##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



|[X]   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIESEXCHANGE ACT OF 1934 
|----- | ----------------------------------------------------------------------------------------
|     
|      | For the quarterly period ended September 30, 2002                                       
|     
|OR    |                                                                                         
|     
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 0-27316

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

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

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

(408) 747-1700
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES [X]      NO [   ]

As of November 13, 2002, 15,318,149 shares of the Registrants Common Stock were
outstanding.





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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | ITEM 1: FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES.                                                             
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                    
|CERTIFICATIONS               
|EXHIBIT INDEX                
|EXHIBIT 99.1                 



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MOLECULAR DEVICES CORPORATION

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002

INDEX

|               |  |                                                                                                         |  |                                                     |  |       
|-------------- |  | ------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------- |  | ------
|               |  |                                                                                                         |  |                                                     |  | PAGE  
|               |  |                                                                                                         |  |                                                     |  | NUMBER
|               |  |                                                                                                         |  |                                                     |  |       
|              
|PART I.        |  | FINANCIAL INFORMATION                                                                                   |  |                                                    
|              
|ITEM 1.        |  | FINANCIAL STATEMENTS                                                                                    |  |                                                    
|              
|               |  | CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2002 and December 31, 2001                          |  | 3                                                  
|              
|               |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 2002 and 2001 |  | 4                                                  
|              
|               |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 and 2001           |  | 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                                              |  | 25                                                 
|              
|ITEM 4.        |  | CONTROLS AND PROCEDURES                                                                                 |  | 26                                                 
|              
|PART II.       |  | OTHER INFORMATION                                                                                       |  |                                                    
|              
|               |  | ITEM 1.                                                                                                 |  | LEGAL PROCEEDINGS                                   |  | 27    
|              
|               |  | ITEM 2.                                                                                                 |  | CHANGES IN SECURITIES AND USE OF PROCEEDS           |  | 27    
|              
|               |  | ITEM 3.                                                                                                 |  | DEFAULTS UPON SENIOR SECURITIES                     |  | 27    
|              
|               |  | ITEM 4.                                                                                                 |  | SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS |  | 27    
|              
|               |  | ITEM 5.                                                                                                 |  | OTHER INFORMATION                                   |  | 27    
|              
|               |  | ITEM 6.                                                                                                 |  | EXHIBITS AND REPORTS ON FORM 8-K                    |  | 28    
|              
|SIGNATURE      |  | 28                                                                                                     
|              
|CERTIFICATIONS |  | 29                                                                                                     

2



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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)

|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |        |         |         | 
|------------------------------------ | ----------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ------------- | ------- | ------------ | ------ | ------- | ------- | 
|                                     |                                           |                                                                                                                                                                                                                 |                            |        | September 30, |         | December 31,
|                                     |                                           |                                                                                                                                                                                                                 |                            |        | 2002          |         | 2001(1)     
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |             
|                                     |                                           |                                                                                                                                                                                                                 |                            |        | (unaudited)   |         |              |        |        
|ASSETS:                              |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     | Current assets:                           |                                                                                                                                                                                                                 |                            |        |               |         |              |        |        
|                                     |                                           | Cash and cash equivalents                                                                                                                                                                                       |                            | $      | 41,447        |         |              | $      | 56,372  |        
|                                     |                                           | Short-term investments                                                                                                                                                                                          |                            |        | 9,670         |         |              |        | 10,885  |        
|                                     |                                           | Accounts receivable, net                                                                                                                                                                                        |                            |        | 21,911        |         |              |        | 23,612  |        
|                                     |                                           | Inventories                                                                                                                                                                                                     |                            |        | 17,163        |         |              |        | 17,181  |        
|                                     |                                           | Deferred tax assets                                                                                                                                                                                             |                            |        | 1,770         |         |              |        | 4,015   |        
|                                     |                                           | Other current assets                                                                                                                                                                                            |                            |        | 1,700         |         |              |        | 2,233   |        
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     |                                           |                                                                                                                                                                                                                 | Total current assets       |        |               | 93,661  |              |        |         | 114,298 | 
|                                     | Equipment and leasehold improvements, net |                                                                                                                                                                                                                 |                            | 11,474 |               |         |              | 10,323 |        
|                                     | Goodwill                                  |                                                                                                                                                                                                                 |                            | 26,017 |               |         |              | 7,171  |        
|                                     | Intangible and other assets               |                                                                                                                                                                                                                 |                            | 23,105 |               |         |              | 20,569 |        
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     |                                           | $                                                                                                                                                                                                               | 154,257                    |        |               | $       | 152,361      |       
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|LIABILITIES AND STOCKHOLDERS EQUITY |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     | Current liabilities:                      |                                                                                                                                                                                                                 |                            |        |               |         |              |        |        
|                                     |                                           | Accounts payable                                                                                                                                                                                                |                            | $      | 3,194         |         |              | $      | 2,470   |        
|                                     |                                           | Accrued liabilities                                                                                                                                                                                             |                            |        | 8,551         |         |              |        | 8,835   |        
|                                     |                                           | Deferred revenue                                                                                                                                                                                                |                            |        | 3,366         |         |              |        | 3,571   |        
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     |                                           |                                                                                                                                                                                                                 | Total current liabilities  |        |               | 15,111  |              |        |         | 14,876  | 
|                                     | Stockholders equity:                     |                                                                                                                                                                                                                 |                            |        |               |         |              |        |        
|                                     |                                           | Preferred stock, $.001 par value; 3,000,000 shares
authorized, no shares issued or outstanding at
September 30, 2002 and December 31, 2001                                                                      |                            |        |              |         |              |        |        |        
|                                     |                                           | Common stock, $.001 par value; 60,000,000 shares
authorized; 15,559,905 and 15,487,438 shares
issued and 15,317,607 and 15,481,844 shares
outstanding at September 30, 2002 and
December 31, 2001, respectively |                            |        | 15            |         |              |        | 15      |        
|                                     |                                           | Additional paid-in capital                                                                                                                                                                                      |                            |        | 181,995       |         |              |        | 181,233 |        
|                                     |                                           | Deferred compensation                                                                                                                                                                                           |                            |        | (258          | )       |              |        | (332    | )      
|                                     |                                           | Treasury stock, at cost; 242,298 and 10,000 shares at
September 30, 2002 and December 31, 2001, respectively                                                                                                    |                            |        | (4,632        | )       |              |        | (160    | )      
|                                     |                                           | Accumulated deficit                                                                                                                                                                                             |                            |        | (36,455       | )       |              |        | (40,653 | )      
|                                     |                                           | Accumulated other comprehensive loss                                                                                                                                                                            |                            |        | (1,519        | )       |              |        | (2,618  | )      
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     |                                           |                                                                                                                                                                                                                 | Total stockholders equity |        |               | 139,146 |              |        |         | 137,485 | 
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       
|                                     |                                           | $                                                                                                                                                                                                               | 154,257                    |        |               | $       | 152,361      |       
|                                     |                                           |                                                                                                                                                                                                                 |                            |        |               |         |              |       



---

|(1) |  | Derived from the Companys audited financial statements as of December 31, 2001, included
in the Companys Form 10-K filed with the Securities and Exchange Commission.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these statements.

3



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

|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |        |        | 
|------------------------------------------------------------ | -------------------------------------------- | ------------------------ | ------ | ------------------ | ------ | ----------------- | ------- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                             |                                              |                          |        | Three Months Ended |        | Nine Months Ended
|                                                             |                                              |                          |        | September 30,      |        | September 30,    
|                                                             |                                              |                          |        |                    |        |                  
|                                                             |                                              |                          |        | 2002               |        | 2001              |         | 2002   |        | 2001
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |     
|REVENUES                                                     |                                              | $                        | 25,907 |                    |        | $                 | 22,140  |        |        | $    | 71,972 |        |        | $ | 66,854 |       
|COST OF REVENUES                                             |                                              |                          | 10,373 |                    |        |                   | 8,653   |        |        |      | 28,879 |        |        |   | 25,963 |       
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|GROSS MARGIN                                                 |                                              |                          | 15,534 |                    |        |                   | 13,487  |        |        |      | 43,093 |        |        |   | 40,891 |       
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|OPERATING EXPENSES:                                          |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|                                                             | Research and development                     |                          |        | 4,612              |        |                   |         | 3,738  |        |      |        | 13,101 |        |   |        | 10,880 |       
|                                                             | Acquired in-process research and development |                          |        |                   |        |                   |         | 12,625 |        |      |        |       |        |   |        | 12,625 |       
|                                                             | Selling, general and administrative          |                          |        | 9,084              |        |                   |         | 8,183  |        |      |        | 25,063 |        |   |        | 24,368 |       
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|                                                             |                                              | Total operating expenses |        |                    | 13,696 |                   |         |        | 24,546 |      |        |        | 38,164 |   |        |        | 47,873 | 
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|INCOME (LOSS) FROM OPERATIONS                                |                                              |                          | 1,838  |                    |        |                   | (11,059 | )      |        |      | 4,929  |        |        |   | (6,982 | )     
|Other income, net                                            |                                              |                          | 461    |                    |        |                   | 732     |        |        |      | 1,244  |        |        |   | 3,286  |       
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|INCOME (LOSS) BEFORE INCOME TAXES                            |                                              |                          | 2,299  |                    |        |                   | (10,327 | )      |        |      | 6,173  |        |        |   | (3,696 | )     
|Income tax provision                                         |                                              |                          | (504   | )                  |        |                   | (884    | )      |        |      | (1,975 | )      |        |   | (3,438 | )     
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|NET INCOME (LOSS)                                            |                                              | $                        | 1,795  |                    |        | $                 | (11,211 | )      |        | $    | 4,198  |        |        | $ | (7,134 | )     
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|BASIC NET INCOME (LOSS) PER SHARE                            |                                              | $                        | 0.12   |                    |        | $                 | (0.69   | )      |        | $    | 0.27   |        |        | $ | (0.43  | )     
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|DILUTED NET INCOME (LOSS) PER SHARE                          |                                              | $                        | 0.12   |                    |        | $                 | (0.69   | )      |        | $    | 0.27   |        |        | $ | (0.43  | )     
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|SHARES USED IN COMPUTING BASIC NET INCOME
(LOSS) PER SHARE   |                                              |                          | 15,318 |                    |        |                   | 16,323  |        |        |      | 15,354 |        |        |   | 16,441 |       
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       
|SHARES USED IN COMPUTING DILUTED NET INCOME
(LOSS) PER SHARE |                                              |                          | 15,381 |                    |        |                   | 16,323  |        |        |      | 15,455 |        |        |   | 16,441 |       
|                                                             |                                              |                          |        |                    |        |                   |         |        |        |      |        |        |        |   |        |       

The accompanying notes are an integral part of these statements.

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

|                                                                                         |                                                           |                      |         |                   |        |      |         |        |        |  
|---------------------------------------------------------------------------------------- | --------------------------------------------------------- | -------------------- | ------- | ----------------- | ------ | ---- | ------- | ------ | ------ | -
|                                                                                         |                                                           |                      |         | Nine Months Ended
|                                                                                         |                                                           |                      |         | September 30,    
|                                                                                         |                                                           |                      |         |                  
|                                                                                         |                                                           |                      |         | 2002              |        | 2001
|                                                                                         |                                                           |                      |         |                   |        |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |                                                           |                      |         |                   |        |      |         |       
|Net income (loss)                                                                        |                                                           | $                    | 4,198   |                   |        | $    | (7,134  | )     
|Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |                                                           |                      |         |                   |        |      |         |       
|                                                                                         | Depreciation and amortization                             |                      |         | 2,828             |        |      |         | 1,973  |       
|                                                                                         | Write-off of acquired in-process research and development |                      |         |                  |        |      |         | 12,625 |       
|                                                                                         | Amortization of deferred compensation                     |                      |         | 74                |        |      |         | 83     |       
|                                                                                         | Amortization of goodwill and patents                      |                      |         | 185               |        |      |         | 451    |       
|                                                                                         | (Increase) decrease in assets:                            |                      |         |                   |        |      |         |        |       
|                                                                                         |                                                           | Accounts receivable  |         |                   | 3,834  |      |         |        | 5,346  |  
|                                                                                         |                                                           | Inventories          |         |                   | 638    |      |         |        | (5,030 | )
|                                                                                         |                                                           | Deferred tax assets  |         |                   | 2,245  |      |         |        | 3,422  |  
|                                                                                         |                                                           | Other current assets |         |                   | 738    |      |         |        | 2,747  |  
|                                                                                         | Increase (decrease) in liabilities:                       |                      |         |                   |        |      |         |        |       
|                                                                                         |                                                           | Accounts payable     |         |                   | 198    |      |         |        | (3,044 | )
|                                                                                         |                                                           | Accrued liabilities  |         |                   | (1,604 | )    |         |        | (3,370 | )
|                                                                                         |                                                           | Deferred revenue     |         |                   | (280   | )    |         |        | (130   | )
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|Net cash provided by operating activities                                                |                                                           |                      | 13,054  |                   |        |      | 7,939   |       
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |                                                           |                      |         |                   |        |      |         |       
|Purchases of short-term investments                                                      |                                                           |                      | (14,638 | )                 |        |      | (11,851 | )     
|Proceeds from sales and maturities of short-term investments                             |                                                           |                      | 15,853  |                   |        |      | 48,220  |       
|Capital expenditures                                                                     |                                                           |                      | (2,070  | )                 |        |      | (3,039  | )     
|Acquisitions, net                                                                        |                                                           |                      | (22,927 | )                 |        |      | (10,367 | )     
|Other assets                                                                             |                                                           |                      | (380    | )                 |        |      | (577    | )     
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|Net cash provided by (used in) investing activities                                      |                                                           |                      | (24,162 | )                 |        |      | 22,386  |       
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |                                                           |                      |         |                   |        |      |         |       
|Payments on borrowings                                                                   |                                                           |                      |        |                   |        |      | (586    | )     
|Issuance of common stock                                                                 |                                                           |                      | 762     |                   |        |      | 3,612   |       
|Purchase of treasury stock                                                               |                                                           |                      | (4,472  | )                 |        |      | (30,586 | )     
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|Net cash used in financing activities                                                    |                                                           |                      | (3,710  | )                 |        |      | (27,560 | )     
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                  |                                                           |                      | (107    | )                 |        |      | (151    | )     
|Net increase (decrease) in cash and cash equivalents                                     |                                                           |                      | (14,925 | )                 |        |      | 2,614   |       
|Cash and cash equivalents at beginning of period                                         |                                                           |                      | 56,372  |                   |        |      | 41,832  |       
|                                                                                         |                                                           |                      |         |                   |        |      |         |       
|Cash and cash equivalents at end of period                                               |                                                           | $                    | 41,447  |                   |        | $    | 44,446  |       
|                                                                                         |                                                           |                      |         |                   |        |      |         |       

The accompanying notes are an integral part of these statements.

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

Note 1. Decription of Business and Basis of Presentation

Molecular Devices Corporation, a Delaware corporation, is principally involved
in the design, development, manufacture, sale and service of bioanalytical
measurement systems for life sciences and drug discovery applications. The
principal markets for Molecular Devices products include leading
pharmaceutical and biotechnology companies as well as medical centers,
universities, government research laboratories and other institutions
throughout the world. In this Quarterly Report, Molecular Devices, the
Company, we, our, or us refers to Molecular Devices Corporation and its
subsidiaries, unless the context requires otherwise.

The condensed consolidated financial statements included herein have been
prepared in accordance with the published rules and regulations of the
Securities and Exchange Commission (SEC) applicable to interim financial
information. Certain information and footnote disclosures included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in these interim statements as allowed by such SEC
rules and regulations. However, management believes 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, 2001, included in the
Molecular Devices Annual Report on Form 10-K for the fiscal year ended December
31, 2001, filed with the SEC on April 1, 2002.

The unaudited condensed consolidated financial statements include the accounts
of Molecular Devices and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. The unaudited condensed
consolidated financial statements contained herein reflect all adjustments
(which include only normal, recurring adjustments), which are, in the opinion
of management, necessary to state fairly the results for the periods presented.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. The results for the three and nine-month periods ended September
30, 2002 are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2002.

Note 2. Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 142 requires goodwill to be tested for
impairment under certain circumstances, and written down when impaired, rather
than being amortized as previous standards required. Furthermore, SFAS 142
requires purchased intangible assets other than goodwill to be amortized over
their useful lives unless these lives are determined to be indefinite.

SFAS 142 was effective as of the beginning of the fiscal year ending December
31, 2002 and, accordingly, Molecular Devices ceased amortizing goodwill as of
the beginning of fiscal 2002. Molecular Devices also performed the initial
goodwill impairment test and did not note impairment indicators. Impairment
tests are required to be performed annually and between annual tests in certain
circumstances. There can be no assurance that future goodwill impairment tests
will not result in a charge to earnings. Molecular Devices reassessed the
useful lives of all other purchased intangible assets. No adjustments to
amortization periods were deemed necessary.

6



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The following table presents the impact of adoption of SFAS 142 had the
standard been in effect for the three and nine months ended September 30, 2001
(in thousands, except per share data):

|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |       |  
|--------------------------- | ------------------------------- | - | ------------------ | ---- | ----------------- | - | ------- | ----- | ---- | - | ----- | ---- |  | - | ------ | ----- | -
|                            |                                 |   | Three Months Ended |      | Nine Months Ended
|                            |                                 |   | September 30,      |      | September 30,    
|                            |                                 |   |                    |      |                  
|                            |                                 |   | 2002               |      | 2001              |   | 2002    |       | 2001
|                            |                                 |   |                    |      |                   |   |         |       |     
|Reported net income (loss)  |                                 | $ | 1,795              |      |                   | $ | (11,211 | )     |      | $ | 4,198 |      |  | $ | (7,134 | )    
|                            | Add back: Goodwill amortization |   |                    |     |                   |   |         | 80    |      |   |       |     |  |   |        | 240   |  
|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|Adjusted net income (loss)  |                                 | $ | 1,795              |      |                   | $ | (11,131 | )     |      | $ | 4,198 |      |  | $ | (6,894 | )    
|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|Basic earnings per share:   |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|                            | Reported net income (loss)      |   | $                  | 0.12 |                   |   | $       | (0.69 | )    |   | $     | 0.27 |  |   | $      | (0.43 | )
|                            | Goodwill amortization           |   |                    |     |                   |   |         |      |      |   |       |     |  |   |        | 0.01  |  
|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|                            | Adjusted net income (loss)      |   | $                  | 0.12 |                   |   | $       | (0.69 | )    |   | $     | 0.27 |  |   | $      | (0.42 | )
|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|Diluted earnings per share: |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|                            | Reported net income (loss)      |   | $                  | 0.12 |                   |   | $       | (0.69 | )    |   | $     | 0.27 |  |   | $      | (0.43 | )
|                            | Goodwill amortization           |   |                    |     |                   |   |         |      |      |   |       |     |  |   |        | 0.01  |  
|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      
|                            | Adjusted net income (loss)      |   | $                  | 0.12 |                   |   | $       | (0.69 | )    |   | $     | 0.27 |  |   | $      | (0.42 | )
|                            |                                 |   |                    |      |                   |   |         |       |      |   |       |      |  |   |        |      

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
144). SFAS 144 establishes a single accounting model, based on the framework
established in Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of (SFAS 121), for long-lived assets to be disposed of by sale, and
resolves implementation issues related to SFAS 121. We adopted SFAS 144 as of
January 1, 2002. The adoption of SFAS 144 did not have an impact on our
results of operations or financial position.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS
146). SFAS 146 addresses significant issues relating to the recognition,
measurement and reporting of costs associated with exit and disposal
activities, including restructuring activities, and nullifies the guidance in
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit and Activity
(including Certain Costs Incurred in a Restructuring). SFAS 146 requires that
the initial liability for costs associated with exit and disposal activities be
measured at fair value and prohibits the recognition of a liability based
solely on an entitys commitment to a plan. The provisions of SFAS 146 are
effective for exit and disposal activities initiated after December 31, 2002.
We do not believe that the adoption of SFAS 146 will have a material impact on
our financial position or results of operations.

Note 3. Goodwill and Purchased Intangible Assets

The changes in goodwill during the nine months ended September 30, 2002 were as
follows (in thousands):

|                                    |       |   |              |       |          |   |             |        |      |   |   |   |               |   |        |        | 
|----------------------------------- | ----- | - | ------------ | ----- | -------- | - | ----------- | ------ | ---- | - | - | - | ------------- | - | ------ | ------ | 
|                                    |       |   | December 31, |       |          |   |             |        |      |   |   |   | September 30,
|                                    |       |   | 2001         |       | Acquired |   | Adjustments |        | 2002
|                                    |       |   |              |       |          |   |             |        |     
|Skatron Instruments AS              |       | $ | 3,892        |       |          | $ |            |        |      | $ |  |   |               | $ | 3,892  |       
|Nihon Molecular Devices
Corporation |       |   | 1,924        |       |          |   |            |        |      |   |  |   |               |   | 1,924  |       
|Cytion SA                           |       |   | 1,355        |       |          |   |            |        |      |   |  |   |               |   | 1,355  |       
|Universal Imaging Corporation       |       |   |             |       |          |   | 18,846      |        |      |   |  |   |               |   | 18,846 |       
|                                    |       |   |              |       |          |   |             |        |      |   |   |   |               |   |        |       
|                                    | Total |   | $            | 7,171 |          |   | $           | 18,846 |      |   | $ |  |               |   | $      | 26,017 | 
|                                    |       |   |              |       |          |   |             |        |      |   |   |   |               |   |        |       

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Purchased intangible assets not subject to amortization are comprised of
tradename, valued at $707,000 as of September 30, 2002 and $0 at December 31,
2001.

Purchased intangible assets subject to amortization consisted of the following
(in thousands):

|                     |       |   |                    |       |                   |   |          |     |          |   |              |       |          |   |       |       |     |   |    |    |  |   |       |       | 
|-------------------- | ----- | - | ------------------ | ----- | ----------------- | - | -------- | --- | -------- | - | ------------ | ----- | -------- | - | ----- | ----- | --- | - | -- | -- |  | - | ----- | ----- | 
|                     |       |   | September 30, 2002 |       | December 31, 2001
|                     |       |   |                    |       |                  
|                     |       |   | Gross              |       |                   |   |          |     | Net      |   | Gross        |       |          |   |       |       | Net
|                     |       |   | Carrying           |       | Accumulated       |   | Carrying |     | Carrying |   | Accumulated  |       | Carrying
|                     |       |   | Value              |       | Amortization      |   | Value    |     | Value    |   | Amortization |       | Value   
|                     |       |   |                    |       |                   |   |          |     |          |   |              |       |         
|Patents              |       | $ | 1,372              |       |                   | $ | 164      |     |          | $ | 1,208        |       |          | $ | 1,372 |       |     | $ | 61 |    |  | $ | 1,311 |      
|Developed technology |       |   | 1,468              |       |                   |   | 37       |     |          |   | 1,431        |       |          |   |      |       |     |   |   |    |  |   |      |      
|                     |       |   |                    |       |                   |   |          |     |          |   |              |       |          |   |       |       |     |   |    |    |  |   |       |      
|                     | Total |   | $                  | 2,840 |                   |   | $        | 201 |          |   | $            | 2,639 |          |   | $     | 1,372 |     |   | $  | 61 |  |   | $     | 1,311 | 
|                     |       |   |                    |       |                   |   |          |     |          |   |              |       |          |   |       |       |     |   |    |    |  |   |       |      

The estimated future amortization expense of purchased intangible assets as of
September 30, 2002 was as follows (in thousands):

|                              |       |        |       |       | 
|----------------------------- | ----- | ------ | ----- | ----- | 
|Fiscal Year                   |       | Amount
|                              |       |       
|2002 (remaining three months) |       | $      | 71    |      
|2003                          |       |        | 284   |      
|2004                          |       |        | 284   |      
|2005                          |       |        | 284   |      
|2006                          |       |        | 284   |      
|2007                          |       |        | 284   |      
|Thereafter                    |       |        | 1,148 |      
|                              |       |        |       |      
|                              | Total |        | $     | 2,639 | 
|                              |       |        |       |      

Note 4. Business Combinations

On June 1, 2002, Molecular Devices acquired Universal Imaging Corporation
(UIC) pursuant to a Stock Purchase Agreement, in exchange for $22 million in
cash. In addition, Molecular Devices incurred $1.2 million of acquisition
costs. As a result of the acquisition, UIC became a wholly-owned subsidiary of
Molecular Devices. The acquisition expands Molecular Devices portfolio of
novel tools for cell analysis to include MetaMorph, cellular imaging software
widely used in life sciences research, and the Discovery-1 screening system for
drug discovery. The excess of the purchase price over the identified net
assets of UIC has been allocated to goodwill, tradename and developed
technology as follows (in thousands):

|                                                                               |  |   |        | 
|------------------------------------------------------------------------------ |  | - | ------ | 
|Acquired goodwill                                                              |  | $ | 18,846 | 
|Acquired developed technology (amortized over ten years)                       |  |   | 1,468  | 
|Acquired tradename                                                             |  |   | 707    | 
|Net book value of acquired assets and liabilities which approximate fair value |  |   | 2,179  | 
|                                                                               |  |   |        | 
|Total purchase price                                                           |  | $ | 23,200 | 
|                                                                               |  |   |        | 

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Pro forma consolidated results of operations for the three and nine months
ended September 30, 2002 and 2001 for Molecular Devices as if the acquisition
had been consummated January 1, 2001 were as follows (in thousands, except per
share amount):

|                                    |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  
|----------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------ |  |  | - | ------ | -
|                                    |  | Three Months Ended |        | Nine Months Ended
|                                    |  | September 30,      |        | September 30,    
|                                    |  |                    |        |                  
|                                    |  | 2002               |        | 2001              |  | 2002 |         | 2001
|                                    |  |                    |        |                   |  |      |         |     
|Revenue                             |  | $                  | 25,907 |                   |  | $    | 24,818  |      |  | $ | 76,958 |  |  | $ | 74,269 |  
|Net income (loss)                   |  |                    | 1,795  |                   |  |      | (11,035 | )    |  |   | 4,433  |  |  |   | (6,895 | )
|Diluted net income (loss) per share |  | $                  | 0.12   |                   |  | $    | (0.68   | )    |  | $ | 0.29   |  |  | $ | (0.42  | )

The pro forma information does not purport to be indicative of the results that
actually would have occurred had the acquisition been consummated January 1,
2001, or of the results which may occur in the future.

Note 5. Comprehensive Income (Loss)

Comprehensive income (loss), net of tax, was approximately $1.2 million and
($10.8) million for the three-month periods ended September 30, 2002 and 2001,
respectively. Comprehensive income (loss), net of tax, was approximately $4.9
million and ($7.2) million for the nine-month periods ended September 30, 2002
and 2001, respectively. The differences between reported net income (loss) and
comprehensive income (loss) are principally comprised of changes in accumulated
foreign currency translation, which is recorded in stockholders equity.

Note 6. Cash Equivalents and Short-Term Investments

Molecular Devices considers all highly liquid investments in debt securities
with a remaining maturity from the date of purchase of 90 days or less to be
cash equivalents. As of September 30, 2002, Molecular Devices cash and cash
equivalents was $41.4 million. Cash equivalents consist of money market funds,
corporate debt securities and U.S. government debt instruments.

As of September 30, 2002, Molecular Devices short-term investments included
obligations of $5.7 million of governmental agencies and $4.0 million of
corporate debt securities with original maturities ranging between 3 and 12
months. By policy, Molecular Devices limits concentration of credit risk by
diversifying its investments among a variety of high credit-quality issuers.
All cash equivalents and short-term investments are classified as
available-for-sale. Available-for-sale securities are carried at amortized
cost, which approximated fair value at September 30, 2002. Material unrealized
gains and losses, if any, are reported in stockholders equity and included in
other comprehensive income (loss). Fair value is estimated based on available
market information. The cost of securities sold is based on the specific
identification method. For the three and nine months ended September 30, 2002
and September 30, 2001, gross realized gains and losses on available-for-sale
securities were immaterial.

Note 7. Inventories

Inventories consist of (in thousands):

|                                |  |                    |        |                   |  |   |        | 
|------------------------------- |  | ------------------ | ------ | ----------------- |  | - | ------ | 
|                                |  | September 30, 2002 |        | December 31, 2001
|                                |  |                    |        |                  
|                                |  | (unaudited)        |        |                   |  |  
|Finished goods                  |  | $                  | 8,881  |                   |  | $ | 8,835  | 
|Work-in-process                 |  |                    | 1,832  |                   |  |   | 1,347  | 
|Raw materials and subassemblies |  |                    | 6,450  |                   |  |   | 6,999  | 
|                                |  |                    |        |                   |  |   |        | 
|                                |  | $                  | 17,163 |                   |  | $ | 17,181 | 
|                                |  |                    |        |                   |  |   |        | 

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Note 8. Stock Repurchase

In the first quarter of 2002, Molecular Devices completed the repurchase of
220,000 shares of common stock. The repurchase occurred at various times
throughout the quarter subsequent to approval of the repurchase plan by the
Molecular Devices Board of Directors in October 2001, allowing for the
repurchase of up to 1.5 million shares. As of September 30, 2002, 240,045
shares remained on Molecular Devices balance sheet as treasury stock, at cost.

Note 9. Net Income (Loss) Per Share

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

|                                                                                                  |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  
|------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------ |  |  | - | ------ | -
|                                                                                                  |  | Three Months Ended |        | Nine Months Ended
|                                                                                                  |  | September 30,      |        | September 30,    
|                                                                                                  |  |                    |        |                  
|                                                                                                  |  | 2002               |        | 2001              |  | 2002 |         | 2001
|                                                                                                  |  |                    |        |                   |  |      |         |     
|Net income (loss)                                                                                 |  | $                  | 1,795  |                   |  | $    | (11,211 | )    |  | $ | 4,198  |  |  | $ | (7,134 | )
|                                                                                                  |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  
|Denominator for basic EPS  weighted average
common shares outstanding                            |  |                    | 15,318 |                   |  |      | 16,323  |      |  |   | 15,354 |  |  |   | 16,441 |  
|Effect of dilutive securities  employee stock options                                            |  |                    | 63     |                   |  |      |        |      |  |   | 101    |  |  |   |       |  
|                                                                                                  |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  
|Denominator for diluted EPS  weighted average
common shares outstanding plus dilutive securities |  |                    | 15,381 |                   |  |      | 16,323  |      |  |   | 15,455 |  |  |   | 16,441 |  
|                                                                                                  |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  
|BASIC NET INCOME (LOSS) PER SHARE                                                                 |  | $                  | 0.12   |                   |  | $    | (0.69   | )    |  | $ | 0.27   |  |  | $ | (0.43  | )
|                                                                                                  |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  
|DILUTED NET INCOME (LOSS) PER SHARE                                                               |  | $                  | 0.12   |                   |  | $    | (0.69   | )    |  | $ | 0.27   |  |  | $ | (0.43  | )
|                                                                                                  |  |                    |        |                   |  |      |         |      |  |   |        |  |  |   |        |  

For the three and nine months ended September 30, 2001, the total number of
shares excluded from the calculations of diluted net loss per share was 165,000
and 482,000, 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.

Note 10. Legal Proceedings

On April 16, 2002, Caliper Technologies Corp. (Caliper) filed a patent
infringement lawsuit against us alleging that our IMAP and reagent assay kits
infringe a U.S. patent held by Caliper. We believe that none of our products
infringes any claim of the Caliper patent. 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 patent and that the
Caliper patent is invalid. IMAP products represented less than 1% of our
revenues for the first nine months of 2002 and are expected to represent less
than 1% of our anticipated revenues for the full year of 2002. Accordingly,
based on both our assessment of the lack of merit to the lawsuit and the
anticipated immateriality of our IMAP product sales, we believe that any
outcome of the patent infringement lawsuit will not have a material effect on
the results of operations or financial condition of Molecular Devices.

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MOLECULAR DEVICES CORPORATION




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 the Molecular Devices Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the SEC on April 1, 2002.

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,
2001 contained in the Molecular Devices Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the SEC on April 1, 2002, including in
particular the discussion of Critical Accounting Policies included therein.
The results for the first nine months of 2002 are not necessarily indicative of
the results to be expected for the entire fiscal year ending December 31, 2002.

RESULTS OF OPERATIONS  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

REVENUES. Revenues for the third quarter of 2002 were $25.9 million, an
increase of $3.8 million, or 17%, as compared to the third quarter of 2001.
Revenues for the first nine months of 2002 increased $5.1 million, or 8%, to
$72.0 million from $66.9 million in the same period last year. Molecular
Devices revenues are split into two product families. The Drug Discovery
product family, which includes cell analysis and HTS systems, consists of
Molecular Devices IonWorks HT, FLIPR®, CLIPR, Analyst, Discovery-1 and
Cytosensor systems. The Life Sciences Research product family, which includes
bench top detection and liquid handling products, consists of Molecular
Devices Maxline, Skatron, MetaMorph and Threshold® products. The Drug
Discovery product family experienced an increase in revenues of 5% compared
with the third quarter of 2001 due to a strong contribution from the FLIPR
product line, as well as the introduction of the IonWorks HT to Molecular
Devices Drug Discovery product family. For the first nine months of 2002, the
Drug Discovery product family experienced an increase of 1% when compared to
the first nine months of 2001 due to strength in the FLIPR product line as well
as the addition of the Discovery-1. The Life Sciences Research product family
generated a 27% increase in revenues compared with the third quarter of 2001
primarily due to the addition of the MetaMorph product line in 2002 as well as
growth in Maxline and Skatron products. The Life Sciences Research product
family generated a 14% increase for the first nine months of 2002 when compared
to the first nine months of 2001. Life Sciences Research year to date revenues
increased primarily due to the addition of the MetaMorph sales, as well as
growth in the unit sales of Maxline and Skatron products.

GROSS MARGIN. Gross margin decreased to 60% for the three and nine-month
periods ended September 30, 2002, as
compared to 61% for the three and nine-month periods ended September 30,
2001. The decreased margin for the third quarter of 2002 was due to a product
mix that included a higher percentage of lower margin products. The decreased
margin for the nine months ended September 30, 2002 was primarily due to
special pricing on a significant FLIPR order that occurred in the second
quarter of 2002 and an unfavorable product mix.

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RESEARCH AND DEVELOPMENT. Research and development expenses for the third
quarter of 2002 increased by 23% to $4.6 million (18% of revenues) from $3.7
million (17% of revenues) for the third quarter of 2001. Research and
development expenses for the first nine months of 2002 increased by 20% to
$13.1 million (18% of revenues) from $10.9 million (16% of revenues) for the
first nine months of 2001. The increased spending for the periods was
primarily the result of research and development expenses related to Universal
Imaging Corporation, which we acquired in June 2002, and the research and
development expenses related to Cytion, which was acquired in July 2001.

WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. In the third
quarter of 2001, a $12.6 million write-off of in-process research and
development occurred in conjunction with the acquisition of Cytion S.A. There
was no similar write-off in the three and nine months ended September 30, 2002.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the third quarter of 2002 increased to $9.1 million (35% of
revenues) as compared to the third quarter of 2001, which was $8.2 million, or
37% of revenues. Selling, general and administrative expenses for the first
nine months of 2002 increased to $25.1 million (35% of revenues) as compared to
the first nine months of 2001, which was $24.4 million, or 36% of revenues.
The increases in both the three and nine-months ended September 30, 2002, when
compared to the same periods of 2001, were due to the additional selling,
general and administrative expenses associated with Universal Imaging
Corporation, which was acquired in June 2002.

OTHER INCOME (NET). Net other income decreased to $461,000 in the third
quarter of 2002 as compared to $732,000 in the same period of 2001. Net other
income decreased to $1.2 million for the first nine months of 2002 as compared
to $3.3 million in the same period of 2001. The decrease in net other income
in both periods was primarily due to lower interest income as a result of lower
average cash and short-term investment balances and the significant decline in
interest rates compared to 2001. The lower average cash balances result
principally from a share repurchase plan under which we have repurchased over
1.7 million shares of our common stock beginning in the third quarter of 2001,
and our acquisitions of Cytion S.A. and Universal Imaging Corporation.

INCOME TAX PROVISION. We recorded an income tax provision of $504,000 in the
third quarter of 2002 as compared to $884,000 in the same period of 2001. The
tax provision for the third quarter of 2002 was based on an effective tax rate
of 22.0%, down from 38.5% in the third quarter of 2001. In the third quarter
of 2002, we revised our estimated effective annual tax rate to 32% for 2002.
The significant drop in the effective tax rate for the third quarter of 2002 is
necessary to adjust the year to date income tax provision to the lower
estimated annual rate for 2002. The decreased rate for 2002 is primarily due
to strategic tax elections in our Swiss and German subsidiaries.

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, 2001 filed with the
Securities and Exchange Commission on April 1, 2002. There have been no
changes in any of our accounting policies since December 31, 2001, other than
the adoption of SFAS 142 and SFAS 144, as described in the notes to the
financial statements in Part I  Item I of this report.

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Liquidity and Capital Resources

We had cash, cash equivalents and short-term investments of approximately $51.1
million at September 30, 2002 compared to $67.3 million at December 31, 2001.
Operating activities in the first nine months of 2002 provided approximately
$13.1 million of cash primarily due to net income, decreases in accounts
receivable and the use of deferred tax assets, partially offset by a decrease
in accrued liabilities. In the first nine months of 2001, operating activities
provided $7.9 million of cash primarily due to decreases in accounts receivable
and the use of deferred tax assets, partially offset by an increase in
inventory and decreased accounts payable and accrued liabilities.

$24.1 million of cash was used in investing activities in the first nine months
of 2002, primarily due to $22.0 million spent to acquire Universal Imaging
Corporation and $2.1 million of capital expenditures related to various
computer and software related projects. In the first nine months of 2001,
investing activities provided $22.4 million, primarily due to the net
maturities of short-term investments, partially offset by $7.2 million to
acquire Cytion S.A., $3.2 million to acquire Nihon Molecular Devices and $3.0
million of capital expenditures.

In the first nine months of 2002, financing activities used $3.7 million,
primarily due to the repurchase of 220,000 shares of our common stock,
partially offset by the proceeds from the issuance of common stock under the
employee stock plans. In the first nine months of 2001, financing activities
used $27.6 million of cash due to the repurchase of 1.5 million shares of our
common stock, partially offset by the issuance of common stock under the
employee stock plans.

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 and the
timing of customer orders, competition, risks associated with the
pharmaceutical and biotechnology industries, supplier or manufacturing problems
or delays and risks associated with past and potential future acquisitions.

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

Our forecast of the period of time through which our financial resources will
be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of
a number of factors. We have based this estimate on 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                                                             

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| |  | the costs of expanding our sales, marketing and distribution capabilities
both in the United States and abroad.
|- |  | ---------------------------------------------------------------------------------------------------------------

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

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

Factors That 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 is expected to be uneven
and difficult to predict. Many of our products represent significant 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 materially 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
most of our purchase orders require payment within 30 days of product shipment,
in the past we have experienced significant collection delays. We cannot
predict whether we will continue to experience similar or more severe delays.

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

We depend on orders that are received and shipped in the same quarter and
therefore have limited visibility of future product shipments.

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

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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. Over 76% of our
revenues in 2001 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 them. Any
significant delay in releasing new systems could adversely affect our
reputation, give a competitor a first-to-market advantage or cause a competitor
to achieve greater market share. In addition, our future success depends on our
continued ability to develop new applications for our existing products. If we
are not able to complete the development of these applications, or if we
experience difficulties or delays, we may lose our current customers and may
not be able to attract new customers, which could seriously harm our business
and our future growth prospects.

We must expend a significant amount of time and resources to develop new
products and if these products do not achieve commercial acceptance, our
operating results may suffer.

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

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 sometimes have 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.

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 pricing
pressures as third-party payors continue challenging the pricing of medical
products and services, government

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regulation and uncertainty of technological
change, and reduction and delays in research and development expenditures by
companies in these industries.

In addition, our future revenues may be adversely affected by the ongoing
consolidation in the pharmaceutical and biotechnology industries, which will
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.

There may be third-party patents that relate to our technology or potential
products. A third party has asserted and additional third parties may in the
future assert infringement or other intellectual property claims against us. We
may have to pay substantial damages, including treble damages, for past
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. 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 and reagent assay kits infringe a
U.S. patent held by Caliper. We believe that none of our products infringes
any claim of the Caliper patent. 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 patent and that the
Caliper patent is invalid. However, we can not assure you that we will prevail
in the Caliper lawsuit or that, even if we prevail, that attention to the
lawsuit will not consume substantial financial and management resources.

We may need to initiate lawsuits to protect or enforce our patents, which would
be expensive and, if we lose, may cause us to lose some of our intellectual
property rights, which would reduce our ability to compete in the market.

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.

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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. We cannot assure you that we will prevail in any of
these suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, it could cause our stock price to decline.

The rights we rely upon to protect our intellectual property underlying our
products may not be adequate, which could enable third parties to use our
technology and would reduce our ability to compete in the market.

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

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



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

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

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products without infringing on any of our intellectual property
rights or design around our proprietary technologies.

We obtain some of the components and subassemblies included in our systems from
a single source or a limited group of suppliers, and the partial or complete
loss of one of these suppliers could cause production delays and a substantial
loss of revenues.

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

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



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

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

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, Downingtown, 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. As a result of the
electricity crisis in California, our Sunnyvale manufacturing facility
periodically runs the risk of a partial or complete power failure. If we
cannot deliver our systems in a timely manner, our revenues will likely suffer.

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

As we develop new products, we must transition the manufacture of a new product
from the development stage to commercial manufacturing. We cannot predict
whether we will be able to

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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.

We may have difficulty managing our growth.

We expect to continue to experience significant growth in the number of our
employees and customers and the scope of our operations. 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 2002 approximately 9% of our sales have been made through distributors
outside North America. 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
materially adverse affect on our business, financial condition and results of
operations.

If we do not successfully develop and commercialize new products, we will have
incurred significant costs that may harm our business.

Our research and development costs have increased as a result of the
acquisition of Cytion S.A. Achieving the benefits of the acquisition of Cytion
will depend in part on our ability to develop new products, including
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 the electrophysiology market segment. As a result, we may lose
customers and our business and results of operations may be harmed. We have
made an investment in, and obtained exclusive world-wide rights to
commercialize the high-throughput patch clamp system products of, Essen
Instruments, Inc. While we believe that the technology acquired through the
acquisition of Cytion complements the high-throughput patch clamp system
products of Essen Instruments, we cannot assure you that the acquisition of
Cytion will be complementary to the Essen products. In addition, we
may continue to incur costs from integrating Cytions technology and
operations, which may be expensive and time consuming and may
adversely impact our ability to successfully develop products. Such
costs may include costs for reorganization or closures of facilities,
employee redeployment or severance, conversion of information
systems or other costs arising from the coordination of our
development teams. We cannot assure you that
we will be able to retain the key personnel or that the anticipated benefits of
their expertise will be realized. Further, successful product development may
place a significant burden on our existing management and our internal
resources, which could have a materially adverse effect on our business,
financial condition and operating results. Finally, the market price of
Molecular Devices common stock could decline as a result of the acquisition if
we do not achieve the perceived benefits of the acquisition as rapidly or to
the extent anticipated by financial analysts or investors.

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If we choose to acquire additional new and complementary businesses, products
or technologies instead of developing them ourselves, we may be unable to
complete these acquisitions or may not be able to successfully integrate an
acquired business or technology in a cost-effective and non-disruptive manner.

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

If we do not successfully manufacture, promote, sell and service UICs
products, develop new products and retain UICs customer relationships and key
employees, we may fail to achieve the expected benefits of the acquisition of
UIC.

Achieving the benefits of the acquisition of UIC will depend in part on our
ability to continue to successfully manufacture, promote, sell and service
UICs products and develop new products and features in a timely and efficient
manner. Our failure to do so could have a materially adverse effect on the
combined companys business, financial condition and results of operations. Any
significant delay or reduction in orders for UICs products could have a
materially adverse effect on the combined companys business, financial
condition and results of operations. Finally, the failure to integrate UIC into
our operations and retain UICs key employees could diminish the benefits of
the acquisition. Achieving the benefits of the acquisition will depend on part
on the successful integration and coordination of Molecular Devices and UICs
operations and personnel in a timely and efficient manner. We cannot assure you
that we will be able to retain UICs key employees or that the anticipated
benefits of their expertise, experience and capabilities will be realized.
Molecular Devices may incur unanticipated costs if integrating UICs operations
and key employees is difficult or unsuccessful. We do not know whether
Molecular Devices will be successful in these integration efforts and cannot
assure you that we will realize the expected benefits of the acquisition.

We depend on our key personnel, the loss of whom would impair our ability to
compete.

We are highly dependent on the principal members of our management, engineering
and scientific staff. The loss of the service of any of these persons could
seriously harm our product development and commercialization efforts. In
addition, research, product development and commercialization will require
additional skilled personnel in areas such as chemistry and biology, software
engineering and electronic engineering. Our corporate headquarters is located
in Sunnyvale, California, where demand for personnel with these skills is
extremely high and is likely to remain high. As a result, competition for and
retention of personnel, particularly for employees with technical expertise, is
intense and the turnover rate for these people 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.

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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, Japan and
Switzerland, and sales to customers outside the U.S. have accounted for
approximately 35% of our revenues in the first nine months of 2002. 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.
All of our direct sales in the United Kingdom, Germany, France, Japan and
Canada are denominated in local currencies and totaled $28.9 million (31% of
total revenues) in 2001. 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. 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 engage in foreign currency hedging transactions currently,
but may consider developing a hedging program 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 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 particular, if sales levels in a particular quarter
do not meet expectations, we may not be able to adjust operating expenses
sufficiently quickly to compensate for the shortfall, and our results of
operations for that quarter may be seriously harmed. We manufacture our
products based on forecasted orders rather than to outstanding orders. Our
manufacturing procedures may in certain instances create a risk of excess or
inadequate inventory levels

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if orders do not match forecasts. In addition, 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 affected directly by variations
in revenues.

It is possible that in some future quarter or quarters, our operating results
will be below the expectations of securities analysts or investors. In this
event, the market price of our common stock may fall abruptly and
significantly. 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. Over the
last twelve months, our stock price has ranged from $9.95 to $23.65. 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:



| |  | our failure to meet our the performance estimates or those developed by securities analysts;                                                                                          
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | changes in financial estimates of our revenues and operating results or buy/sell recommendations by securities analysts;                                                              
| 
| |  | 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; and
| 
| |  | general stock market conditions, other economic or external factors.                                                                                                                  

Provisions of our charter documents and Delaware law may inhibit a takeover,
which could limit the price investors might be willing to pay in the future for
our common stock.

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

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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. The
provisions described above and our poison pill could limit the price that
investors might be willing to pay in the future for our common stock.

Our actual results could differ materially from those anticipated in our
forward-looking statements.

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

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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 in the Summary of Significant
Accounting Policies note in the Notes to Consolidated Financial Statements
included in the Molecular Devices Annual Report on Form 10-K for the fiscal
year ended December 31, 2001.

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 invest our excess cash primarily in demand
deposits with United States banks and money market accounts and short-term
securities. These securities, consisting of $5.7 million of U.S. government
agency securities and $4.0 million of commercial paper, are carried at market
value, which approximate cost, typically mature or are redeemable within 90 to
360 days and bear minimal valuation risk. We have not experienced any
significant losses on these investments.

We are exposed to changes in exchange rates primarily in the United Kingdom,
Germany, Japan and Canada, where we sell direct in local currencies. Further,
a strengthening of the U.S. dollar could make our products less competitive in
overseas markets, as most of our costs are incurred in the U.S. dollar.
Translation gains and losses related to our foreign subsidiaries in the United
Kingdom, Germany, Japan, Switzerland and Norway are accumulated as a separate
component of stockholders equity.

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ITEM 4. CONTROLS AND PROCEDURES.

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

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

Limitations on the Effectiveness of Controls

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

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MOLECULAR DEVICES CORPORATION




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 and reagent assay kits infringe a
U.S. patent held by Caliper. We believe that none of our products infringes
any claim of the Caliper patent. 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 patent and that the
Caliper patent is invalid. IMAP products represented less than 1% of our
revenues for the first three quarters of 2002 and are expected to represent
less than 1% of our anticipated revenues for the full year of 2002.
Accordingly, based on both our assessment of the lack of merit to the lawsuit
and the anticipated immateriality of our IMAP product sales, we believe that
any outcome of the patent infringement lawsuit will not have a material effect
on our results of operations or financial condition.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In 2000, we entered into an employment arrangement with Patricia Sharp pursuant
to which we are obligated to issue an aggregate of up to 2,500 shares of our
common stock over a period of two years to Ms. Sharp in exchange for services
rendered. As a result of this arrangement, we issued shares of our common
stock to this officer as indicated below in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933, as
amended.

|          |  |                  |     |               |  |                   |  | 
|--------- |  | ---------------- | --- | ------------- |  | ----------------- |  | 
|          |  | Number of Shares |     | Date of Issue
|          |  |                  |     |              
|Ms. Sharp |  |                  | 313 |               |  | September 5, 2002




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




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

None.




ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



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

|        |  |                                                                                                                                                                                                                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                         
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                         
|99.1(1) |  | Certification by the Chief Executive Officer and the Chief Financial
Officer of Molecular Devices as required by Section 906 of the Public
Company Accounting Reform and Investor Protection Act of 2002 (18
U.S.C. Section 1350, as adopted) (the Sarbanes-Oxley Act of 2002),
dated November 14, 2002.



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



| |  |  | An Amended Form 8-K report was filed on August 9, 2002.
| |  |  | -------------------------------------------------------




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                                                                                             
| |  |                               |  |                                                                                                                     
| |  |                               |  | Vice President, Finance and Chief Financial Officer
(Duly Authorized and Principal Financial and
Accounting Officer)
|
| |  | Date:                         |  | November 14, 2002                                                                                                   



---

|(1) |  | The certification attached as Exhibit 99.1 accompanies the Quarterly Report on
Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall
not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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CERTIFICATIONS

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



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Molecular
Devices Corporation;                                                                                                                                                                                                                                          
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     

|   |  |                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|c) |  | presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



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

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



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

Date: November 14, 2002



| | /s/ JOSEPH D. KEEGAN, PH.D
Joseph D. Keegan, Ph.D.
Chief Executive Officer
| | --------------------------------------------------------------------------

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I, Timothy A. Harkness, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Molecular
Devices Corporation;                                                                                                                                                                                                                                          
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     

|   |  |                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|c) |  | presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



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

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



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

Date: November 14, 2002



| | /s/ TIMOTHY A. HARKNESS
Timothy A. Harkness
Chief Financial Officer
| | -------------------------------------------------------------------

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                         
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                         
|99.1(1) |  | Certification by the Chief Executive Officer and the Chief Financial
Officer of Molecular Devices as required by Section 906 of the Public
Company Accounting Reform and Investor Protection Act of 2002 (18
U.S.C. Section 1350, as adopted) (the Sarbanes-Oxley Act of 2002),
dated November 14, 2002.