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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|    |  |                                                                                         
|--- |  | ----------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|   
|    |  | For the quarterly period ended March 31, 2002                                           

OR

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number 0-27316

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

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

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

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

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

YES  [X]    NO  [   ]

As of May 13, 2002, 15,284,573 shares of the Registrants Common Stock were outstanding.



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TABLE OF CONTENTS



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



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MOLECULAR DEVICES CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2002

INDEX

|          |  |                                                                                            |    |        |    | 
|--------- |  | ------------------------------------------------------------------------------------------ | -- | ------ | -- | 
|          |  |                                                                                            |    | PAGE  
|          |  |                                                                                            |    | NUMBER
|          |  |                                                                                            |    |       
|PART I.   |  | FINANCIAL INFORMATION NUMBER                                                               |    |        |    | 
|         
|ITEM 1.   |  | FINANCIAL STATEMENTS                                                                       |    |        |    | 
|         
|          |  | CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2002 and December 31, 2001                 |    |        | 3  | 
|         
|          |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2002 and 2001 |    |        | 4  | 
|         
|          |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2002 and 2001 |    |        | 5  | 
|         
|          |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                       |    |        | 6  | 
|         
|ITEM 2.   |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS      |    |        | 11 | 
|         
|ITEM 3.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 |    |        | 24 | 
|         
|PART II.  |  | OTHER INFORMATION                                                                          |    |        |    | 
|         
|ITEM 1.   |  | LEGAL PROCEEDINGS                                                                          |    |        | 25 | 
|         
|ITEM 2.   |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                                  |    |        | 25 | 
|         
|ITEM 3.   |  | DEFAULTS UPON SENIOR SECURITIES                                                            |    |        | 25 | 
|         
|ITEM 4.   |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                        |    |        | 25 | 
|         
|ITEM 5.   |  | OTHER INFORMATION                                                                          |    |        | 25 | 
|         
|ITEM 6.   |  | EXHIBITS AND REPORTS ON FORM 8-K                                                           |    |        | 25 | 
|         
|SIGNATURE |  |                                                                                            | 26 |       

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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)


|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 
|------------------------------------ | ----------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ----------- | ------- | ------------ | ------ | ------- | ------- | 
|                                     |                                           |                                                                                                                                                                                                             |                            |        | March 31,   |         | December 31,
|                                     |                                           |                                                                                                                                                                                                             |                            |        | 2002        |         | 2001 (1)    
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |             
|                                     |                                           |                                                                                                                                                                                                             |                            |        | (unaudited) |         |              |        |        
|ASSETS:                              |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |       
|                                     | Current assets:                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |        
|                                     |                                           | Cash and cash equivalents                                                                                                                                                                                   |                            | $      | 52,440      |         |              | $      | 56,372  |        
|                                     |                                           | Short-term investments                                                                                                                                                                                      |                            |        | 11,901      |         |              |        | 10,885  |        
|                                     |                                           | Accounts receivable, net                                                                                                                                                                                    |                            |        | 21,547      |         |              |        | 23,612  |        
|                                     |                                           | Inventories                                                                                                                                                                                                 |                            |        | 17,019      |         |              |        | 17,181  |        
|                                     |                                           | Deferred tax asset                                                                                                                                                                                          |                            |        | 3,296       |         |              |        | 4,015   |        
|                                     |                                           | Other current assets                                                                                                                                                                                        |                            |        | 2,205       |         |              |        | 2,233   |        
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 
|                                     |                                           |                                                                                                                                                                                                             | Total current assets       |        |             | 108,408 |              |        |         | 114,298 | 
|                                     | Equipment and leasehold improvements, net |                                                                                                                                                                                                             |                            | 10,470 |             |         |              | 10,323 |        
|                                     | Goodwill                                  |                                                                                                                                                                                                             |                            | 7,171  |             |         |              | 7,171  |        
|                                     | Intangible and other assets               |                                                                                                                                                                                                             |                            | 20,590 |             |         |              | 20,569 |        
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 
|                                     |                                           |                                                                                                                                                                                                             |                            |        | $           | 146,639 |              |        | $       | 152,361 | 
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 
|LIABILITIES AND STOCKHOLDERS EQUITY |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |       
|                                     | Current liabilities:                      |                                                                                                                                                                                                             |                            |        |             |         |              |        |        
|                                     |                                           | Accounts payable                                                                                                                                                                                            |                            | $      | 2,385       |         |              | $      | 2,470   |        
|                                     |                                           | Accrued liabilities                                                                                                                                                                                         |                            |        | 6,795       |         |              |        | 8,835   |        
|                                     |                                           | Deferred revenue                                                                                                                                                                                            |                            |        | 3,192       |         |              |        | 3,571   |        
|                                     |                                           |                                                                                                                                                                                                             | Total current liabilities  |        |             | 12,372  |              |        |         | 14,876  | 
|                                     | Stockholders equity:                     |                                                                                                                                                                                                             |                            |        |             |         |              |        |        
|                                     |                                           | Preferred stock, $.001 par value; 3,000,000 shares
authorized, no shares issued or outstanding at
March 31, 2002 and December 31, 2001, respectively                                                        |                            |        |            |         |              |        |        |        
|                                     |                                           | Common stock, $.001 par value; 60,000,000 shares
authorized; 15,519,480 and 15,487,438 shares
issued and 15,279,435 and 15,481,844 shares
outstanding at March 31, 2002 and
December 31, 2001, respectively |                            |        | 15          |         |              |        | 15      |        
|                                     |                                           | Additional paid-in capital                                                                                                                                                                                  |                            |        | 181,361     |         |              |        | 181,233 |        
|                                     |                                           | Deferred compensation                                                                                                                                                                                       |                            |        | (305        | )       |              |        | (332    | )      
|                                     |                                           | Treasury stock, at cost; 230,000 and 10,000 shares at
March 31, 2002 and December 31, 2001, respectively                                                                                                    |                            |        | (4,632      | )       |              |        | (160    | )      
|                                     |                                           | Accumulated deficit                                                                                                                                                                                         |                            |        | (39,930     | )       |              |        | (40,653 | )      
|                                     |                                           | Accumulated other comprehensive loss                                                                                                                                                                        |                            |        | (2,242      | )       |              |        | (2,618  | )      
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 
|                                     |                                           |                                                                                                                                                                                                             | Total stockholders equity |        |             | 134,267 |              |        |         | 137,485 | 
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 
|                                     |                                           |                                                                                                                                                                                                             |                            |        | $           | 146,639 |              |        | $       | 152,361 | 
|                                     |                                           |                                                                                                                                                                                                             |                            |        |             |         |              |        |         |         | 



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

The accompanying notes are an integral part of these statements.

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MOLECULAR DEVICES CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except per share amounts, unaudited)


|                                                      |                                     |                          |        |                    |        |      |        |       |        | 
|----------------------------------------------------- | ----------------------------------- | ------------------------ | ------ | ------------------ | ------ | ---- | ------ | ----- | ------ | 
|                                                      |                                     |                          |        | Three Months Ended
|                                                      |                                     |                          |        | March 31,         
|                                                      |                                     |                          |        |                   
|                                                      |                                     |                          |        | 2002               |        | 2001
|                                                      |                                     |                          |        |                    |        |     
|REVENUES                                              |                                     | $                        | 20,625 |                    |        | $    | 20,732 |      
|COST OF REVENUES                                      |                                     |                          | 8,050  |                    |        |      | 7,976  |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|GROSS PROFIT                                          |                                     |                          | 12,575 |                    |        |      | 12,756 |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|OPERATING EXPENSES:                                   |                                     |                          |        |                    |        |      |        |      
|                                                      | Research and development            |                          |        | 4,121              |        |      |        | 3,635 |       
|                                                      | Selling, general and administrative |                          |        | 7,584              |        |      |        | 7,773 |       
|                                                      |                                     |                          |        |                    |        |      |        |      
|                                                      |                                     | Total operating expenses |        |                    | 11,705 |      |        |       | 11,408 | 
|                                                      |                                     |                          |        |                    |        |      |        |      
|INCOME FROM OPERATIONS                                |                                     |                          | 870    |                    |        |      | 1,348  |      
|Other income, net                                     |                                     |                          | 296    |                    |        |      | 1,325  |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|INCOME BEFORE INCOME TAXES                            |                                     |                          | 1,166  |                    |        |      | 2,673  |      
|Income tax provision                                  |                                     |                          | (443   | )                  |        |      | (1,029 | )    
|                                                      |                                     |                          |        |                    |        |      |        |      
|NET INCOME                                            |                                     | $                        | 723    |                    |        | $    | 1,644  |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|BASIC NET INCOME PER SHARE                            |                                     | $                        | 0.05   |                    |        | $    | 0.10   |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|DILUTED NET INCOME PER SHARE                          |                                     | $                        | 0.05   |                    |        | $    | 0.10   |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|SHARES USED IN COMPUTING BASIC NET INCOME PER SHARE   |                                     |                          | 15,432 |                    |        |      | 16,454 |      
|                                                      |                                     |                          |        |                    |        |      |        |      
|SHARES USED IN COMPUTING DILUTED NET INCOME PER SHARE |                                     |                          | 15,576 |                    |        |      | 17,207 |      
|                                                      |                                     |                          |        |                    |        |      |        |      

The accompanying notes are an integral part of these statements.

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MOLECULAR DEVICES CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands, unaudited)


|                                                                                  |                                       |                      |        |                    |        |      |        |     |        |  
|--------------------------------------------------------------------------------- | ------------------------------------- | -------------------- | ------ | ------------------ | ------ | ---- | ------ | --- | ------ | -
|                                                                                  |                                       |                      |        | Three Months Ended
|                                                                                  |                                       |                      |        | March 31,         
|                                                                                  |                                       |                      |        |                   
|                                                                                  |                                       |                      |        | 2002               |        | 2001
|                                                                                  |                                       |                      |        |                    |        |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                       |                      |        |                    |        |      |        |    
|Net income                                                                        |                                       | $                    | 723    |                    |        | $    | 1,644  |    
|Adjustments to reconcile net income to net
cash provided by operating activities: |                                       |                      |        |                    |        |      |        |    
|                                                                                  | Depreciation and amortization         |                      |        | 876                |        |      |        | 641 |       
|                                                                                  | Amortization of deferred compensation |                      |        | 27                 |        |      |        | 27  |       
|                                                                                  | Amortization of goodwill and patents  |                      |        | 47                 |        |      |        | 141 |       
|                                                                                  | (Increase) decrease in assets:        |                      |        |                    |        |      |        |     |       
|                                                                                  |                                       | Accounts receivable  |        |                    | 2,065  |      |        |     | 4,356  |  
|                                                                                  |                                       | Inventories          |        |                    | (9     | )    |        |     | (5,074 | )
|                                                                                  |                                       | Deferred tax asset   |        |                    | 719    |      |        |     | 1,030  |  
|                                                                                  |                                       | Other current assets |        |                    | 28     |      |        |     | 319    |  
|                                                                                  | Increase (decrease) in liabilities:   |                      |        |                    |        |      |        |     |       
|                                                                                  |                                       | Accounts payable     |        |                    | (85    | )    |        |     | 520    |  
|                                                                                  |                                       | Accrued liabilities  |        |                    | (2,040 | )    |        |     | (2,420 | )
|                                                                                  |                                       | Deferred revenue     |        |                    | (379   | )    |        |     | (316   | )
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|Net cash provided by operating activities                                         |                                       |                      | 1,972  |                    |        |      | 868    |    
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |                                       |                      |        |                    |        |      |        |    
|Purchases of short-term investments                                               |                                       |                      | (5,981 | )                  |        |      | (6,914 | )  
|Proceeds from sales and maturities of short-term investments                      |                                       |                      | 4,965  |                    |        |      | 41,562 |    
|Capital expenditures                                                              |                                       |                      | (852   | )                  |        |      | (956   | )  
|Acquisition of Nihon Molecular Devices                                            |                                       |                      |       |                    |        |      | (3,150 | )  
|Other assets                                                                      |                                       |                      | (68    | )                  |        |      | (586   | )  
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|Net cash provided by (used in) investing activities                               |                                       |                      | (1,936 | )                  |        |      | 29,956 |    
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                                       |                      |        |                    |        |      |        |    
|Payments on borrowings                                                            |                                       |                      |       |                    |        |      | (586   | )  
|Issuance of common stock, net                                                     |                                       |                      | 128    |                    |        |      | 2,990  |    
|Purchase of treasury stock                                                        |                                       |                      | (4,472 | )                  |        |      |       |    
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|Net cash provided by (used in) financing activities                               |                                       |                      | (4,344 | )                  |        |      | 2,404  |    
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                           |                                       |                      | 376    |                    |        |      | (822   | )  
|Net increase (decrease) in cash and cash equivalents                              |                                       |                      | (3,932 | )                  |        |      | 32,406 |    
|Cash and cash equivalents at beginning of period                                  |                                       |                      | 56,372 |                    |        |      | 41,832 |    
|                                                                                  |                                       |                      |        |                    |        |      |        |    
|Cash and cash equivalents at end of period                                        |                                       | $                    | 52,440 |                    |        | $    | 74,238 |    
|                                                                                  |                                       |                      |        |                    |        |      |        |    

The accompanying notes are an integral part of these statements.

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MOLECULAR DEVICES CORPORATION




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


Note 1.   Basis of Presentation

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

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

Molecular Devices acquired all of the outstanding capital stock of Nihon
Molecular Devices (NMD), its Japanese distributor, on January 5, 2001 for
$3.2 million in cash. Molecular Devices has accounted for the transaction as a
purchase, and all financial information related to 2001 includes the results of
both companies since the date of acquisition.

On July 19, 2001, Molecular Devices acquired all of the outstanding capital
stock of Cytion S.A (Cytion). Cytion develops systems designed to analyze
ion channels through the electrophysiological technique of automated patch
clamping. The aggregate purchase price paid at closing for the capital stock
of Cytion was $15.8 million, including $7.5 million in cash, the fair value of
400,000 shares of Molecular Devices common stock valued at $7.4 million, and
acquisition related expenses of $900,000. Molecular Devices funded the cash
portion of the purchase price from working capital. The acquisition was
accounted for using the purchase method of accounting. Molecular Devices
currently intends to maintain Cytion as a wholly-owned subsidiary located in
Switzerland.

The condensed consolidated financial statements included herein have been
prepared in accordance with the published rules and regulations of the
Securities and Exchange Commission (SEC) applicable to interim financial
information. Certain information and footnote disclosures included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in these interim statements as allowed by such SEC
rules and regulations. However, management believes that the disclosures are
adequate to make the information presented not misleading. The unaudited
condensed consolidated financial statements included in this Form 10-Q should
be read in conjunction with the audited consolidated financial statements and
notes thereto for the fiscal year ended December 31, 2001, included in the
Molecular Devices Annual Report on Form 10-K for the fiscal year ended December
31, 2001, filed with the SEC on April 1, 2002.

The unaudited condensed consolidated financial statements included 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, 2002 are not necessarily indicative of the results to be
expected for the entire fiscal year ending December 31, 2002.

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Note 2.   Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (FAS 144), which supersedes both Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (FAS 121) and
the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions (Opinion 30), for the disposal of a segment of a business (as
previously defined in that Opinion). FAS 144 retains the fundamental provisions
in FAS 121 for recognizing and measuring impairment losses on long-lived assets
held for use and long-lived assets to be disposed of by sale, while also resolving significant
implementation issues associated with FAS 121. For example, FAS 144 provides
guidance on how a long-lived asset that is used as part of a group should be
evaluated for impairment, establishes criteria for when a long-lived asset is
held for sale, and prescribes the accounting for a long-lived asset that will
be disposed of other than by sale. FAS 144 retains the basic provisions of
Opinion 30 on how to present discontinued operations in the income statement
but broadens that presentation to include a component of an entity (rather than
a segment of a business). Unlike FAS 121, an impairment assessment under FAS
144 will never result in a write-down of goodwill. Rather, goodwill is
evaluated for impairment under FAS No. 142, Goodwill and Other Intangible
Assets. The Company has adopted FAS 144 and the adoption of FAS 144 for
long-lived assets held for use did not have a material impact on the Companys
financial statements because the impairment assessment under FAS 144 is largely
unchanged from FAS 121.

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Note 3.   Goodwill and Intangible Assets

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations (FAS 141) and
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (FAS 142). FAS 141 specifies criteria that intangible assets
acquired in a purchase business combination must meet to be recognized and
reported apart from goodwill, noting that any purchases price allocable to an
assembled workforce may not be accounted for separately. FAS 142 requires,
among other things, that the assembled workforce be reclassified to goodwill
and that goodwill (including assembled workforce) and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with FAS 142. Molecular Devices has
no intangible assets with indefinite useful lives. FAS 142 also requires that
intangible assets with definite useful lives be amortized over their respective
useful lives to their estimated residual values, and reviewed for impairment in
accordance with FAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Molecular Devices adopted the provisions of FAS 141
immediately, and FAS 142 effective January 1, 2002.

FAS 141 required, upon adoption of FAS 142, Molecular Devices to evaluate
existing intangible assets and goodwill that were acquired in a purchase
business combination prior to June 30, 2001, and make any necessary
reclassifications to conform to the new criteria in FAS 141. Molecular Devices
did not reclassify any intangibles to goodwill on January 1, 2002 as a
result of this evaluation.

Upon adoption of FAS 142, Molecular Devices reassessed the useful lives and
residual values of all intangible assets (excluding goodwill) acquired in purchase business combinations. No adjustments to
amortization periods were necessary.

In connection with the transitional goodwill impairment evaluation, the
adoption of FAS 142 requires Molecular Devices to assess whether there is an
indication that goodwill is impaired as of January 1, 2002. To accomplish
this, Molecular Devices identified its reporting units as of January 1, 2002.
Molecular Devices has determined the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of January 1, 2002. Molecular
Devices has up to six months from January 1, 2002 to determine the fair value
of each reporting unit and compare it to the reporting units carrying amount.
To the extent a reporting units carrying amount exceeds its fair value, an
indication exits that the reporting units goodwill may be impaired and
Molecular Devices must perform the second step of the transitional impairment
test. In the second step, Molecular Devices must compare the implied fair
value of the reporting units goodwill, determined by allocating the reporting
units fair value to all of its assets (recognized and unrecognized) and
liabilities in a manner similar to a purchase price allocation in accordance
with FAS 141, to its carrying amount, both of which will be measured as of
January 1, 2002. This second step must be completed as soon as possible, but
no later than December 31, 2002. Molecular Devices will recognize any
transitional impairment loss as the cumulative effect of a change in accounting
principle. Molecular Devices is currently working on determining the fair
value of each reporting unit. Based upon a review to date, Molecular Devices
does not anticipate any transitional impairment losses.

In addition, Molecular Devices must perform an impairment test at least
annually. Any
impairment loss from the annual test will be recognized as part of operations.

A reconciliation of reported net income to adjusted net income, as if FAS 142
had been implemented as
of January 1, 2001, is as follows (in thousands, except per share data):

|                            |                                 |   |                    |      |      |   |       |      | 
|--------------------------- | ------------------------------- | - | ------------------ | ---- | ---- | - | ----- | ---- | 
|                            |                                 |   | Three Months Ended
|                            |                                 |   | March 31,         
|                            |                                 |   |                   
|                            |                                 |   | 2002               |      | 2001
|                            |                                 |   |                    |      |     
|Reported net income         |                                 | $ | 723                |      |      | $ | 1,644 |     
|                            | Add back: Goodwill amortization |   |                    |     |      |   |       | 80   | 
|                            |                                 |   |                    |      |      |   |       |     
|Adjusted net income         |                                 | $ | 723                |      |      | $ | 1,724 |     
|                            |                                 |   |                    |      |      |   |       |     
|Basic earnings per share:   |                                 |   |                    |      |      |   |       |     
|                            | Reported net income             |   | $                  | 0.05 |      |   | $     | 0.10 | 
|                            | Goodwill amortization           |   |                    |     |      |   |       |     | 
|                            |                                 |   |                    |      |      |   |       |     
|                            | Adjusted Net Income             |   | $                  | 0.05 |      |   | $     | 0.10 | 
|                            |                                 |   |                    |      |      |   |       |     
|Diluted earnings per share: |                                 |   |                    |      |      |   |       |     
|                            | Reported net income             |   | $                  | 0.05 |      |   | $     | 0.10 | 
|                            | Goodwill amortization           |   |                    |     |      |   |       |     | 
|                            |                                 |   |                    |      |      |   |       |     
|                            | Adjusted net income             |   | $                  | 0.05 |      |   | $     | 0.10 | 
|                            |                                 |   |                    |      |      |   |       |     

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

|                                                                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  |   |     |  |  |   |       | 
|----------------------------------------------------------------------------- |  | -------------- | ----- | ----------------- |  | -------- | -- | -------- |  | ------------ | ----- | -------- |  | - | ----- | --- |  | - | --- |  |  | - | ----- | 
|                                                                              |  | March 31, 2002 |       | December 31, 2001
|                                                                              |  |                |       |                  
|                                                                              |  | Gross          |       |                   |  |          |    | Net      |  | Gross        |       |          |  |   |       | Net
|                                                                              |  | Carrying       |       | Accumulated       |  | Carrying |    | Carrying |  | Accumulated  |       | Carrying
|                                                                              |  | Value          |       | Amortization      |  | Value    |    | Value    |  | Amortization |       | Value   
|                                                                              |  |                |       |                   |  |          |    |          |  |              |       |         
|Patents                                                                       |  | $              | 1,372 |                   |  | $        | 95 |          |  | $            | 1,277 |          |  | $ | 1,372 |     |  | $ | 61  |  |  | $ | 1,311 | 
|                                                                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  |   |     |  |  |   |       | 
|Aggregate amortization expense is
as follows (in thousands):                  |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  |   |     |  |  |   |       | 
|For the three months ended
March 31, 2002 (reported)                          |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 34  |  |  |   |       | 
|For the remaining nine months
in the year ended December 31, 2002
(estimated) |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 102 |  |  |   |       | 
|For the year ended December 31, 2002
(estimated)                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 136 |  |  |   |       | 
|For the year ended December 31, 2003
(estimated)                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 136 |  |  |   |       | 
|For the year ended December 31, 2004
(estimated)                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 136 |  |  |   |       | 
|For the year ended December 31, 2005
(estimated)                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 136 |  |  |   |       | 
|For the year ended December 31, 2006
(estimated)                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 136 |  |  |   |       | 
|For the year ended December 31, 2007
(estimated)                              |  |                |       |                   |  |          |    |          |  |              |       |          |  |   |       |     |  | $ | 136 |  |  |   |       | 

There was no change in the carrying value of goodwill by reporting unit.

Note 4.   Comprehensive Income

Statement of Financial Accounting Standards No. 130 requires unrealized gains
or losses on Molecular Devices short-term investments and the cumulative
effect of Molecular Devices foreign currency translation adjustments, which
are reported in stockholders equity, to be included in other comprehensive
income. Comprehensive income, net of tax, was approximately $1.0 million and
$1.1 million for the three-month periods ended March 31, 2002 and 2001,
respectively. The differences from reported net income are made up almost
entirely of changes in accumulated foreign currency translation.

Note 5.   Cash Equivalents and Short-Term Investments

Molecular Devices considers all highly liquid investments in debt securities
with a remaining maturity from the date of purchase of 90 days or less to be
cash equivalents. Cash equivalents consist of money market funds and corporate
debt securities and U.S. government debt instruments. As of March 31, 2002,
Molecular Devices short-term investments included obligations of $2.0 million
of governmental agencies and $9.9 million of corporate debt securities with
original maturities ranging between 3 and 12 months. By policy, Molecular
Devices limits concentration of credit risk by diversifying its investments
among a variety of high credit-quality issuers. All cash equivalents and
short-term investments are classified as available-for-sale. Available-for-sale
securities are carried at amortized cost, which approximated fair value at
March 31, 2002. Material unrealized gains and losses, if any, are reported in
stockholders equity and included in other comprehensive income. Fair value is
estimated based on available market information. The cost of securities sold is
based on the specific identification method. For the three months ended March
31, 2002, gross realized gains and losses on available-for-sale securities were
immaterial.

Note 6.   Inventories

Inventories consist of (in thousands):

|                                |  |                |        |                   |  |   |        | 
|------------------------------- |  | -------------- | ------ | ----------------- |  | - | ------ | 
|                                |  | March 31, 2002 |        | December 31, 2001
|                                |  |                |        |                  
|                                |  | (unaudited)    |        |                   |  |  
|Finished goods                  |  | $              | 8,609  |                   |  | $ | 8,835  | 
|Work in process                 |  |                | 1,643  |                   |  |   | 1,347  | 
|Raw materials and subassemblies |  |                | 6,767  |                   |  |   | 6,999  | 
|                                |  |                |        |                   |  |   |        | 
|                                |  | $              | 17,019 |                   |  | $ | 17,181 | 
|                                |  |                |        |                   |  |   |        | 

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Note 7.   Stock Repurchase

In the first quarter of 2002, Molecular Devices completed the repurchase of
220,000 shares of common stock. The repurchase occurred at various times
throughout the quarter subsequent to approval of the repurchase plan by the
Molecular Devices Board of Directors in October 2001, allowing for the
repurchase of up to 1.5 million shares. As of March 31, 2002, 230,000 shares
remained on Molecular Devices balance sheet as treasury stock, at cost.

Note 8.   Net Income Per Share

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

|                                                                                                                 |  |                    |        |      |  |   |        | 
|---------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                                                                                                 |  | Three Months Ended
|                                                                                                                 |  | March 31,         
|                                                                                                                 |  |                   
|                                                                                                                 |  | 2002               |        | 2001
|                                                                                                                 |  |                    |        |     
|Net Income                                                                                                       |  | $                  | 723    |      |  | $ | 1,644  | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|Denominator for basic earnings per share  weighted
average common shares outstanding                            |  |                    | 15,432 |      |  |   | 16,454 | 
|Effect of dilutive securities  employee stock options                                                           |  |                    | 144    |      |  |   | 753    | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|Denominator for diluted earnings per share  weighted
average common shares outstanding plus dilutive securities |  |                    | 15,576 |      |  |   | 17,207 | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|BASIC NET INCOME PER SHARE                                                                                       |  | $                  | 0.05   |      |  | $ | 0.10   | 
|                                                                                                                 |  |                    |        |      |  |   |        | 
|DILUTED NET INCOME PER SHARE                                                                                     |  | $                  | 0.05   |      |  | $ | 0.10   | 
|                                                                                                                 |  |                    |        |      |  |   |        | 

Note 9.   Legal Proceedings

On April 16, 2002, Caliper Technologies Corp. filed a patent infringement
lawsuit against us alleging that our IMAP and reagent assay kits infringe a
U.S. patent held by Caliper. We believe that none of our products infringes
any claim of the Caliper patent and intend to vigorously defend the lawsuit.
On May 8, 2002, we filed an answer and counter-claim to Calipers lawsuit
denying all allegations of infringement, setting forth certain affirmative
defenses and making a counter-claim for declaratory relief that, among other
things, we are not infringing and have not infringed any valid and enforceable
claim of the Caliper patent and that the Caliper patent is invalid. IMAP
products represented less than 1% of our revenues for the first quarter of 2002
and are expected to represent less than 1% of our anticipated revenues for the
full year of 2002. Accordingly, based on both our assessment of the lack of
merit to the lawsuit and the anticipated immateriality of our IMAP product
sales, we believe the patent infringement lawsuit will not be material to
Molecular Devices.

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MOLECULAR DEVICES CORPORATION




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

Except for the historical information contained herein, the following
discussion contains forward-looking statements. For this purpose, any
statements that are not statements of historical fact may be deemed to be
forward-looking statements. Words such as believes, anticipates, plans,
predicts, expects, estimates, intends, will, continue, may,
potential, should and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause our results to differ materially from those indicated by these
forward-looking statements, including, among others, those discussed below and
under the caption Factors that May Affect Future Results, as well as those
identified in the Molecular Devices Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the SEC on April 1, 2002.

The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part
I  Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Managements Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
2001 contained in the Molecular Devices Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the SEC on April 1, 2002, including in
particular the discussion of Critical Accounting Policies included therein.
The results for the first three months of 2002 are not necessarily indicative
of the results to be expected for the entire fiscal year ending December 31,
2002.

RESULTS OF OPERATIONS  THREE MONTHS ENDED MARCH 31, 2002 AND 2001

REVENUES. Revenues for the first quarter of 2002 were $20.6 million, down
$107,000 as compared to the first quarter of 2001. The Drug Discovery product
family experienced a decline in revenues of 21% compared with the first quarter
of 2001, while the Life Sciences Research product family generated a 23%
increase in revenues compared with the first quarter of 2001. The Drug
Discovery products, which include cell analysis and HTS systems, consist of
Molecular Devices FLIPR®, CLIPR, Analyst and Cytosensor systems. The Life
Sciences Research products, which include benchtop detection and liquid
handling products, consist of Molecular Devices Maxline, Skatron and
Threshold® products. Drug Discovery revenues decreased primarily due to
continued weak demand for the high-end high-throughput systems. Life Sciences
Research revenues increased primarily due to the strong sales of our
FLEXstation product and Maxline product line.

GROSS MARGIN. Gross margin decreased to 61% in the first quarter of 2002 as
compared to 61.5% in the first quarter of 2001 due to negative manufacturing
overhead variances associated with lower sales volumes.

RESEARCH AND DEVELOPMENT. Research and development expenses for the first
quarter of 2002 increased by 13.4% to $4.1 million (20.0% of revenues) from
$3.6 million (17.5% of revenues) for the first quarter of 2001. The increased
spending for the period was primarily the result of research and development
expenses related to Cytion S.A., which was acquired in the third quarter of
2001.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the first quarter of 2002 were essentially flat at $7.6 million
(36.8% of revenues) as compared to the first quarter of 2001 amount of $7.8
million (37.5% of revenues). The small decrease related to increased cost
controls and the absence of amortization of goodwill in accordance with the
implementation of FAS 142.

On January 1, 2002, we adopted
FAS 142, Goodwill and Other Intangible Assets. In
accordance with FAS 142, we discontinued the amortization of
goodwill. This resulted in an increase in reported net income of
approximately $80,000, net of tax, (or less than $0.01 per share) in
the first quarter of 2002 as compared to the accounting prior to the
adoption of FAS 142. We performed an impairment test of goodwill
as of January 1, 2002, which did not result in an impairment
charge at transition. We will continue to monitor the carrying value
of our goodwill through the annual impairment tests. See also
Note 3, Goodwill and Intangible Assets in the Notes
to Condensed Consolidated Financial Statements.

OTHER INCOME (NET). Net other income decreased to $296,000 in the first
quarter of 2002 as compared to $1.3 million in the same period of 2001. The
decrease in other income generated in the

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first quarter of 2002 was due to
lower average cash and short-term investment balances and the significant
decline in interest rates compared to the first quarter of 2001. The lower
average cash balances result principally from a share repurchase plan under
which we have repurchased over 1.7 million shares of our common stock, and our
acquisition of Cytion S.A.

INCOME TAX PROVISION. We recorded an income tax provision of $443,000 in the
first quarter of 2002 as compared to $1.0 million in the same period of 2001.
The tax provision for the first quarter of 2002 was based on an effective tax
rate of 38.0%, down from 38.5% in the first quarter of 2001. The improved rate
is mainly the result of the utilization of loss carry forwards in foreign tax
jurisdictions.

Critical Accounting Policies

The process of preparing financial statements requires the use of estimates on
the part of management. The estimates used by management are based on the
Companys historical experiences combined with managements understanding of
current facts and circumstances. Certain of the Companys accounting policies
are considered critical as they are both important to the portrayal of the
Companys financial condition and results and require significant or complex
judgment on the part of management. For our critical accounting policies and
estimates, refer to our Annual Report on Form 10-K for the year ended December
31, 2001 filed with the Securities and Exchange Commission on April 1, 2002.
There have been no changes in any of our accounting policies since December 31,
2001.

Liquidity and Capital Resources

We had cash, cash equivalents and short-term investments of approximately $64.3
million at March 31, 2002 compared to $67.3 million at December 31, 2001.
Operating activities in the first three months of 2002 provided approximately
$2.0 million of cash primarily due to decreased accounts receivable and the use
of deferred tax assets, as offset by a decrease in accrued liabilities. In the
first three months of 2001, operating activities provided $868,000 of cash
primarily due to decreases in accounts receivable and deferred tax assets,
offset by an increase in inventory and decreased accrued liabilities.
Approximately $1.9 million of cash was used by investing activities in the
first three months of 2002, primarily due to $1.0 million of net short-term
investment purchases and $852,000 of capital expenditures related to various
computer and software related projects. In the first three months of 2001,
investing activities provided $30.0 million, primarily due to the net
maturities of short-term investments, as offset by $900,000 of capital
expenditures. In the first three months of 2002, financing activities used
$4.3 million, primarily due to the repurchase of 220,000 shares of our common
stock, as offset by the issuance of common stock related to the exercise of
stock options by employees. In the first three months of 2001, financing
activities provided $2.4 million of cash due to option exercises throughout the
period, offset by $586,000 used to pay off all remaining debt. Our ability to
generate our anticipated cash flow from operations is subject to the risks and
uncertainties discussed below under Factors That May Affect Future Results,
including in particular variations in the amount of time it takes for us to
sell our products and collect accounts receivable and the timing of customer
orders, competition, risks associated with the pharmaceutical and biotechnology
industries, supplier or manufacturing problems or delays and risks associated
with past and potential future acquisitions.

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

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



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

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

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

Factors That May Affect Future Results

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

Variations in the amount of time it takes for us to sell our products and
collect accounts receivable and the timing of customer orders may cause
fluctuations in our operating results, which could cause our stock price to
decline.

The timing of capital equipment purchases by customers is expected to be uneven
and difficult to predict. Many of our products represent significant capital
purchases for our customers. The list prices for our instruments range from
$5,000 to $494,500. Accordingly, our customers generally take a relatively long
time to evaluate our products, and a significant portion of our revenues is
typically derived from sales of a small number of relatively high-priced products.
Purchases are generally made

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by purchase orders and not long-term contracts.
Delays in receipt of anticipated orders for our relatively high priced products
could lead to substantial variability from quarter to quarter. Furthermore, we
have historically received purchase orders and made a significant portion of
each quarters product shipments near the end of the quarter. If that pattern
continues, even short delays in the receipt of orders or shipment of products
at the end of a quarter could have a materially adverse affect on results of
operations for that quarter.

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

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

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

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

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

Many of our current and potential competitors have significantly greater
resources than we do, and increased competition could impair sales of our
products.

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

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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. Over 76% of our
revenues in 2001 were derived from the sale of products that were introduced in
the last three years, and our future success will depend on our ability to
enhance our current products and to develop and introduce, on a timely basis,
new products that address the evolving needs of our customers. We may
experience difficulties or delays in our development efforts with respect to
new products, and we may not ultimately be successful in developing them. Any
significant delay in releasing new systems could adversely affect our
reputation, give a competitor a first-to-market advantage or cause a competitor
to achieve greater market share. In addition, our future success depends on our
continued ability to develop new applications for our existing products. If we
are not able to complete the development of these applications, or if we
experience difficulties or delays, we may lose our current customers and may
not be able to attract new customers, which could seriously harm our business
and our future growth prospects.

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

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

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If we deliver products with defects, our credibility will be harmed and the
sales and market acceptance of our products will decrease.

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

Most of our current and potential customers are from the pharmaceutical and
biotechnology industries and are subject to risks faced by those industries.

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

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

Our products could infringe on the intellectual property rights of others,
which may cause us to engage in costly litigation and, if we are not
successful, could also cause us to pay substantial damages and prohibit us from
selling our products.

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

On April 16, 2002, Caliper Technologies Corp. filed a patent infringement
lawsuit against us alleging that our IMAP and reagent assay kits infringe a
U.S. patent held by Caliper. We believe that none of our products infringes
any claim of the Caliper patent and intend to vigorously defend the lawsuit.

On May 8, 2002, we filed an answer and counter-claim to Calipers lawsuit
denying all allegations of infringement, setting forth certain affirmative
defenses and making a counter-claim for declaratory relief that, among other things, we are not
infringing and have not infringed any valid and enforceable claim of the
Caliper patent and that the Caliper patent is invalid. However, we can not
assure you that we will

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prevail in the Caliper lawsuit or that, even if we
prevail, that defending the lawsuit will not consure substantial financial and
management resources.

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

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



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

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

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

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

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



| |  | the pending patent applications we have filed or to which we have exclusive rights may not result in issued patents or may
take longer than we expect to result in issued patents;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the claims of any patents which are issued may not provide meaningful protection;                                                                                                 
| 
| |  | we may not be able to develop additional proprietary technologies that are patentable;                                                                                            
| 
| |  | the patents licensed or issued to us or our customers may not provide a competitive advantage;                                                                                    
| 
| |  | other companies may challenge patents licensed or issued to us or our customers;                                                                                                  

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

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

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

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



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

Because the manufacturing of certain of these components and subassemblies
involves extremely complex processes and requires long lead times, we may
experience delays or shortages caused by suppliers. We believe that alternative
sources could be obtained and qualified, if necessary, for most sole and
limited source parts. However, if we were forced to seek alternative sources of
supply or to manufacture such components or subassemblies internally, we may be
forced to redesign our systems, which could prevent us from shipping our
systems to customers on a timely basis. Some of our suppliers have relatively
limited financial and other resources. Any inability to obtain adequate
deliveries, or any other circumstance that would restrict our ability to ship our products, could
damage relationships with current and prospective customers and could harm our
business.

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We may encounter manufacturing and assembly problems or delays, which could
result in lost revenues.

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

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

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

We may have difficulty managing our growth.

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

We rely upon distributors for product sales and support outside North America.

In 2001 approximately 5% of our sales were made through distributors. We often
rely upon distributors to provide customer support to the ultimate end users of
our products. As a result, our success depends on the continued sales and
customer support efforts of our network of distributors. The use of
distributors involves certain risks, including risks that distributors will not
effectively sell or support our products, that they will be unable to satisfy
financial obligations to us and that they will cease operations. Any reduction,
delay or loss of orders from our significant distributors could harm our
revenues. We also do not currently have distributors in a number of significant
international markets that we have targeted and will need to establish
additional international distribution relationships. In January 2001, we
acquired our Japanese distributor, Nihon Molecular Devices. As a result, we
are providing direct sales and service support to customers in this substantial
market. There can be no assurance that we will engage qualified distributors in a timely manner, and the failure to do
so could have a materially adverse affect on our business, financial condition
and results of operations.

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

We expect that our research and development costs will increase as a result of
the acquisition of Cytion S.A. Achieving the benefits of the acquisition of
Cytion will depend in part on our ability to develop new products through
Cytion in a timely and efficient manner. Failure to develop new products in a
timely and efficient manner, or at all, may prevent us from offering
first-to-market products in the electrophysiology market segment. As a result,
we may lose customers and our business and results of operations may be harmed.
We have made an investment in, and obtained exclusive world-wide rights to
commercialize the high-throughput patch clamp system products of, Essen
Instruments, Inc. While we believe that Cytions technology complements the
high-throughput patch clamp system products of Essen Instruments, we cannot
assure you that the acquisition of Cytion will be complementary to the Essen
products. Our ability to successfully develop products through Cytion will
depend in part on the retention of key personnel, particularly technical
personnel. We cannot assure you that we will be able to retain the key
personnel or that the anticipated benefits of their expertise will be realized.
Further, successful product development may place a significant burden on our
existing management and our internal resources, which could have a materially
adverse effect on our business, financial condition and operating results.
Finally, the market price of Molecular Devices common stock could decline as a
result of the acquisition if we do not achieve the perceived benefits of the
acquisition as rapidly or to the extent anticipated by financial analysts or
investors.

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

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

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

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

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We are dependent on international sales and operations, which exposes us to
foreign currency exchange rate, political and economic risks.

We maintain facilities in Norway, the United Kingdom, Germany, Japan and
Switzerland, and sales to customers outside the U.S. accounted for
approximately 36% our revenues in 2001. We anticipate that international sales
will continue to account for a significant portion of our revenues.

All of our sales to international distributors are denominated in U.S. dollars.
All of our direct sales in the United Kingdom, Germany, France, Japan and
Canada are denominated in local currencies and totaled $28.9 million (31% of
total revenues) in 2001. To the extent that our sales and operating expenses
are denominated in foreign currencies, our operating results may be adversely
affected by changes in exchange rates. Historically, foreign exchange gains and
losses have been immaterial to our results of operations. However, we cannot
predict whether these gains and losses will continue to be immaterial,
particularly as we increase our direct sales outside North America. Owing to
the number of currencies involved, the substantial volatility of currency
exchange rates, and our constantly changing currency exposures, we cannot
predict the effect of exchange rate fluctuations on our future operating
results. We do not engage in foreign currency hedging transactions currently,
but plan to in the future.

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



| |  | political, social and economic instability;                    
|- |  | ---------------------------------------------------------------
| 
| |  | trade restrictions and changes in tariffs;                     
| 
| |  | import and export license requirements and restrictions;       
| 
| |  | difficulties in staffing and managing international operations;
| 
| |  | disruptions in international transport or delivery;            
| 
| |  | difficulties in collecting receivables; and                    
| 
| |  | potentially adverse tax consequences.                          

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

Our operating results fluctuate and any failure to meet financial expectations
may disappoint securities analysts or investors and result in a decline in our
stock price.

We typically experience a decrease in the level of sales in the first calendar
quarter as compared to the fourth quarter of the preceding year because of
budgetary and capital equipment purchasing patterns in the life sciences
industry.

Our quarterly operating results have fluctuated in the past, and we expect they
will fluctuate in the future as a result of many factors, some of which are
outside of our control. In particular, if sales levels in a particular quarter do not meet expectations, we may not be able to adjust
operating expenses sufficiently quickly to compensate for the shortfall, and
our results of operations for that quarter may be seriously harmed. We
manufacture our products based on forecasted orders rather than to outstanding
orders. Our manufacturing procedures may in certain instances create a risk of
excess or inadequate inventory levels if orders do not match forecasts. In
addition, our expense levels are based, in part, on expected future

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sales, and we generally cannot quickly adjust operating expenses. For example, research
and development and general and administrative expenses are not affected
directly by variations in revenues.

It is possible that in some future quarter or quarters, our operating results
will be below the expectations of securities analysts or investors. In this
event, the market price of our common stock may fall abruptly and
significantly. Because our revenues and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.

Our stock price is volatile, which could cause stockholders to lose a
substantial part of their investment in our stock.

The stock market in general, and the stock prices of technology companies in
particular, have recently experienced volatility which has often been unrelated
to the operating performance of any particular company or companies. Over the
last twelve months, our stock price has ranged from $15.50 to $49.99. Our
stock price could decline regardless of our actual operating performance, and
stockholders could lose a substantial part of their investment as a result of
industry or market-based fluctuations. In the past, our stock has traded
relatively thinly. If a more active public market for our stock is not
sustained, it may be difficult for stockholders to resell shares of our common
stock. Because we do not anticipate paying cash dividends on our common stock
for the foreseeable future, stockholders will not be able to receive a return
on their shares unless they sell them.

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



| |  | our failure to meet the performance estimates of securities analysts;                                                                                                                 
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | changes in financial estimates of our revenues and operating results or
buy/sell recommendations by securities analysts;                                                              
| 
| |  | the timing of announcements by us or our competitors of significant
products, contracts or acquisitions or publicity regarding actual or
potential results or performance thereof; and
| 
| |  | general stock market conditions, other economic or external factors.                                                                                                                  

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

Provisions in our certificate of incorporation and bylaws may have the effect
of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. For example, our certificate of
incorporation gives our board of directors the authority to issue shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of common stock
will be subject to, and may harmed by, the rights of the holders of any shares
of preferred stock that may be issued in the future. The issuance of preferred
stock may delay, defer or prevent a change in control, as the terms of the
preferred stock that might be issued could potentially prohibit our
consummation of any merger, reorganization, sale of substantially all of our
assets, liquidation or other extraordinary corporate transaction without the
approval of the holders of the outstanding shares of preferred stock. The issuance of preferred stock could
also have a dilutive effect on our stockholders. In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of the outstanding voting
stock, from consummating a merger or combination involving us. Further, in
October 2001, our Board of Directors

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adopted a stockholder rights plan,
commonly known as a poison pill. The provisions described above and our
poison pill could limit the price that investors might be willing to pay in the
future for our common stock.

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

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

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes in interest rates and foreign
currency exchange rates. The primary objective of our investment activities is
to preserve principal while at the same time maximizing the income we receive
from our investments without significantly increasing risk. A discussion of
our accounting policies for financial instruments and further disclosures
relating to financial institutions is included in the Summary of Significant
Accounting Policies note in the Notes to Consolidated Financial Statements
included in the Molecular Devices Annual Report on Form 10-K for the fiscal
year ended December 31, 2001.

Our interest income is sensitive to changes in the general level of interest
rates, primarily United States interest rates. In this regard, changes in
United States interest rates affect the interest earned on our cash equivalents
and short-term investments. We invest our excess cash primarily in demand
deposits with United States banks and money market accounts and short-term
securities. These securities, consisting of $2.0 million of U.S. government
agency securities and $9.9 million of commercial paper, are carried at market
value, which approximate cost, typically mature or are redeemable within 90 to
360 days and bear minimal valuation risk. We have not experienced any
significant losses on these investments.

We are exposed to changes in exchange rates primarily in the United Kingdom,
Germany, Japan and Canada, where we sell direct in local currencies. All
export sales, with the exception of sales into Canada, 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 in Canada have historically
been immaterial. Translation gains and losses related to our foreign
subsidiaries in the United Kingdom, Germany, Japan, Switzerland and Norway are
accumulated as a separate component of stockholders equity. Those gains and
losses have historically been immaterial.

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MOLECULAR DEVICES CORPORATION




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

On April 16, 2002, Caliper Technologies Corp. filed a patent infringement
lawsuit against us alleging that our IMAP and reagent assay kits infringe a
U.S. patent held by Caliper. We believe that none of our products infringes
any claim of the Caliper patent and intend to vigorously defend the lawsuit.
On May 8, 2002, we filed an answer and counter-claim to Calipers lawsuit
denying all allegations of infringement, setting forth certain affirmative
defenses and making a counter-claim for declaratory relief that, among other
things, we are not infringing and have not infringed any valid and enforceable
claim of the Caliper patent and that the Caliper patent is invalid. IMAP
products represented less than 1% of our revenues for the first quarter of 2002
and are expected to represent less than 1% of our anticipated revenues for the
full year of 2002. Accordingly, based on both our assessment of the lack of
merit to the lawsuit and the anticipated immateriality of our IMAP product
sales, we believe the patent infringement lawsuit will not be material to
Molecular Devices.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

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

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




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




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

None




ITEM 5. OTHER INFORMATION

None




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|    |  |                                                                                          
|--- |  | -----------------------------------------------------------------------------------------
|(a) |  | Exhibits                                                                                 
|   
|    |  | None                                                                                     
|   
|(b) |  | Reports on Form 8-K                                                                      
|   
|    |  | No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 2002.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |                               |                                                                                                                                             
| | ----------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------
| | MOLECULAR DEVICES CORPORATION
|
| | By:                           | /s/  Timothy A. HarknessVice President, Finance and Chief Financial Officer
(Duly Authorized and Principal Financial and
Accounting Officer)
|
| | Date:                         | May 14, 2002                                                                                                                                

26