##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2004 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  Delaware
(State or other jurisdiction of incorporation or
 organization)
    
    94-2914362
(I.R.S. Employer Identification No.)
 1311 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices, including zip code) (408) 747-1700
(Registrants telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ] As
of May 5, 2004, 14,251,908 shares of the Registrants Common Stock, $.001
par value, were outstanding.




---



MOLECULAR DEVICES CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004  
 INDEX PAGE
NUMBERPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2004 and December 31, 2003
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended March 31, 2004 and 2003
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2004 and 2003
    
    
    5NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    6ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    11ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    25ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    26PART II.
    
    OTHER INFORMATIONITEM 2.
    
    CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    27ITEM 5.
    
    OTHER INFORMATION
    
    
    27ITEM 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K
    
    
    27SIGNATURE
    
    
    
    
    28EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




---



##### Table of Contents



PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS
 MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share amounts, unaudited)
 March 31,
    
    December 31,2004
    
    2003ASSETS:Current assets:Cash and cash equivalents
    
    $
    50,418
    
    
    $
    50,260Short-term investments
    
    
    
    
    
    
    8,114Accounts receivable, net
    
    
    21,473
    
    
    
    26,209Inventories, net
    
    
    17,339
    
    
    
    17,025Deferred tax assets
    
    
    5,220
    
    
    
    5,223Other current assets
    
    
    2,119
    
    
    
    1,849Total current assets
    
    
    96,569
    
    
    
    108,680Long-term investments
    
    
    
    
    
    
    1,736Equipment and leasehold improvements, net
    
    
    9,426
    
    
    
    9,706Goodwill
    
    
    26,017
    
    
    
    26,017Other assets
    
    
    20,864
    
    
    
    20,774Total assets
    
    $
    152,876
    
    
    $
    166,913LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,175
    
    
    $
    4,019Accrued liabilities
    
    
    7,372
    
    
    
    12,237Deferred revenue
    
    
    5,495
    
    
    
    5,119Total current liabilities
    
    
    17,042
    
    
    
    21,375Stockholders equity:Preferred stock, $.001 par value; 3,000,000 shares
authorized, no shares issued or outstanding at
March 31, 2004 and December 31, 2003
    
    
    
    
    
    
    Common stock, $.001 par value; 60,000,000 shares
authorized; 15,720,542 and 15,653,283 shares
issued and 14,216,096 and 14,778,837 shares
outstanding at March 31, 2004 and December 31,
2003, respectively
    
    
    16
    
    
    
    16Additional paid-in capital
    
    
    185,725
    
    
    
    184,956Treasury stock, at cost; 1,504,446 and 874,446 shares
at March 31, 2004 and December 31, 2003, respectively
    
    
    (26,994
    )
    
    
    (14,968
    )Accumulated deficit
    
    
    (24,678
    )
    
    
    (26,106
    )Accumulated other comprehensive loss
    
    
    1,765
    
    
    
    1,640Total stockholders equity
    
    
    135,834
    
    
    
    145,538Total liabilities and stockholders equity
    
    $
    152,876
    
    
    $
    166,913
 The accompanying notes are an integral part of these statements 3




---



##### Table of Contents



MOLECULAR DEVICES CORPORATION 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share amounts, unaudited)
 Three Months EndedMarch 31,2004
    
    2003REVENUES
    
    $
    27,337
    
    
    $
    24,550COST OF REVENUES
    
    
    10,242
    
    
    
    9,528GROSS PROFIT
    
    
    17,095
    
    
    
    15,022OPERATING EXPENSES:Research and development
    
    
    4,017
    
    
    
    4,659Selling, general and administrative
    
    
    10,920
    
    
    
    9,639Total operating expenses
    
    
    14,937
    
    
    
    14,298INCOME FROM OPERATIONS
    
    
    2,158
    
    
    
    724Other income, net
    
    
    36
    
    
    
    306INCOME BEFORE INCOME TAXES
    
    
    2,194
    
    
    
    1,030Income tax provision
    
    
    (764
    )
    
    
    (309
    )NET INCOME
    
    $
    1,430
    
    
    $
    721BASIC NET INCOME PER SHARE
    
    $
    0.10
    
    
    $
    0.05DILUTED NET INCOME PER SHARE
    
    $
    0.10
    
    
    $
    0.05SHARES USED IN COMPUTING BASIC NET INCOME PER SHARE
    
    
    14,588
    
    
    
    15,343SHARES USED IN COMPUTING DILUTED NET INCOME PER
SHARE
    
    
    14,791
    
    
    
    15,402
 The accompanying notes are an integral part of these statements 4




---



##### Table of Contents



MOLECULAR DEVICES CORPORATION 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands, unaudited)
 Three Months EndedMarch 31,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,430
    
    
    $
    721Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    1,311
    
    
    
    1,274Amortization of developed technology and patents
    
    
    136
    
    
    
    95Income tax benefit realized as a result of employee
exercises of stock options
    
    
    
    
    
    
    1,886(Increase) decrease in assets:Accounts receivable, net
    
    
    4,909
    
    
    
    3,379Inventories
    
    
    (612
    )
    
    
    102Deferred tax assets
    
    
    
    
    
    
    272Other current assets
    
    
    (266
    )
    
    
    (383
    )Increase (decrease) in liabilities:Accounts payable
    
    
    161
    
    
    
    (438
    )Accrued liabilities
    
    
    (4,893
    )
    
    
    (5,879
    )Deferred revenue
    
    
    360
    
    
    
    311Net cash provided by operating activities
    
    
    2,536
    
    
    
    1,340CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of short-term investments
    
    
    
    
    
    
    (3,365
    )Proceeds from sales and maturities of short-term investments
    
    
    9,850
    
    
    
    4,197Capital expenditures
    
    
    (684
    )
    
    
    (737
    )Increase (decrease) in other assets
    
    
    (210
    )
    
    
    393Net cash provided by investing activities
    
    
    8,956
    
    
    
    488CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of common stock, net
    
    
    769
    
    
    
    605Purchase of treasury stock
    
    
    (12,026
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (11,257
    )
    
    
    605EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (77
    )
    
    
    (76
    )Net increase in cash and cash equivalents
    
    
    158
    
    
    
    2,357Cash and cash equivalents at beginning of period
    
    
    50,260
    
    
    
    43,733Cash and cash equivalents at end of period
    
    $
    50,418
    
    
    $
    46,090
 The accompanying notes are
an integral part of these statements. 5




---



##### Table of Contents



MOLECULAR DEVICES CORPORATION 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 Note 1. Description of Business and Basis of Presentation Molecular Devices Corporation (Molecular Devices, we, or our), a Delaware
corporation, is principally involved in the design, development, manufacture,
sale and service of bioanalytical measurement systems for life sciences and
drug discovery applications. The principal markets for our products include
leading pharmaceutical and biotechnology companies as well as medical centers,
universities, government research laboratories and other institutions
throughout the world. We operate in a single industry segment: the design, development, sale and
service of bioanalytical measurement systems for drug discovery and life
sciences research applications. The unaudited condensed consolidated financial statements included herein have
been prepared in accordance with the published rules and regulations of the
Securities and Exchange Commission (SEC) applicable to interim financial
information. Certain information and footnote disclosures included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in these interim statements as allowed by such SEC
rules and regulations. However, we believe that the disclosures are adequate to
make the information presented not misleading. The unaudited condensed
consolidated financial statements included in this Form 10-Q should be read in
conjunction with the audited consolidated financial statements and notes
thereto for the fiscal year ended December 31, 2003, included in our Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31, 2003, filed with the
SEC on April 29, 2004. The unaudited condensed consolidated financial statements include the accounts
of Molecular Devices and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. The unaudited condensed
consolidated financial statements contained herein reflect all adjustments
(which include only normal, recurring adjustments), which are, in the opinion
of management, necessary to state fairly the results for the periods presented.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. The results for the three-month period ended March 31, 2004 are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2004. Note 2. Stock Based Compensation As permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123),
Accounting for Stock-Based Compensation, as amended, we apply the intrinsic
value method of accounting as described in APB Opinion 25 and related
interpretations in accounting for our stock option plans and, accordingly,
recognize no compensation expense for stock option grants with an exercise
price equal to the fair market value of the shares at the date of grant. If we
had elected to recognize compensation cost based on the fair value of the
options granted at grant date and shares issued under stock purchase plans as
prescribed by SFAS 123, net income and net income per share would have been
changed to the pro forma amounts indicated in the table below (in thousands,
except per share amounts): 6




---



##### Table of Contents



Three Months EndedMarch 31,2004
    
    2003Net income - as reported
    
    $
    1,430
    
    
    $
    721Stock based compensation expense determined
using the fair value method, net of tax
    
    
    1,728
    
    
    
    2,131Net income/(loss) - pro forma
    
    $
    (298
    )
    
    $
    (1,410
    )Net income/(loss) per share:Basic - as reported
    
    $
    0.10
    
    
    $
    0.05Basic - pro forma
    
    
    (0.02
    )
    
    
    (0.08
    )Diluted - as reported
    
    $
    0.10
    
    
    $
    0.05Diluted - pro forma
    
    
    (0.02
    )
    
    
    (0.09
    )
 The fair value of each option is estimated on the date of grant using Black
Scholes option-pricing model with the following assumptions: Three Months EndedMarch 31,2004
    
    2003Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    78
    %
    
    
    82
    %Risk-free interest rate
    
    
    3
    %
    
    
    3
    %Expected life of options
    
    6.7 years
    
    6.2 years
 Note 3. Balance Sheet Components March 31,
    
    December 31,2004
    
    2003Inventories:Raw materials
    
    $
    6,565
    
    
    $
    6,213Work-in-process
    
    
    1,107
    
    
    
    600Finished goods and demonstration equipment
    
    
    9,667
    
    
    
    10,212$
    17,339
    
    
    $
    17,025Accrued liabilities:Accrued income tax
    
    $
    244
    
    
    $
    939Warranty accrual
    
    
    1,476
    
    
    
    1,502Accrued compensation
    
    
    2,848
    
    
    
    6,295Other
    
    
    2,804
    
    
    
    3,501$
    7,372
    
    
    $
    12,237
 Note 4. Goodwill and Purchased Intangible Assets Goodwill was $26.0 million at March 31, 2004 and December 31, 2003. Purchased
intangible assets not subject to amortization, consisting primarily of a
tradename, were $707,000 at March 31, 2004 and December 31, 2003. 7




---



##### Table of Contents



Purchased intangible assets subject to amortization over ten years consist of
patents, developed technology, and license fees. The gross and net carrying
value of these assets at March 31, 2004 and December 31, 2003 were as follows
(in thousands): Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    CarryingValue
    
    Amortization
    
    ValuePatents
    
    $
    1,372
    
    
    $
    369
    
    
    $
    1,003Developed technology
    
    
    1,468
    
    
    
    257
    
    
    
    1,211License fees
    
    
    2,688
    
    
    
    318
    
    
    
    2,370Total at March 31, 2004
    
    $
    5,528
    
    
    $
    944
    
    
    $
    4,584Patents
    
    $
    1,372
    
    
    $
    335
    
    
    $
    1,037Developed technology
    
    
    1,468
    
    
    
    220
    
    
    
    1,248License fees
    
    
    2,588
    
    
    
    253
    
    
    
    2,335Total at December 31, 2003
    
    $
    5,428
    
    
    $
    808
    
    
    $
    4,620
 The estimated future amortization expense of purchased intangible assets as of
March 31, 2004 was as follows (in thousands): AmortizationFor the year ending December 31,
    
    Expense2004 (remaining nine months)
    
    $
    4162005
    
    
    5522006
    
    
    5522007
    
    
    5522008
    
    
    552Thereafter
    
    
    1,960$
    4,584
 8




---



##### Table of Contents



Note 5. Net Income Per Share Basic net income per share is computed using the weighted average number of
shares of common stock outstanding and diluted net income per share is computed
using the weighted average number of shares of common stock outstanding and
dilutive common equivalent shares from outstanding stock options (using the
treasury stock method), when dilutive. Computation of earnings per share is as
follows (in thousands, except per share amounts): Three Months EndedMarch 31,2004
    
    2003Net income
    
    $
    1,430
    
    
    $
    721Denominator for basic earnings per share  weighted average common
shares outstanding
    
    
    14,588
    
    
    
    15,343Effect of dilutive securities  employee stock options
    
    
    203
    
    
    
    59Denominator for diluted earnings per share  weighted average common
shares outstanding plus dilutive securities
    
    
    14,791
    
    
    
    15,402Basic net income per share
    
    $
    0.10
    
    
    $
    0.05Diluted net income per share
    
    $
    0.10
    
    
    $
    0.05
 For the three months ended March 31, 2004, the total number of shares excluded
from the calculations of diluted net income per share was 1,981,212, as the
weighted-average exercise price of these outstanding stock options was greater
than the average market price of the common shares and, therefore, the effect
would have been anti-dilutive. Note 6. Comprehensive Income Comprehensive income, net of tax, was approximately $1.6 million and $690,000
for the three-month periods ended March 31, 2004 and 2003, respectively. The
differences between reported net income and comprehensive income are
principally comprised of changes in accumulated foreign currency translation,
which is recorded in stockholders equity. Note 7. Guarantees Under our charter, we have agreed to indemnify any person who is made a party
to any action or threatened with any action as a result of such persons
serving or having served as an officer or director of Molecular Devices or
having served, at our request, as an officer or director of another company.
The indemnification does not apply if the person is determined not to have
acted in good faith in the reasonable belief that his or her actions were in
the best interests of Molecular Devices. The maximum potential amount of
future payments that we could be required to make under the charter provision
and the corresponding indemnification agreements is unlimited; however, we have
Director and Officer insurance policies that, in most cases, would limit our
exposure and enable us to recover a portion of any future amounts paid. The
estimated fair value of these indemnification provisions is minimal. Most of
these indemnification provisions were grandfathered under the provisions of FIN
45 as they were in effect prior to December 31, 2003. Accordingly, we have no
liabilities recorded for these provisions as of March 31, 2004. 9




---



##### Table of Contents



We enter into indemnification provisions under our agreements with other
companies in the ordinary course of business, typically with business partners,
contractors, clinical sites and customers. Under these
provisions we generally indemnify and hold harmless the indemnified party for
losses suffered or incurred by the indemnified party as a result of our
activities. These indemnification provisions generally survive termination of
the underlying agreement. The maximum potential amount of future payments we
could be required to make under these indemnification provisions is unlimited.
We have not incurred material costs to defend lawsuits or settle claims related
to these indemnification agreements. As a result, the estimated fair value of
these agreements is minimal. Accordingly, we have no liabilities recorded for
these agreements as of March 31, 2004. At the time of sale, we record an estimate for warranty costs that may be
incurred under product warranties. Warranty expense and activity are estimated
based on historical experience. The warranty accrual is evaluated periodically
and adjusted for changes in experience. Changes in the warranty liability
during the three months ended March 31, 2004 were as follows (in thousands): Balance December 31, 2003
    
    $
    1,502New warranties issued during the period
    
    
    79Cost of warranties incurred during the period
    
    
    (105
    )Changes in liabilities for pre existing warranties
    
    
    Balance March 31, 2004
    
    $
    1,476
 Note 8. Pending Business Combination We entered into an Agreement and Plan of Merger and Reorganization, dated as of
March 20, 2004, among Molecular Devices, Astros Acquisition Sub I, Inc., a
wholly-owned subsidiary of Molecular Devices, Astros Acquisition Sub II, LLC, a
wholly-owned subsidiary of Molecular Devices, and Axon Instruments, Inc.
(Axon), under which Astros Acquisition Sub I, Inc. will be merged with and
into Axon, immediately following which, Axon will be merged with and into
Astros Acquisition Sub II, LLC (the Merger Agreement). The Merger Agreement
contemplates that, subject to the satisfaction of certain conditions contained
therein, including approval of the transaction by the stockholders of Molecular
Devices and the shareholders of Axon, we would acquire Axon for approximately
$66.2 million in cash and approximately $67.0 million in Molecular Devices
common stock, with each share of Axon common stock being converted into the
right to receive $0.1359 in cash and 0.00734 of a share of Molecular Devices
common stock, and outstanding options to purchase Axon common stock being
assumed or canceled and converted into the right to receive either cash and
Molecular Devices common stock or Molecular Devices common stock. If
consummated, the merger transaction will be accounted for under the purchase
method of accounting. In March 2004, as part of the proposed merger transaction, we received a
commitment letter from a major financial institution to provide financing of
$35.0 million in connection with the proposed transaction and for general
corporate purposes. Simultaneously with the closing of the transactions
contemplated by the Merger Agreement, we will enter into a new senior unsecured
credit facility, which will provide for a revolving credit facility in the
amount of up to $35.0 million. The revolving credit facility will be
guaranteed by our domestic subsidiaries. 10




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OVERVIEW Except for the historical information contained herein, the following
discussion contains forward-looking statements. For this purpose, any
statements that are not statements of historical fact may be deemed to be
forward-looking statements. Words such as believes, anticipates, plans,
predicts, expects, estimates, intends, will, continue, may,
potential, should and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause our results to differ materially from those indicated by these
forward-looking statements, including, among others, those discussed in this
section as well as under Factors That May Affect Future Results, and Item 3
 Quantitative and Qualitative Disclosures about Market Risk and the risks
detailed from time to time in the Companys future SEC reports. We are a leading supplier of high-performance bioanalytical measurement systems
which accelerate and improve drug discovery and other life sciences research.
Our systems and consumables enable pharmaceutical and biotechnology companies
to leverage advances in genomics, proteomics and combinatorial chemistry by
facilitating the high-throughput and cost-effective identification and
evaluation of drug candidates. Our solutions are based on advanced core
technologies that integrate our expertise in engineering, molecular and cell
biology, and chemistry. We enable our customers to improve research
productivity and effectiveness, which ultimately accelerates the complex
process of discovering and developing new drugs. Our customers include small and large pharmaceutical, biotechnology and
industrial companies as well as medical centers, universities, government
research laboratories and other institutions throughout the world. The success
of our business is impacted by research and development spending trends of
these customers, which has been unpredictable over the last three years and
remains unpredictable in the near term. We focus on generating revenue growth
through the development of innovative products for these customers. In each of
the last three years, our internal research and development efforts have
enabled us to exceed our goal of generating over 50% of annual revenues from
products that are introduced in the last three years. We divide our revenues into two product families based primarily on the
customers to which they are sold into. The Drug Discovery product family
includes systems that integrate detection, liquid handling and automation, have
price points in excess of $100,000, and are primarily sold to large
pharmaceutical and biotechnology companies. Product lines included in the Drug
Discovery family are IonWorks, FLIPR, Analyst and Discovery-1 systems. The Life
Sciences product family, which includes bench-top detection and liquid handling
products, consists of Maxline, MetaMorph, Skatron and Threshold product lines.
These single-purpose instruments generally cost less than $50,000 and are sold
throughout our entire customer base. We recognize revenue on the sale of these
products, when collectibility is reasonably assured, at the time of shipment
and transfer of title to customers and distributors. There are no significant
customer acceptance requirements or post shipment obligations on our part. CRITICAL ACCOUNTING ESTIMATES Managements discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information. The preparation of these
financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those related to revenue
recognition, bad debts, inventories, intangible assets, equity investments,
income taxes and warranty obligations. Management bases its estimates on
historical experience and on various assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. 11




---



##### Table of Contents



RESULTS OF OPERATIONS  THREE MONTHS ENDED MARCH 31, 2004 and 2003 REVENUES. Revenues increased by 11% to $27.3 million in the first three months
of 2004 from $24.6 million in first three months of 2003. Drug Discovery
product family revenues in the first quarter of 2004 were flat compared to the
first quarter of 2003. Strong growth in our IonWorks product line and reagents
was offset by decreases in sales in our Analyst product line. Life Sciences
Research revenues increased by 19% largely due to strong sales of our
SpectraMax M2, which was launched in the third quarter of 2003, and strong
growth in our MetaMorph product line. GROSS MARGIN. Gross margin increased to 62.5% in the first quarter of 2004 from
61.2% in the same period of the prior year. This improvement was driven by
strong sales of our higher margin IonWorks and MetaMorph product lines. RESEARCH AND DEVELOPMENT. Research and development expenses decreased in the
first quarter of 2004 by 14% to $4.0 million from $4.7 million in the first
quarter of 2003. This decrease resulted from the settlement of a patent
infringement lawsuit late in 2003 and the closure of Cytion, our Switzerland
based research organization, in the first quarter of 2003. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses in the first quarter of 2004 increased by 13% to $10.9 million from
$9.6 million in the first quarter of 2003. This increase was due to the
expansion of our sales and support staff associated with our IonWorks product
lines. OTHER INCOME (NET). Other income (net) was $36,000 in the first quarter of
2004, compared to $306,000 in the first quarter of 2003. This decrease was
largely due to foreign currency losses in our European businesses, and lower
average cash and investment balances during the first quarter of 2004. INCOME TAX PROVISION. We recorded a tax provision of $764,000 for the first
quarter of 2004 compared to $309,000 in the first quarter of 2003. The tax
provision for the first quarter of 2004 was based on an 35% effective tax rate,
up from 30% in the first quarter of 2003. This increase was due to the full
utilization in 2003 of the net loss carryforward amounts relating to certain of
our foreign operations Liquidity and Capital Resources We had cash, cash equivalents and short and long-term investments of
approximately $50.4 million at March 31, 2004 compared to $60.1 million at
December 31, 2003. Operating activities in the first three months of 2004
provided approximately $2.5 million of cash primarily due to net income and
decreases in accounts receivable, partially offset by a decrease in accrued
liabilities. We generated approximately $9.0 million of cash from investing activities in
the first three months of 2004, primarily due to $9.9 million in proceeds
received from the sale and maturity of short-term investments, which were
partially offset by $684,000 in capital expenditures. In the first three months of 2004, cash used in financing activities was $11.3
million. We repurchased 630,000 shares of our common stock for $12.0 million
and raised $769,000 from the issuance of common stock associated with stock
option exercises and shares issued under our employee stock purchase plan. The
timing of and amounts received under our employee stock option and purchase
plans are determined by the decisions of the respective option or rights
holders, and are not controlled by us. Therefore, funds raised from the
issuance of common stock under our employee stock option and purchase plans
should not be considered an indication of additional funds to be raised in
future periods. On March 20, 2004, we entered into a merger agreement with Axon Instruments,
Inc. and two wholly-owned subsidiaries pursuant to which, subject to certain
closing conditions, an aggregate of approximately $66.2 million in cash would
be paid to the shareholders and optionholders of Axon and approximately $67.0
million in Molecular Devices common stock would be issued to Axon shareholders
and 12




---



##### Table of Contents



optionholders. As part of the proposed merger transaction, we received a
commitment letter from a major financial institution to provide financing of
$35.0 million in connection with the transactions contemplated by the merger
agreement and for general corporate purposes. Simultaneously with the closing
of the transactions contemplated by the merger agreement, we will enter into a
new senior unsecured credit facility, which will provide for a revolving credit
facility in the amount of up to $35.0 million (reducing to $30.0 million 60
days after initial drawdown). The revolving credit facility will expire and
become repayable in full on June 1, 2007 and will be secured in the event that
the revolving credit facility is not reduced to the required $30 million level.
All loans outstanding under the new senior unsecured credit facility will bear
interest at a rate per annum equal to, at our option, either the base rate plus
..50% or LIBOR plus 1.25%. The revolving credit facility may be drawn, paid and
reborrowed at our option. We anticipate using this credit facility initially
to finance the cash portion of the merger consideration to be paid to Axon
shareholders and optionholders. During the three months ended March 31, 2004, we engaged several professional
service firms to perform certain accounting, legal and financial advisory
services in conjunction with the proposed acquisition of Axon. We expect to pay
the bulk of these fees during our second quarter of 2004 with our existing cash
reserves and anticipated future cash generated from operations. The fees will
be capitalized as part of the purchase accounting for the acquisition. We believe that our existing cash and investment securities and anticipated
cash flow from our operations, and, if the acquisition of Axon is completed,
funds available under the unsecured credit facility described above, will be
sufficient to support our current operating plan for the foreseeable future. Our forecast of the period of time through which our financial resources will
be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of
a number of factors. We have based this estimate on our current plans which may
change and assumptions that may prove to be wrong. 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, including risks related to
potential difficulties in the integration of operations, strategies,
technologies and products of the acquired company. 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 13




---



##### Table of Contents



maturities to match projected cash needs and limit concentration of credit risk
by diversifying our investments among a variety of high credit-quality issuers. Factors That May Affect Future Results Our business faces significant risks and the risks described below may not be
the only risks we face. Additional risks that we do not know of or that we
currently think are immaterial may also impair our business operations. If any
of the events or circumstances described in the following risks actually
occurs, our business, financial condition or results of operations could be
harmed and the trading price of our common stock could decline. VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR US TO SELL OUR PRODUCTS AND
COLLECT ACCOUNTS RECEIVABLE AND THE TIMING OF CUSTOMER ORDERS MAY CAUSE
FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH COULD CAUSE OUR STOCK PRICE TO
DECLINE. The timing of capital equipment purchases by customers has been and is expected
to continue to be uneven and difficult to predict. Our products represent major
capital purchases for our customers. The list prices for our instruments range
from $5,000 to $419,500. Accordingly, our customers generally take a relatively
long time to evaluate our products, and a significant portion of our revenues
is typically derived from sales of a small number of relatively high-priced
products. Purchases are generally made by purchase orders and not long-term
contracts. Delays in receipt of anticipated orders for our relatively high
priced products could lead to substantial variability from quarter to quarter.
Furthermore, we have historically received purchase orders and made a
significant portion of each quarters product shipments near the end of the
quarter. If that pattern continues, even short delays in the receipt of orders
or shipment of products at the end of a quarter could have a material adverse
affect on results of operations for that quarter. We expend significant resources educating and providing information to our
prospective customers regarding the uses and benefits of our products. Because
of the number of factors influencing the sales process, the period between our
initial contact with a customer and the time when we recognize revenues from
that customer, if ever, varies widely. Our sales cycles typically range from
three to six months, but can be much longer. During these cycles, we commit
substantial resources to our sales efforts in advance of receiving any
revenues, and we may never receive any revenues from a customer despite our
sales efforts. The relatively high purchase price for a customer order contributes to
collection delays that result in working capital volatility. While the terms of
our sales orders generally require payment within 30 days of product shipment
and do not provide return rights, in the past we have experienced significant
collection delays. We cannot predict whether we will continue to experience
similar or more severe delays. The capital spending policies of our customers have a significant effect on the
demand for our products. Those policies are based on a wide variety of factors,
including resources available to make purchases, spending priorities, and
policies regarding capital expenditures during industry downturns or
recessionary periods. Any decrease in capital spending by our customers
resulting from any of these factors could harm our business. WE DEPEND ON ORDERS THAT ARE RECEIVED AND SHIPPED IN THE SAME QUARTER AND
THEREFORE HAVE LIMITED VISIBILITY OF FUTURE PRODUCT SHIPMENTS. Our net sales in any given quarter depend upon a combination of orders received
in that quarter for shipment in that quarter and shipments from backlog. Our
products are typically shipped within ninety days of purchase order receipt. As
a result, we do not believe that the amount of backlog at any particular date
is indicative of our future level of sales. Our backlog at the beginning of
each quarter does not include all product sales needed to achieve expected
revenues for that quarter. Consequently, we are dependent on obtaining orders
for products to be shipped in the same quarter that the order is received.
Moreover, 14




---



##### Table of Contents



customers may reschedule shipments, and production difficulties could delay
shipments. Accordingly, we have limited visibility of future product shipments,
and our results of operations are subject to significant variability from
quarter to quarter. MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER
RESOURCES THAN WE DO, AND INCREASED COMPETITION COULD IMPAIR SALES OF OUR
PRODUCTS. We operate in a highly competitive industry and face competition from companies
that design, manufacture and market instruments for use in the life sciences
research industry, from genomic, pharmaceutical, biotechnology and diagnostic
companies and from academic and research institutions and government or other
publicly-funded agencies, both in the United States and abroad. We may not be
able to compete effectively with all of these competitors. Many of these
companies and institutions have greater financial, engineering, manufacturing,
marketing and customer support resources than we do. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
or market developments by devoting greater resources to the development,
promotion and sale of products, which could impair sales of our products.
Moreover, there has been significant merger and acquisition activity among our
competitors and potential competitors. These transactions by our competitors
and potential competitors may provide them with a competitive advantage over us
by enabling them to rapidly expand their product offerings and service
capabilities to meet a broader range of customer needs. Many of our customers
and potential customers are large companies that require global support and
service, which may be easier for our larger competitors to provide. We believe that competition within the markets we serve is primarily driven by
the need for innovative products that address the needs of customers. We
attempt to counter competition by seeking to develop new products and provide
quality products and services that meet customers needs. We cannot assure you,
however, that we will be able to successfully develop new products or that our
existing or new products and services will adequately meet our customers
needs. Rapidly changing technology, evolving industry standards, changes in customer
needs, emerging competition and frequent new product and service introductions
characterize the markets for our products. To remain competitive, we will be
required to develop new products and periodically enhance our existing products
in a timely manner. We are facing increased competition as new companies
entering the market with new technologies compete, or will compete, with our
products and future products. We cannot assure you that one or more of our
competitors will not succeed in developing or marketing technologies or
products that are more effective or commercially attractive than our products
or future products, or that would render our technologies and products obsolete
or uneconomical. Our future success will depend in large part on our ability to
maintain a competitive position with respect to our current and future
technologies, which we may not be able to do. In addition, delays in the launch
of our new products may result in loss of market share due to our customers
purchases of competitors products during any delay. IF WE ARE NOT SUCCESSFUL IN DEVELOPING NEW AND ENHANCED PRODUCTS, WE MAY LOSE
MARKET SHARE TO OUR COMPETITORS. The life sciences instrumentation market is characterized by rapid
technological change and frequent new product introductions. In the twelve
months ended March 31, 2004, 61% of our revenues were derived from the sale of
products that were introduced in the last three years, and our future success
will depend on our ability to enhance our current products and to develop and
introduce, on a timely basis, new products that address the evolving needs of
our customers. We may experience difficulties or delays in our development
efforts with respect to new products, and we may not ultimately be successful
in developing or commercializing them, which would harm our business. Any
significant delay in releasing new systems could cause our revenues to suffer,
adversely affect our reputation, give a competitor a first-to-market advantage
or cause a competitor to achieve greater market share. In addition, our future
success depends on our continued ability to develop new applications for our
existing products. If we are not able to complete the development of these
applications, or if we experience difficulties or delays, we may lose our
current 15




---



##### Table of Contents



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. Our products are also generally
priced higher than competitive products, which may impair commercial
acceptance. We cannot predict whether new products that we expect to introduce
will achieve commercial acceptance. We currently anticipate that our IonWorks product family will include in the
near term our recently launched IonWorks HT system and an additional IonWorks
system based on technology acquired through the acquisition of Cytion S.A. in
2001. Our IonWorks product family may not achieve significant commercial
acceptance or generate significant revenues within the time frame that we have
anticipated, or at all. Any such failure would adversely affect our financial
performance. In particular, we recently launched our IonWorks HT system. This
system has not achieved, and may not achieve or maintain, significant
commercial acceptance. The system could fail to obtain significant commercial
acceptance due to general economic conditions, competitive conditions, customer
concerns related to the price or performance of the IonWorks HT system or other
factors. It is likely that any failure of the IonWorks HT system to achieve
commercial acceptance within the time frame that we have anticipated would
cause us to fail to meet our 2004 revenue expectations, which would likely
cause our stock price to decline. The successful commercialization of our IonWorks product family, as well as the
achievement of the benefits of our 2001 acquisition of Cytion, will depend in
part on our ability to develop new products that include technology acquired
through the acquisition of Cytion, or enhancements thereto, in a timely and
efficient manner. Failure to develop new products in a timely and efficient
manner, or at all, may prevent us from offering first-to-market products in
segments of the electrophysiology market. As a result, we may lose customers,
and our business and results of operations may be harmed. While we believe that
the technology acquired through the acquisition of Cytion complements our
IonWorks HT system, we may not be able to develop and commercialize any new
products that include technology acquired through the acquisition of Cytion and
are complementary to the IonWorks HT system. Further, successful product
development may place a significant burden on our existing management and our
internal resources, which could have a material adverse effect on our business,
financial condition and operating results. Any failure to develop new products
that include technology acquired through the acquisition of Cytion, or
enhancements thereto, in a timely and efficient manner, or at all, or any
failure of such products to achieve commercial acceptance within the time frame
that we have anticipated would adversely affect our business and financial
performance. WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS FROM
A SINGLE SOURCE OR A LIMITED GROUP OF SUPPLIERS, AND THE PARTIAL OR COMPLETE
LOSS OF ONE OF THESE SUPPLIERS COULD CAUSE PRODUCTION DELAYS AND A SUBSTANTIAL
LOSS OF REVENUES. We rely on outside vendors to manufacture many components and subassemblies.
Certain components, subassemblies and services necessary for the manufacture of
our systems are obtained from a sole supplier or limited group of suppliers,
some of which are our competitors. Additional components, such as optical,
electronic and pneumatic devices, are currently purchased in configurations
specific to our requirements 16




---



##### Table of Contents



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. For example, we rely upon a single supplier for a component of the PatchPlate consumable that is part of the IonWorks HT system. This supplier might
be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements for this
component, either by bringing production of this component in-house or by seeking an alternative supplier. We currently do not have the
capability to manufacture this component on a commercial scale, and are not aware of any other supplier that currently has the capability to
supply us with commercial quantities of this component. Any failure or delay in obtaining sufficient quantities of this component could
adversely affect the ability of the IonWorks HT system to achieve or maintain significant commercial acceptance, which would harm our
business. WE MAY ENCOUNTER MANUFACTURING AND ASSEMBLY PROBLEMS OR DELAYS, WHICH COULD
RESULT IN LOST REVENUES. We assemble our systems in our manufacturing facilities located in Sunnyvale,
California, Downingtown, Pennsylvania, and Norway. Our manufacturing and
assembly processes are highly complex and require sophisticated, costly
equipment and specially designed facilities. As a result, any prolonged
disruption in the operations of our manufacturing facilities could seriously
harm our ability to satisfy our customer order deadlines. If we cannot deliver
our systems in a timely manner, our revenues will likely suffer. Our product sales depend in part upon manufacturing yields. We currently have
limited manufacturing capacity and experience variability in manufacturing
yields. We are currently manufacturing high-throughput instruments in-house, in
limited volumes and with largely manual assembly. If demand for our
high-throughput instruments increases, we will either need to expand our
in-house manufacturing capabilities or outsource to other manufacturers. If we
fail to deliver our products in a timely manner, our relationships with our
customers could be seriously harmed, and our revenues could decline. As we develop new products, we must transition the manufacture of a new product
from the development stage to commercial manufacturing. We cannot predict
whether we will be able to complete these transitions on a timely basis and
with commercially reasonable costs. We cannot assure you that manufacturing or
quality control problems will not arise as we attempt to scale-up our
production for any future new products or that we can scale-up manufacturing
and quality control in a timely manner or at commercially reasonable costs. If
we are unable to consistently manufacture our products on a timely basis
because of these or other factors, our product sales will decline. For example, we decided in 2002 to bring the production of PatchPlates
in-house. We previously relied on Essen Instruments for the PatchPlate
consumable, and Essen has assisted us in transferring the PatchPlate
manufacturing technology to us. We have purchased from Essen the inventory we
believe is sufficient to meet our needs for PatchPlates until we commence full
scale manufacturing on our own. However, we may not be successful in achieving
full scale manufacturing capabilities for the PatchPlate consumable in a timely
manner or at all, and any failure or delays in manufacturing sufficient
quantities of PatchPlates could harm our business. 17




---



##### Table of Contents



IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY WILL BE HARMED AND THE
SALES AND MARKET ACCEPTANCE OF OUR PRODUCTS WILL DECREASE. Our products are complex and have at times contained errors, defects and bugs
when introduced. If we deliver products with errors, defects or bugs, our
credibility and the market acceptance and sales of our products would be
harmed. Further, if our products contain errors, defects or bugs, we may be
required to expend significant capital and resources to alleviate such
problems. Defects could also lead to product liability as a result of product
liability lawsuits against us or against our customers. We have agreed to
indemnify our customers in some circumstances against liability arising from
defects in our products. In the event of a successful product liability claim,
we could be obligated to pay damages significantly in excess of our product
liability insurance limits. MOST OF OUR CURRENT AND POTENTIAL CUSTOMERS ARE FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES AND ARE SUBJECT TO RISKS FACED BY THOSE INDUSTRIES. We derive a significant portion of our revenues from sales to pharmaceutical
and biotechnology companies. We expect that sales to pharmaceutical and
biotechnology companies will continue to be a primary source of revenues for
the foreseeable future. As a result, we are subject to risks and uncertainties
that affect the pharmaceutical and biotechnology industries, such as
availability of capital and reduction and delays in research and development
expenditures by companies in these industries, pricing pressures as third-party
payers continue challenging the pricing of medical products and services,
government regulation, and the uncertainty resulting from technological change. In addition, our future revenues may be adversely affected by the ongoing
consolidation in the pharmaceutical and biotechnology industries, which would
reduce the number of our potential customers. Furthermore, we cannot assure you
that the pharmaceutical and biotechnology companies that are our customers will
not develop their own competing products or in-house capabilities. OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS,
WHICH MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT
SUCCESSFUL, COULD ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM
SELLING OUR PRODUCTS. Third parties may assert infringement or other intellectual property claims
against us. We may have to pay substantial damages for infringement if it is
ultimately determined that our products infringe a third partys proprietary
rights. Further, any legal action against us could, in addition to subjecting
us to potential liability for damages, prohibit us from selling our products
before we obtain a license to do so from the party owning the intellectual
property, which, if available at all, may require us to pay substantial
royalties. Even if these claims are without merit, defending a lawsuit takes
significant time, may be expensive and may divert management attention from
other business concerns. There may be third-party patents that may relate to
our technology or potential products. Any public announcements related to
litigation or interference proceedings initiated or threatened against us could
cause our stock price to decline. We believe that there may be significant
litigation in the industry regarding patent and other intellectual property
rights. If we become involved in litigation, it could consume a substantial
portion of our managerial and financial resources. 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. 18




---



##### Table of Contents



We rely on patents to protect a large part of our intellectual property and our
competitive position. In order to protect or enforce our patent rights, we may
initiate patent litigation against third parties, such as infringement suits or
interference proceedings. Litigation may be necessary to:  
    
    assert claims of infringement;
    
    enforce our patents;
    
    protect our trade secrets or know-how; or
    
    determine the enforceability, scope and validity of the proprietary rights of others. Lawsuits could be expensive, take significant time and divert managements
attention from other business concerns. They would put our patents at risk of
being invalidated or interpreted narrowly and our patent applications at risk
of not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. If initiated, we cannot assure you that we would
prevail in any of these suits or that the damages or other remedies awarded, if
any, would be commercially valuable. During the course of these suits, there
could be public announcements of the results of hearings, motions and other
interim proceedings or developments in the litigation. If securities analysts
or investors were to perceive any of these results to be negative, our stock
price could decline. THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET. Our success will depend in part on our ability to obtain commercially valuable
patent claims and to protect our intellectual property. Our patent position is
generally uncertain and involves complex legal and factual questions. Legal
standards relating to the validity and scope of claims in our technology field
are still evolving. Therefore, the degree of future protection for our
proprietary rights is uncertain. The risks and uncertainties that we face with respect to our patents and other
proprietary rights include the following:  
    
    the pending patent applications we have filed or to which we have exclusive rights may not
result in issued patents or
may take longer than we expect to result in issued patents;
    
    the claims of any patents which are issued may not provide meaningful protection;
    
    we may not be able to develop additional proprietary technologies that are patentable;
    
    the patents licensed or issued to us or our customers may not provide a competitive advantage;
    
    other companies may challenge patents licensed or issued to us or our customers;
    
    patents issued to other companies may harm our ability to do business;other companies may independently develop similar or
alternative technologies or duplicate our technologies;
    
    and
    
    other companies may design around technologies we have licensed or developed. In addition to patents, we rely on a combination of trade secrets,
nondisclosure agreements and other contractual provisions and technical
measures to protect our intellectual property rights. Nevertheless, these
measures may not be adequate to safeguard the proprietary technology underlying
our products. If these measures do not protect our rights, third parties could
use our technology, and our ability to compete in the market would be reduced.
In addition, employees, consultants and others who participate in the
development of our products may breach their agreements with us regarding our
intellectual property, and we may not have adequate remedies for the breach. We
also may not be able to effectively protect our intellectual property rights in
some foreign countries. For a variety of reasons, we may decide not to file for
patent, copyright or trademark protection or prosecute potential infringements
of our patents. We also 19




---



##### Table of Contents



realize that our trade secrets may become known through other means not
currently foreseen by us. Notwithstanding our efforts to protect our
intellectual property, our competitors may design around our proprietary
technologies or may independently develop similar or alternative technologies
or products that are equal or superior to our technology and products without
infringing on any of our intellectual property rights. WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH. We expect to experience significant growth in the number of our employees and
customers and the scope of our operations, including as a result of potential
acquisitions. This growth may continue to place a significant strain on our
management and operations. Our ability to manage this growth will depend upon
our ability to broaden our management team and our ability to attract, hire and
retain skilled employees. Our success will also depend on the ability of our
officers and key employees to continue to implement and improve our operational
and other systems, to manage multiple, concurrent customer relationships and to
hire, train and manage our employees. Our future success is heavily dependent
upon growth and acceptance of new products. If we cannot scale our business
appropriately or otherwise adapt to anticipated growth and new product
introductions, a key part of our strategy may not be successful. WE RELY UPON DISTRIBUTORS FOR PRODUCT SALES AND SUPPORT OUTSIDE NORTH AMERICA. In the first three months of 2004, approximately 9% of our sales were made
through distributors. We often rely upon distributors to provide customer
support to the ultimate end users of our products. As a result, our success
depends on the continued sales and customer support efforts of our network of
distributors. The use of distributors involves certain risks, including risks
that distributors will not effectively sell or support our products, that they
will be unable to satisfy financial obligations to us and that they will cease
operations. Any reduction, delay or loss of orders from our significant
distributors could harm our revenues. We also do not currently have
distributors in a number of significant international markets that we have
targeted and will need to establish additional international distribution
relationships. There can be no assurance that we will engage qualified
distributors in a timely manner, and the failure to do so could have a material
adverse affect on our business, financial condition and results of operations. IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR
TECHNOLOGIES INSTEAD OF DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE
THESE ACQUISITIONS OR MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE AN ACQUIRED
BUSINESS OR TECHNOLOGY IN A COST-EFFECTIVE AND NON-DISRUPTIVE MANNER. Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. To this end, from time to time we have acquired
complementary businesses, products or technologies instead of developing them
ourselves, and we may choose to do so in the future. For example, we recently
entered into an agreement to acquire Axon Instruments, Inc., acquired Universal
Imaging Corporation in June 2002 and acquired Cytion S.A. in 2001. We do not
know if we will be able to complete any future acquisitions, including the Axon
acquisition, 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, both in connection with the
proposed acquisition of Axon and other potential future acquisitions, involves
considerable operational and financial risks and strains, including:  
    
    the potential disruption of our ongoing business and distraction of our management;
    
    the potential strain on our financial and managerial controls and reporting systems and procedures;
    
    unanticipated expenses and potential delays related to integration of the operations, technology
and other resources of acquired businesses;
    
    the impairment of relationships with employees, suppliers and customers as a result of any
integration 20




---



##### Table of Contents



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
acquisition costs, which may cause our quarterly and annual operating results to fluctuate. We may not succeed in addressing these risks or any other problems encountered
in connection with the proposed acquisition of Axon or other potential future
acquisitions. If we are unable to successfully integrate the operations,
products, technology and personnel of acquired businesses in a timely manner or
at all, or if we do achieve the perceived benefits of any acquisition as
rapidly or to the extent anticipated by financial analysts or investors, the
market price of our common stock could decline. In addition, in order to finance any acquisitions, we might need to raise
additional funds through public or private equity or debt financings. In that
event, we could be forced to obtain financing on terms that are not favorable
to us and, in the case of equity financing, that may result in dilution to our
stockholders. In connection with the proposed acquisition of Axon, we
anticipate borrowing $35 million in order to pay the cash portion of the merger
consideration to be paid to Axon shareholders and optionholders. Incurrence of
this new debt will significantly increase the combined companys leverage.
While management believes that our cash flows will be more than adequate to
service this new debt, there may be circumstances in which required payments of
principal and/or interest on this new debt could adversely affect our cash
flows and operating results, and therefore the market price of our common
stock. In addition, any impairment of goodwill and amortization of other
intangible assets or charges resulting from the costs of acquisitions could
harm our business and operating results. IF
THE PROPOSED MERGER TRANSACTION IS CONSUMMATED, MOLECULAR DEVICES WILL BE A
SUBSTANTIALLY LARGER AND BROADER ORGANIZATION, AND IF THE MOLECULAR DEVICES
MANAGEMENT IS UNABLE TO SUFFICIENTLY MANAGE THE COMPANY, ITS OPERATING RESULTS
WILL SUFFER. If the proposed merger transaction is consummated, Molecular Devices will
acquire approximately 128 employees based at Axons office in Union City,
California and at its facilities in Melbourne, Australia and San Luis Obispo,
California. The combined company will face challenges inherent in efficiently
managing an increased number of employees over large geographic distances,
including the need to implement appropriate systems, policies, benefits and
compliance programs. The inability to successfully manage the substantially
larger and internationally diverse organization, or any significant delay in
achieving successful management, could have a material adverse effect on the
combined company after the proposed merger transaction and, as a result, on the
market price of Molecular Devices common stock. THE PROPOSED MERGER TRANSACTION COULD CAUSE AXON OR MOLECULAR DEVICES TO
LOSE KEY PERSONNEL, WHICH COULD MATERIALLY AFFECT THE RESPECTIVE COMPANYS
BUSINESS AND REQUIRE THE COMPANIES TO INCUR SUBSTANTIAL COSTS TO RECRUIT
REPLACEMENTS FOR LOST PERSONNEL. As a result of the proposed merger transaction, current and prospective
Axon and Molecular Devices employees could experience uncertainty about their
future roles within Molecular Devices. This uncertainty may adversely affect
the ability of Axon and Molecular Devices to attract and retain key management,
sales, marketing and technical personnel. Any failure to attract and retain key
personnel could have a material adverse effect on the business of Molecular
Devices after completion of the proposed merger transaction. GENERAL UNCERTAINTY RELATED TO THE PROPOSED MERGER TRANSACTION COULD HARM
MOLECULAR DEVICES AND AXON. 21




---



##### Table of Contents



Molecular Devices or Axons customers may, in response to the announcement of
the proposed merger transaction, delay or defer purchasing decisions. If
Molecular Devices or Axons customers delay or defer purchasing decisions, the
revenues of Molecular Devices and Axon, respectively, and the revenues of the
combined company, could materially decline or any anticipated increases in
revenue could be lower than expected. Also, speculation regarding the
likelihood of the closing of the proposed merger transaction could increase the
volatility of Molecular Devices and Axons share prices. CHARGES TO EARNINGS RESULTING FROM THE APPLICATION OF THE PURCHASE METHOD OF
ACCOUNTING MAY ADVERSELY AFFECT THE MARKET VALUE OF MOLECULAR DEVICES COMMON
STOCK FOLLOWING THE PROPOSED MERGER TRANSACTION. If the benefits of the proposed merger transaction are not achieved,
Molecular Devices financial results, including earnings per share, could be
adversely affected. In accordance with United States generally accepted
accounting principles, the combined company will account for the proposed
merger transaction using the purchase method of accounting. Molecular Devices
will allocate the total estimated purchase price to Axons net tangible assets,
amortizable intangible assets, and in-process research and development based on
their fair values as of the date of completion of the proposed merger
transaction, and record the excess of the purchase price over those fair values
as goodwill. The combined company will incur additional amortization expense
over the estimated useful lives of certain of the intangible assets acquired in
connection with the proposed merger transaction, which is expected to be
approximately US$1.6 million on an annual basis. In addition, to the extent the
value of goodwill or intangible assets with indefinite lives becomes impaired,
the combined company may be required to incur material charges relating to the
impairment of those assets. WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE. We are highly dependent on the principal members of our management, engineering
and scientific staff. The loss of the service of any of these persons could
seriously harm our product development and commercialization efforts. In
addition, research, product development and commercialization will require
additional skilled personnel in areas such as chemistry and biology, and
software and electronic engineering. Our corporate headquarters are located in
Sunnyvale, California, where demand for personnel with these skills is
extremely high and is likely to remain high. As a result, competition for and
retention of personnel, particularly for employees with technical expertise, is
intense and the turnover rate for qualified personnel is high. If we are unable
to hire, train and retain a sufficient number of qualified employees, our
ability to conduct and expand our business could be seriously reduced. The
inability to retain and hire qualified personnel could also hinder the planned
expansion of our business. WE ARE DEPENDENT ON INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO
FOREIGN CURRENCY EXCHANGE RATE, POLITICAL AND ECONOMIC RISKS. We maintain facilities in Norway, the United Kingdom, Germany and Japan, and
sales to customers outside the United States accounted for approximately 44%
our revenues in the first three months of 2004. We anticipate that
international sales will continue to account for a significant portion of our
revenues. All of our sales to international distributors are denominated in U.S. dollars.
Most of our direct sales in the United Kingdom, Germany, France, Canada and
Japan are denominated in local currencies and totaled $10.2 million (38% of
total revenues) in the first three months of 2004. To the extent that our sales
and operating expenses are denominated in foreign currencies, our operating
results may be adversely affected by changes in exchange rates. Historically,
foreign exchange gains and losses have been immaterial to our results of
operations. However, we cannot predict whether these gains and losses will
continue to be immaterial, particularly as we increase our direct sales outside
North America. For example, we cannot predict whether other foreign exchange
gains or losses in the future would have a material effect on our income. Owing
to the number of currencies involved, the substantial volatility of currency
exchange rates, 22




---



##### Table of Contents



and our constantly changing currency exposures, we cannot predict the effect of
exchange rate fluctuations on our future operating results. We do not currently
engage in foreign currency hedging transactions, but may do so in the future. Our reliance on international sales and operations exposes us to foreign
political and economic risks, including:  
    
    political, social and economic instability;
    
    trade restrictions and changes in tariffs;
    
    import and export license requirements and restrictions;
    
    difficulties in staffing and managing international operations;
    
    disruptions in international transport or delivery;
    
    difficulties in collecting receivables; and
    
    potentially adverse tax consequences. If any of these risks materialize, our international sales could decrease and
our foreign operations could suffer. OUR OPERATING RESULTS FLUCTUATE AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS
MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE IN OUR
STOCK PRICE. We have experienced and in the future may experience a shortfall in revenues or
earnings or otherwise fail to meet public market expectations, which could
materially and adversely affect our business and the market price of our common
stock. Our total revenues and operating results may fluctuate significantly
because of a number of factors, many of which are outside of our control. These
factors include:  
    
    customer confidence in the economy, evidenced, in part, by stock market levels;
    
    changes in the domestic and international economic, business and political conditions;
    
    economic conditions within the pharmaceutical and biotechnology industries;
    
    levels of product and price competition;
    
    the length of our sales cycle and customer buying patterns;
    
    the size and timing of individual transactions;
    
    the timing of new product introductions and product enhancements;
    
    the mix of products sold;
    
    levels of international transactions;
    
    activities of and acquisitions by competitors;
    
    the timing of new hires and the allocation of our resources;
    
    changes in foreign currency exchange rates; and
    
    our ability to develop and market new products and control costs. One or more of the foregoing factors may cause our operating expenses to be
disproportionately high during any given period or may cause our revenues and
operating results to fluctuate significantly. In particular, we typically
experience a decrease in the level of sales in the first calendar quarter as
compared to the fourth quarter of the preceding year because of budgetary and
capital equipment purchasing patterns in the life sciences industry. Our
quarterly operating results have fluctuated in the past, and we expect they
will fluctuate in the future as a result of many factors, some of which are
outside of our control. In addition, we manufacture our products based on forecasted orders rather than
on outstanding orders. Accordingly, our expense levels are based, in part, on
expected future sales, and we generally cannot quickly adjust operating
expenses. For example, research and development and general and administrative
expenses are not directly affected by variations in revenues. As a result, if
sales levels in a particular 23




---



##### Table of Contents



quarter do not meet expectations, we may not be able to adjust operating
expenses in a sufficient timeframe to compensate for the shortfall, and our
results of operations for that quarter may be seriously harmed. Likewise, our
manufacturing procedures may in certain instances create a risk of excess or
inadequate inventory levels if orders do not match forecasts. Based upon the preceding factors, we may experience a shortfall in revenues or
earnings or otherwise fail to meet public market expectations, which could
materially and adversely affect our business, financial condition, results of
operations and the market price of our common stock. Because our revenues and
operating results are difficult to predict, we believe that period-to-period
comparisons of our results of operations are not a good indication of our
future performance. OUR STOCK PRICE IS VOLATILE, WHICH COULD CAUSE STOCKHOLDERS TO LOSE A
SUBSTANTIAL PART OF THEIR INVESTMENT IN OUR STOCK. The stock market in general, and the stock prices of technology companies in
particular, have recently experienced volatility which has often been unrelated
to the operating performance of any particular company or companies. In the
twelve months ended March 31, 2004, the closing sales price of our common stock
ranged from $11.20 to $22.32. Our stock price could decline regardless of our
actual operating performance, and stockholders could lose a substantial part of
their investment as a result of industry or market-based fluctuations. In the
past, our stock has traded relatively thinly. If a more active public market
for our stock is not sustained, it may be difficult for stockholders to resell
shares of our common stock. Because we do not anticipate paying cash dividends
on our common stock for the foreseeable future, stockholders will not be able
to receive a return on their shares unless they sell them. The market price of our common stock will likely fluctuate in response to a
number of factors, including the following:  
    
    domestic and international economic, business and political conditions;
    
    economic conditions within the pharmaceutical and biotechnology industries;
    
    our failure to meet our performance estimates or the performance estimates of securities analysts;
    
    changes in financial estimates of our revenues and operating results by us or securities analysts;
    
    changes in buy/sell recommendations by securities analysts; and
    
    the timing of announcements by us or our competitors of significant products, contracts or
acquisitions or publicity regarding actual or potential results or performance thereof. PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK. Provisions in our certificate of incorporation and bylaws may have the effect
of delaying or preventing an acquisition, or merger in which we are not the
surviving company or which results in changes in our management. For example,
our certificate of incorporation gives our board of directors the authority to
issue shares of preferred stock and to determine the price, rights, preferences
and privileges and restrictions, including voting rights, of those shares
without any further vote or action by our stockholders. The rights of the
holders of common stock will be subject to, and may harmed by, the rights of
the holders of any shares of preferred stock that may be issued in the future.
The issuance of preferred stock may delay, defer or prevent a change in
control, as the terms of the preferred stock that might be issued could
potentially prohibit our consummation of any merger, reorganization, sale of
substantially all of our assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of
preferred stock. The issuance of preferred stock could also have a dilutive
effect on our stockholders. In addition, because we are incorporated in
Delaware, we are governed by the provisions of Section 203 of the Delaware
General Corporation Law. These provisions may prohibit large stockholders, in
particular those owning 15% or more of the outstanding voting stock, from
consummating 24




---



##### Table of Contents



a merger or combination involving us. Further, in October 2001, our Board of
Directors adopted a stockholder rights plan, commonly known as a poison pill.
These provisions described above and our poison pill could limit the price that
investors might be willing to pay in the future for our common stock. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR
FORWARD-LOOKING STATEMENTS. This report contains forward-looking statements within the meaning of the
federal securities laws that relate to future events or our future financial
performance. When used in this report, you can identify forward-looking
statements by terminology such as anticipates, plans, predicts,
expects, estimates, intends, will, continue, may, potential,
should and the negative of these terms or other comparable terminology. These
statements are only predictions. Our actual results could differ materially
from those anticipated in our forward-looking statements as a result of many
factors, including those set forth above and elsewhere in this report. Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements. We assume
no duty to update any of the forward-looking statements after the date of this
report or to conform these statements to actual results. Accordingly, we
caution readers not to place undue reliance on these statements. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our market and currency risk disclosures set forth in Item 7A of our Annual
Report on Form 10-K, as amended, for the year ended December 31, 2003, have not changed
significantly. 25




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES. Evaluation of disclosure controls and procedures.Based on our managements
evaluation (with the participation of our chief executive officer and chief
financial officer), as of the end of the period covered by this report, our
chief executive officer and chief financial officer have concluded that,
subject to limitations described below, our disclosure controls and procedures
(as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) are
effective to ensure that the information required to be disclosed by us in
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. Changes in internal controls.There were no changes in our internal controls
over financial reporting during the quarter ended March 31, 2004 that have
materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting. Limitations on the effectiveness of controls.Our management, including our
chief executive officer and chief financial officer, does not expect that our
control systems will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within Molecular Devices Corporation have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected. Accordingly, our disclosure controls and procedures
are designed to provide reasonable, not absolute, assurance that the objectives
of our disclosure control system are met and, as set forth above, our chief
executive officer and chief financial officer have concluded, based on their
evaluation as of the end of the period covered by this report, that our
disclosure controls and procedures were sufficiently effective to provide
reasonable assurance that the objectives of our disclosure control system were
met. 26




---



##### Table of Contents



PART II. OTHER INFORMATION 
 ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES Following is a summary of stock repurchases for the quarter ended March, 31,
2004 (in thousands, except average price per share).(1) MaximumNumber ofShares that MayTotal Number
    
    Average Price
    
    Yet beof Shares
    
    Paid per
    
    PurchasedPeriod
    
    Purchased(2)
    
    Share
    
    Under the PlanJanuary 1, 2004 to January 31, 2004
    
    
    
    
    
    
    
    
    
    
    630,000February 1, 2004 to February 29, 2004
    
    
    630,000
    
    
    $
    19.09
    
    
    
    March 1, 2004 to March 31, 2004
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    630,000
    
    
    $
    19.09
  (1)
    
    In October 2001, the Board of Directors authorized us to
systematically repurchase 1.5 million shares of our common stock in the open
market. The repurchase program was completed in the quarter ended
March 31, 2004, and all such shares remain as treasury shares.(2)
    
    All shares were purchased pursuant to the publicly announced plan. 
 ITEM 5. OTHER INFORMATION Consistent with Section 10A(i)(2) of the Securities Exchange Act of 1934, as
added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible for
listing the non-audit services approved by our Audit Committee to be performed
by Ernst & Young LLP, our external auditor. During the period covered by this
Quarterly Report, our Audit Committee approved the engagement of Ernst & Young
to perform services associated with our acquisition of Axon Instruments, a
non-audit service within the meaning of Section 10A(i) of the Securities
Exchange Act. The fees for this non-audit service are not expected to exceed
$500,000. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits ExhibitNumber
    
    Description of Exhibit2.1(1)
    
    Agreement and Plan of Merger and Reorganization, dated as of March
20, 2004, by and among Molecular Devices Corporation, Astros
Acquisition Sub I, Inc., Astros Acquisition Sub II, LLC and Axon
Instruments, Inc.3.1(2)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(2)
    
    Bylaws of the Registrant.3.3(3)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(2)
    
    Specimen Certificate of Common Stock of the Registrant.
 27




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit31.1
    
    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 8-K filed on March 22, 2004. (2) Incorporated by reference to the similarly described exhibit in our
Registration Statement on Form S-1 (File No. 33-98926), as amended. (3) 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. * The certification attached as Exhibit 32.1 accompanies the Quarterly Report
on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.  (b)
    
    Reports on Form 8-K  (1)
    
    We filed a current report on Form 8-K, dated February
6, 2004, describing and furnishing the press release announcing
our fiscal fourth quarter and year end results for the period
ended December 31, 2003, which press release included our
condensed consolidated balance sheet and statements of income
for the periods presented.(2)
    
    We filed a current report on Form 8-K, dated March
22, 2004, describing and filing the press release announcing
that we entered into a into a definitive Agreement and Plan of
Merger and Reorganization with Axon Instruments, Inc. 28




---



##### Table of Contents



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. Molecular Devices Corporation By:
    
    /s/ TIMOTHY A. HARKNESSTimothy A. HarknessVice President, Finance
and Chief Financial Officer(Duly Authorized and PrincipalFinancial and Accounting Officer)
 Date: May 10, 2004 29




---



##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    Description of Exhibit2.1(1)
    
    Agreement and Plan of Merger and Reorganization, dated as of March
20, 2004, by and among Molecular Devices Corporation, Astros
Acquisition Sub I, Inc., Astros Acquisition Sub II, LLC and Axon
Instruments, Inc.3.1(2)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(2)
    
    Bylaws of the Registrant.3.3(3)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(2)
    
    Specimen Certificate of Common Stock of the Registrant.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 8-K filed on March 22, 2004. (2) Incorporated by reference to the similarly described exhibit in our
Registration Statement on Form S-1 (File No. 33-98926), as amended. (3) 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. * The certification attached as Exhibit 32.1 accompanies the Quarterly Report
on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.