 2003 increased by 27% to $9.6 million (39% of
revenues) from $7.6 million (37% of revenues) in the first quarter of 2002.
This increase was due to incremental UIC expenses, the negative impact of
foreign exchange rates on expenses related to our European sales and service
offices, and variable selling costs associated with higher revenues.

OTHER INCOME (NET). Other income (net) was essentially flat at $306,000 in the
first quarter of 2003 compared to $296,000 in the first quarter of 2002
primarily due to the continuing low interest rates currently available for
short-term investments.

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INCOME TAX PROVISION. We recorded an income tax provision of $309,000 for the
first quarter of 2003 compared to $443,000 in the first quarter of 2002. The
tax provision for the first quarter of 2003 was based on an 30% effective tax
rate, down from 38% in the first quarter of 2002. The decrease in the
effective tax rate for the first quarter of 2003 was largely due to the usage of
loss carryforwards in foreign jurisdictions.

Critical Accounting Policies

The process of preparing financial statements requires the use of estimates on
the part of management. The estimates used by management are based on our
historical experiences combined with managements understanding of current
facts and circumstances. Certain of our accounting policies are considered
critical as they are both important to the portrayal of our financial condition
and results and require significant or complex judgment on the part of
management. For our critical accounting policies and estimates, refer to our
Annual Report on Form 10-K for the year ended December 31, 2002 filed with the
Securities and Exchange Commission on March 27, 2003. There have been no
changes in any of our accounting policies since December 31, 2002.

Liquidity and Capital Resources

We had cash, cash equivalents and short-term investments of approximately $55.3
million at March 31, 2003 compared to $53.8 million at December 31, 2002.
Operating activities in the first three months of 2003 provided approximately
$1.3 million of cash primarily due to net income, decreases in accounts
receivable and the income tax benefit associated with the exercise of employee
stock options, partially offset by a decrease in accrued liabilities.

We generated $488,000 of cash from investing activities in the first three
months of 2003, primarily due to $832,000 in net proceeds received from the
sale and maturity of short-term investments and $393,000 reduction in other
assets, both of which were offset by $737,000 in capital expenditures.

In the first three months of 2003, cash provided by financing activities of
$605,000 consisted of amounts received for the issuance of common stock under
our employee stock option and purchase plans. The timing of and amounts
received under our employee stock option and purchase plans are determined by
the decisions of the respective option or rights holders, and are not
controlled by us. Therefore, funds raised from the issuance of common stock
under our employee stock option and purchase plans should not be considered an
indication of additional funds to be raised in future periods. Additionally,
as of March 31, 2003, approximately 1.3 million shares remain available for repurchase under the
stock repurchase program approved by our Board of Directors in October 2001.

Our ability to generate our anticipated cash flow from operations is subject to
the risks and uncertainties discussed below under Factors That  Affect
Future Results, including in particular, variations in the amount of time it
takes for us to sell our products and collect accounts receivable, and the
timing of customer orders, competition, risks associated with the
pharmaceutical and biotechnology industries, supplier or
manufacturing problems,
or delays and risks associated with past and potential future acquisitions.

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We believe that our existing cash and investment securities and anticipated
cash flow from our operations will be sufficient to support our current
operating plan for the foreseeable future.

Our forecast of the period of time through which our financial resources will
be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of
a number of factors. We have based this estimate on our current plans which may
change and assumptions that may prove to be wrong. Our future capital
requirements will depend on many factors, including:



| |  | the progress of our research and development;                                                                  
|- |  | ---------------------------------------------------------------------------------------------------------------
| 
| |  | the number and scope of our research programs;                                                                 
| 
| |  | market acceptance and demand for our products;                                                                 
| 
| |  | the costs that may be involved in enforcing our patent claims and other
intellectual property rights;          
| 
| |  | potential acquisition and technology licensing opportunities;                                                  
| 
| |  | the costs associated with repurchasing shares of our common stock;                                             
| 
| |  | manufacturing capacity requirements; and                                                                       
| 
| |  | the costs of expanding our sales, marketing and distribution capabilities
both in the United States and abroad.

We have generated sufficient cash flow to fund our capital requirements
primarily though operating and financing activities over the last three years.
However, we cannot assure you that we will not require additional financing in
the future to support our existing operations or potential acquisition and
technology licensing opportunities that may arise. Therefore, we may in the
future seek to raise additional funds through bank facilities, debt or equity
offerings or other sources of capital. Additional financing may not be
available on favorable terms or at all and may be dilutive to our then-current
stockholders.

Our cash and investments policy emphasizes liquidity and preservation of
principal over other portfolio considerations. We select investments that
maximize interest income to the extent possible given these two constraints. We
satisfy liquidity requirements by investing excess cash in securities with
different maturities to match projected cash needs and limit concentration of
credit risk by diversifying our investments among a variety of high
credit-quality issuers.

Factors That  Affect Future Results

Our business faces significant risks and the risks described below may not be
the only risks we face. Additional risks that we do not know of or that we
currently think are immaterial may also impair our business operations. If any
of the events or circumstances described in the following risks actually
occurs, our business, financial condition or results of operations could be
harmed and the trading price of our common stock could decline.

VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR US TO SELL OUR PRODUCTS AND
COLLECT ACCOUNTS RECEIVABLE AND THE TIMING OF CUSTOMER ORDERS MAY CAUSE
FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH COULD CAUSE OUR STOCK PRICE TO
DECLINE.

The timing of capital equipment purchases by customers has been and is expected
to continue to be uneven and difficult to predict. Our products represent major
capital purchases for our customers. The list prices

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for our instruments range from $5,000 to $494,500. Accordingly, our customers
generally take a relatively long time to evaluate our products, and a
significant portion of our revenues is typically derived from sales of a small
number of relatively high-priced products. Purchases are generally made by
purchase orders and not long-term contracts. Delays in receipt of anticipated
orders for our relatively high priced products could lead to substantial
variability from quarter to quarter. Furthermore, we have historically received
purchase orders and made a significant portion of each quarters product
shipments near the end of the quarter. If that pattern continues, even short
delays in the receipt of orders or shipment of products at the end of a quarter
could have a material adverse affect on results of operations for that quarter.

We expend significant resources educating and providing information to our
prospective customers regarding the uses and benefits of our products. Because
of the number of factors influencing the sales process, the period between our
initial contact with a customer and the time when we recognize revenues from
that customer, if ever, varies widely. Our sales cycles typically range from
three to six months, but can be much longer. During these cycles, we commit
substantial resources to our sales efforts in advance of receiving any
revenues, and we may never receive any revenues from a customer despite our
sales efforts.

The relatively high purchase price for a customer order contributes to
collection delays that result in working capital volatility. While the terms of
our sales orders generally require payment within 30 days of product shipment
and do not provide return rights, in the past we have experienced significant
collection delays. We cannot predict whether we will continue to experience
similar or more severe delays.

The capital spending policies of our customers have a significant effect on the
demand for our products. Those policies are based on a wide variety of factors,
including resources available to make purchases, spending priorities, and
policies regarding capital expenditures during industry downturns or
recessionary periods. Any decrease in capital spending by our customers
resulting from any of these factors could harm our business.

WE DEPEND ON ORDERS THAT ARE RECEIVED AND SHIPPED IN THE SAME QUARTER AND
THEREFORE HAVE LIMITED VISIBILITY OF FUTURE PRODUCT SHIPMENTS.

Our net sales in any given quarter depend upon a combination of orders received
in that quarter for shipment in that quarter and shipments from backlog. Our
products are typically shipped within 30 to 90 days of purchase order receipt.
As a result, we do not believe that the amount of backlog at any particular
date is indicative of our future level of sales. Our backlog at the beginning
of each quarter does not include all product sales needed to achieve expected
revenues for that quarter. Consequently, we are dependent on obtaining orders
for products to be shipped in the same quarter that the order is received.
Moreover, customers may reschedule shipments, and production difficulties could
delay shipments. Accordingly, we have limited visibility of future product
shipments, and our results of operations are subject to significant variability
from quarter to quarter.

MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER
RESOURCES THAN WE DO, AND INCREASED COMPETITION COULD IMPAIR SALES OF OUR
PRODUCTS.

We operate in a highly competitive industry and face competition from companies
that design, manufacture and market instruments for use in the life sciences
research industry, from genomic, pharmaceutical, biotechnology and diagnostic
companies and from academic and research institutions and government or other
publicly-funded agencies, both in the United States and abroad. We may not be
able to compete effectively with all of these competitors. Many of these
companies and institutions have greater financial, engineering, manufacturing,
marketing and customer support resources than we do. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
or market developments by devoting greater resources to the development,
promotion and sale of products, which could impair sales of our products.
Moreover, there has been significant merger and acquisition activity among our
competitors and potential competitors. These transactions by our competitors
and potential competitors may provide them with a competitive advantage over us
by enabling them to rapidly expand their product offerings and service
capabilities to meet a broader range of customer needs. Many of our customers
and

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potential customers are large companies that require global support and
service, which may be easier for our larger competitors to provide.

We believe that competition within the markets we serve is primarily driven by
the need for innovative products that address the needs of customers. We
attempt to counter competition by seeking to develop new products and provide
quality products and services that meet customers needs. We cannot assure you,
however, that we will be able to successfully develop new products or that our
existing or new products and services will adequately meet our customers
needs.

Rapidly changing technology, evolving industry standards, changes in customer
needs, emerging competition and frequent new product and service introductions
characterize the markets for our products. To remain competitive, we will be
required to develop new products and periodically enhance our existing products
in a timely manner. We are facing increased competition as new companies
entering the market with new technologies compete, or will compete, with our
products and future products. We cannot assure you that one or more of our
competitors will not succeed in developing or marketing technologies or
products that are more effective or commercially attractive than our products
or future products, or that would render our technologies and products obsolete
or uneconomical. Our future success will depend in large part on our ability to
maintain a competitive position with respect to our current and future
technologies, which we may not be able to do. In addition, delays in the launch
of our new products may result in loss of market share due to our customers
purchases of competitors products during any delay.

IF WE ARE NOT SUCCESSFUL IN DEVELOPING NEW AND ENHANCED PRODUCTS, WE MAY LOSE
MARKET SHARE TO OUR COMPETITORS.

The life sciences instrumentation market is characterized by rapid
technological change and frequent new product introductions. In the first three
months of 2003, 60% of our revenues were derived from the sale of products that
were introduced in the last three years, and our future success will depend on
our ability to enhance our current products and to develop and introduce, on a
timely basis, new products that address the evolving needs of our customers. We
may experience difficulties or delays in our development efforts with respect
to new products, and we may not ultimately be successful in developing or
commercializing them, which would harm our business. Any significant delay in
releasing new systems could cause our revenues to suffer, adversely affect our
reputation, give a competitor a first-to-market advantage or cause a competitor
to achieve greater market share. In addition, our future success depends on our
continued ability to develop new applications for our existing products. If we
are not able to complete the development of these applications, or if we
experience difficulties or delays, we may lose our current customers and may
not be able to attract new customers, which could seriously harm our business
and our future growth prospects.

WE MUST EXPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP NEW
PRODUCTS, AND IF THESE PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, OUR
OPERATING RESULTS MAY SUFFER.

We expect to spend a significant amount of time and resources to develop new
products and refine existing products. In light of the long product development
cycles inherent in our industry, these expenditures will be made well in
advance of the prospect of deriving revenues from the sale of new products. Our
ability to commercially introduce and successfully market new products is
subject to a wide variety of challenges during this development cycle that
could delay introduction of these products. In addition, since our customers
are not obligated by long-term contracts to purchase our products, our
anticipated product orders may not materialize, or orders that do materialize
may be canceled. As a result, if we do not achieve market acceptance of new
products, our operating results will suffer. Our products are also generally
priced higher than competitive products, which may impair commercial
acceptance. We cannot predict whether new products that we expect to introduce
will achieve commercial acceptance.

We currently anticipate that our IonWorks product family will include in the
near term our recently launched IonWorks HT system and an additional IonWorks
system based on technology acquired through the acquisition of Cytion S.A. in
2001. Our IonWorks product family may not achieve significant

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commercial acceptance or generate significant revenues within the time frame
that we have anticipated, or at all. Any such failure would adversely affect
our financial performance. In particular, we recently launched our IonWorks HT
system. This system has not achieved, and may not achieve or maintain,
significant commercial acceptance. The system could fail to obtain significant
commercial acceptance due to general economic conditions, competitive
conditions, customer concerns related to the price or performance of the
IonWorks HT system or other factors. In addition, we recently commenced the
process of transferring the production of PatchPlates, a component of our
IonWorks HT system, from the current manufacturer to in-house manufacturing.
Any problems or delays in this transfer could adversely affect the ability of
the IonWorks HT system to achieve or maintain significant commercial
acceptance. It is likely that any failure of the IonWorks HT system to achieve
commercial acceptance within the time frame that we have anticipated would
cause us to fail to meet our previously stated 2003 revenue expectations, which
would likely cause our stock price to decline.

The successful commercialization of our IonWorks product family, as well as the
achievement of the benefits of our 2001 acquisition of Cytion, will depend in
part on our ability to develop new products that include technology acquired
through the acquisition of Cytion, or enhancements thereto, in a timely and
efficient manner. Failure to develop new products in a timely and efficient
manner, or at all, may prevent us from offering first-to-market products in
segments of the electrophysiology market. As a result, we may lose customers,
and our business and results of operations may be harmed. In January 2003, we
initiated activities associated with the closure of the Cytion facility in
Switzerland and the integration of Cytions technology and operations into
operations located at our other facilities. In addition to the costs and
potential delays associated with this facility closure, the closure may
adversely impact our ability to successfully develop products that include
technology acquired through the acquisition of Cytion, or enhancements thereto.
Further, while we believe that the technology acquired through the acquisition
of Cytion complements our IonWorks HT system, we may not be able to develop and
commercialize any new products that include technology acquired through the
acquisition of Cytion and are complementary to the IonWorks HT system. Any
failure to develop new products that include technology acquired through the
acquisition of Cytion, or enhancements thereto, in a timely and efficient
manner, or at all, or any failure of such products to achieve commercial
acceptance within the time frame that we have anticipated would adversely
affect our business and financial performance.

WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS FROM
A SINGLE SOURCE OR A LIMITED GROUP OF SUPPLIERS, AND THE PARTIAL OR COMPLETE
LOSS OF ONE OF THESE SUPPLIERS COULD CAUSE PRODUCTION DELAYS AND A SUBSTANTIAL
LOSS OF REVENUES.

We rely on outside vendors to manufacture many components and subassemblies.
Certain components, subassemblies and services necessary for the manufacture of
our systems are obtained from a sole supplier or limited group of suppliers,
some of which are our competitors. Additional components, such as optical,
electronic and pneumatic devices, are currently purchased in configurations
specific to our requirements and, together with certain other components, such
as computers, are integrated into our products. We maintain only a limited
number of long-term supply agreements with our suppliers.

Our reliance on a sole or a limited group of suppliers involves several risks,
including the following:



| |  | we may be unable to obtain an adequate supply of required components;                                                         
|- |  | ------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we have reduced control over pricing and the timely delivery of
components and subassemblies; and                             
| 
| |  | our suppliers may be unable to develop technologically advanced
products to support our growth and development of new systems.

Because the manufacturing of certain of these components and subassemblies
involves extremely complex processes and requires long lead times, we may
experience delays or shortages caused by suppliers. We believe that alternative
sources could be obtained and qualified, if necessary, for most sole and
limited source parts. However, if we were forced to seek alternative sources of
supply or to manufacture such

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components or subassemblies internally, we may be forced to redesign our
systems, which could prevent us from shipping our systems to customers on a
timely basis. Some of our suppliers have relatively limited financial and other
resources. Any inability to obtain adequate deliveries, or any other
circumstance that would restrict our ability to ship our products, could damage
relationships with current and prospective customers and could harm our
business.

For example, we rely on a single supplier, Essen Instruments, for the
PatchPlate consumable that is part of the IonWorks HT system. We decided in
2002 to bring the production of PatchPlates in-house, and Essen is assisting us
in transferring their PatchPlate manufacturing technology to us. We have
purchased from Essen the inventory we believe is sufficient to meet our needs
for PatchPlates until we commence production on our own. However, we may not
have sufficient inventory and until we have successfully completed the transfer
of the technology and commenced in-house manufacturing on a commercial scale,
we will continue to rely on Essen as our sole supplier of PatchPlates. Any
failures by Essen to meet our requirements for PatchPlates could harm our
business.

WE MAY ENCOUNTER MANUFACTURING AND ASSEMBLY PROBLEMS OR DELAYS, WHICH COULD
RESULT IN LOST REVENUES.

We assemble our systems in our manufacturing facilities located in Sunnyvale,
California, Downington, Pennsylvania, and Norway. Our manufacturing and
assembly processes are highly complex and require sophisticated, costly
equipment and specially designed facilities. As a result, any prolonged
disruption in the operations of our manufacturing facilities could seriously
harm our ability to satisfy our customer order deadlines. If we cannot deliver
our systems in a timely manner, our revenues will likely suffer.

Our product sales depend in part upon manufacturing yields. We currently have
limited manufacturing capacity and experience variability in manufacturing
yields. We are currently manufacturing high-throughput instruments in-house, in
limited volumes and with largely manual assembly. If demand for our
high-throughput instruments increases, we will either need to expand our
in-house manufacturing capabilities or outsource to other manufacturers. If we
fail to deliver our products in a timely manner, our relationships with our
customers could be seriously harmed, and revenues would decline.

As we develop new products, we must transition the manufacture of a new product
from the development stage to commercial manufacturing. We cannot predict
whether we will be able to complete these transitions on a timely basis and
with commercially reasonable costs. We cannot assure you that manufacturing or
quality control problems will not arise as we attempt to scale-up our
production for any future new products or that we can scale-up manufacturing
and quality control in a timely manner or at commercially reasonable costs. If
we are unable to consistently manufacture our products on a timely basis
because of these or other factors, our product sales will decline.

For example we are in the process of transferring the production of
PatchPlates, a component of our IonWorks HT system, from the current
manufacturer to in-house manufacturing. Since the production of PatchPlates is
a complex process, it may take longer than we anticipate to reach full
production capacity using our own manufacturing. Any problems or delays in the
completion of this transfer could harm our business.

IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY WILL BE HARMED AND THE
SALES AND MARKET ACCEPTANCE OF OUR PRODUCTS WILL DECREASE.

Our products are complex and have at times contained errors, defects and bugs
when introduced. If we deliver products with errors, defects or bugs, our
credibility and the market acceptance and sales of our products would be
harmed. Further, if our products contain errors, defects or bugs, we may be
required to expend significant capital and resources to alleviate such
problems. Defects could also lead to product liability as a result of product
liability lawsuits against us or against our customers. We have agreed to
indemnify our customers in some circumstances against liability arising from
defects in our products. In the event of a successful product liability claim,
we could be obligated to pay damages significantly in excess of our product
liability insurance limits.

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MOST OF OUR CURRENT AND POTENTIAL CUSTOMERS ARE FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES AND ARE SUBJECT TO RISKS FACED BY THOSE INDUSTRIES.

We derive a significant portion of our revenues from sales to pharmaceutical
and biotechnology companies. We expect that sales to pharmaceutical and
biotechnology companies will continue to be a primary source of revenues for
the foreseeable future. As a result, we are subject to risks and uncertainties
that affect the pharmaceutical and biotechnology industries, such as
availability of capital and reduction and delays in research and development
expenditures by companies in these industries, pricing pressures as third-party
payers continue challenging the pricing of medical products and services,
government regulation, and uncertainty of technological change.

In addition, our future revenues may be adversely affected by the ongoing
consolidation in the pharmaceutical and biotechnology industries, which would
reduce the number of our potential customers. Furthermore, we cannot assure you
that the pharmaceutical and biotechnology companies that are our customers will
not develop their own competing products or in-house capabilities.

OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS,
WHICH MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT
SUCCESSFUL, COULD ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM
SELLING OUR PRODUCTS.

Third parties may assert infringement or other intellectual property claims
against us. We may have to pay substantial damages for infringement if it is
ultimately determined that our products infringe a third partys proprietary
rights. Further, any legal action against us could, in addition to subjecting
us to potential liability for damages, prohibit us from selling our products
before we obtain a license to do so from the party owning the intellectual
property, which, if available at all, may require us to pay substantial
royalties. Even if these claims are without merit, defending a lawsuit takes
significant time, may be expensive and may divert management attention from
other business concerns. There may be third-party patents that may relate to
our technology or potential products. Any public announcements related to
litigation or interference proceedings initiated or threatened against us could
cause our stock price to decline. We believe that there may be significant
litigation in the industry regarding patent and other intellectual property
rights. If we become involved in litigation, it could consume a substantial
portion of our managerial and financial resources.

On April 16, 2002, Caliper Technologies Corp. filed a patent infringement
lawsuit against us alleging that our IMAP assay kits infringe U.S. patents held
by Caliper. We believe that none of our products infringe any claim of the
Caliper patents. On  8, 2002, we filed an answer and counter-claim to
Calipers lawsuit denying all allegations of infringement, setting forth
certain affirmative defenses and making a counter-claim for declaratory relief
that, among other things, we are not infringing and have not infringed any
valid and enforceable claim of the Caliper patents and that the Caliper patents
are invalid. Caliper has also brought a motion for preliminary injunction,
expected to be decided in the second half of 2003 after the claims of the
Caliper patents are construed by the court. We have filed our opposition to
this motion. If Caliper were to prevail in this motion, we may be prohibited
from selling IMAP assay kits until completion of the litigation, which may take
several additional months. If we do not prevail in litigation, we may be
prohibited permanently from selling IMAP assay kits. Our inability to sell IMAP
assay kits could have an adverse impact on our overall customer relations. We
can not assure you that we will prevail in the Caliper lawsuit or that, even if
we prevail, attention to the lawsuit will not consume substantial financial and
management resources.

WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD
BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL
PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

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We rely on patents to protect a large part of our intellectual property and our
competitive position. In order to protect or enforce our patent rights, we may
initiate patent litigation against third parties, such as infringement suits or
interference proceedings. Litigation may be necessary to:



| |  | assert claims of infringement;                                                       
|- |  | -------------------------------------------------------------------------------------
| 
| |  | enforce our patents;                                                                 
| 
| |  | protect our trade secrets or know-how; or                                            
| 
| |  | determine the enforceability, scope and validity of the proprietary
rights of others.

Lawsuits could be expensive, take significant time and divert managements
attention from other business concerns. They would put our patents at risk of
being invalidated or interpreted narrowly and our patent applications at risk
of not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. If initiated, we cannot assure you that we would
prevail in any of these suits or that the damages or other remedies awarded, if
any, would be commercially valuable. During the course of these suits, there
could be public announcements of the results of hearings, motions and other
interim proceedings or developments in the litigation. If securities analysts
or investors were to perceive any of these results to be negative, our stock
price could decline.

THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

Our success will depend in part on our ability to obtain commercially valuable
patent claims and to protect our intellectual property. Our patent position is
generally uncertain and involves complex legal and factual questions. Legal
standards relating to the validity and scope of claims in our technology field
are still evolving. Therefore, the degree of future protection for our
proprietary rights is uncertain.

The risks and uncertainties that we face with respect to our patents and other
proprietary rights include the following:



| |  | the pending patent applications we have filed or to which we have
exclusive rights may not result in issued patents or may take longer than we
expect to result in issued patents;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the claims of any patents which are issued may not provide meaningful
protection;                                                                                                 
| 
| |  | we may not be able to develop additional proprietary technologies that
are patentable;                                                                                            
| 
| |  | the patents licensed or issued to us or our customers may not provide
a competitive advantage;                                                                                    
| 
| |  | other companies may challenge patents licensed or issued to us or our
customers;                                                                                                  
| 
| |  | patents issued to other companies may harm our ability to do business;                                                                                                            
| 
| |  | other companies may independently develop similar or alternative
technologies or duplicate our technologies; and                                                                  
| 
| |  | other companies may design around technologies we have licensed or
developed.                                                                                                     

In addition to patents, we rely on a combination of trade secrets,
nondisclosure agreements and other contractual provisions and technical
measures to protect our intellectual property rights. Nevertheless, these
measures may not be adequate to safeguard the technology underlying our
products. If they do not protect our rights, third parties could use our
technology, and our ability to compete in the market would be

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reduced. In addition, employees, consultants and others who participate in the
development of our products may breach their agreements with us regarding our
intellectual property, and we may not have adequate remedies for the breach. We
also may not be able to effectively protect our intellectual property rights in
some foreign countries. For a variety of reasons, we may decide not to file for
patent, copyright or trademark protection or prosecute potential infringements
of our patents. We also realize that our trade secrets may become known through
other means not currently foreseen by us. Notwithstanding our efforts to
protect our intellectual property, our competitors may design around our
proprietary technologies or may independently develop similar or alternative
technologies or products that are equal or superior to our technology and
products without infringing on any of our intellectual property rights.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

We expect to experience significant growth in the number of our employees and
customers and the scope of our operations, including as a result of potential
acquisitions. This growth may continue to place a significant strain on our
management and operations. Our ability to manage this growth will depend upon
our ability to broaden our management team and our ability to attract, hire and
retain skilled employees. Our success will also depend on the ability of our
officers and key employees to continue to implement and improve our operational
and other systems, to manage multiple, concurrent customer relationships and to
hire, train and manage our employees. Our future success is heavily dependent
upon growth and acceptance of new products. If we cannot scale our business
appropriately or otherwise adapt to anticipated growth and new product
introductions, a key part of our strategy may not be successful.

WE RELY UPON DISTRIBUTORS FOR PRODUCT SALES AND SUPPORT OUTSIDE NORTH AMERICA.

In the first three months of 2003, approximately 9% of our sales were made
through distributors. We often rely upon distributors to provide customer
support to the ultimate end users of our products. As a result, our success
depends on the continued sales and customer support efforts of our network of
distributors. The use of distributors involves certain risks, including risks
that distributors will not effectively sell or support our products, that they
will be unable to satisfy financial obligations to us and that they will cease
operations. Any reduction, delay or loss of orders from our significant
distributors could harm our revenues. We also do not currently have
distributors in a number of significant international markets that we have
targeted and will need to establish additional international distribution
relationships. There can be no assurance that we will engage qualified
distributors in a timely manner, and the failure to do so could have a material
adverse affect on our business, financial condition and results of operations.

IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR
TECHNOLOGIES INSTEAD OF DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE
THESE ACQUISITIONS OR MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE AN ACQUIRED
BUSINESS OR TECHNOLOGY IN A COST-EFFECTIVE AND NON-DISRUPTIVE MANNER.

Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. To this end, from time to time we have acquired
complementary businesses, products or technologies instead of developing them
ourselves, and we may choose to do so in the future. For example, in June 2002,
we acquired Universal Imaging Corporation. We do not know if we will be able to
complete any additional acquisitions, or whether we will be able to
successfully integrate any acquired business, operate it profitably or retain
its key employees. Integrating any business, product or technology we acquire
could be expensive and time consuming, disrupt our ongoing business and
distract our management. In addition, in order to finance any acquisitions, we
might need to raise additional funds through public or private equity or debt
financings. In that event, we could be forced to obtain financing on terms that
are not favorable to us and, in the case of an equity financing, that may result
in dilution to our stockholders. If we are unable to integrate any acquired
entities, products or technologies effectively, our business will suffer. In
addition, any impairment of goodwill and amortization of other intangible
assets or charges resulting from the costs of acquisitions could harm our
business and operating results.

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We acquired Cytion S.A. in 2001. In January 2003, we initiated activities
associated with the closure of the Cytion facility in Switzerland. We may
continue to incur costs from integrating Cytions technology and operations
into operations located at our other facilities, which may be expensive and
time consuming and may adversely impact our ability to successfully develop
products. Such costs may include costs for reorganization, closure of the
facility, satisfaction of contractual obligations, employee redeployment or
severance, conversion of information systems or other costs arising from the
coordination of our development teams. Successful product development may place
a significant burden on our existing management and our internal resources,
which could have a material adverse effect on our business, financial condition
and operating results. Finally, the market price of our common stock could
decline if we do not achieve the perceived benefits of the acquisition as
rapidly or to the extent anticipated by financial analysts or investors.

WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.

We are highly dependent on the principal members of our management, engineering
and scientific staff. The loss of the service of any of these persons could
seriously harm our product development and commercialization efforts. In
addition, research, product development and commercialization will require
additional skilled personnel in areas such as chemistry and biology, software
engineering and electronic engineering. Our corporate headquarters is located
in Sunnyvale, California, where demand for personnel with these skills is
extremely high and is likely to remain high. As a result, competition for and
retention of personnel, particularly for employees with technical expertise, is
intense and the turnover rate for qualified personnel is high. If we are unable
to hire, train and retain a sufficient number of qualified employees, our
ability to conduct and expand our business could be seriously reduced. The
inability to retain and hire qualified personnel could also hinder the planned
expansion of our business.

WE ARE DEPENDENT ON INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO
FOREIGN CURRENCY EXCHANGE RATE, POLITICAL AND ECONOMIC RISKS.

We maintain facilities in Norway, the United Kingdom, Germany and Japan, and
sales to customers outside the United States accounted for approximately 37%
our revenues in the first three months of 2003. We anticipate that
international sales will continue to account for a significant portion of our
revenues.

All of our sales to international distributors are denominated in U.S. dollars.
Most of our direct sales in the United Kingdom, Germany, France, Canada and
Japan are denominated in local currencies and totaled $7.8 million (32% of
total revenues) in the first three months of 2003. To the extent that our sales
and operating expenses are denominated in foreign currencies, our operating
results may be adversely affected by changes in exchange rates. Historically,
foreign exchange gains and losses have been immaterial to our results of
operations. However, we cannot predict whether these gains and losses will
continue to be immaterial, particularly as we increase our direct sales outside
North America. For example, we cannot predict whether other foreign exchange
gains or losses in the future would have a material effect on our income. Owing
to the number of currencies involved, the substantial volatility of currency
exchange rates, and our constantly changing currency exposures, we cannot
predict the effect of exchange rate fluctuations on our future operating
results. We do not currently engage in foreign currency hedging transactions,
but may do so in the future.

Our reliance on international sales and operations exposes us to foreign
political and economic risks, including:



| |  | political, social and economic instability;             
|- |  | --------------------------------------------------------
| 
| |  | trade restrictions and changes in tariffs;              
| 
| |  | import and export license requirements and restrictions;

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| |  | difficulties in staffing and managing international operations;
|- |  | ---------------------------------------------------------------
| 
| |  | disruptions in international transport or delivery;            
| 
| |  | difficulties in collecting receivables; and                    
| 
| |  | potentially adverse tax consequences.                          

If any of these risks materialize, our international sales could decrease and
our foreign operations could suffer.

OUR OPERATING RESULTS FLUCTUATE AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS
MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE IN OUR
STOCK PRICE.

We have experienced and in the future may experience a shortfall in revenue or
earnings or otherwise fail to meet public market expectations, which could
materially and adversely affect our business and the market price of our common
stock. Our total revenues and operating results may fluctuate significantly
because of a number of factors, many of which are outside of our control. These
factors include:



| |  | customer confidence in the economy, evidenced, in part, by stock
market levels;       
|- |  | --------------------------------------------------------------------------------------
| 
| |  | changes in the domestic and international economic, business and
political conditions;
| 
| |  | economic conditions within the pharmaceutical and biotechnology
industries;           
| 
| |  | levels of product and price competition;                                              
| 
| |  | the length of our sales cycle and customer buying patterns;                           
| 
| |  | the size and timing of individual transactions;                                       
| 
| |  | the timing of new product introductions and product enhancements;                     
| 
| |  | the mix of products sold;                                                             
| 
| |  | levels of international transactions;                                                 
| 
| |  | activities of and acquisitions by competitors;                                        
| 
| |  | the timing of new hires and the allocation of our resources;                          
| 
| |  | changes in foreign currency exchange rates; and                                       
| 
| |  | our ability to develop and market new products and control costs.                     

One or more of the foregoing factors may cause our operating expenses to be
disproportionately high during any given period or may cause our revenues and
operating results to fluctuate significantly. In particular, we typically
experience a decrease in the level of sales in the first calendar quarter as
compared to the fourth quarter of the preceding year because of budgetary and
capital equipment purchasing patterns in the life sciences industry. Our
quarterly operating results have fluctuated in the past, and we expect they
will fluctuate in the future as a result of many factors, some of which are
outside of our control.

In addition, we manufacture our products based on forecasted orders rather than
on outstanding orders. Accordingly, our expense levels are based, in part, on
expected future sales, and we generally cannot quickly adjust operating
expenses. For example, research and development and general and administrative

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expenses are not directly affected by variations in revenues. As a result, if
sales levels in a particular quarter do not meet expectations, we may not be
able to adjust operating expenses in a sufficient timeframe to compensate for
the shortfall, and our results of operations for that quarter may be seriously
harmed. Likewise, our manufacturing procedures may in certain instances create
a risk of excess or inadequate inventory levels if orders do not match
forecasts.

Based upon the preceding factors, we may experience a shortfall in revenue or
earnings or otherwise fail to meet public market expectations, which could
materially and adversely affect our business, financial condition, results of
operations and the market price of our common stock. Because our revenues and
operating results are difficult to predict, we believe that period-to-period
comparisons of our results of operations are not a good indication of our
future performance.

OUR STOCK PRICE IS VOLATILE, WHICH COULD CAUSE STOCKHOLDERS TO LOSE A
SUBSTANTIAL PART OF THEIR INVESTMENT IN OUR STOCK.

The stock market in general, and the stock prices of technology companies in
particular, have recently experienced volatility which has often been unrelated
to the operating performance of any particular company or companies. In the
twelve months ended March 31, 2003, the closing sales price of our common
stock ranged from $10.22 to $19.64. Our stock price could decline regardless of
our actual operating performance, and stockholders could lose a substantial
part of their investment as a result of industry or market-based fluctuations.
In the past, our stock has traded relatively thinly. If a more active public
market for our stock is not sustained, it may be difficult for stockholders to
resell shares of our common stock. Because we do not anticipate paying cash
dividends on our common stock for the foreseeable future, stockholders will not
be able to receive a return on their shares unless they sell them.

The market price of our common stock will likely fluctuate in response to a
number of factors, including the following:



| |  | domestic and international economic, business and political
conditions;                                                                                                           
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | economic conditions within the pharmaceutical and biotechnology
industries;                                                                                                       
| 
| |  | our failure to meet our performance estimates or the performance
estimates of securities analysts;                                                                                
| 
| |  | changes in financial estimates of our revenues and operating results
by us or securities analysts;                                                                                
| 
| |  | changes in buy/sell recommendations by securities analysts; and                                                                                                                   
| 
| |  | the timing of announcements by us or our competitors of significant
products, contracts or acquisitions or publicity regarding actual or potential
results or performance thereof.

PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.

Provisions in our certificate of incorporation and bylaws may have the effect
of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. For example, our certificate of
incorporation gives our board of directors the authority to issue shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of common stock
will be subject to, and may harmed by, the rights of the holders of any shares
of preferred stock that may be issued in the future. The issuance of preferred
stock may delay, defer or prevent a change in control, as the terms of the
preferred stock that might be issued could potentially prohibit our
consummation of any merger, reorganization, sale of substantially all of our
assets, liquidation or other extraordinary corporate transaction without the
approval of the holders of the outstanding shares of preferred stock. The
issuance of preferred stock could also have a dilutive effect on our
stockholders. In

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addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions may prohibit large stockholders, in particular those owning 15% or
more of the outstanding voting stock, from consummating a merger or combination
involving us. Further, in October 2001, our Board of Directors adopted a
stockholder rights plan, commonly known as a poison pill. These provisions
described above and our poison pill could limit the price that investors might
be willing to pay in the future for our common stock.

OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR
FORWARD-LOOKING STATEMENTS.

This report contains forward-looking statements within the meaning of the
federal securities laws that relate to future events or our future financial
performance. When used in this report, you can identify forward-looking
statements by terminology such as anticipates, plans, predicts,
expects, estimates, intends, will, continue, may, potential,
should and the negative of these terms or other comparable terminology. These
statements are only predictions. Our actual results could differ materially
from those anticipated in our forward-looking statements as a result of many
factors, including those set forth above and elsewhere in this report.

Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements. We assume
no duty to update any of the forward-looking statements after the date of this
report or to conform these statements to actual results. Accordingly, we
caution readers not to place undue reliance on these statements.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes in interest rates and foreign
currency exchange rates. The primary objective of our investment activities is
to preserve principal while at the same time maximizing the income we receive
from our investments without significantly increasing risk. A discussion of
our accounting policies for financial instruments and further disclosures
relating to financial institutions is included under Note 1, Summary of
Significant Accounting Policies in the Notes to Consolidated Financial
Statements included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.

Our interest income is sensitive to changes in the general level of interest
rates, primarily United States interest rates. In this regard, changes in
United States interest rates affect the interest earned on our cash equivalents
and short-term investments. We have determined that changes in interest rates
would not have a significant negative impact on our interest income or on the
value of our investment portfolio due to the short-term maturities of our
investments. Accordingly, we currently do not hedge interest rate exposure.
We invest our excess cash primarily in demand deposits with United States banks
and money market accounts and short-term securities. These securities,
consisting of $6.7 million of U.S. government agency securities and $2.5
million of commercial paper, are carried at market value, which approximate
cost, typically mature or are redeemable within 90 to 360 days and bear minimal
valuation risk. We have not experienced any significant losses on these
investments.

We are exposed to changes in exchange rates primarily in the United Kingdom,
Germany, Japan and Canada, where we sell direct in local currencies. Further,
a strengthening of the U.S. dollar could make our products less competitive in
overseas markets, as most of our costs are incurred in the U.S. dollar.
Translation gains and losses related to our foreign subsidiaries in the United
Kingdom, Germany, Japan, Switzerland and Norway are accumulated as a separate
component of stockholders equity. We do not currently engage in foreign
currency hedging transactions, but may do so in the future.

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ITEM 4. CONTROLS AND PROCEDURES

Our chief executive officer and chief financial officer have concluded that our
disclosure controls and procedures (as defined in Securities Exchange Act Rules
13a-14(c) and 15d-14(c)) are sufficiently effective to ensure that the
information required to be disclosed by us in the reports we file under the
Exchange Act is gathered, analyzed and disclosed with adequate timeliness,
accuracy and completeness, based on an evaluation of such controls and
procedures conducted within 90 days prior to the date of this
Quarterly Report.

There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date
of the evaluation referred to above, nor were there any significant
deficiencies or material weaknesses in our internal controls. Accordingly, no
corrective actions were required or undertaken.

Limitations on the Effectiveness of Controls

Our management, including our chief executive officer and chief financial
officer, does not expect that our disclosure controls or our internal controls
will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

On April 16, 2002, Caliper Technologies Corp. filed a patent infringement
lawsuit against us alleging that our IMAP assay kits infringe U.S. patents held
by Caliper. We believe that none of our products infringe any claim of the
Caliper patents. On  8, 2002, we filed an answer and counter-claim to
Calipers lawsuit denying all allegations of infringement, setting forth
certain affirmative defenses and making a counter-claim for declaratory relief
that, among other things, we are not infringing and have not infringed any
valid and enforceable claim of the Caliper patents and that the Caliper patents
are invalid. Caliper has also brought a motion for preliminary injunction,
which is expected to be decided in the second half of 2003 after the claims of
the Caliper patents are construed by the court. We have filed our opposition to
this motion. If Caliper were to prevail in this motion, we may be prohibited
from selling IMAP assay kits until completion of the litigation, which may take
several additional months. If we do not prevail in litigation, we may be
prohibited permanently from selling IMAP assay kits. Our inability to sell IMAP
assay kits could have an adverse impact on our overall customer relations.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------

|        |  |                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                              
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                              
|3.1(1)  |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                                                                                                                         
|3.2(1)  |  | Bylaws of the Registrant.                                                                                                                                                                                                                                                                    
|3.3(2)  |  | Certificate of Amendment to Certificate of Incorporation.                                                                                                                                                                                                                                    
|4.1(1)  |  | Specimen Certificate of Common Stock of the Registrant.                                                                                                                                                                                                                                      
|99.1*   |  | Certification by the Chief Executive Officer and the Chief
Financial Officer of the Registrant as required by Section 906 of
the Public Company Accounting Reform and Investor Protection Act of
2002 (18 U.S.C. Section 1350, as adopted) (the Sarbanes-Oxley Act
of 2002), dated  15, 2003.



---

|(1) |  | Incorporated by reference to the similarly described exhibit in our
Registration Statement on Form S-1 (File No. 33-98926), as amended.                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to the similarly described exhibit in our Form
10-K Annual Report dated December 31, 2001 and filed on April 1, 2002.                                                                                                                                 
|   
|*   |  | The certification attached as Exhibit 99.1 accompanies the Quarterly Report
on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------
|
| |     |  | None.              

26



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##### Table of Contents






SIGNATURE

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.

| |  |                                                                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Molecular Devices Corporation                                                                                                                                        
| |  |                                                                                                                                                                      
| |  | By: /s/ TIMOTHY A. HARKNESS

Timothy A. Harkness
Vice President, Finance and Chief
Financial Officer
(Duly Authorized and Principal
Financial and Accounting Officer)
| |  |                                                                                                                                                                      
| |  | Date:  15, 2003                                                                                                                                                      

27



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##### Table of Contents






CERTIFICATIONS

I, Joseph D. Keegan, Ph.D., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Molecular
Devices 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 quarterly 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-14 and 15d-14) for the registrant and we have:



| | a) |  | designed such disclosure controls and procedures 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) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |  |                                                                            
| |  | ---------------------------------------------------------------------------
| |  | Date:  15, 2003                                                            
| |  |                                                                            
| |  | /s/ JOSEPH D. KEEGAN, PH.D

Joseph D. Keegan, Ph.D.
Chief Executive Officer

28



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##### Table of Contents



I, Timothy A. Harkness, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Molecular
Devices 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 quarterly 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-14 and 15d-14) for the registrant and we have:



| | d) |  | designed such disclosure controls and procedures 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;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | e) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | f) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | c) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | d) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |  |                                                                     
| |  | --------------------------------------------------------------------
| |  | Date:  15, 2003                                                     
| |  |                                                                     
| |  | /s/ TIMOTHY A. HARKNESS

Timothy A. Harkness
Chief Financial Officer

29



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                              
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                              
|3.1(1)  |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                                                                                                                         
|3.2(1)  |  | Bylaws of the Registrant.                                                                                                                                                                                                                                                                    
|3.3(2)  |  | Certificate of Amendment to Certificate of Incorporation.                                                                                                                                                                                                                                    
|4.1(1)  |  | Specimen Certificate of Common Stock of the Registrant.                                                                                                                                                                                                                                      
|99.1*   |  | Certification by the Chief Executive Officer and the Chief
Financial Officer of the Registrant as required by Section 906 of
the Public Company Accounting Reform and Investor Protection Act of
2002 (18 U.S.C. Section 1350, as adopted) (the Sarbanes-Oxley Act
of 2002), dated  15, 2003.



---

|(1) |  | Incorporated by reference to the similarly described exhibit in our
Registration Statement on Form S-1 (File No. 33-98926), as amended.                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to the similarly described exhibit in our Form
10-K Annual Report dated December 31, 2001 and filed on April 1, 2002.                                                                                                                                 
|   
|*   |  | The certification attached as Exhibit 99.1 accompanies the Quarterly Report
on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.

30