##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from                                        to
 Commission File Number: 0-27316
 Molecular Devices Corporation
  Delaware
    
    94-2914362(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 
 
 R £
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
 o þ




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##### 



MOLECULAR DEVICES CORPORATION
 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2006
 INDEX
  
 PAGE NOPART I.
    FINANCIAL INFORMATION
    
    
    3ITEM 1.
    FINANCIAL STATEMENTS
    
    
    3CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2006 AND
DECEMBER 31, 2005
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND
SIX MONTHS ENDED JUNE 30, 2006 AND 2005
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS
ENDED JUNE 30, 2006 AND 2005
    
    
    5NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    6ITEM 2.

    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    13ITEM 3.
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    17ITEM 4.
    CONTROLS AND PROCEDURES
    
    
    18PART II.
    OTHER INFORMATION
    
    
    18ITEM 1A.
    RISK FACTORS
    
    
    18ITEM 2.
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    28ITEM 4.
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    28ITEM 6.
    EXHIBITS
    
    
    29SIGNATURE
    
    
    30EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share amounts, unaudited)
 June 30,
    
    December 31,2006
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,656
    
    
    $
    28,908Accounts receivable, net
    
    
    38,256
    
    
    
    41,197Inventories, net
    
    
    26,919
    
    
    
    23,197Deferred tax assets
    
    
    5,875
    
    
    
    5,873Prepaid and other current assets
    
    
    2,326
    
    
    
    2,353Total current assets
    
    
    91,032
    
    
    
    101,528Equipment and leasehold improvements, net
    
    
    10,394
    
    
    
    9,902Goodwill
    
    
    104,172
    
    
    
    102,835Developed technology
    
    
    26,048
    
    
    
    25,152Intangible and other assets
    
    
    22,012
    
    
    
    17,999$
    253,658
    
    
    $
    257,416LIABILITIES AND STOCKHOLDERS
EQUITYCurrent liabilities:Accounts payable
    
    $
    8,444
    
    
    $
    7,676Accrued compensation
    
    
    5,117
    
    
    
    9,759Other accrued liabilities
    
    
    10,968
    
    
    
    13,623Deferred revenue
    
    
    8,922
    
    
    
    7,806Total current liabilities
    
    
    33,451
    
    
    
    38,864Other long-term liabilities
    
    
    1,083
    
    
    
    993Deferred tax liabilities
    
    
    4,486
    
    
    
    4,486Total liabilities
    
    
    39,020
    
    
    
    44,343Commitments and contingencies (Note 9)Stockholders equity:Common stock, $.001 par value;
60,000,000 shares authorized;
20,748,730 and 20,076,495 shares
issued and 16,731,400 and 16,681,727
outstanding at June 30, 2006 and
December 31, 2005, respectively
    
    
    21
    
    
    
    20Additional paid-in capital
    
    
    289,479
    
    
    
    271,300Retained earnings
    
    
    9,401
    
    
    
    7,023Treasury stock, at cost; 4,017,330
and 3,394,768 shares at June 30, 2006
and December 31, 2005, respectively
    
    
    (86,447
    )
    
    
    (66,519
    )Accumulated other comprehensive income
    
    
    2,184
    
    
    
    1,249Total stockholders equity
    
    
    214,638
    
    
    
    213,073$
    253,658
    
    
    $
    257,416
  3




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MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts, unaudited)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2006
    
    2005
    
    2006
    
    2005Revenues
    
    $
    47,385
    
    
    $
    44,537
    
    
    $
    87,381
    
    
    $
    83,602Cost of revenues
    
    
    17,625
    
    
    
    17,600
    
    
    
    33,086
    
    
    
    32,647Gross profit
    
    
    29,760
    
    
    
    26,937
    
    
    
    54,295
    
    
    
    50,955Operating expenses:Research and development
    
    
    5,881
    
    
    
    6,309
    
    
    
    11,346
    
    
    
    12,535Write-off of acquired in-process research and development
    
    
    4,272
    
    
    
    
    
    
    
    4,272
    
    
    
    Selling, general and administrative
    
    
    17,593
    
    
    
    14,593
    
    
    
    33,839
    
    
    
    28,907Total operating expenses
    
    
    27,746
    
    
    
    20,902
    
    
    
    49,457
    
    
    
    41,442Income from operations
    
    
    2,014
    
    
    
    6,035
    
    
    
    4,838
    
    
    
    9,513Gain on sale of equity securities
    
    
    
    
    
    
    
    
    
    
    1,669
    
    
    
    Interest income
    
    
    175
    
    
    
    68
    
    
    
    418
    
    
    
    193Interest expense
    
    
    (20
    )
    
    
    (20
    )
    
    
    (39
    )
    
    
    (47
    )Other expense, net
    
    
    (63
    )
    
    
    (171
    )
    
    
    (35
    )
    
    
    (748
    )Income before income taxes
    
    
    2,106
    
    
    
    5,912
    
    
    
    6,851
    
    
    
    8,911Income tax provision
    
    
    2,564
    
    
    
    2,247
    
    
    
    4,463
    
    
    
    3,402Net income (loss)
    
    $
    (458
    )
    
    $
    3,665
    
    
    $
    2,388
    
    
    $
    5,509Basic net income (loss) per share
    
    
    (0.03
    )
    
    
    0.22
    
    
    
    0.14
    
    
    
    0.32Diluted net income (loss) per share
    
    
    (0.03
    )
    
    
    0.21
    
    
    
    0.14
    
    
    
    0.32Shares used in computing basic net income (loss) per share
    
    
    16,806
    
    
    
    16,872
    
    
    
    16,815
    
    
    
    16,989Shares used in computing diluted net income (loss) per share
    
    
    16,806
    
    
    
    17,135
    
    
    
    17,326
    
    
    
    17,261
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MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands, unaudited)
 Six Months Ended June 30,2006
    
    2005Cash flows from operating activities:Net income:
    
    $
    2,388
    
    
    $
    5,509Adjustments to reconcile net income to net cash provided by operating actives:Depreciation and amortization
    
    
    3,095
    
    
    
    3,352Amortization of intangible assets
    
    
    1,776
    
    
    
    1,409Amortization of deferred stock compensation
    
    
    
    
    
    
    113Charge for acquired in-process research and development
    
    
    4,272
    
    
    
    Equity investment exchanged for services
    
    
    
    
    
    
    262Gain on sale of equity securities
    
    
    
    
    
    
    Loss on disposal of fixed assets
    
    
    42
    
    
    
    Employee stock-based compensation
    
    
    2,577
    
    
    
    Excess tax
benefits from stock-based compensation
    
    
    (1,325
    )
    
    
    248(Increase) decrease in assets:Accounts receivable
    
    
    3,819
    
    
    
    738Inventories
    
    
    (2,787
    )
    
    
    (260
    )Deferred tax assets
    
    
    155
    
    
    
    1,198Other current assets
    
    
    72
    
    
    
    10Increase (decrease) in liabilities:Accounts payable
    
    
    752
    
    
    
    (136
    )Accrued liabilities
    
    
    (6,415
    )
    
    
    (7,032
    )Deferred revenue
    
    
    241
    
    
    
    21Net cash provided by operating activities
    
    
    8,662
    
    
    
    5,432Cash flows from investing activities:Acquisitions
    
    
    (10,197
    )
    
    
    Capital expenditures
    
    
    (2,441
    )
    
    
    (1,511
    )Purchase of intangible and other assets
    
    
    (1,158
    )
    
    
    (11,733
    )Net cash used in investing activities
    
    
    (13,796
    )
    
    
    (13,244
    )Cash flows from financing activities:Issuance of common stock
    
    
    12,558
    
    
    
    2,959Purchase of treasury stock
    
    
    (19,929
    )
    
    
    (12,262
    )Excess tax
benefits from stock-based compensation
    
    
    1,325
    
    
    
    Net cash used in financing activities
    
    
    (6,046
    )
    
    
    (9,303
    )Effect of exchange rate changes on cash
    
    
    (72
    )
    
    
    (595
    )Net decrease in cash and cash equivalents
    
    
    (11,252
    )
    
    
    (17,710
    )Cash and cash equivalents at beginning of period
    
    
    28,908
    
    
    
    30,175Cash and cash equivalents at
end of period
    
    $
    17,656
    
    
    $
    12,465
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MOLECULAR DEVICES CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 Note 1. Description of Business and Basis of Presentation
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Note 2. Business Combination
    In-process research and development
    
    $
    4,272Acquired goodwill
    
    
    1,337Acquired developed technology (amortized over five to ten years)
    
    
    2,762Acquired trade name
    
    
    1,002Acquired patents (amortized over ten years)
    
    
    1,797Net book value of acquired assets and liabilities which approximate fair value
    
    
    72Total preliminary purchase price
    
    $
    11,242
   Note 3. Stock Based Compensation
     7




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Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2006Cost of revenues
    
    $
    109
    
    
    $
    214Research and development
    
    
    265
    
    
    
    549Selling, general and administrative
    
    
    920
    
    
    
    1,814Income before income taxes
    
    
    1,294
    
    
    
    2,577Income tax benefit
    
    
    (351
    )
    
    
    (742
    )Net
stock-based compensation expense
    
    $
    943
    
    
    $
    1,835Net
stock-based compensation expense per basic share
    
    $
    0.06
    
    
    $
    0.11Net
stock-based compensation expense per diluted share
    
    $
    0.05
    
    
    $
    0.11
   Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2005Net income  as reported
    
    $
    3,665
    
    
    $
    5,509Plus: Stock based employee compensation expense included in reported net income, net of tax
    
    
    57
    
    
    
    113Less: Stock based compensation expense determined using the fair value method, net of tax
    
    
    (1,704
    )
    
    
    (3,460
    )Net income  pro forma
    
    $
    2,018
    
    
    $
    2,162Net income per share:Basic  as reported
    
    
    0.22
    
    
    
    0.32Basic  pro forma
    
    
    0.12
    
    
    
    0.13Diluted  as reported
    
    
    0.21
    
    
    
    0.32Diluted  pro forma
    
    
    0.12
    
    
    
    0.13
  8




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Three and Six Months EndedJune 30,2006
    
    
    2005Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    49
    %
    
    
    77
    %Risk-free interest rate
    
    
    4.3
    %
    
    
    4.0
    %Expected life of options
    
    
    5.2 years

    
    
    6.0 years
  SharesAvailable for
    
    
    
    
    
    Weighted AverageFuture Grant
    
    Options Outstanding
    
    Exercise PriceBalance at December 31, 2005
    
    
    1,076,718
    
    
    
    3,084,330
    
    
    $
    25.15Granted
    
    
    (336,250
    )
    
    
    336,250
    
    
    
    29.49Exercised
    
    
    
    
    
    
    (684,654
    )
    
    
    18.24Cancelled
    
    
    97,456
    
    
    
    (97,456
    )
    
    
    29.81Balance at June 30, 2006
    
    
    837,924
    
    
    
    2,638,470
    
    
    $
    27.27
  Options Outstanding
    
    Options ExercisableWeighted AverageWeighted Average
    
    
    
    
    
    
    
    
    
    RemainingRange of Exercise
    
    
    
    
    
    Remaining Contractual
    
    Weighted Average
    
    Number
    
    Contractual Life
    
    Weighted AveragePrices
    
    Number Outstanding
    
    Life (Yr.)
    
    Exercise Price
    
    Exercisable
    
    (Yr.)
    
    Exercise Price$0.00 to $12.58
    
    
    103,644
    
    
    
    4.0
    
    
    $
    7.28
    
    
    
    97,462
    
    
    
    3.8
    
    
    $
    7.23$12.59 to $25.16
    
    
    1,593,295
    
    
    
    6.5
    
    
    
    19.62
    
    
    
    1,063,896
    
    
    
    5.7
    
    
    
    19.57$25.17 to $37.74
    
    
    466,421
    
    
    
    7.5
    
    
    
    28.91
    
    
    
    147,671
    
    
    
    3.0
    
    
    
    27.67$37.75 to $50.33
    
    
    294,193
    
    
    
    3.5
    
    
    
    46.85
    
    
    
    294,193
    
    
    
    3.5
    
    
    
    46.85$50.34 to $62.91
    
    
    65,318
    
    
    
    3.1
    
    
    
    52.99
    
    
    
    65,318
    
    
    
    3.1
    
    
    
    52.99$62.92 to $75.49
    
    
    41,250
    
    
    
    4.6
    
    
    
    75.27
    
    
    
    41,250
    
    
    
    4.6
    
    
    
    75.27$75.50 to $88.08
    
    
    74,349
    
    
    
    4.3
    
    
    
    77.74
    
    
    
    74,349
    
    
    
    4.3
    
    
    
    77.742,638,470
    
    
    
    
    
    
    
    27.27
    
    
    
    1,784,139
    
    
    
    
    
    
    
    29.00
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Note 4. Balance Sheet Components (in thousands)
 June 30,
    
    December 31,2006
    
    2005Inventories, net:Raw materials
    
    $
    13,935
    
    
    $
    11,350Work-in-process
    
    
    2,448
    
    
    
    2,127Finished goods and demonstration equipment
    
    
    10,536
    
    
    
    9,720$
    26,919
    
    
    $
    23,197Other accrued liabilities:Accrued income tax
    
    $
    1,927
    
    
    $
    3,051Warranty accrual
    
    
    2,764
    
    
    
    2,663Other
    
    
    6,277
    
    
    
    7,909$
    10,968
    
    
    $
    13,623
 Note 5. Developed Technology and Intangible and Other Assets
   June 30, 2006
    
    December 31, 2005Gross Carrying
    
    Accumulated
    
    
    
    
    
    Gross Carrying
    
    AccumulatedValue
    
    Amortization
    
    Net Carrying Value
    
    Value
    
    Amortization
    
    Net Carrying ValueDeveloped technology
    
    $
    31,130
    
    
    $
    5,082
    
    
    $
    26,048
    
    
    $
    28,743
    
    
    $
    3,591
    
    
    $
    25,152License fees
    
    
    4,188
    
    
    
    948
    
    
    
    3,240
    
    
    
    2,688
    
    
    
    772
    
    
    
    1,916Patents
    
    
    3,169
    
    
    
    708
    
    
    
    2,461
    
    
    
    1,372
    
    
    
    610
    
    
    
    762Tradename
    
    
    200
    
    
    
    25
    
    
    
    175
    
    
    
    200
    
    
    
    15
    
    
    
    185Total
    
    $
    38,687
    
    
    $
    6,763
    
    
    $
    31,924
    
    
    $
    33,003
    
    
    $
    4,988
    
    
    $
    28,015
  For the Year Ended December 31,
    
    Amortization Expense2006 (remaining 6 months)
    
    $
    1,9882007
    
    
    3,9762008
    
    
    3,9762009
    
    
    3,9762010
    
    
    3,976Thereafter
    
    
    14,032$
    31,924
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Note 6. Net Income (Loss) Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Weighted average common shares
outstanding for the period
    
    
    16,806
    
    
    
    16,872
    
    
    
    16,815
    
    
    
    16,989Common equivalent shares assuming
the exercise of stock options
under the treasury stock method
    
    
    
    
    
    
    263
    
    
    
    511
    
    
    
    272Shared used in computing diluted
net income per share
    
    
    16,806
    
    
    
    17,135
    
    
    
    17,326
    
    
    
    17,261Net income (loss)
    
    $
    (458
    )
    
    $
    3,665
    
    
    $
    2,388
    
    
    $
    5,509Basic net income (loss) per share
    
    $
    (0.03
    )
    
    $
    0.22
    
    
    $
    0.14
    
    
    $
    0.32Diluted net income (loss) per share
    
    $
    (0.03
    )
    
    $
    0.21
    
    
    $
    0.14
    
    
    $
    0.32
  Note 7. Comprehensive Income
  Note 8. Restructuring
  Balance atDecember 31,
    
    
    
    
    
    Balance at2005
    
    Payments
    
    June 30, 2006Molecular Devices employee severance
    
    $
    403
    
    
    $
    (394
    )
    
    $
    9
  11




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Note 9. Commitments and Contingencies
 Guarantees
 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,
   Warranty
  Balance December 31, 2005
    
    $
    2,663New warranties issued during the period
    
    
    2,624Warranties assumed through the acquisition of Arcturus
    
    
    186Cost of warranties incurred during the period
    
    
    (2,709
    )Balance June 30, 2006
    
    $
    2,764
 Note 10. Revolving Credit Facility
  12




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Note
11. Income Taxes
  Note 12. Subsequent Event
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 Except for the historical information contained herein, the following discussion contains
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any
statements that are not statements of historical fact may be deemed to be forward-looking
statements. Words such as believes, anticipates, plans, predicts, expects, estimates,
intends, will, continue, may, potential, should and similar expressions are intended to
identify forward-looking statements. There are a number of important factors that could cause our
results to differ materially from those indicated by these forward-looking statements, including,
among others, those discussed in this section as well as under Item 1A of Part II  Risk Factors
and Item 3  Quantitative and Qualitative Disclosures About Market Risk and the risks detailed
from time to time in our future SEC reports.
      13




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Critical Accounting Policies
   Stock Based Compensation
    Results of Operations  Three and Six Months Ended June 30, 2006 and 2005
 Revenues
  14




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Gross Profit
  Research and Development Expenses
   Selling, General and Administrative Expenses
   Gain on Sale of Equity Securities
  Interest Income
  15




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Interest Expense
  Other Income (Expense), Net
  Income Tax Provision
  Liquidity and Capital Resources
      
    
    the progress of our research and development;
    
    the number and scope of our research and development programs;
 16




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
    
    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.
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Exchange
  Interest and Investment Income
  17




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Debt and Interest Expense
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 Part II. Other Information
 
 Item 1A. Risk Factors
  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.
    18




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We depend on orders that are received and shipped in the same quarter and therefore have limited
visibility of future product shipments.
  Many of our current and potential competitors have significantly greater resources than we do, and
increased competition could impair sales of our products.
    If we are not successful in developing new and enhanced products, we may lose market share to our
competitors.
  19




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We must expend a significant amount of time and resources to develop new products, and if these
products do not achieve commercial acceptance, our operating results may suffer.
  We obtain some of the consumables, components and subassemblies used with or included in our
systems from a single source or limited group of suppliers, and the partial or complete loss of
one of these suppliers could cause customer supply or production delays and a substantial loss of
revenues.
   §
    
    our suppliers may cease or interrupt production of required consumables, components or
subassemblies or otherwise fail to supply us with an adequate supply of required
consumables, components or subassemblies for a number of reasons, including contractual
disputes with our suppliers or adverse financial developments at or affecting the supplier;§
    
    we have reduced control over the pricing of third party-supplied consumables, components
and subassemblies, and our suppliers may be unable or unwilling to supply us with required
consumables, components and subassemblies on commercially acceptable terms, or at all;§
    
    we have reduced control over the timely delivery of third party-supplied consumables,
components and subassemblies; and§
    
    our suppliers may be unable to develop technologically advanced products to support our
growth and development of new systems.
  We may encounter manufacturing and assembly problems or delays, which could result in lost
revenues.
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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.
  We have significantly expanded our international operations, which exposes us to risks inherent in
international business activities.
   §
    
    political, social and economic instability;§
    
    trade restrictions and changes in tariffs;§
    
    the impact of business cycles and downturns in economies outside of the United States;§
    
    unexpected changes in regulatory requirements that may limit our ability to export our
products or sell into particular jurisdictions;§
    
    import and export license requirements and restrictions;§
    
    difficulties and costs of staffing, managing and monitoring geographically disparate operations;§
    
    difficulties in maintaining effective communications with employees and customers due to
distance, language and cultural barriers;
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§
    
    disruptions in international transport or delivery;§
    
    difficulties in protecting our intellectual property rights, particularly in countries
where the laws and practices do not protect proprietary rights to as great an extent as do
the laws and practices of the United States;§
    
    difficulties in enforcing agreements through non-U.S. legal systems;§
    
    longer payment cycles and difficulties in collecting receivables; and§
    
    potentially adverse tax consequences.
   Most of our current and potential customers are from the pharmaceutical and biotechnology
industries and are subject to risks faced by those industries.
   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.
  We may need to initiate lawsuits to protect or enforce our patents, which would be expensive and,
if we lose, may cause us to lose some of our intellectual property rights, which would reduce our
ability to compete in the market.
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§
    
    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.
  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.
   §
    
    the pending patent applications we have filed or to which we have exclusive rights may
not result in issued patents or may take longer than we expect to result in issued patents;§
    
    the claims of any patents which are issued may not provide meaningful protection;§
    
    we may not be able to develop additional proprietary technologies that are patentable;§
    
    the patents licensed or issued to us or our customers may not provide a competitive advantage;§
    
    other companies may challenge patents licensed or issued to us or our customers;§
    
    patents issued to other companies may harm our ability to do business;§
    
    other companies may independently develop similar or alternative technologies or duplicate our technologies; and§
    
    other companies may design around the technologies we have licensed or developed.
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We may have difficulty managing our growth.
  We rely upon distributors for product sales and support outside of North America.
  If we choose to acquire new and complementary businesses, products or technologies instead of
developing them ourselves, we may be unable to complete these acquisitions or may not be able to
successfully integrate an acquired business or technology in a cost-effective and non-disruptive
manner.
  §
    
    the potential disruption of our ongoing business and distraction of our management;§
    
    the potential strain on our financial and managerial controls and reporting systems and procedures;§
    
    unanticipated expenses and potential delays related to integration of the operations,
technology and other resources of acquired businesses;§
    
    the impairment of relationships with employees, suppliers and customers as a result of
any integration of new management personnel;§
    
    greater than anticipated costs and expenses related to restructuring, including employee
severance or relocation costs and costs related to vacating leased facilities; and§
    
    potential unknown liabilities associated with any acquisition, including higher than
expected integration costs, which may cause our quarterly and annual operating results to
fluctuate.
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We depend on our key personnel, the loss of whom would impair our ability to compete.
  Changes to financial accounting standards may affect our results of operations and cause us to
change our business practices.
  Changes in our effective income tax rate could reduce our earnings.
 Share-Based
Payment
 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.
  §
    
    customer confidence in the economy, evidenced, in part, by stock market levels;§
    
    changes in the domestic and international economic, business and political conditions;§
    
    economic conditions within the pharmaceutical and biotechnology industries;§
    
    levels of product and price competition;
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§
    
    the length of our sales cycle and customer buying patterns;§
    
    the size and timing of individual transactions;§
    
    the timing of new product introductions and product enhancements;§
    
    the mix of products sold;§
    
    levels of international transactions;§
    
    activities of and acquisitions by competitors;§
    
    the timing of new hires and the allocation of our resources;§
    
    changes in foreign currency exchange rates;§
    
    our ability to develop and market new products and control costs; and§
    
    changes in U.S. generally accepted accounting principles.
    Failure to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our stock price.
  Our stock price is volatile, which could cause stockholders to lose a substantial part of their
investment in our stock.
  26




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##### Table of Contents



§
    
    domestic and international economic, business and political conditions;§
    
    economic conditions within the pharmaceutical and biotechnology industries;§
    
    our failure to meet our performance estimates or the performance estimates of securities analysts;§
    
    changes in financial estimates of our revenues and operating results by us or securities analysts;§
    
    changes in buy/sell recommendations by securities analysts; and§
    
    the timing of announcements by us or our competitors of significant products, contracts
or acquisitions or publicity regarding actual or potential results or performance thereof.
 Provisions of our charter documents and Delaware law may inhibit a takeover, which could limit the
price investors might be willing to pay in the future for our common stock.
  Our actual results could differ materially from those anticipated in our forward-looking
statements.
  27




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total number
    
    Maximumof shares
    
    number ofpurchased as
    
    shares thatpart of
    
    may yet beTotal number
    
    
    
    
    
    publicly
    
    purchasedof shares
    
    Average price
    
    announced
    
    under thePeriod
    
    purchased
    
    paid per share
    
    programs
    
    programsApril 1, 2006 through April 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 1, 2006 through May 31, 2006
    
    
    300,000
    
    
    $
    32.69
    
    
    
    300,000
    
    
    
    487,116June 1, 2006 through June 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    300,000
    
    
    $
    32.69
    
    
    
    300,000
    
    
    
    487,116
  
 Item 4. Submission of Matters to a Vote of Security Holders
   For
    
    Authority WithheldJoseph D. Keegan, Ph.D.
    
    
    15,282,523
    
    
    
    351,097Moshe H. Alafi
    
    
    15,276,453
    
    
    
    357,167David L. Anderson
    
    
    15,063,949
    
    
    
    569,671A. Blaine Bowman
    
    
    15,279,330
    
    
    
    354,290Alan Finkel, Ph.D.
    
    
    15,280,113
    
    
    
    353,507Andre F. Marion
    
    
    8,996,828
    
    
    
    6,636,792Harden M. McConnell, Ph.D.
    
    
    15,281,410
    
    
    
    352,210J. Allan Waitz, Ph.D.
    
    
    15,277,022
    
    
    
    356,598
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes15,403,823
    
    219,145
    
    4,832
    
    5,820
 28




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description of Exhibit3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(1)
    
    Specimen Certificate of Common Stock of the Registrant.10.58(3)
    
    Non-Employee Director Cash Compensation Arrangements, effective as of May 11, 2006.31.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1*
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C 1350).
 
 (1)
    
    Incorporated by reference to the similarly described exhibit in our Registration Statement on
Form S-1 (File No. 33-98926), as amended.(2)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form
10-K for the year ended December 31, 2001 and filed on April 1, 2002.(3)
    
    Incorporated by reference to the information in our Current Report on Form 8-K filed on May
17, 2006.*
    
    The certification attached as Exhibit 32.1 accompanies the Quarterly Report on Form 10-Q
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by
the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 29




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SIGNATURE
  Molecular Devices CorporationDate: August 7, 2006
    
    By:
    
    /s/ TIMOTHY A. HARKNESSTimothy A. HarknessChief Financial Officer and Senior VicePresident Finance and Operations(Duly Authorized and Principal Financial
and Accounting Officer)
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Exhibit Index
 ExhibitNumber
    
    Description of Exhibit3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(1)
    
    Specimen Certificate of Common Stock of the Registrant.10.58(3)
    
    Non-Employee Director Cash Compensation Arrangements, effective as of May 11, 2006.31.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1*
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C 1350).
 
 (1)
    
    Incorporated by reference to the similarly described exhibit in our Registration Statement on
Form S-1 (File No. 33-98926), as amended.(2)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form
10-K for the year ended December 31, 2001 and filed on April 1, 2002.(3)
    
    Incorporated by reference to the information in our Current Report on Form 8-K filed on May
17, 2006.*
    
    The certification attached as Exhibit 32.1 accompanies the Quarterly Report on Form 10-Q
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by
the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.