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 September 30, 2003
OR
[  ]       
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-27316

Molecular Devices Corporation
(Exact name of
registrant as specified in its charter)

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

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 [ ]
Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ]
As of October 28, 2003, there were 14,831,351
shares of the Registrants Common Stock, $.001 par value, outstanding.

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##### 

# MOLECULAR DEVICES
CORPORATION

# FORM 10-Q FOR THE
QUARTER ENDED SEPTEMBER 30, 2003

# INDEX

|          |                                                         | PAGE
NUMBER
|--------- | ------------------------------------------------------- | -----------
|PART I    | FINANCIAL INFORMATION                                   |            
|ITEM 1    | FINANCIAL STATEMENTS                                   
|          | CONDENSED CONSOLIDATED BALANCE SHEETS                  
|          | September 30, 2003 and December 31, 2002                | 3          
|          | CONDENSED CONSOLIDATED INCOME STATEMENTS               
|          | Three and Nine Months Ended September 30, 2003 and 2002 | 4          
|          | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        
|          | Nine Months Ended September 30, 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                                       | 22         
|ITEM 4    | CONTROLS AND PROCEDURES                                 | 23         
|PART II   | OTHER INFORMATION                                      
|ITEM 1    | LEGAL PROCEEDINGS                                       | 24         
|ITEM 5    | OTHER INFORMATION                                       | 24         
|ITEM 6    | EXHIBITS AND REPORTS ON FORM 8-K                        | 24         
|SIGNATURE |                                                         | 25         

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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)

|                                                       | September 30,
2003 | December 31,
2002
|------------------------------------------------------ | ------------------ | -----------------
|ASSETS:                                                |                    |                  
|Current assets:                                        |                    |                  
|Cash and cash equivalents                              |                    |                  
|Short-term investments                                 |                    |                  
|Accounts receivable, net                               |                    |                  
|Inventories, net                                       |                    |                  
|Deferred tax assets                                    |                    |                  
|Other current assets                                   |                    |                  
|                                                       |                    |                  
|Total current assets                                   |                    |                  
|Long-term investments                                  |                    |                  
|Equipment and leasehold improvements, net              |                    |                  
|Goodwill                                               |                    |                  
|Other assets                                           |                    |                  
|                                                       |                    |                  
|Total assets                                           |                    |                  
|                                                       |                    |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY                   |                    |                  
|Current liabilities:                                   |                    |                  
|Accounts payable                                       |                    |                  
|Accrued liabilities                                    |                    |                  
|Deferred revenue                                       |                    |                  
|                                                       |                    |                  
|Total current liabilities                              |                    |                  
|Stockholders' equity:                                  |                    |                  
|Preferred stock, $.001 par value; 3,000,000 shares     |                    |                  
|authorized, no shares issued or outstanding at         |                    |                  
|September 30, 2003 and December 31, 2002               |                    |                  
|Common stock, $.001 par value; 60,000,000 shares       |                    |                  
|authorized; 15,648,465 and 15,555,190 shares           |                    |                  
|issued and 14,924,019 and 15,312,892 shares            |                    |                  
|outstanding at September 30, 2003 and December 31,     |                    |                  
|2002, respectively                                     |                    |                  
|Additional paid-in capital                             |                    |                  
|Treasury stock, at cost; 724,446 and 242,298 shares at |                    |                  
|September 30, 2003 and December 31, 2002, respectively |                    |                  
|Accumulated deficit                                    |                    |                  
|Accumulated other comprehensive income (loss)          |                    |                  
|                                                       |                    |                  
|Total stockholders' equity                             |                    |                  
|                                                       |                    |                  
|Total liabilities and stockholders' equity             |                    |                  
|                                                       |                    |                  

The accompanying notes are an integral part of these statements.

3

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##### 

# MOLECULAR DEVICES
CORPORATION

# CONDENSED CONSOLIDATED
INCOME STATEMENTS

# (in thousands, except
per share amounts, unaudited)

|                                                      | Three Months Ended
September 30, | Nine Months Ended
September 30,
|----------------------------------------------------- | -------------------------------- | -------------------------------
|
|REVENUES                                              |                                  |                                
|COST OF REVENUES                                      |                                  |                                
|                                                      |                                  |                                
|GROSS PROFIT                                          |                                  |                                
|                                                      |                                  |                                
|OPERATING EXPENSES:                                   |                                  |                                
|Research and development                              |                                  |                                
|Selling, general and administrative                   |                                  |                                
|                                                      |                                  |                                
|Total operating expenses                              |                                  |                                
|                                                      |                                  |                                
|INCOME FROM OPERATIONS                                |                                  |                                
|Other income, net                                     |                                  |                                
|                                                      |                                  |                                
|INCOME BEFORE INCOME TAXES                            |                                  |                                
|Income tax provision                                  |                                  |                                
|                                                      |                                  |                                
|NET INCOME                                            |                                  |                                
|                                                      |                                  |                                
|BASIC NET INCOME PER SHARE                            |                                  |                                
|                                                      |                                  |                                
|DILUTED NET INCOME PER SHARE                          |                                  |                                
|                                                      |                                  |                                
|SHARES USED IN COMPUTING BASIC NET INCOME PER SHARE   |                                  |                                
|                                                      |                                  |                                
|SHARES USED IN COMPUTING DILUTED NET INCOME PER SHARE |                                  |                                
|                                                      |                                  |                                

The accompanying notes are an integral part of these statements.

4

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##### 

# MOLECULAR DEVICES
CORPORATION

# CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS

# (in thousands,
unaudited)

|                                                    | Nine Months Ended
September 30,
|--------------------------------------------------- | -------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:               |                                
|Net income                                          |                                
|Adjustments to reconcile net income to net          |                                
|cash provided by operating activities:              |                                
|Depreciation and amortization                       |                                
|Amortization of deferred compensation               |                                
|Amortization of developed technology and patents    |                                
|Income tax benefit realized as a result of employee |                                
|exercises of stock options                          |                                
|(Increase) decrease in assets:                      |                                
|Accounts receivable, net                            |                                
|Inventories, net                                    |                                
|Deferred tax assets                                 |                                
|Other current assets                                |                                
|Increase (decrease) in liabilities:                 |                                
|Accounts payable                                    |                                
|Accrued liabilities                                 |                                
|Deferred revenue                                    |                                
|                                                    |                                
|Net cash provided by operating activities           |                                
|                                                    |                                
|CASH FLOWS FROM INVESTING ACTIVITIES:               |                                
|Purchases of investments                            |                                
|Proceeds from sales and maturities of investments   |                                
|Capital expenditures                                |                                
|Acquisitions, net of cash acquired                  |                                
|Other assets                                        |                                
|                                                    |                                
|Net cash used in investing activities               |                                
|                                                    |                                
|CASH FLOWS FROM FINANCING ACTIVITIES:               |                                
|Issuance of common stock, net                       |                                
|Purchase of treasury stock                          |                                
|                                                    |                                
|Net cash used in financing activities               |                                
|                                                    |                                
|EFFECT OF EXCHANGE RATE CHANGES ON CASH             |                                
|Net decrease in cash and cash equivalents           |                                
|Cash and cash equivalents at beginning of period    |                                
|                                                    |                                
|Cash and cash equivalents at end of period          |                                
|                                                    |                                

The accompanying notes are an integral part of these statements.

5

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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 research 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 unaudited 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 and 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 interim 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 and nine-month
periods ended September 30, 2003 are not necessarily indicative of the results to be
expected for the entire fiscal year ending December 31, 2003.

6

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##### 

# Note 2. 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 our
2002 fiscal year. The interim disclosure requirements were first effective for the first
quarter of our 2003 fiscal year. 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. The adoption of SFAS 148 did not have a material impact on our financial position or
results of operations. If we had elected to recognize stock-based employee compensation
cost based on the fair value of the options granted at the grant date as prescribed by
SFAS 123, net income and net income 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
September 30, | Nine Months Ended
September 30,
|------------------------------------------- | -------------------------------- | -------------------------------
|
|Net income - as reported                    |                                  |                                
|Stock based compensation expense determined |                                  |                                
|using the fair value method, net of tax     |                                  |                                
|                                            |                                  |                                
|Net income (loss) - pro forma               |                                  |                                
|                                            |                                  |                                
|Net income/(loss) per share:                |                                  |                                
|Basic - as reported                         |                                  |                                
|Basic - pro forma                           |                                  |                                
|Diluted - as reported                       |                                  |                                
|Diluted - pro forma                         |                                  |                                

The fair value of each option is
estimated on the date of grant using the Black Scholes option-pricing model assuming no
dividends, expected stock price volatility factors between 82% and 92%, risk-free interest
rates between 2.4% and 4.0%, and expected option lives between five and six years.

# Note 3.  Balance Sheet Components (in thousands)

|                                           | September 30,
2003 | December 31,
2002
|------------------------------------------ | ------------------ | -----------------
|Inventories, net:                          |                    |                  
|Raw materials                              |                    |                  
|Work-in-process                            |                    |                  
|Finished goods and demonstration equipment |                    |                  
|                                           |                    |                  
|                                           |                    |                  
|                                           |                    |                  
|Accrued liabilities:                       |                    |                  
|Accrued income tax                         |                    |                  
|Warranty accrual                           |                    |                  
|Accrued compensation                       |                    |                  
|Other                                      |                    |                  
|                                           |                    |                  
|                                           |                    |                  
|                                           |                    |                  

7

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##### 

# Note 4. Goodwill and
Purchased Intangible Assets

There were no changes in goodwill
during the nine months ended September 30, 2003.

Purchased intangible assets not
subject to amortization are comprised of tradename, valued at $707,000 at September 30,
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 $1,071,000 and $1,174,000 at September 30, 2003 and December 31, 2002,
respectively. The net carrying value of developed technology was $1,284,000 and $1,395,000
at September 30, 2003 and December 31, 2002, respectively.

The estimated future amortization
expense of purchased intangible assets as of September 30, 2003 was as follows (in
thousands):

|For the years ending December 31, | Amortization
Expense
|--------------------------------- | --------------------
|2003 (remaining three months)     |                     
|2004                              |                     
|2005                              |                     
|2006                              |                     
|2007                              |                     
|2008                              |                     
|Thereafter                        |                     
|                                  |                     
|                                  |                     
|                                  |                     

# Note 5. 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 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
September 30, | Nine Months Ended
September 30,
|---------------------------------------------------------- | -------------------------------- | -------------------------------
|
|Net income                                                 |                                  |                                
|                                                           |                                  |                                
|Denominator for basic earnings per share - weighted        |                                  |                                
|average common shares outstanding                          |                                  |                                
|Effect of dilutive securities - employee stock options     |                                  |                                
|                                                           |                                  |                                
|Denominator for diluted earnings per share - weighted      |                                  |                                
|average common shares outstanding plus dilutive securities |                                  |                                
|                                                           |                                  |                                
|Basic net income per share                                 |                                  |                                
|                                                           |                                  |                                
|Diluted net income per share                               |                                  |                                
|                                                           |                                  |                                

8

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##### 

For the three months ended September
30, 2003 and September 30, 2002, the total number of shares excluded from the calculations
of diluted net income per share was 2,027,000 and 2,453,000, respectively, as the
options weighted-average exercise price was greater than the average market price of
the common shares and, therefore, the effect would have been anti-dilutive. For the nine
months ended September 30, 2003 and September 30, 2002, the total number of anti-dilutive
shares excluded from the calculations of diluted net income per share was 2,501,000 and
2,141,000, respectively.

# Note 6. Comprehensive
Income (Loss)

Comprehensive income, net of tax, was
approximately $3.0 million and $1.2 million for the three-month periods ended
September 30, 2003 and 2002, respectively. Comprehensive income, net of tax, was
approximately $5.8 million and $4.9 million for the nine-month periods ended
September 30, 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 7.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 May 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 brought a motion for preliminary injunction to which we filed opposition
(if Caliper were to prevail in this motion, we may be prohibited from selling IMAP assay
kits until completion of the litigation.) The judge vacated the hearing date and decided
not to rule on the motion for preliminary injunction until after the claims of the Caliper
patents are construed by the court. In June 2003, the court held a technology tutorial and
hearing to construe the claims of the Caliper patents. On September 3, 2003 the court
issued a claim construction order on the Caliper patents and terminated the preliminary
injunction motion. Trial is scheduled to begin May 17, 2004.

# Note 8. Guarantees

Under our articles of incorporation,
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 September
30, 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 September 30, 2003.

9

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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 nine months ended September 30, 2003 were as follows (in thousands):

|                                              | 
|--------------------------------------------- | 
|Balance at December 31, 2002                  | 
|New warranties issued during the period       | 
|Cost of warranties incurred during the period | 
|                                              | 
|Balance at September 30, 2003                 | 
|                                              | 

# Note 9. Recent
Accounting Pronouncements

In January 2003, the FASB issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities.In general, a variable interest entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that either
(a) does not have equity investors with voting rights or (b) has equity investors that do
not provide sufficient financial resources for the entity to support its activities. FIN
46 requires a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entitys
activities or entitled to receive a majority of the entitys residual returns or
both. The consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period ending after December 15, 2003.
Certain of the disclosure requirements apply in all financial statements issued after
January 31, 2003, regardless of when the variable interest entity was established. We await issuance
of a modification to the interpretation before full adoption, however we do not believe the full
adoption of FIN 46 will have a material impact on our financial position or results of
operations.

In November 2002, the Emerging Issues
Task Force (EITF) reached a consensus on Issue No. 00-21 Accounting for
Revenue Arrangements with Multiple Deliverables. The EITF concluded that revenue
arrangements with multiple elements should be divided into separate units of accounting if
the deliverables in the arrangement have value to the customer on a standalone basis, if
there is objective and reliable evidence of the fair value of the undelivered elements,
and as long as there are no rights of return or additional performance guarantees by the
Company. The provisions of EITF Issue No. 00-21 are applicable to agreements entered into
after June 15, 2003. Adoption of the consensus in the third quarter of fiscal 2003 did not
have a material effect on the Companys results of operations or financial condition.

# Note 10. Subsequent Event

Through October 28, 2003, we have
repurchased approximately 100,000 shares of our common stock for approximately $1.8
million.

10

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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 May 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 nine months of 2003 are
not necessarily indicative of the results to be expected for the entire fiscal year ending
December 31, 2003.

OVERVIEW

Molecular Devices Corporation is a
leading supplier of high-performance bioanalytical measurement systems that accelerate and
improve drug discovery and other life sciences research. Our systems and consumables
enable pharmaceutical and biotechnology companies to leverage advances in genomics,
proteomics and combinatorial chemistry by facilitating the high-throughput and
cost-effective identification and evaluation of drug candidates. Our solutions are based
on our advanced core technologies that integrate our expertise in engineering, molecular
and cell biology and chemistry. We enable our customers to improve research productivity
and effectiveness, which ultimately accelerates the complex process of discovering and
developing new drugs.

We group our product offerings into
two categories based on the markets that are primarily served by each. Our Drug Discovery
products include four major families of products: our Fluorometric Imaging Plate Reader,
or FLIPR®, system, our multimode Analyst system, our IonWorks automated
electrophysiology system and our Discovery-1 cellular imaging system. Our Life Sciences
Research products include our Maxline family of microplate readers, our Skatron
liquid handling systems, our Threshold® system and our MetaMorph line of
cellular imaging software. In addition to high-performance instrumentation, we offer
reagent kits that enable researchers to perform popular assays with higher-throughput than
can be achieved using conventional technologies.

RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

REVENUES.    
     For the third quarter of 2003, total revenues were $29.3 million or an increase
     of 13% compared to the same period last year. Drug Discovery product family
     revenues were $13.5 million representing 31% growth over the third quarter of
     2002. The key drivers of this growth were increased sales of our IonWorks HT,
     Discovery-1, and FLIPR family of products. Life Science Research product family
     revenues were $15.8 million, representing 1% growth over the prior year period.
     Quarterly growth in this segment was primarily driven by the strong sales of our
     MetaMorph cellular imaging software.

Revenues for the first nine months of
2003 were $82.3 million, or an increase of 14% compared to the same period last year. Drug
Discovery product family revenues were $37.8 million, or an increase of 19% compared to
the first nine months of 2002. Growth in this segment was due to the strength of our
IonWorks HT, Discovery-1 and FLIPR instrument sales, as well as our FLIPR and Analyst
reagent products. The Life Science Research product family revenues grew by 11% over the
same period last year to $44.6 million, largely due to the inclusion of a full nine months
of revenues from our wholly owned subsidiary, Universal Imaging Corporation, and the year
to date growth of our Threshold business.

GROSS MARGIN. Gross margin increased
to 63.2% for the three months ended September 30, 2003, from 60.0% for the three months
ended September 30, 2002. This improvement was driven by strong sales of our higher margin
IonWorks and Universal Imaging products, and Drug Discovery reagents. Gross margin
increased to 62.5% for the nine months ended September 30, 2003, from 59.9% in the nine
months ended September 30, 2002. The improvement in the nine month period was similarly
driven by the strong sales of IonWorks and Universal Imaging products. Gross margin for
the nine months ended September 30, 2002, was negatively impacted by a single large FLIPR
order that was priced below normal FLIPR gross margins.

11

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##### 

RESEARCH AND DEVELOPMENT. Research
and development expenses for the third quarter of 2003 were flat at $4.6 million compared
to third quarter of 2002. As a percent of revenues this resulted in a decrease from 18% to
16%. Research and development expenses for the first nine months of 2003 increased by 8%
to $14.1 million (17% of revenues) from $13.1 million (18% of revenues) for the first nine
months of 2002. This increase was due primarily to the inclusion of a full nine months of
research and development expenses from our Universal Imaging subsidiary which we acquired
in June 2002, as well as, additional costs we incurred as part of our on going development
of IonWorks programs.

SELLING, GENERAL AND ADMINISTRATIVE.
Selling, general and administrative expenses for the third quarter of 2003 increased by
18% to $10.7 million (37% of revenues) from $9.1 million (35% of revenues) in the third
quarter of 2002. This increase was primarily due to higher variable selling expenses
associated with higher sales as well as the expanded sales and support dedicated to the
IonWorks program. For the first nine months of 2003, selling, general and administrative
expenses increased by 24% to $31.1 million (38% of revenues) from $25.1 million (35% of
revenues) for the first nine months of 2002. This increase was also due to the higher
variable selling expenses, legal expenses related to the Caliper litigation, and a full
nine months of expenses from our Universal Imaging subsidiary.

OTHER INCOME, NET. Net other income
for the third quarter of 2003 decreased to $73,000 from $461,000 in the third quarter of
2002. This decrease mainly resulted from lower interest rates on lower average cash and
investment balances. Net other income for the first nine months of 2003 decreased to
$639,000 from $1.2 million in the first nine months of 2002. This decrease was also due to
lower interest rates on lower average cash balances resulting from our acquisition of
Universal Imaging in June 2002.

INCOME TAX PROVISION. We recorded an
income tax provision of $977,000 in the third quarter of 2003 compared to $504,000 in the
same period of 2002. The income tax provision for the first nine months of 2003 was $2.1
million compared to $2.0 million in the first nine months of 2002. The income tax
provision for the first nine months of 2003 represented a 30% effective tax rate, down
from 32% in the first nine months of 2002. This improved rate resulted from numerous
factors, including the utilization of net operating loss carry forwards from certain
foreign tax 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 and long-term investments of approximately $57.4 million at September 30, 2003
compared to $53.8 million at December 31, 2002. Operating activities in the first nine
months of 2003 provided approximately $10.9 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.

Net cash used in investing activities
in the first nine months of 2003 was $6.3 million, primarily consisting of $4.8 million in
net purchases of short and long-term investments and $1.6 million in capital expenditures.

In October 2001, our Board of
Directors approved a stock repurchase program authorizing us to repurchase up to 1,500,000
shares of our common stock. In the first nine months of 2003, we used cash of $7.6 million
to repurchase approximately 482,000 shares of our common stock, and received $1.3 million
for the issuance of common stock under our employee stock option and purchase plans,
resulting in net cash used in financing activities of $6.3 million. As of September 30,
2003, approximately 786,000 shares remained available for repurchase under the stock
repurchase program. 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.

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 ability to generate our
anticipated cash flow from operations is subject to the risks and uncertainties discussed
below under Factors That May Affect Future Results, including, in particular,
variations in the amount of time it takes for us to sell our products and collect accounts
receivable, 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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Likewise, 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 through 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 May 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
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.

13

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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 ninety 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 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 twelve months ended September 30, 2003, 63% 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.

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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 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 completed the process
of transferring the manufacturing technology for the production of PatchPlates, a
component of our IonWorks HT system, from the former manufacturer to us, and any failure
or delay in manufacturing sufficient commercial quantities of PatchPlates 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 and 2004 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. We recently completed the closure of the Cytion
facility in Switzerland and are in the process of fully integrating Cytions
technology and operations into operations located at our other facilities. 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. Further, 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, and we cannot guarantee
you that the full integration of Cytions operations and technology will ultimately
be successful. 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.                                                           

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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 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 upon a single
supplier for a component of the PatchPlate consumable that is part of the IonWorks HT
system. This supplier might not be able to fulfill our commercial needs, which would
require us to seek new manufacturing arrangements for this component, either by bringing
production of this component in-house or by seeking an alternative supplier. We currently
do not have the capability to manufacture this component on a commercial scale, and are
not aware of any other supplier that currently has the capability to supply us with
commercial quantities of this component. Any failure or delay in obtaining sufficient
quantities of this component could adversely affect the ability of the IonWorks HT system
to achieve or maintain significant commercial acceptance, which would 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 our revenues could 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 decided in 2002 to
bring the production of PatchPlates in-house. We previously relied on Essen Instruments
for the PatchPlate consumable, and Essen has assisted us in transferring the 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 full scale manufacturing on
our own. However, we may not be successful in achieving full scale manufacturing
capabilities for the PatchPlate consumable in a timely manner or at all, and any failure
or delays in manufacturing sufficient quantities of PatchPlates 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 the
uncertainty resulting from 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 May 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 brought a
motion for preliminary injunction to which we filed opposition (if Caliper were to prevail
in this motion, we may be prohibited from selling IMAP assay kits until completion of the
litigation.) The judge vacated the hearing date and decided not to rule on the motion for
preliminary injunction until after the claims of the Caliper patents are construed by the
court. In June 2003, the court held a technology tutorial and hearing to construe the
claims of the Caliper patents. On September 3, 2003 the court issued a claim construction
order on the Caliper patents and terminated the preliminary injunction motion. Trial is
scheduled to begin May 17, 2004. 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.

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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.

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 proprietary technology underlying our
products. If these measures do not protect our rights, third parties could use our
technology, and our ability to compete in the market would be 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.

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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 nine months of 2003,
approximately 8% 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, we acquired Cytion
S.A. in 2001, and 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, and if we do
not achieve the perceived benefits of any acquisition as rapidly or to the extent
anticipated by financial analysts or investors, the market price of our common stock could
decline. 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 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.

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, and software and electronic engineering. Our corporate headquarters are 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.

19

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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 36% our revenues in the first nine 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
$26.1 million (32% of total revenues) in the first nine 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;       
| | 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 revenues 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.                     

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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 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 revenues 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 September 30, 2003, the closing sales price of our
common stock ranged from $10.87 to $20.31. 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, or
merger in which we are not the surviving company or which results in 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 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.

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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 $10.2 million of U.S. government
agency securities and $1.4 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. Additionally, we have $3.2 million of long-term investments with maturities
of less than two years, all in U.S. government agency securities.

We are exposed to changes in foreign
currency 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.

Evaluation of disclosure controls
and procedures. Based on their evaluation as of September 30, 2003, our chief
executive officer and chief financial officer, with the participation of our management,
have concluded that our disclosure controls and procedures (as defined in Securities
Exchange Act Rules 13a-15(e) and 15d-15(e)) were sufficiently effective to ensure that the
information required to be disclosed by us in this Quarterly Report on Form 10-Q was
recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and Form 10-Q.

Changes in internal controls.
There were no changes in our internal controls over financial reporting during the quarter
ended September 30, 2003 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

Limitations on the effectiveness
of controls. Our management, including our chief executive officer and chief financial
officer, does not expect that our control systems 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. Accordingly, our disclosure controls and procedures are
designed to provide reasonable, not absolute, assurance that the objectives of our
disclosure control system are met and, as set forth above, our principal executive officer
and principal financial officer have concluded, based on their evaluation as of September
30, 2003, that our disclosure controls and procedures were sufficiently effective to
provide reasonable assurance that the objectives of our disclosure control system were
met.

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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 May 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 brought a
motion for preliminary injunction to which we filed opposition (if Caliper were to prevail
in this motion, we may be prohibited from selling IMAP assay kits until completion of the
litigation.) The judge vacated the hearing date and decided not to rule on the motion for
preliminary injunction until after the claims of the Caliper patents are construed by the
court. In June 2003, the court held a technology tutorial and hearing to construe the
claims of the Caliper patents. On September 3, 2003 the court issued a claim construction
order on the Caliper patents and terminated the preliminary injunction motion. Trial is
scheduled to begin May 17, 2004. 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 5. OTHER INFORMATION

Consistent with Section 10A(i)(2) of
the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of
2002, we are responsible for listing the non-audit services approved by our Audit
Committee to be performed by Ernst & Young LLP, our external auditor. During the
period covered by this Quarterly Report, our Audit Committee approved the engagement of
Ernst & Young to perform services related to a business development transaction, a non-audit
service within the meaning of Section 10A(i) of the Securities Exchange Act. The fees for
this non-audit service are not expected to exceed $235,000.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

|ExhibitNumber | Description of Exhibit
|------------- | ----------------------
|              | 3                     
|              | 3                     
|              | 3                     
|              | 4                     
|              | 31                    
|              | 31                    
|              | 32                    
|              |                       

(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 with the SEC on April 1, 2002.

* The certification attached as
Exhibit 32.1 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

(1)    
    We filed a current report on Form 8-K, dated July 17, 2003, to furnish our public announcement of our fiscal second
    quarter results for the period ended June 30, 2003, which announcement included our consolidated balance sheets and
    statements of operations for the period.

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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 and Chief                    
| |  | Financial Officer                           
| |  | (Duly Authorized and Principal Financial and
| |  | Accounting Officer)                         
| |  |                                             
| |  | Date:          October 31, 2003