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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005 OR o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to Commission File Number: 0-27316 Molecular Devices Corporation  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 þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o As of April 26, 2005, 16,923,487 shares of the registrants Common Stock, $.001 par value, were
outstanding.




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MOLECULAR DEVICES CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2005 INDEX PAGENUMBERPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2005 and December 31, 2004
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended March 31,
2005 and 2004
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March
31, 2005 and 2004
    
    
    5NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    6ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
    
    
    11ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    21ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    22PART II.
    
    OTHER INFORMATION
    
    
    22ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    22ITEM 6.
    
    EXHIBITS
    
    
    23SIGNATURE
    
    
    
    
    24EXHIBIT 10.51EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  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, unaudited)
 March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,326
    
    
    $
    30,175Accounts receivable, net
    
    
    35,614
    
    
    
    36,995Inventories, net
    
    
    26,298
    
    
    
    25,785Deferred tax assets
    
    
    9,756
    
    
    
    9,654Prepaids and other current assets
    
    
    2,394
    
    
    
    2,780Total current assets
    
    
    82,388
    
    
    
    105,389Equipment and leasehold improvements, net
    
    
    11,115
    
    
    
    11,762Goodwill
    
    
    104,228
    
    
    
    104,228Intangible assets
    
    
    41,360
    
    
    
    30,243Other assets
    
    
    3,437
    
    
    
    3,607Total assets
    
    $
    242,528
    
    
    $
    255,229LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,740
    
    
    $
    7,085Accrued compensation
    
    
    3,608
    
    
    
    8,447Other accrued liabilities
    
    
    13,357
    
    
    
    14,995Deferred revenue
    
    
    7,213
    
    
    
    7,306Total current liabilities
    
    
    30,918
    
    
    
    37,833Other long-term liabilities
    
    
    1,374
    
    
    
    1,452Deferred tax liabilities
    
    
    5,312
    
    
    
    5,324Total liabilities
    
    
    37,604
    
    
    
    44,609Commitments and contingencies (Note 8)Stockholders equity:Common stock, $.001 par value;
60,000,000 shares authorized;
19,746,920 and 19,363,579 shares
issued and 16,920,474 and 17,152,610
shares outstanding at March 31, 2005
and December 31, 2004, respectively
    
    
    20
    
    
    
    19Additional paid-in capital
    
    
    264,886
    
    
    
    262,676Accumulated deficit
    
    
    (6,694
    )
    
    
    (8,873
    )Treasury stock, at cost; 2,826,446 and
2,429,446 shares at March 31, 2005 and
December 31, 2004, respectively
    
    
    (54,992
    )
    
    
    (46,595
    )Deferred stock compensation
    
    
    (57
    )
    
    
    (113
    )Accumulated other comprehensive income
    
    
    1,761
    
    
    
    3,506Total stockholders equity
    
    
    204,924
    
    
    
    210,620Total liabilities and stockholders equity
    
    $
    242,528
    
    
    $
    255,229
 The accompanying notes are an integral part of these statements 3




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MOLECULAR DEVICES CORPORATION 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share amounts, unaudited)
 Three Months EndedMarch 31,2005
    
    
    2004Revenues
    
    $
    39,064
    
    
    $
    27,337Cost of revenues
    
    
    15,046
    
    
    
    10,242Gross profit
    
    
    24,018
    
    
    
    17,095Operating expenses:Research and development
    
    
    6,226
    
    
    
    4,017Selling, general and administrative
    
    
    14,313
    
    
    
    10,920Total operating expenses
    
    
    20,539
    
    
    
    14,937Income from operations
    
    
    3,479
    
    
    
    2,158Interest and other income, net
    
    
    35
    
    
    
    36Income before income taxes
    
    
    3,514
    
    
    
    2,194Income tax provision
    
    
    (1,335
    )
    
    
    (764
    )Net income
    
    $
    2,179
    
    
    $
    1,430Basic net income per share
    
    $
    0.13
    
    
    $
    0.10Diluted net income per share
    
    $
    0.13
    
    
    $
    0.10Shares used in computing basic net income per share
    
    
    17,041
    
    
    
    14,588Shares used in computing diluted net income per share
    
    
    17,361
    
    
    
    14,791
 The accompanying notes are an integral part of these statements 4




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MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands, unaudited)
 Three Months EndedMarch 31,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    2,179
    
    
    $
    1,430Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    1,748
    
    
    
    1,311Amortization of intangible assets
    
    
    559
    
    
    
    136Amortization of deferred stock compensation
    
    
    56
    
    
    
    Equity investment exchanged for services
    
    
    131
    
    
    
    (Increase) decrease in assets:Accounts receivable, net
    
    
    891
    
    
    
    4,909Inventories
    
    
    (1,099
    )
    
    
    (612
    )Deferred tax assets
    
    
    (113
    )
    
    
    Other current assets
    
    
    372
    
    
    
    (266
    )Increase (decrease) in liabilities:Accounts payable
    
    
    (330
    )
    
    
    161Accrued liabilities
    
    
    (6,497
    )
    
    
    (4,893
    )Deferred revenue
    
    
    (27
    )
    
    
    360Net cash provided by (used in) operating activities
    
    
    (2,130
    )
    
    
    2,536Cash flows from investing activities:Proceeds from sales and maturities of short-term investments
    
    
    
    
    
    
    9,850Capital expenditures
    
    
    (676
    )
    
    
    (684
    )Purchase of intangible assets
    
    
    (10,035
    )
    
    
    Decrease (increase) in intangible assets
    
    
    (1,820
    )
    
    
    36Decrease
(increase) in other assets
    
    
    170
    
    
    
    (246
    )Net cash provided by (used in) investing activities
    
    
    (12,361
    )
    
    
    8,956Cash flows from financing activities:Issuance of common stock, net
    
    
    2,211
    
    
    
    769Purchase of treasury stock
    
    
    (8,397
    )
    
    
    (12,026
    )Net cash used in financing activities
    
    
    (6,186
    )
    
    
    (11,257
    )Effect of exchange rate changes on cash
    
    
    (1,172
    )
    
    
    (77
    )Net (decrease) increase in cash and cash equivalents
    
    
    (21,849
    )
    
    
    158Cash and cash equivalents at beginning of period
    
    
    30,175
    
    
    
    50,260Cash and cash equivalents at end of period
    
    $
    8,326
    
    
    $
    50,418
 The accompanying notes are an integral part of these statements 5




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MOLECULAR DEVICES CORPORATION 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 Note 1. Description of Business and Basis of Presentation Molecular Devices Corporation
(Molecular Devices, the Company, our, us or we), a Delaware
corporation, is principally involved in the design, development, manufacture, sale and service of
bioanalytical measurement systems that accelerate and improve drug discovery and other life
sciences research. The customers for our products include leading pharmaceutical and biotechnology
companies as well as medical centers, universities, government research laboratories and other
institutions throughout the world. We operate in a single industry segment: the design, development, sale and service of bioanalytical
measurement systems for drug discovery and life sciences research applications. The unaudited condensed consolidated financial statements included herein have been prepared in
accordance with the published rules and regulations of the Securities and Exchange Commission
(SEC) applicable to interim financial information. Certain information and footnote disclosures
included in financial statements prepared in accordance with generally accepted accounting
principles have been omitted in these interim statements as allowed by such SEC rules and
regulations. However, we believe that the disclosures herein 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, 2004, included in our Annual Report on Form
10-K, for the fiscal year ended December 31, 2004, filed with the SEC on March 16, 2005. The unaudited condensed consolidated financial statements include the accounts of Molecular Devices
and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
The unaudited condensed consolidated financial statements contained herein reflect all adjustments
(which include only normal, recurring adjustments), which are, in the opinion of management,
necessary to state fairly the results for the periods presented. The preparation of financial
statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates. The
results for the three-month period ended March 31, 2005 are not necessarily indicative of the
results to be expected for the entire fiscal year ending December 31, 2005. Note 2. Stock Based Compensation As permitted by the Financial
Accounting Standards Board (FASB) Statement
No. 123 (FAS 123),
Accounting for Stock-Based Compensation, as amended, we apply the intrinsic value method of
accounting as described in Accounting Principles Board Opinion No. 25 (APB Opinion 25) and
related interpretations in accounting for our stock option plans and, accordingly, recognize no
compensation expense for stock option grants with an exercise price equal to the fair market value
of the shares at the date of grant. If we had elected to recognize compensation cost based on the
fair value of the options granted on their grant date and shares issued under stock purchase plans
as prescribed by FAS 123, net income and net income per share would have been changed to the pro
forma amounts indicated in the table below (in thousands, except per share amounts): Three Months EndedMarch 31,2005
    
    
    2004Net income  as reported
    
    $
    2,179
    
    
    $
    1,430Plus: Stock based employee
compensation expense included in
reported net income, net of tax
    
    
    56
    
    
    
    Less: Stock based compensation
expense determined using the fair
value method, net of tax
    
    
    (1,792
    )
    
    
    (1,728
    )Net income (loss)  pro forma
    
    $
    443
    
    
    $
    (298
    )Net income (loss) per share:Basic  as reported
    
    $
    0.13
    
    
    $
    0.10Basic  pro forma
    
    
    0.03
    
    
    
    (0.02
    )Diluted  as reported
    
    
    0.13
    
    
    
    0.10Diluted  pro forma
    
    
    0.03
    
    
    
    (0.02
    )
 6




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The fair value of each option
is estimated on the date of grant using the Black Scholes option-pricing
model with the following assumptions: Three Months EndedMarch 31,2005
    
    
    2004Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    77
    %
    
    
    78
    %Risk-free interest rate
    
    
    4
    %
    
    
    3
    %Expected life of options
    
    6.0 years
    
    6.7 years
 In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (FAS
123R) which is a revision of FAS 123, and supersedes APB Opinion 25. FAS 123R requires all
share-based payments to employees, including grants of employee stock options, to be recognized in
the financial statements based on their fair values, beginning with the first annual period after
June 15, 2005, with early adoption encouraged. On April 14, 2005, the SEC adopted a new rule that
amended the compliance dates for FAS 123R such that we are now allowed to adopt the new standard
effective January 1, 2006. The pro forma disclosures previously permitted under FAS 123 will no
longer be an alternative to financial statement recognition. As permitted by FAS 123, we currently
account for share-based payments to employees using APB Opinion 25s intrinsic value method and, as
such, recognize no compensation cost for employee stock options. Although expected to be material,
we cannot predict the impact of adoption of FAS 123R at this time because it will depend on the
valuation methodology adopted, assumptions used and the levels of share-based payments granted in
the future. Note 3. Balance Sheet Components (in thousands) March 31,
    
    
    December 31,2005
    
    
    2004Inventories:Raw materials
    
    $
    12,247
    
    
    $
    12,521Work-in-process
    
    
    2,062
    
    
    
    2,202Finished goods and demonstration equipment
    
    
    11,989
    
    
    
    11,062$
    26,298
    
    
    $
    25,785Other accrued liabilities:Accrued income tax
    
    $
    1,399
    
    
    $
    3,128Warranty accrual
    
    
    2,303
    
    
    
    2,276Other
    
    
    9,655
    
    
    
    9,591$
    13,357
    
    
    $
    14,995
 Note 4. Intangible Assets In March 2005, we completed the purchase of certain assets from Xsira Pharmaceuticals, Inc.
(Xsira) relating to the Transfluor® technology, a cell-based fluorescent assay system for
monitoring the function of G-protein coupled receptors. We acquired $11.7 million of intangible
assets, including $11.5 million of developed technology and tradenames valued at $200,000. These
intangible assets will be amortized over their estimated useful lives of ten years. At March 31, 2005, purchased intangible assets not subject to amortization totaled $10.8 million
and consisted of tradenames valued at $9.3 million and distribution rights valued at approximately
$1.5 million. At December 31, 2004, purchased intangible assets not subject to amortization
totaled $10.8 million and consisted of tradenames valued at $9.3 million and distribution rights
valued at $1.5 million. Purchased intangible assets subject to amortization over ten years consist of patents, developed
technology, license fees, and certain tradenames. Purchased intangible assets subject to
amortization over one year consist of order backlog. The gross and net carrying value of these
assets at March 31, 2005 and December 31, 2004 were included as Intangible assets in the condensed
consolidated balance sheets, and were as follows (in thousands): 7




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Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingValue
    
    
    Amortization
    
    
    ValueOrder backlog
    
    $
    100
    
    
    $
    67
    
    
    $
    33Patents
    
    
    1,372
    
    
    
    507
    
    
    
    865Developed technology
    
    
    28,868
    
    
    
    1,464
    
    
    
    27,404Tradenames
    
    
    200
    
    
    
    
    
    
    
    200License fees
    
    
    2,688
    
    
    
    577
    
    
    
    2,111Total at March 31, 2005
    
    $
    33,228
    
    
    $
    2,615
    
    
    $
    30,613Order backlog
    
    $
    100
    
    
    $
    42
    
    
    $
    58Patents
    
    
    1,372
    
    
    
    472
    
    
    
    900Developed technology
    
    
    17,368
    
    
    
    1,029
    
    
    
    16,339License fees
    
    
    2,688
    
    
    
    513
    
    
    
    2,175Total at December 31, 2004
    
    $
    21,528
    
    
    $
    2,056
    
    
    $
    19,472
 The estimated future amortization expense of purchased intangible assets as of March 31, 2005 was
as follows (in thousands): AmortizationFor the year ending December 31,
    
    Expense2005 (remaining nine months)
    
    $
    2,5102006
    
    
    3,3032007
    
    
    3,3032008
    
    
    3,3032009
    
    
    3,303Thereafter
    
    
    14,891$
    30,613
 Note 5. Net Income Per Share Basic net income per share is computed using the weighted average number of shares of common stock
outstanding and diluted net income per share is computed using the weighted average number of
shares of common stock outstanding and common equivalent shares from outstanding stock options
(using the treasury stock method), when dilutive. The computation of earnings per share is as
follows (in thousands, except per share amounts): Three Months EndedMarch 31,2005
    
    
    2004Net income
    
    $
    2,179
    
    
    $
    1,430Denominator for basic earnings per share  weighted
average common shares outstanding
    
    
    17,041
    
    
    
    14,588Effect of dilutive securities  employee stock options
    
    
    320
    
    
    
    203Denominator for diluted earnings per share  weighted
average common shares outstanding plus dilutive
securities
    
    
    17,361
    
    
    
    14,791Basic net income per share
    
    $
    0.13
    
    
    $
    0.10Diluted net income per share
    
    $
    0.13
    
    
    $
    0.10
 For the three months ended March 31, 2005, the total number of shares excluded from the
calculations of diluted net income per share was 1,781,793, as the weighted-average exercise price
of these outstanding stock options was greater than the average market price of the common shares
and, therefore, the effect would have been anti-dilutive. For the three months ended March 31,
2004, the total number of shares excluded from the calculations of diluted net income per share was
1,981,212. Note 6. Comprehensive Income Comprehensive income, net of tax, was approximately $400,000 and $1.6 million for the three-month
periods ended March 31, 2005 and 2004, respectively. The differences between reported net income
and comprehensive income are principally comprised of changes in accumulated foreign currency
translation, which is recorded in stockholders equity. 8




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Note 7. Restructuring On July 1, 2004, we acquired all of the outstanding capital stock of Axon Instruments, Inc.
(Axon). Concurrent with the acquisition, we implemented an integration plan which included the
termination of Axon employees, the relocation or transfer to other sites of employees, and the
closure of duplicate facilities. Costs for this plan associated with employee severance and
relocation totaled $500,000 and costs associated with the closure of duplicate facilities totaled
$2.2 million. In the fourth quarter of 2004, we implemented an integration plan which included the
termination of additional employees. Termination costs related to Molecular Devices employees
totaled $1.2 million. Activity for restructuring charges for the three months ended March 31,
2005 is as follows (in thousands): Balance at
    
    
    
    
    
    
    Adjustments
    
    
    Balance atBeginning
    
    
    
    
    
    
    December
    
    
    
    
    
    
    Included in
    
    
    March 31,Balance
    
    
    Payments
    
    
    31, 2004
    
    
    Payments
    
    
    Net Income
    
    
    2005Axon employee
severance
and relocation
    
    $
    500
    
    
    $
    (365
    )
    
    $
    135
    
    
    $
    (10
    )
    
    $
    (100
    )
    
    $
    25Closure of duplicate
facilities
    
    
    2,200
    
    
    
    
    
    
    
    2,200
    
    
    
    (146
    )
    
    
    
    
    
    
    2,054Molecular Devices
employee severance
    
    
    1,157
    
    
    
    (124
    )
    
    
    1,033
    
    
    
    (869
    )
    
    
    (61
    )
    
    
    103Total
    
    $
    3,857
    
    
    $
    (489
    )
    
    $
    3,368
    
    
    $
    (1,025
    )
    
    $
    (161
    )
    
    $
    2,182
 Note 8. Commitments and Contingencies GUARANTEES Under our charter, we have agreed to indemnify any person who is made a party to any action or
threatened with any action as a result of such persons serving or having served as an officer or
director of Molecular Devices or having served, at our request, as an officer or director of
another company. The indemnification does not apply if the person is determined not to have acted
in good faith in the reasonable belief that his or her actions were in the best interests of
Molecular Devices. The maximum potential amount of future payments that we could be required to
make under the charter provision and the corresponding indemnification agreements is unlimited;
however, we have directors and officers liability insurance policies that, in most cases, would
limit our exposure and enable us to recover a portion of any future amounts paid. The estimated
fair value of these indemnification provisions is minimal. Most of these indemnification provisions
were grandfathered under the provisions of FASB Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,
as they were in effect prior to December 31, 2003. Accordingly, we have no liabilities recorded for
these provisions as of March 31, 2005. We enter into indemnification provisions under our agreements with other companies in the ordinary
course of business, typically with business partners, contractors, clinical sites and customers.
Under these provisions we generally indemnify and hold harmless the indemnified party for losses
suffered or incurred by the indemnified party as a result of our activities. These indemnification
provisions generally survive termination of the underlying agreement. The maximum potential amount
of future payments we could be required to make under these indemnification provisions is
unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these
indemnification agreements. As a result, the estimated fair value of these agreements is minimal.
Accordingly, we have no liabilities recorded for these agreements as of March 31, 2005. WARRANTY At the time of sale, we record an estimate for warranty costs that may be incurred under product
warranties. Our standard warranty generally includes parts and labor for a twelve month period.
Warranty expense and activity are estimated based on historical experience. The warranty accrual is
evaluated periodically and adjusted for changes in experience. Changes in the warranty liability
during the three months ended March 31, 2005 were as follows (in thousands): Balance at December 31, 2004
    
    $
    2,276New warranties issued during the period
    
    
    568Cost of warranties incurred during the period
    
    
    (541
    )Balance at March 31, 2005
    
    $
    2,303
 LITIGATION In January 2005, a former Axon distributor filed a claim against us. The claim alleges that we
breached two authorized agency contracts that were entered into by the distributor and Axon. As
we believe it is probable that we will pay some amount to settle this matter, we have accrued a
liability for an amount as determined using the criteria in FASB
Statement No. 5, Accounting for Contingencies. 9




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Note 9. Revolving Credit Facility In connection with the acquisition of Axon, we entered into a new senior unsecured credit facility
with Union Bank of California, N.A., which provides us with a revolving credit facility in the
amount of up to $30.0 million. The revolving credit facility is guaranteed by our domestic
subsidiaries. All loans outstanding under the senior unsecured credit facility will bear interest
at a rate per annum equal to, at our option, either the base rate plus 0.50% or the London
InterBank Offered Rate (LIBOR) plus 1.25%. The revolving credit facility may be drawn, paid and
reborrowed at our option, and matures on July 1, 2007. The revolving credit facility had no
outstanding balance as of March 31, 2005 and December 31,
2004. 10




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview 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 in
this section as well as under Factors That May Affect Future Results, and Item 3  Quantitative
and Qualitative Disclosures about Market Risk and the risks detailed from time to time in our
future SEC reports. We are a leading supplier of high-performance bioanalytical measurement systems that accelerate and
improve drug discovery and other life sciences research. Our systems and consumables enable
pharmaceutical and biotechnology companies to leverage advances in genomics, proteomics and
parallel chemistry by facilitating the high-throughput and cost-effective identification and
evaluation of drug candidates. Our solutions are based on our advanced core technologies that
integrate our expertise in engineering, molecular and cell biology, and chemistry. We enable our
customers to improve research productivity and effectiveness, which ultimately accelerates the
complex process of discovering and developing new drugs. Our customers include leading pharmaceutical and biotechnology companies as well as medical
centers, universities, government research laboratories and other institutions throughout the
world. The success of our business is impacted by research and development spending trends of these
customers, which has been unpredictable over the last three years and remains unpredictable in the
near term. We focus on generating revenue growth through the development of innovative products for
these customers. In each of the last four years, our internal research and development efforts have
enabled us to exceed our goal of generating over 50% of annual revenues from products that are
introduced in the last three years. We divide our revenues into two product families based primarily on the customers to which they are
sold. The drug discovery product family includes systems that integrate detection, liquid handling
and automation, have price points in excess of $100,000, and are primarily sold to large
pharmaceutical and biotechnology companies. Product lines included in the drug discovery family are
FLIPR, Analyst, IonWorks, PatchXpress, ImageXpress and Discovery-1 systems. The life sciences
product family, which includes bench-top detection, imaging software and liquid handling products,
consists of the SpectraMax, MetaMorph, GenePix, Threshold, Skatron and Axopatch product lines.
These single-purpose instruments generally cost less than $60,000 and are sold throughout our
entire customer base. We recognize revenue on the sale of these products, when collectibility is
reasonably assured, at the time of shipment and transfer of title to customers and distributors.
There are no significant customer acceptance requirements or post shipment obligations on our part. We are deriving an increasing portion of our revenues from overseas operations. Sales to customers
outside of the United States accounted for 47% of total revenues during the first three months of
2005, and 44% of total revenues during the first three months of 2004. We anticipate that
international sales will account for an increasing percentage of revenues in the future, and we
expect to continue expanding our international operations in order to take advantage of increasing
international market opportunities. On July 1, 2004, we acquired all of the outstanding capital stock of Axon Instruments, Inc.
(Axon). The total cost of the acquisition was $139.9 million including cash and stock paid,
options assumed, and direct transaction costs. As a result of the acquisition, we received $22.1
million in cash that had been on the balance sheet of Axon. The acquisition was accounted for under
the purchase method of accounting. The results of operations of Axon have been included in the
accompanying condensed consolidated financial statements from the date of acquisition. CRITICAL ACCOUNTING ESTIMATES Managements discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial reporting. The
preparation of these financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an ongoing basis, management evaluates its estimates,
including those related to revenue recognition, bad debts, inventories, intangible assets, equity
investments, income taxes and warranty obligations. Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Our critical accounting policies and estimates
are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed
with the SEC on March 16, 2005. RESULTS OF OPERATIONS  THREE MONTHS ENDED MARCH 31, 2005 and 2004 REVENUES. Revenues increased by 43% to $39.1 million in the first three months of 2005 from $27.3
million in first three months of 2004. Drug discovery product family revenues increased by 41%
compared to the first three months of 2004, and represented 38% 11




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of total revenue. Life sciences research product family revenues increased by 44% compared to the
first three months of 2004, and represented 62% of total revenue. The $11.8 million increase in
revenue was due to $10.4 million of sales of our acquired Axon product lines, including
PatchXpress, ImageXpress, cellular neurosciences and genomics, $600,000 in growth in drug discovery
products driven primarily by increased FLIPR sales, and $800,000 in growth in life sciences
research products including our SpectraMax products and MetaMorph software. GROSS PROFIT. Gross profit remained relatively stable at 61.5% in the first quarter of 2005
compared to 62.5% in the same period of the prior year primarily due to the addition of lower
margin products from Axon. RESEARCH AND DEVELOPMENT EXPENSE. Research and development expenses increased in the first quarter
of 2005 by 55% to $6.2 million from $4.0 million in the first quarter of 2004. The increase was
primarily due to $1.6 million of additional salary, benefits and other expenses associated with
increased headcount, largely driven by the acquisition of Axon in the third quarter of 2004. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expenses in the
first quarter of 2005 increased by 31% to $14.3 million from $10.9 million in the first quarter of
2004. The increase was primarily due to $1.4 million of additional salary, benefits and other
expenses associated with increased headcount, largely driven by the acquisition of Axon in the
third quarter of 2004, $800,000 in increased accounting and consulting fees associated with
Sarbanes-Oxley Section 404 compliance, and $400,000 of increased amortization due to acquired
intangible assets. INTEREST AND OTHER INCOME, NET. Other income, net was $35,000 in the first quarter of 2005,
compared to $36,000 in the first quarter of 2004. INCOME TAX PROVISION. We recorded a tax provision of $1.3 million for the first quarter of 2005
compared to $800,000 in the first quarter of 2004. The tax provision for the first quarter of 2005
was based on a 38% annual estimated effective income tax rate for 2005, up from 35% in the first
quarter of 2004. The increase was due primarily to the reduction of federal and state research and
development credits. The effective tax rates for the first quarter of 2005 and the first quarter of
2004 are calculated on profit before tax. Liquidity and Capital Resources We had cash, cash equivalents and short and long-term investments of $8.3 million at March 31,
2005, compared to $30.2 million at December 31, 2004. Operating activities in the first three
months of 2005 used $2.1 million of cash, compared to $2.5 million provided in the first three
months of 2004, primarily due to lower cash generated by collections on accounts receivable and a
higher payout of accrued liabilities, which included a $3.0 million income tax payment related to
the gain on the sale of equity securities in the fourth quarter of 2004. We used $12.4 million of cash in investing activities in the first three months of 2005, primarily
due to $10.0 million used to acquire intangible assets from Xsira Pharmaceuticals, Inc. in March
2005. In the first three months of 2004, we generated $9.0 million of cash from investing
activities, primarily due to $9.9 million in proceeds received from the sale and maturity of
short-term investments, which were partially offset by $700,000 in capital expenditures. In the first three months of 2005, cash used in financing activities was $6.2 million. We
repurchased 397,000 shares of our common stock for $8.4 million and raised $2.2 million from the
issuance of common stock associated with stock option exercises and shares issued under our
employee stock purchase plan. The timing of and amounts received under our employee stock option
and purchase plans are determined by the decisions of the respective option or rights holders, and
are not controlled by us. Therefore, funds raised from the issuance of common stock under our
employee stock option and purchase plans should not be considered an indication of additional funds
to be raised in future periods. In the first three months of 2004, we used $11.3 million of cash
in financing activities, primarily for the repurchase of shares of our common stock. We believe that our existing cash and anticipated cash flow from our operations will be sufficient
to support our current operating plan for the foreseeable future. Our ability to generate our
anticipated cash flow from operations is subject to the risks and uncertainties discussed below
under Factors That May Affect Future Results, including, in particular, variations in the amount
of time it takes for us to sell our products and collect accounts receivable, the timing of
customer orders, competition, risks associated with the pharmaceutical and biotechnology
industries, supplier or manufacturing problems or delays, and risks associated with past and
potential future acquisitions. Likewise, our forecast of the period of time through which our financial resources will be adequate
to support our operations is a forward-looking statement that involves risks and uncertainties, and
actual results could vary as a result of a number of factors. We have based this estimate on our
current plans which may change and assumptions that may prove to be wrong. Our future capital
requirements will depend on many factors, including: 12




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
    the progress of our research and development;
    the number and scope of our research and development programs;
    market acceptance and demand for our products;
    the costs that may be involved in enforcing our patent claims and other intellectual property rights;
    potential acquisition and technology licensing opportunities;
    the costs associated with repurchasing shares of our common stock;
    manufacturing capacity requirements; and
    the costs of expanding our sales, marketing and distribution capabilities both in the United States and abroad. We have generated sufficient cash flow to fund our capital requirements primarily through operating
and financing activities over the last three years. However, we cannot assure you that we will not
require additional financing in the future to support our existing operations or potential
acquisition and technology licensing opportunities that may arise. Therefore, we may in the future
seek to raise additional funds through bank facilities, debt or equity offerings or other sources
of capital. Additional financing may not be available on favorable terms or at all, and may be
dilutive to our then-current stockholders. Our cash and investments policy emphasizes liquidity and preservation of principal over other
portfolio considerations. We select investments that maximize interest income to the extent
possible given these two constraints. We satisfy liquidity requirements by investing excess cash in
securities with different maturities to match projected cash needs and limit concentration of
credit risk by diversifying our investments among a variety of high credit-quality issuers. Factors That May Affect Future Results Our business faces significant risks and the risks described below may not be the only risks we
face. Additional risks that we do not know of or that we currently think are immaterial may also
impair our business operations. If any of the events or circumstances described in the following
risks actually occurs, our business, financial condition or results of operations could be harmed
and the trading price of our common stock could decline. VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR US TO SELL OUR PRODUCTS AND COLLECT ACCOUNTS
RECEIVABLE AND THE TIMING OF CUSTOMER ORDERS MAY CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH
COULD CAUSE OUR STOCK PRICE TO DECLINE. The timing of capital equipment purchases by our customers has been and is expected to continue to
be uneven and difficult to predict. Our products represent major capital purchases for our
customers. The list prices for our instruments range from $5,000 to $469,500. Accordingly, our
customers generally take a relatively long time to evaluate our products, and a significant portion
of our revenues is typically derived from sales of a small number of relatively high-priced
products. Purchases are generally made by purchase orders and not long-term contracts. Delays in
receipt of anticipated orders for our relatively high priced products could lead to substantial
variability from quarter to quarter. Furthermore, we have historically received purchase orders and
made a significant portion of each quarters product shipments near the end of the quarter. If that
pattern continues, even short delays in the receipt of orders or shipment of products at the end of
a quarter could have a material adverse affect on results of operations for that quarter. We expend significant resources educating and providing information to our prospective customers
regarding the uses and benefits of our products. Because of the number of factors influencing the
sales process, the period between our initial contact with a customer and the time when we
recognize revenues from that customer, if ever, varies widely. Our sales cycles typically range
from three to six months, but can be much longer. During these cycles, we commit substantial
resources to our sales efforts in advance of receiving any revenues, and we may never receive any
revenues from a customer despite our sales efforts. The relatively high purchase price for a customer order contributes to collection delays that
result in working capital volatility. While the terms of our sales orders generally require payment
within 30 days of product shipment and do not provide return rights, in the past we have
experienced significant collection delays. We cannot predict whether we will continue to experience
similar or more severe delays. The capital spending policies of our customers have a significant effect on the demand for our
products. Those policies are based on a wide variety of factors, including resources available to
make purchases, spending priorities, and policies regarding capital expenditures during industry
downturns or recessionary periods. Any decrease in capital spending by our customers resulting from
any of these factors could harm our business. 13




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WE DEPEND ON ORDERS THAT ARE RECEIVED AND SHIPPED IN THE SAME QUARTER AND THEREFORE HAVE LIMITED
VISIBILITY OF FUTURE PRODUCT SHIPMENTS. Our net sales in any given quarter depend upon a combination of orders received in that quarter for
shipment in that quarter and shipments from backlog. Our products are typically shipped within
ninety days of purchase order receipt. As a result, we do not believe that the amount of backlog at
any particular date is indicative of our future level of sales. Our backlog at the beginning of
each quarter does not include all product sales needed to achieve expected revenues for that
quarter. Consequently, we are dependent on obtaining orders for products to be shipped in the same
quarter that the order is received. Moreover, customers may reschedule shipments, and production
difficulties could delay shipments. Accordingly, we have limited visibility of future product
shipments, and our results of operations are subject to significant variability from quarter to
quarter. MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER RESOURCES THAN WE DO, AND
INCREASED COMPETITION COULD IMPAIR SALES OF OUR PRODUCTS. We operate in a highly competitive industry and face competition from companies that design,
manufacture and market instruments for use in the life sciences research industry, from genomic,
pharmaceutical, biotechnology and diagnostic companies and from academic and research institutions
and government or other publicly-funded agencies, both in the United States and abroad. We may not
be able to compete effectively with all of these competitors. Many of these companies and
institutions have greater financial, engineering, manufacturing, marketing and customer support
resources than we do. As a result, our competitors may be able to respond more quickly to new or
emerging technologies or market developments by devoting greater resources to the development,
promotion and sale of products, which could impair sales of our products. Moreover, there has been
significant merger and acquisition activity among our competitors and potential competitors. These
transactions by our competitors and potential competitors may provide them with a competitive
advantage over us by enabling them to rapidly expand their product offerings and service
capabilities to meet a broader range of customer needs. Many of our customers and potential
customers are large companies that require global support and service, which may be easier for our
larger competitors to provide. We believe that competition within the markets we serve is primarily driven by the need for
innovative products that address the needs of customers. We attempt to counter competition by
seeking to develop new products and provide quality products and services that meet customers
needs. We cannot assure you, however, that we will be able to successfully develop new products or
that our existing or new products and services will adequately meet our customers needs. Rapidly changing technology, evolving industry standards, changes in customer needs, emerging
competition and frequent new product and service introductions characterize the markets for our
products. To remain competitive, we will be required to develop new products and periodically
enhance our existing products in a timely manner. We are facing increased competition as new
companies entering the market with new technologies compete, or will compete, with our products and
future products. We cannot assure you that one or more of our competitors will not succeed in
developing or marketing technologies or products that are more effective or commercially attractive
than our products or future products, or that would render our technologies and products obsolete
or uneconomical. Our future success will depend in large part on our ability to maintain a
competitive position with respect to our current and future technologies, which we may not be able
to do. In addition, delays in the launch of our new products may result in loss of market share due
to our customers purchases of competitors products during any delay. IF WE ARE NOT SUCCESSFUL IN DEVELOPING NEW AND ENHANCED PRODUCTS, WE MAY LOSE MARKET SHARE TO OUR
COMPETITORS. The life sciences instrumentation market is characterized by rapid technological change and
frequent new product introductions. In the twelve months ended March 31, 2005, 73% of our revenues
were derived from the sale of products that were introduced in the last three years, and our future
success will depend on our ability to enhance our current products and to develop and introduce, on
a timely basis, new products that address the evolving needs of our customers. We may experience
difficulties or delays in our development efforts with respect to new products, and we may not
ultimately be successful in developing or commercializing them, which would harm our business. Any
significant delay in releasing new systems could cause our revenues to suffer, adversely affect our
reputation, give a competitor a first-to-market advantage or cause a competitor to achieve greater
market share. In addition, our future success depends on our continued ability to develop new
applications for our existing products. If we are not able to complete the development of these
applications, or if we experience difficulties or delays, we may lose our current customers and may
not be able to attract new customers, which could seriously harm our business and our future growth
prospects. WE MUST EXPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP NEW PRODUCTS, AND IF THESE
PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, OUR OPERATING RESULTS MAY SUFFER. We expect to spend a significant amount of time and resources to develop new products and refine
existing products. In light of the long product development cycles inherent in our industry, these
expenditures will be made well in advance of the prospect of deriving revenues from the sale of new
products. Our ability to commercially introduce and successfully market new products is subject to
a wide variety of challenges during this development cycle that could delay introduction of these
products. In addition, since our customers are not obligated by long-term contracts to purchase our
products, our anticipated product orders may not materialize, or orders that do materialize may be
canceled. As a result, if we do not achieve market acceptance of new products, our operating
results 14




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will suffer. Our products are also generally priced higher than competitive products, which may
impair commercial acceptance. We cannot predict whether new products that we expect to introduce
will achieve commercial acceptance. WE OBTAIN SOME OF THE
CONSUMABLES, COMPONENTS AND
SUBASSEMBLIES USED WITH OR 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
CUSTOMER SUPPLY OR PRODUCTION DELAYS AND A SUBSTANTIAL LOSS OF REVENUES. We rely on outside vendors to manufacture many consumables,
components and subassemblies. Certain consumables, 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, and some of these agreements
provide that the supplier is the exclusive supplier of a particular consumable, component or subassembly. Our reliance on a sole or a limited group of suppliers involves several risks,
including the following:  
    our suppliers may cease or interrupt production of required
consumables, components or subassemblies or otherwise fail to supply us with an adequate supply
of required consumables, components or subassemblies for a number of reasons, including due to
contractual disputes with
our suppliers or due to adverse financial developments at or affecting the supplier;
    we have reduced control over the pricing of third party-supplied consumables, components
and subassemblies, and our suppliers may be unable or unwilling to supply us with required
consumables, components and subassemblies on commercially acceptable terms, or at all;
    we have reduced control over the timely delivery of third party-supplied consumables, 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 consumables,
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, subject in
certain cases to the terms of exclusive supply agreements with suppliers.
However, if we were forced to seek alternative sources of supply or to manufacture such consumables,
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, and we may be liable to suppliers
under the terms of existing supply agreements. 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, and any disputes with suppliers could have an
adverse impact on our financial condition. WE MAY ENCOUNTER MANUFACTURING AND ASSEMBLY PROBLEMS OR DELAYS, WHICH COULD RESULT IN LOST
REVENUES. We manufacture our products at our facilities in Sunnyvale and Union City, both in California, and
in Norway. We assemble the Discovery-1 system at our facility in Downingtown, Pennsylvania. Our
manufacturing and assembly processes are highly complex and require sophisticated, costly equipment
and specially designed facilities. As a result, any prolonged disruption in the operations of our
manufacturing facilities could seriously harm our ability to satisfy our customer order deadlines.
If we cannot deliver our systems in a timely manner, our revenues will likely suffer. Our product sales depend in part upon manufacturing yields. We currently have limited manufacturing
capacity and experience variability in manufacturing yields. We are currently manufacturing
high-throughput instruments in-house, in limited volumes and with largely manual assembly. If
demand for our high-throughput instruments increases, we will either need to expand our in-house
manufacturing capabilities or outsource to other manufacturers. If we fail to deliver our products
in a timely manner, our relationships with our customers could be seriously harmed, and our
revenues could decline. As we develop new products, we must transition the manufacture of a new product from the
development stage to commercial manufacturing. We cannot predict whether we will be able to
complete these transitions on a timely basis and with commercially reasonable costs. We cannot
assure you that manufacturing or quality control problems will not arise as we attempt to scale-up
our production for any future new products or that we can scale-up manufacturing and quality
control in a timely manner or at commercially reasonable costs. If we are unable to consistently
manufacture our products on a timely basis because of these or other factors, our product sales
will decline. IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY WILL BE HARMED AND THE SALES AND MARKET
ACCEPTANCE OF OUR PRODUCTS WILL DECREASE. Our products are complex and have at times contained errors, defects and bugs when introduced. If
we deliver products with errors, defects or bugs, our credibility and the market acceptance and
sales of our products would be harmed. Further, if our products contain errors, defects or bugs, we
may be required to expend significant capital and resources to alleviate such problems. Defects
could also lead to product liability as a result of product liability lawsuits against us or
against our customers. We have agreed to indemnify our customers in some circumstances against
liability arising from defects in our products. In the event of a successful product liability 15




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claim, we could be obligated to pay damages significantly in excess of our product liability
insurance limits. WE HAVE SIGNIFICANTLY EXPANDED OUR INTERNATIONAL OPERATIONS, WHICH EXPOSES US TO RISKS INHERENT IN
INTERNATIONAL BUSINESS ACTIVITIES. We maintain facilities in the United Kingdom, Germany, Norway, Japan, South Korea, Australia and
China. In addition to the increase in our international operations, we are also deriving an
increasing portion of our revenues from customers located outside of the United States. Sales to
customers outside of the United States accounted for approximately 47% our revenues during the
first three months of 2005, and we anticipate that international sales will continue to account for
a significant portion of our revenues. A key aspect of our business strategy has been and is to
expand our sales and support organizations internationally in order to take advantage of increasing
international market opportunities resulting from worldwide growth in the life sciences industry. Our reliance on international sales and operations exposes us to a number of risks associated with
conducting operations internationally, including:  
    political, social and economic instability;
    trade restrictions and changes in tariffs;
    the impact of business cycles and downturns in economies outside of the United States;
    unexpected changes in regulatory requirements that may limit our ability to export our products
or sell into particular jurisdictions;
    import and export license requirements and restrictions;
    difficulties and costs of staffing, managing and monitoring geographically disparate operations;
    difficulties in maintaining effective communications with employees and customers due to
distance, language and cultural barriers;
    disruptions in international transport or delivery;
    difficulties in protecting our intellectual property rights, particularly in countries where
the laws and practices do not protect proprietary rights to as great an extent as do the laws
and practices of the United States;
    difficulties in enforcing agreements through non-U.S. legal systems;
    longer payment cycles and 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. In addition, all of our sales to international distributors are denominated in U.S. dollars. Most
of our direct sales in the United Kingdom, Germany, France, the Benelux, Canada and Japan are
denominated in local currencies and totaled $13.0 million (33% of total revenues) for the first
three months of 2005. To the extent that our sales and operating expenses are denominated in
foreign currencies, our operating results may be adversely affected by changes in exchange rates.
Historically, foreign exchange gains and losses have been immaterial to our results of operations.
However, we cannot predict whether these gains and losses will continue to be immaterial,
particularly as we increase our direct sales outside North America. For example, we cannot predict
whether other foreign exchange gains or losses in the future would have a material effect on our
income. Owing to the number of currencies involved, the substantial volatility of currency exchange
rates, and our constantly changing currency exposures, we cannot predict the effect of exchange
rate fluctuations on our future operating results. We do not currently engage in foreign currency
hedging transactions, but may do so in the future. MOST OF OUR CURRENT AND POTENTIAL CUSTOMERS ARE FROM THE PHARMACEUTICAL AND BIOTECHNOLOGY
INDUSTRIES AND ARE SUBJECT TO RISKS FACED BY THOSE INDUSTRIES. We derive a significant portion of our revenues from sales to pharmaceutical and biotechnology
companies. We expect that sales to pharmaceutical and biotechnology companies will continue to be a
primary source of revenues for the foreseeable future. As a result, we are subject to risks and
uncertainties that affect the pharmaceutical and biotechnology industries, such as availability of
capital and reduction and delays in research and development expenditures by companies in these
industries, pricing pressures as third-party payers continue challenging the pricing of medical
products and services, government regulation, and the uncertainty resulting from technological
change. 16




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In addition, our future revenues may be adversely affected by the ongoing consolidation in the
pharmaceutical and biotechnology industries, which would reduce the number of our potential
customers. Furthermore, we cannot assure you that the pharmaceutical and biotechnology companies
that are our customers will not develop their own competing products or in-house capabilities. OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH MAY CAUSE US TO
ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD ALSO CAUSE US TO PAY SUBSTANTIAL
DAMAGES AND PROHIBIT US FROM SELLING OUR PRODUCTS. Third parties may assert infringement or other intellectual property claims against us. We may have
to pay substantial damages for infringement if it is ultimately determined that our products
infringe on a third partys proprietary rights. Further, any legal action against us could, in
addition to subjecting us to potential liability for damages, prohibit us from selling our products
before we obtain a license to do so from the party owning the intellectual property, which, if
available at all, may require us to pay substantial royalties. Even if these claims are without
merit, defending a lawsuit takes significant time, may be expensive and may divert management
attention from other business concerns. There may be third-party patents that may relate to our
technology or potential products. Any public announcements related to litigation or interference
proceedings initiated or threatened against us could cause our stock price to decline. We believe
that there may be significant litigation in the industry regarding patent and other intellectual
property rights. If we become involved in litigation, it could consume a substantial portion of our
managerial and financial resources. WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD BE EXPENSIVE AND,
IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD REDUCE OUR
ABILITY TO COMPETE IN THE MARKET. We rely on patents to protect a large part of our intellectual property and our competitive
position. In order to protect or enforce our patent rights, we may initiate patent litigation
against third parties, such as infringement suits or interference proceedings. Litigation may be
necessary to:  
    assert claims of infringement;
    enforce our patents;
    protect our trade secrets or know-how; or
    determine the enforceability, scope and validity of the proprietary rights of others. Lawsuits could be expensive, take significant time and divert managements attention from
other business concerns. They would put our patents at risk of being invalidated or interpreted
narrowly and our patent applications at risk of not issuing. We may also provoke third parties to
assert claims against us. Patent law relating to the scope of claims in the technology fields in
which we operate is still evolving and, consequently, patent positions in our industry are
generally uncertain. If initiated, we cannot assure you that we would prevail in any of these suits
or that the damages or other remedies awarded, if any, would be commercially valuable. During the
course of these suits, there could be public announcements of the results of hearings, motions and
other interim proceedings or developments in the litigation. If securities analysts or investors
were to perceive any of these results to be negative, our stock price could decline. THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR PRODUCTS MAY NOT BE
ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO
COMPETE IN THE MARKET. Our success will depend in part on our ability to obtain commercially valuable patent claims and to
protect our intellectual property. Our patent position is generally uncertain and involves complex
legal and factual questions. Legal standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of future protection for our proprietary
rights is uncertain. The risks and uncertainties that we face with respect to our patents and other proprietary rights
include the following:  
    the pending patent applications we have filed or to which we have exclusive rights may not result in issued
patents or may take longer than we expect to result in issued patents;
    the claims of any patents which are issued may not provide meaningful protection;
    we may not be able to develop additional proprietary technologies that are patentable;
    the patents licensed or issued to us or our customers may not provide a competitive advantage;
    other companies may challenge patents licensed or issued to us or our customers; 17




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
    patents issued to other companies may harm our ability to do business;
    other companies may independently develop similar or alternative technologies or duplicate our technologies; and
    other companies may design around technologies we have licensed or developed. In addition to patents, we rely on a combination of trade secrets, nondisclosure agreements
and other contractual provisions and technical measures to protect our intellectual property
rights. Nevertheless, these measures may not be adequate to safeguard the proprietary technology
underlying our products. If these measures do not protect our rights, third parties could use our
technology, and our ability to compete in the market would be reduced. In addition, employees,
consultants and others who participate in the development of our products may breach their
agreements with us regarding our intellectual property, and we may not have adequate remedies for
the breach. We also may not be able to effectively protect our intellectual property rights in some
foreign countries. For a variety of reasons, we may decide not to file for patent, copyright or
trademark protection or prosecute potential infringements of our patents. We also realize that our
trade secrets may become known through other means not currently foreseen by us. Notwithstanding
our efforts to protect our intellectual property, our competitors may design around our proprietary
technologies or may independently develop similar or alternative technologies or products that are
equal or superior to our technology and products without infringing on any of our intellectual
property rights. WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH. We expect to experience significant growth in the number of our employees and customers and the
scope of our operations, including as a result of potential acquisitions. This growth may continue
to place a significant strain on our management and operations. Our ability to manage this growth
will depend upon our ability to broaden our management team and our ability to attract, hire and
retain skilled employees. Our success will also depend on the ability of our officers and key
employees to continue to implement and improve our operational and other systems, to manage
multiple, concurrent customer relationships and to hire, train and manage our employees. Our future
success is heavily dependent upon growth and acceptance of new products. If we cannot scale our
business appropriately or otherwise adapt to anticipated growth and new product introductions, a
key part of our strategy may not be successful. WE RELY UPON DISTRIBUTORS FOR PRODUCT SALES AND SUPPORT OUTSIDE OF NORTH AMERICA. In the first three months of 2005, approximately 17% of our sales were made through distributors.
We often rely upon distributors to provide customer support to the ultimate end users of our
products. As a result, our success depends on the continued sales and customer support efforts of
our network of distributors. The use of distributors involves certain risks, including risks that
distributors will not effectively sell or support our products, that they will be unable to satisfy
financial obligations to us and that they will cease operations. Any reduction, delay or loss of
orders from our significant distributors could harm our revenues. We also do not currently have
distributors under contract in a number of significant international markets that we have targeted
and will need to establish additional international distribution relationships. There can be no
assurance that we will engage qualified distributors in a timely manner, and the failure to do so
could have a material adverse affect on our business, financial condition and results of
operations. IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR TECHNOLOGIES INSTEAD OF
DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE THESE ACQUISITIONS OR MAY NOT BE ABLE TO
SUCCESSFULLY INTEGRATE AN ACQUIRED BUSINESS OR TECHNOLOGY IN A COST-EFFECTIVE AND NON-DISRUPTIVE
MANNER. Our success depends on our ability to continually enhance and broaden our product offerings in
response to changing technologies, customer demands and competitive pressures. To this end, from
time to time we have acquired complementary businesses, products or technologies instead of
developing them ourselves, and we may choose to do so in the future. For example, we acquired
intellectual property relating to the Transfluor® technology in March 2005 and acquired Axon in
July 2004. 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 involves considerable
operational and financial risks and strains, including:  
    the potential disruption of our ongoing business and distraction of our management;
    the potential strain on our financial and managerial controls and reporting systems and procedures;
    unanticipated expenses and potential delays related to integration of the operations, technology and
other resources of acquired businesses;
    the impairment of relationships with employees, suppliers and
customers as a result of any integration of new management personnel  
    greater than anticipated costs and expenses related to restructuring, including employee severance or
relocation costs and costs 18




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related to vacating leased facilities; and  
    potential unknown liabilities associated with any acquisition, including higher than expected
integration costs, which may cause our quarterly and annual operating results to fluctuate. We may not succeed in addressing these risks or any other problems encountered in connection
with the acquisition of complementary businesses, products or
technologies. If we are unable to
successfully integrate the operations, products, technology and personnel of acquired businesses in
a timely manner or at all, or if we do achieve the perceived benefits of any acquisition as rapidly
or to the extent anticipated by financial analysts or investors, the market price of our common
stock could decline. In addition, in order to finance any acquisitions, we might need to raise additional funds through
public or private equity or debt financings. In that event, we could be forced to obtain financing
on terms that are not favorable to us and, in the case of equity financing, that may result in
dilution to our stockholders. In connection with the acquisition of Axon, we borrowed $30 million
on our revolving credit facility in order to partially finance the cash portion of the merger
consideration to be paid to Axon shareholders and optionholders. The revolving credit facility has
no outstanding balance at March 31, 2005. While management believes that our cash flows will be
more than adequate to service new debt, there may be circumstances in which required payments of
principal and/or interest on new debt could adversely affect our cash flows and operating results,
and therefore the market price of our common stock. 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. DUE TO THE AXON ACQUISITION, MOLECULAR DEVICES IS A SUBSTANTIALLY LARGER AND MORE COMPLEX
ORGANIZATION, AND IF MOLECULAR DEVICES MANAGEMENT IS UNABLE TO SUFFICIENTLY MANAGE THE COMBINED
COMPANY, ITS OPERATING RESULTS WILL SUFFER. On July 1, 2004, Molecular Devices acquired a global business, which included approximately 128
employees based at Axons office in Union City, California and at its facilities in San Luis
Obispo, California and Melbourne, Australia. The combined company continues to face challenges
inherent in efficiently managing an increased number of employees over large geographic distances.
The inability to successfully manage the substantially larger and internationally diverse
organization could have a material
adverse effect on the combined company and, as a result, on the market price of Molecular Devices
common stock. WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO COMPETE. We are highly dependent on the principal members of our management, engineering and scientific
staff. The loss of the service of any of these persons could seriously harm our product development
and commercialization efforts. In addition, research, product development and commercialization
will require additional skilled personnel in areas such as chemistry and biology, and software and
electronic engineering. Our corporate headquarters are located in Sunnyvale, California, where
demand for personnel with these skills is extremely high and is likely to remain high. As a result,
competition for and retention of personnel, particularly for employees with technical expertise, is
intense and the turnover rate for qualified personnel is high. If we are unable to hire, train and
retain a sufficient number of qualified employees, our ability to conduct and expand our business
could be seriously reduced. The inability to retain and hire qualified personnel could also hinder
the planned expansion of our business. CHANGES TO FINANCIAL ACCOUNTING STANDARDS MAY AFFECT OUR RESULTS OF OPERATIONS AND CAUSE US TO
CHANGE OUR BUSINESS PRACTICES. We prepare our financial statements to conform with U.S. generally accepted accounting principles.
These accounting principles are subject to interpretation by the American Institute of Certified
Public Accountants, the Public Company Accounting Oversight Board, the Securities and Exchange
Commission and various other bodies formed to interpret and create appropriate accounting
principles. A change in those principles can have a significant effect on our reported results and
may affect our reporting of transactions completed before a change is announced. Changes to those
rules or the questioning of current practices may adversely affect our reported financial results
or the way we conduct our business. For example, accounting principles affecting many aspects of
our business, including rules relating to equity-related compensation, have recently been revised
or are under review. The Financial Accounting Standards Board and other agencies have finalized
changes to U.S. generally accepted accounting principles that will require us, starting in fiscal
year 2006, to record a charge to earnings for employee stock option grants and other equity
incentives. We will have significant and ongoing accounting charges resulting from option grant
and other equity incentive expensing that could reduce our overall net income. In addition, since
we historically have used equity-related compensation as a component of our total employee
compensation program, the accounting change could make the use of equity-related compensation less
attractive to us and therefore make it more difficult to attract and retain employees. See Note 2
of the notes to our condensed consolidated financial statements for a discussion of the impact on
our financial results if we were to use the fair value method of accounting for equity awards to
our employees. OUR OPERATING RESULTS FLUCTUATE AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS MAY 19




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DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE IN OUR STOCK PRICE. We have experienced and in the future may experience a shortfall in revenues or earnings or
otherwise fail to meet public market expectations, which could materially and adversely affect our
business and the market price of our common stock. Our total revenues and operating results may
fluctuate significantly because of a number of factors, many of which are outside of our control.
These factors include:  
    customer confidence in the economy, evidenced, in part, by stock market levels;
    changes in the domestic and international economic, business and political conditions;
    economic conditions within the pharmaceutical and biotechnology industries;
    levels of product and price competition;
    the length of our sales cycle and customer buying patterns;
    the size and timing of individual transactions;
    the timing of new product introductions and product enhancements;
    the mix of products sold;
    levels of international transactions;
    activities of and acquisitions by competitors;
    the timing of new hires and the allocation of our resources;
    changes in foreign currency exchange rates;
    our ability to develop and market new products and control costs; and
    changes in U.S. generally accepted accounting principles. One or more of the foregoing factors may cause our operating expenses to be disproportionately
high during any given period or may cause our revenues and operating results to fluctuate
significantly. In particular, we typically experience a decrease in the level of sales in the first
calendar quarter as compared to the fourth quarter of the preceding year because of budgetary and
capital equipment purchasing patterns in the life sciences industry. Our quarterly operating
results have fluctuated in the past, and we expect they will fluctuate in the future as a result of
many factors, some of which are outside of our control. In addition, we manufacture our products based on forecasted orders rather than on outstanding
orders. Accordingly, our expense levels are based, in part, on expected future sales, and we
generally cannot quickly adjust operating expenses. For example, research and development and
general and administrative expenses are not directly affected by variations in revenues. As a
result, if sales levels in a particular quarter do not meet expectations, we may not be able to
adjust operating expenses in a sufficient timeframe to compensate for the shortfall, and our
results of operations for that quarter may be seriously harmed. Likewise, our manufacturing
processes may in certain instances create a risk of excess or inadequate inventory levels if orders
do not match forecasts. Based upon the preceding factors, we may experience a shortfall in revenues or earnings or
otherwise fail to meet public market expectations, which could materially and adversely affect our
business, financial condition, results of operations and the market price of our common stock.
Because our revenues and operating results are difficult to predict, we believe that
period-to-period comparisons of our results of operations are not a good indication of our future
performance. FAILURE TO MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE
SARBANES-OXLEY ACT OF 2002 COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR STOCK PRICE. Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC
require annual management assessments of the effectiveness of our internal control over financial
reporting and a report by our independent registered public accounting firm attesting to and
reporting on these assessments. If we fail to maintain the adequacy of our internal control over
financial reporting, as such standards are modified, supplemented or amended from time to time, we
may not be able to ensure that we can conclude on an ongoing basis that we have effective internal
control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002
and the related rules and regulations of the SEC. If we cannot favorably assess, or our independent
registered public accounting firm is unable to provide an unqualified attestation report on our
assessment of, the effectiveness of our internal control over financial reporting, investor
confidence in the reliability of our financial reports may be adversely affected, which 20




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could have a material adverse effect on our stock price. OUR STOCK PRICE IS VOLATILE, WHICH COULD CAUSE STOCKHOLDERS TO LOSE A SUBSTANTIAL PART OF THEIR
INVESTMENT IN OUR STOCK. The stock market in general, and the stock prices of technology companies in particular, have
recently experienced volatility which has often been unrelated to the operating performance of any
particular company or companies. In the twelve months ended March 31, 2005, the closing sales price
of our common stock ranged from $17.05 to $25.30. Our stock price could decline regardless of our
actual operating performance, and stockholders could lose a substantial part of their investment as
a result of industry or market-based fluctuations. In the past, our stock has traded relatively
thinly. If a more active public market for our stock is not sustained, it may be difficult for
stockholders to resell shares of our common stock. Because we do not anticipate paying cash
dividends on our common stock for the foreseeable future, stockholders will not be able to receive
a return on their shares unless they sell them. The market price of our common stock will likely fluctuate in response to a number of factors,
including the following:  
    domestic and international economic, business and political conditions;
    economic conditions within the pharmaceutical and biotechnology industries;
    our failure to meet our performance estimates or the performance estimates of securities analysts;
    changes in financial estimates of our revenues and operating results by us or securities analysts;
    changes in buy/sell recommendations by securities analysts; and
    the timing of announcements by us or our competitors of significant products, contracts or
acquisitions or publicity regarding actual or potential results or performance thereof. PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER, WHICH COULD LIMIT
THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR OUR COMMON STOCK. Provisions in our certificate of incorporation and bylaws may have the effect of delaying or
preventing an acquisition, or merger in which we are not the surviving company or which results in
changes in our management. For example, our certificate of incorporation gives our Board of
Directors the authority to issue shares of preferred stock and to determine the price, rights,
preferences and privileges and restrictions, including voting rights, of those shares without any
further vote or action by our stockholders. The rights of the holders of common stock will be
subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that
may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change
in control, as the terms of the preferred stock that might be issued could potentially prohibit our
consummation of any merger, reorganization, sale of substantially all of our assets, liquidation or
other extraordinary corporate transaction without the approval of the holders of the outstanding
shares of preferred stock. The issuance of preferred stock could also have a dilutive effect on our
stockholders. In addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law. These provisions may prohibit
large stockholders, in particular those owning 15% or more of the outstanding voting stock, from
consummating a merger or combination involving us. Further, in October 2001, our Board of Directors
adopted a stockholder rights plan, commonly known as a poison pill. These provisions described
above and our poison pill could limit the price that investors might be willing to pay in the
future for our common stock. 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 believes, anticipates, plans,
predicts, expects, estimates, intends, will, continue, may, potential, should and
similar expressions. These statements are only predictions. Our actual results could differ
materially from those anticipated in our forward-looking statements as a result of many factors,
including those set forth above and elsewhere in this report. Although we believe that the expectations reflected in our forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of these
statements. We assume no duty to update any of the forward-looking statements after the date of
this report or to conform these statements to actual results. Accordingly, we caution readers not
to place undue reliance on these statements. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks, including changes in interest rates and foreign currency rates. 21




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Foreign Currency Exchange We are exposed to changes in foreign currency exchange rates primarily in the United Kingdom,
Germany, France, the Benelux, Canada, Japan and South Korea, where we sell our products directly in
local currencies. All other foreign sales are denominated in U.S. dollars and bear no exchange rate
risk. However, a strengthening of the U.S. dollar could make our products less competitive in
overseas markets. Gains and losses resulting from foreign currency transactions have historically
been immaterial. A sensitivity analysis assuming a hypothetical 10% movement in exchange rates
applied to our projected foreign sales for the remainder of 2005, indicated that such movement
would not have a material effect on our business, operating results or financial condition.
Translation gains and losses related to our foreign subsidiaries in the United Kingdom, Germany,
Norway, Switzerland, Japan, South Korea, China and Australia are accumulated as a separate
component of stockholders equity. We do not currently engage in foreign currency hedging
transactions, but may do so in the future. Interest and Investment Income Our interest and investment income is subject to changes in the general level of interest rates,
primarily U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest
earned on our cash equivalents and short-term investments. We invest our excess cash primarily in
demand deposits with U.S. banks and money market accounts and short-term securities. These
securities are carried at market value, which approximate cost, typically mature or are redeemable
within 90 days to two years and bear minimal risk. We have not experienced any significant losses
on these investments. A sensitivity analysis assuming a hypothetical 10% movement in interest rates
applied to our investment balances at March 31, 2005 indicated that such market movement would not
have a material effect on our business, operating results or financial condition. Actual gains or
losses in the future may differ materially from this analysis, depending upon actual balances and
changes in the timing and amount of interest rate movements. Debt and Interest Expense In connection with the acquisition of Axon, we entered into a new senior unsecured credit facility
with Union Bank of California, N.A., which provides us with a revolving credit facility in the
amount of up to $30.0 million. The revolving credit facility is guaranteed by our domestic
subsidiaries. All loans outstanding under the senior unsecured credit facility will bear interest
at a rate per annum equal to, at our option, either the base rate plus 0.50% or the London
InterBank Offered Rate (LIBOR) plus 1.25%. A sensitivity analysis assuming a hypothetical 10%
movement in interest rates applied to our debt balance at March 31, 2005, indicated that such
market movement would not have a material effect on our business, operating results or financial
condition, as there was no balance at quarter end. Actual gains or losses in the future may differ
materially from this analysis, depending on the level of our outstanding debt and changes in the
timing and amount of interest rate movements. 
 ITEM 4. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures.Based on our managements evaluation (with the
participation of our chief executive officer and chief financial officer), as of the end of the
period covered by this report, our chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures (as defined in Securities Exchange Act Rules
13a-15(e) and 15d-15(e)) are effective to ensure that the information required to be disclosed by
us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms. Changes in internal control over financial reporting.There was no change in our internal control
over financial reporting during the quarter ended March 31, 2005 that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting. 
 PART II. OTHER INFORMATION 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table sets forth information regarding repurchases of our common stock pursuant to
our stock repurchase program during the quarter ended March 31, 2005. 22




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Total
    
    
    
    
    
    
    Total Number of
    
    
    Maximum NumberNumber of
    
    

    Average Price
    
    
    Shares Purchased as
    
    
    of Shares thatShares
    
    
    Paid
    
    
    Part of Publicly
    
    
    May Yet Be PurchasedPeriod
    
    Purchased
    
    
    Per Share
    
    
    Announced Programs
    
    
    Under the ProgramsJanuary 1, 2005
through January 31,
2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February 1, 2005
through February
28, 2005
    
    
    397,000
    
    
    $
    21.15
    
    
    
    397,000
    
    
    
    1,678,000March 1, 2005
through March 31,
2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    397,000
    
    
    $
    21.15
    
    
    
    397,000
    
    
    
    1,678,000
 On August 2, 2001, we announced that our Board of Directors had approved our current stock
repurchase program, pursuant to which we were authorized and did repurchase 1,500,000 shares of our
common stock. On October 25, 2001, our Board of Directors determined to continue the stock
repurchase program and authorized the repurchase of an additional 1,500,000 shares of our common
stock, all of which have since been repurchased. On July 29, 2004, our Board of Directors again
determined to continue the stock repurchase program and authorized the repurchase of an additional
1,500,000 shares of our common stock of which 1,322,000 shares have been repurchased. On February
17, 2005, our Board of Directors authorized the repurchase of an additional 1,500,000 shares of our
common stock under the stock repurchase program. The stock repurchase program will continue until
all 1,678,000 shares currently approved for repurchase under the stock repurchase program have been
repurchased, unless terminated earlier by our Board of Directors. In the event that all of such
shares have been repurchased, our Board of Directors may again determine to continue our stock
repurchase program and authorize management to repurchase additional shares of our common stock. 
 ITEM 6. EXHIBITS ExhibitNumber
    
    Description of Exhibit3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(1)
    
    Specimen Certificate of Common Stock of the Registrant.10.45(3)
    
    Employee Offer Letter for Steven Davenport.10.46(3)
    
    Employee Offer Letter for Jan Hughes.10.47(3)
    
    Amended Employee Offer Letter for Jan Hughes.10.51
    
    Asset Purchase Agreement, dated as of March 9, 2005, by and between
Molecular Devices Corporation and Xsira Pharmaceuticals, Inc.31.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1*
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 1350 of Chapter 63 of Title 18 of the United States Code
(18 U.S.C 1350).
   (1)
    
    Incorporated by reference to the similarly described exhibit in our Registration Statement on
Form S-1 (File No. 33-98926), as amended.(2)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form 10-K
for the year ended December 31, 2001 and filed on April 1, 2002.(3)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form 10-K
for the year ended December 31, 2004 and on filed March 16, 2005.
    
    Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.*
    
    The certification attached as Exhibit 32.1 accompanies the Quarterly Report on Form 10-Q pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Registrant
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 23




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##### Table of Contents



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. Molecular Devices Corporation Date: May 4, 2005
    By:
    /s/ TIMOTHY A. HARKNESSTimothy A. HarknessSenior Vice President and Chief Financial Officer
(Duly Authorized and Principal
Financial and Accounting Officer) 24




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    Description of Exhibit3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(1)
    
    Specimen Certificate of Common Stock of the Registrant.10.45(3)
    
    Employee Offer Letter for Steven Davenport.10.46(3)
    
    Employee Offer Letter for Jan Hughes.10.47(3)
    
    Amended Employee Offer Letter for Jan Hughes.10.51
    
    Asset Purchase Agreement, dated as of March 9, 2005, by and between
Molecular Devices Corporation and Xsira Pharmaceuticals, Inc.31.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1*
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 1350 of Chapter 63 of Title 18 of the United States Code
(18 U.S.C 1350).
   (1)
    
    Incorporated by reference to the similarly described exhibit in our Registration Statement on
Form S-1 (File No. 33-98926), as amended.(2)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form 10-K
for the year ended December 31, 2001 and filed on April 1, 2002.(3)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form 10-K
for the year ended December 31, 2004 and on filed March 16, 2005.
    
    Confidential treatment has been requested with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.*
    
    The certification attached as Exhibit 32.1 accompanies the Quarterly Report on Form 10-Q pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Registrant
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.