<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                ----------------

                                    FORM 10-K

                                ----------------

      [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

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

          FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

                         COMMISSION FILE NUMBER 0-27316

                          MOLECULAR DEVICES CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                             94-2914362
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NUMBER)

                               1311 ORLEANS DRIVE
                           SUNNYVALE, CALIFORNIA 94089
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                 (408) 747-1700
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                               TITLE OF EACH CLASS
                          COMMON STOCK, $.001 PAR VALUE

   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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

   The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 26, 2001, based upon the last sale price reported for
such date on the Nasdaq National Market, was $492,137,237*.

   The number of outstanding shares of the Registrant's Common Stock as of March
26, 2001 was 16,528,829.


                       DOCUMENTS INCORPORATED BY REFERENCE

   Specified portions of the Proxy Statement for Registrant's 2001 Annual
Meeting of Stockholders are incorporated by reference into Part III of this Form
10-K Report.

----------

*  Excludes approximately 5,712,626 shares of common stock held by directors,
   officers and holders of 5% or more of the Registrant's outstanding Common
   Stock at March 26, 2001. Exclusion of shares held by any person should not be
   construed to indicate that such person possesses the power, direct or
   indirect, to direct or cause the direction of the management or policies of
   the Registrant, or that such person is controlled by or under common control
   with the Registrant.

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                                TABLE OF CONTENTS

                          MOLECULAR DEVICES CORPORATION


<TABLE>
<S>                                                                                                    <C>
                                     PART I

Item  1. Business...................................................................................     3
         The Company................................................................................     3
         Industry Background........................................................................     3
         The Molecular Devices Solution.............................................................     4
         Strategy...................................................................................     5
         Our Products...............................................................................     6
         Drug Discovery Products....................................................................     6
         Life Sciences Research Products............................................................     8
         Software and Customer Service..............................................................    10
         Research and Development...................................................................    10
         Marketing and Customers....................................................................    10
         Manufacturing..............................................................................    11
         Patents and Proprietary Technologies.......................................................    11
         Competition................................................................................    11
         Government Regulations.....................................................................    12
         Employees..................................................................................    12
         Business Risks.............................................................................    12
Item  2. Properties.................................................................................    20
Item  3. Legal Proceedings..........................................................................    20
Item  4. Submission of Matters to a Vote of Security Holders........................................    20

                                     PART II

Item  5. Market for Registrant's Common Equity and Related Stockholder Matters......................    21
Item  6. Selected Consolidated Financial Data.......................................................    22
Item  7. Management's Discussion and Analysis of Financial Condition and Results of Operations......    23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.................................    26
Item  8. Financial Statements and Supplementary Data................................................    26
Item  9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......    27

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.........................................    28
Item 11. Executive Compensation.....................................................................    28
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................    28
Item 13. Certain Relationships and Related Transactions.............................................    28

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................    29
         (a) Documents Filed with Report
         (b) Reports on Form 8-K
         (c) Exhibits
         (d) Financial Statement Schedules
</TABLE>




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                                     PART 1


ITEM 1. BUSINESS

THE COMPANY

   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 under "Business Risk" as well as under "Qualitative and Quantitative
Disclosures about Market Risk" and the risks detailed from time to time in the
Company's SEC reports, including this Annual Report on Form 10-K for the year
ended December 31, 2000.

   We are a leading supplier of high-performance bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research. Our systems and consumables enable pharmaceutical and biotechnology
companies to leverage advances in genomics and combinatorial chemistry by
facilitating the high-throughput and cost-effective identification and
evaluation of drug candidates. Our instrument systems are based on our advanced
core technologies that integrate our expertise in engineering, molecular and
cell biology, and chemistry. We enable our customers to improve research
productivity and effectiveness, which ultimately accelerates the complex process
of discovering and developing new drugs.

INDUSTRY BACKGROUND

   Life sciences research, particularly drug discovery, is currently undergoing
a revolution as a result of two converging trends. The worldwide effort to
sequence the human genome is beginning to identify a large number of previously
unknown natural molecules that play a role in disease and thus are likely
targets for new therapeutic products. Until recently, only a few hundred disease
targets were available to drug discovery researchers. In 2000, researchers
completed the sequencing of the human genome; the estimated 30,000 genes that
were revealed suggest the existence of thousands of previously unknown drug
targets. At the same time, advances in combinatorial chemistry have provided
chemists with techniques that allow them to synthesize a greater number of and
diversity of compounds than ever before. Pharmaceutical companies previously
maintained "libraries" of hundreds of thousands of compounds to test against
disease targets to determine their potential as drugs; now, drug researchers
have access to millions of such compounds.

   The identification of disease targets and synthesis of chemical compounds are
key first steps in the drug discovery process. After this, researchers undertake
additional steps to determine which compounds are the most promising drug
candidates prior to entering clinical development. Among the most important
downstream steps in the drug discovery process are assay development, drug
candidate screening and lead optimization.

   Assay Development. Once a disease target has been identified, researchers
must develop a test, or assay, to determine whether a particular compound has a
desired effect on the target. Most assays involve creating a biochemical
reaction that takes place in a microplate, which is a plate containing an array
of small wells that are similar to miniature test tubes. The plate is inserted
into a microplate reader, which measures the light absorbed or emitted by the
sample in each well. Depending upon its underlying technology, the reader
detects light in the form of absorption, fluorescence or luminescence. The type
of assay developed depends upon the characteristics of the disease target and
the type of information the researcher is seeking. Two major categories of
assays are biochemical assays and cell-based assays. A cell-based assay measures
how a target on or inside a living cell responds to a compound; in a biochemical
assay, the target is isolated from the cell environment. Because they mimic the
target's natural function, cell-based assays are often considered particularly
valuable in predicting how well a compound is likely to function as a drug.

   Drug Candidate Screening. Once an assay has been developed, it is performed
repeatedly to test the effects of a variety of compounds on the disease target,
a process known as screening. Primary screening identifies "hits," or compounds
that exhibit significant activity against a target; secondary screening gathers
more information on the hits to confirm and characterize their activity. Because
drug companies now have a rapidly increasing number of compounds to test, they
are interested in high-throughput screening, or HTS, to reduce the amount of
time that is required for primary and secondary screening. Traditional
bioanalytical

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Many of our product names mentioned throughout this document are our trademarks
and service marks. Other trademarks, trade names and service marks referred to
in this report are the property of their respective owners.




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instruments and methods were not designed for high-throughput screening, which
has contributed to the current bottleneck at this stage of the drug discovery
process.

   Lead Optimization. Compounds that emerge from the secondary screening
process, now called "leads," are next subjected to successive rounds of
additional testing and chemical manipulations to make them even more suitable as
drug candidates. This process, known as lead optimization, involves a variety of
tests, such as cell-based assays, that yield a higher level of biological
information than screening assays. As drug companies generate increasing numbers
of leads, bottlenecks have emerged in this stage, resulting in demand for more
efficient lead optimization tools.

   After optimization, a lead compound must pass a lengthy and expensive set of
pre-clinical and clinical trials before becoming a drug. Because of the
resources required to conduct such trials, the cost of failure is high; thus,
companies are interested in tools which allow more accurate assessment of a
compound's probability of success as early as possible in the drug discovery
process.

   To reduce the length and cost of the drug discovery process, researchers
increasingly need tools that speed up the above steps and increase the value of
the information generated by them. Traditional bioanalytical instruments and
methods do not adequately address these needs because of several limitations,
including:

   -  Low sensitivity. One way to increase the speed of drug development is to
      conduct assays in high-density microplates, such that many samples can be
      analyzed in one equipment run. Microplates are now made in standard
      formats with either 96, 384 or 1,536 wells; the more wells there are, the
      smaller the sample volume in each well. Reading very small-volume samples
      requires a higher level of sensitivity than is available in most
      traditional detection equipment.

   -  Lack of automation. Throughput is often enhanced by incorporating
      automation into the drug discovery process. Some assays which provide high
      levels of information, such as live cell-based assays, require a
      particularly high degree of automation to run efficiently. For example,
      gaining certain kinetic data from a live cell assay, which is valuable in
      lead optimization, requires integrated liquid handling equipment so that
      compounds can be added to the cells and the detector can read the result
      of the assay almost instantaneously. Traditionally, many bioanalytical
      instruments have not been designed to integrate easily with automation
      equipment.

   -  Assay Complexity. Many assays in use today are performed in a complex,
      multi-step process and are expensive, time-consuming and difficult to
      adapt to a high-throughput mode of operation. Thus, researchers are
      interested in assay formats that yield as much information as traditional
      assays but follow simplified protocols.

   The proliferation in disease targets and chemical compounds coupled with the
limitations of traditional technologies have created bottlenecks at each of the
downstream steps of the drug discovery process which our products are
specifically designed to address.

THE MOLECULAR DEVICES SOLUTION

   We offer a full range of high-performance bioanalytical systems that address
the sensitivity, automation and assay complexity challenges currently faced by
researchers. Our major products possess levels of detection sensitivity that
enable the analysis of high-density microplates, thereby increasing throughput.
These products also include, or are easily integrated with, automation equipment
to further enhance throughput and allow complex assays to be performed with high
efficiency. Additionally, we develop novel assays which simplify the process of
obtaining key information about the activity of drug candidates; in particular,
we are an industry leader in providing technologies for performing
information-rich live cell assays in high-throughput mode.

   We group our product offerings into two categories based on the markets that
are primarily served by each. Our Drug Discovery products include three major
families of high-throughput instrument and reagent systems: our Fluorometric
Imaging Plate Reader, or FLIPR, system, our Chemiluminescence Imaging Plate
Reader, or CLIPR, system, and our multimode Analyst and Acquest systems. In each
of these systems, our high-performance instrumentation is complemented by
reagent kits that enable researchers to perform popular assays with higher
throughput than can be achieved using conventional technologies. Our Drug
Discovery product family also includes our Cytosensor system, which enables more
detailed investigations of cell physiology. Together, our Drug Discovery
products provide a wide array of solutions for both biochemical and cell-based
research in the high-throughput screening and lead optimization market segments.

   Our Life Sciences Research products include our Maxline family of microplate
readers, our Skatron liquid handling systems and our Threshold system. Maxline
microplate readers primarily address the assay development market and offer the
assay development




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scientist eight differentiated instruments that include a wide range of
innovative and flexible feature sets. We are widely perceived as a leader in
microplate reader technology, and we believe that we have been the first to
offer a number of innovative features into the premium end of the microplate
reader market. Skatron liquid handling systems facilitate assays by dispensing
liquids into microplates and washing microplate wells, a key step in many of the
most widely used laboratory tests. Finally, our Threshold system is aimed at the
biopharmaceutical manufacturing and quality control process, and we believe that
the Threshold system is the only commercially available fully integrated system
that rapidly and reproducibly detects potential contaminants with picogram level
sensitivity.


STRATEGY

   Our objective is to be the world's leading provider of innovative
bioanalytical systems and related consumable products for drug discovery and
life sciences research. We focus on providing comprehensive solutions that
accelerate and improve the critical downstream drug discovery processes of assay
development, drug candidate screening and lead optimization. Key elements of our
strategy include:

   - MAINTAIN AND ADVANCE OUR TECHNOLOGICAL LEADERSHIP. Since our first product
introduction in 1987, we have consistently developed innovative, technologically
advanced tools to facilitate and enhance life sciences research. In the past, we
have often been the first company among our competitors to introduce a new
technology to the market. We continue to invest in new products as well as in
enhancements to our existing products, thereby sustaining or increasing our
technological edge over competitors. Maintaining and advancing our track record
of innovation will be a key element of our future success, particularly as the
needs of drug discovery customers change due to advances in genomics,
proteomics, combinatorial chemistry and other disciplines. To accomplish this,
we have invested as much as 21%, and we intend to invest a significant portion,
of our revenues in research and development to build upon our leading-edge
technological expertise and customer application knowledge.

   - INCREASE RECURRING REVENUE FROM OUR CONSUMABLE PRODUCTS. In order to
increase the value of our existing products and enhance our market position, we
dedicate a significant portion of our research and development efforts to
introducing reagent kits that are optimized for use on our instruments. We have
historically developed and produced reagent kits for our Threshold systems, and
we now offer several kits for performing important assays on our Drug Discovery
instruments. We focus our reagent development efforts in areas where we can
provide enabling technologies; for example, our FLIPR Calcium Assay Kit allows
customers to perform the most popular FLIPR assay using fewer steps than is
required by the standard protocol. Other kits we have recently introduced expand
the applications for our instruments into entirely new areas that are of
significant interest to our customers, such as ion channel research. These
products allow us to offer complete assay systems (instruments and reagents) to
our customers, to increase our market share and to create a recurring revenue
stream to balance the inherent variability of our instrument revenue.

   - EXPAND WORLDWIDE DISTRIBUTION AND SUPPORT. We maintain strong sales and
support organizations in North America, Europe and Japan and a network of
selected distribution partners to address regions that we do not serve directly.
We intend to enhance our market presence by expanding our existing direct sales
offices, opening new offices in attractive markets and forming additional
distribution relationships in new regions. We believe that building a direct
field presence in additional key markets will allow us to realize the full
potential of these markets in terms of increased sales, closer customer
relationships and improved competitive positioning.

   - ACQUIRE COMPLEMENTARY BUSINESSES AND TECHNOLOGIES. We intend to continue to
seek businesses and technologies that will enhance our ability to provide
complete, innovative solutions to drug discovery and life sciences research
customers. As we identify these opportunities, we intend to seek acquisitions,
partnerships and licensing arrangements with companies that meet our selection
criteria. We will focus on acquisitions that allow us to gain access to novel
technologies, broaden our product offerings to existing customers and extend our
reach to new customers. For example, in 1998 we acquired the underlying
technology for CLIPR, and in 1999 we acquired a complementary product line
through our acquisition of Skatron Instruments AS. In 2000 we merged with LJL
BioSystems, a leading provider of high-throughput systems that complemented our
existing products and contributed significantly to our ability to provide the
complete range of solutions that we currently offer.

   In addition to pursuing acquisitions, we intend to continue to seek
partnerships and licensing arrangements to supplement our in-house research and
development efforts and add complementary products to our existing offerings. In
2000, we made investments in two companies, Essen Instruments and Argonex, Inc.,
the parent company of Upstate Biotechnology. Essen is a company founded by the
inventors of FLIPR which is developing technologies of significant interest to
the drug discovery market, such as high-throughput cell electrophysiology
systems. Upstate is a leading provider of cell signaling enzymes such as protein
kinases, which are key components in some of the most frequently used assays in
drug discovery.




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<PAGE>   6

OUR PRODUCTS

   Our products include a wide range of solutions for the Drug Discovery and
Life Sciences Research markets.

<TABLE>
<CAPTION>
                                                 DATE         US LIST PRICE         PRIMARY DRUG
                       PRODUCT                 INTRODUCED         RANGE         DISCOVERY APPLICATION
                       -------                 ----------  -------------------  ----------------------
          <S>                                  <C>         <C>                  <C>
          DRUG DISCOVERY
          FLIPR(96)                              1999      $314,500 - $404,500  HTS/Lead Optimization
          FLIPR(384)                             1998      $364,500 - $454,500  HTS/Lead Optimization
          CLIPR                                  1999      $344,500 - $390,000  HTS/Lead Optimization
          Analyst HT                             1998      $105,000 - $120,000  HTS
          Analyst AD                             1999      $ 76,000 - $ 94,500  Assay Development
          Acquest                                1998      $135,000 - $150,000  HTS
          FLIPR Calcium Assay Kit                2000      $  2,125 - $  2,500  HTS
          FLIPR Membrane Potential Assay Kit     2000      $  2,125 - $  2,500  HTS
          CLIPR Luciferase Assay Kit             2000      $    425 - $    500  HTS
          HEFP Assay Kits                        2000      $    850 - $    950  HTS
          Cytosensor                             1992      $ 59,500 - $ 99,500  HTS

          LIFE SCIENCES RESEARCH
          Emax                                   1988      $  5,000 - $  6,795  Assay Development
          Vmax                                   1987      $  6,000 - $  8,285  Assay Development
          VERSAmax                               1998      $  8,825 - $ 12,800  Assay Development
          SPECTRAmax 340 PC                      1998      $ 12,895 - $ 16,870  Assay Development
          SPECTRAmax 190                         1998      $ 17,525 - $ 27,500  Assay Development
          SPECTRAmax PLUS(384)                   2000      $ 23,000 - $ 30,950  Assay Development/HTS
          SPECTRAmax GEMINI XS                   2000      $ 30,775 - $ 38,750  Assay Development/HTS
          SPECTRAmax LMax                        2000      $ 25,000 - $ 31,000  Assay Development
          Skatron Liquid Handling Systems        1999      $  5,990 - $ 39,500  Assay Development/HTS
          Threshold Instrument                   1989             $49,500       Quality Control
          Threshold Reagent Kits                 1989      $  7,735 - $  9,450  Quality Control
</TABLE>

DRUG DISCOVERY PRODUCTS

   Our Drug Discovery systems, which represented 51% of our total revenues in
2000, 46% of our total revenues in 1999 and 40% of our total revenues in 1998,
are used to perform both biochemical and cell-based assays and are primarily
targeted toward high-throughput screening and lead optimization.

FLIPR System

   Our FLIPR system satisfies a key demand from pharmaceutical companies for
live cell analysis at a high-throughput rate. Many therapeutic drugs are
targeted to cell membrane receptors: special proteins that function as control
switches for cell activity and are triggered by the specific binding of soluble
natural substances to relay messages to the cell via "signal transduction"
mechanisms. Therapeutic drugs which act on receptors either mimic or block the
action of the natural receptor-specific substance. The therapeutic potential of
such drugs is, therefore, most appropriately studied using live cell systems.
These studies are inherently challenging, but a high value is placed upon them
by the pharmaceutical industry and the research community.

   Our FLIPR was the first instrument to enable high-throughput screening of
live cells with high information content on cellular activation. The primary
applications for our FLIPR system are the measurement of intracellular calcium
ion flux and membrane potential change, both of which provide critical
information on the activation of cells by test compounds.

   In our FLIPR system, cells, along with appropriate fluorescent dyes, are
maintained in microplates in a thermally-controlled compartment together with
compound-addition plates. Fluorescence activity is evaluated before, during, and
after delivery of compounds to the wells to evaluate the effect of compounds on
the cells. Laser light provides excitation illumination to the wells and
fluorescence from the cells on the bottom of the wells is quantified with an
electronic camera. During the reading cycle, a built-in pipettor transfers
compound samples from the compound-addition plate to the cell plate and the
reaction is continuously monitored by an ultrasensitive charge coupled device, a
CCD camera, at intervals of less than one second. This strategy allows for
real-time




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monitoring of cells before and after compound addition, thus allowing the
measurement of rapid non-linear, response kinetics. Our FLIPR system's limited
depth-of-field fluorometry optical design is patented. We currently offer two
primary products based on our FLIPR technology platform.

   -  FLIPR(384). This product, introduced in 1998, was the second generation
      FLIPR product. It combines all of the benefits of the original FLIPR along
      with new automation capabilities and the ability to analyze samples in 384
      well microplates, as well as 96 well microplates. FLIPR(384) can screen as
      many as 50,000 samples daily, and offers optional integrated plate stacker
      and washer accessories which can dramatically reduce the need for human
      intervention during sample processing. In addition, the instrument also
      incorporates interfaces that enable it to integrate into automated
      screening lines.

   -  FLIPR(96). This product is built on same chassis as the FLIPR(384) and is
      capable of all of the automation benefits of the FLIPR(384). The primary
      differentiation is that FLIPR(96) is not 384 well compatible, and
      therefore is targeted at lower throughput applications in lead
      optimization. We also offer an upgrade package for the FLIPR(96) that
      enables 384 well capability.


CLIPR System

   Our Chemiluminescence Imaging Plate Reader, or CLIPR, system was developed
based on telecentric lens luminometer technology licensed from Affymax Research
Institute in 1998. We introduced this system in the third quarter of 1999. It
satisfies a key demand from pharmaceutical companies for live cell analysis at
an ultra high-throughput rate using luminescence technology. This allows
customers to perform popular assays, such as those involving reporter genes, at
unprecedented speeds. CLIPR's applications also include non-cell-based assays
such as SPA, which is among the most frequently-performed tests in the drug
discovery market. These applications complement those of our FLIPR, Analyst and
Acquest systems, offering solutions for a wide range of biochemical and
cell-based assays.

   The system combines an ultra sensitive CCD camera with proprietary wide field
optics to achieve ultra high-throughput by simultaneously imaging all of the
wells on a microplate. As a result of the simultaneous imaging, CLIPR is
compatible with any microwell plate format including 96, 384, 1536 and beyond.
Our CLIPR system can be integrated with a linear track robot, used in
workstation mode with an optional light-tight plate stacker module, or used in a
stand-alone mode. CLIPR can support the analysis of over 200,000 samples in an
eight-hour day.

Analyst and Acquest Systems

   Our Analyst and Acquest systems complement our other drug discovery offerings
by providing industry-leading flexibility and throughput for a wide range of
biochemical assays. These systems each feature seven different readout
modalities, allowing customers to choose the one that is optimal for the
particular screen they are performing. One of these readout modalities,
fluorescence polarization, has become popular in recent years because it enables
assays to be performed with greatly simplified protocols. We were pioneers in
developing the market for fluorescence polarization, and our proprietary High
Efficiency Fluorescence Polarization (HEFP(TM)) technology is incorporated into
the Analyst and Acquest systems. Our HEFP technology enables miniaturized
biochemical assays to be performed in a single step, a significant advantage
over traditional biochemical assays.

   Analyst and Acquest provide several important customer benefits, including:
increased throughput, improved analytical performance and flexibility
(especially in higher density formats), lower reagent costs and compatibility
with automation equipment. Analyst HT, launched in 1998, performs up to 70,000
screens per day. In 1998 we also introduced the ultra-high-throughput Acquest,
capable of reading microplates in 96-, 384- and 1,536-well formats and running
up to 200,000 assays per day. In 1999 we launched Analyst AD, which was designed
specifically for assay development and is fully compatible with Analyst HT.




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Cytosensor System

   We developed the Cytosensor system to provide a fast, reliable, single assay
system to investigate multiple cellular functions in numerous cell types. Our
Cytosensor system incorporates our core Light Addressable Potentiometric Sensor,
or LAPS, technology, a detection system capable of measuring a wide variety of
chemical reactions as they occur on the surface of a silicon based sensor, into
a patented system that permits researchers to conduct microphysiometry, the
study of cellular metabolism, without destroying the cells. Cellular metabolism
is the most fundamental and essential of all physiological processes, and allows
for the monitoring of cell activation, stimulation, growth, toxicity and other
biochemical events crucial to the development of new therapeutics. We believe
that the primary applications of the Cytosensor system are receptor
characterization, orphan receptor identification, human cell pharmacological
profiling and in vitro toxicology. We offer a 4-chamber Cytosensor system
targeting customers with relatively low throughput requirements and an 8-chamber
system for customers who require higher throughput.

Drug Discovery Reagents

   We are expanding our reagent business by focusing on the internal development
of proprietary reagent kits optimized for our Drug Discovery instruments. We
have historically developed and produced reagent kits for our Threshold systems,
and in 1999 we began to sell consumables for our installed base of Drug
Discovery instruments with the introduction of kits for performing important
assays on FLIPR, CLIPR, Analyst and Acquest. Our reagent business is supported
by a reagent development and marketing team, in-house organic chemistry labs and
significant reagent production capacity. Our current Drug Discovery reagent
offerings include:

   -  FLIPR Calcium Assay Kit. This product was released in 2000, and has begun
      to revolutionize the way FLIPR calcium assays are performed. The kit's
      unique feature is that it enables researchers to eliminate a step in the
      assay protocol, thereby saving up to 15 minutes of processing time for
      each 384 well plate. This kit has the potential to significantly increase
      throughput, reduce costs and increase screening efficiency.

   -  FLIPR Membrane Potential Assay Kit. Based on a similar time-saving
      methodology as the Calcium Assay Kit, this product allows researchers to
      measure changes in the electrical potential of live cell membranes, a key
      indicator of ion channel activity. Ion channels are implicated in many
      major diseases and are therefore a target of great interest to drug
      discovery customers.

   -  CLIPR Luciferase Assay Kit. This is optimized for 1536 well plates used
      with the CLIPR system and targeted at reporter gene assay applications.

   -  HEFP Assay Kits. Our HEFP reagent kits, optimized for use on our Analyst
      and Acquest systems, include STX-1, TKXtra Explorer, and cAMP.


LIFE SCIENCES RESEARCH PRODUCTS

   Our Life Sciences Research products, which represented 49% of total revenues
in 2000, 54% of total revenues in 1999 and 60% of total revenues in 1998,
encompass our Maxline and Threshold product lines. The Maxline family of
products consists primarily of advanced microplate readers. Microplate readers
have become one of the most fundamental tools used in life sciences research by
addressing the increasing need for the acquisition and processing of large
quantities of biochemical and biological data. Microplate readers provide
scientists the benefit of high-throughput analysis in a standardized,
multi-sample format. Because of the productivity gains using a multi-sample
format, microplates have largely replaced test tubes and cuvettes for many life
sciences applications.

   A microplate is a disposable plastic vessel that is used with a microplate
reader to measure light. The basic principles of microplate readers are that
light from an appropriate source is directed to a wavelength selection device,
such as a monochromator, and its intensity is measured before and after passing
through each of the sample wells of a microplate. Application of a mathematical
formula to the light intensity measurements of each microplate well provides a
measure of the sample present in the well. The measurement, known as optical
density, relative fluorescence, or luminescence, is proportional to the
concentration of the substance that is being measured. Historically, the
standard microplate was comprised of 96 individual wells. As cost and throughput
have become increasingly important, however, the industry has begun to move to
higher density plates including 384 wells and 1536 wells. We believe that this
trend towards miniaturization will continue to be a significant factor affecting
the microplate reader market in the future.




                                       8
<PAGE>   9

Maxline

   Our Maxline strategy has been to continue to introduce new products that
include first-of-a-kind features, as well as to offer varying feature sets and
price points to address different market segments. We have historically focused
on the premium end of the microplate reader market through offering products
with advanced capabilities. Some of the first-of-a-kind features that we have
pioneered include the first reader and software capable of kinetic analysis, the
first monochromator-based reader that enabled continuous wavelength selection
and the first reader capable of performance comparable to a spectrophotometer.
In each case, we believe that the innovation helped expand the utility of
microplate readers and, more broadly, the available market for microplate
readers. Our Maxline family currently includes the following primary products:

   -  Emax. This product is aimed at the market for traditional microplate
      readers that do not require kinetic capability. We introduced it to
      provide a reader for customers in academia and other customers with
      restricted capital budgets.

   -  Vmax. This was the first microplate reader to offer kinetic read
      capability and is designed to address the needs of biochemists.

   -  VERSAmax. The VERSAmax is our low cost variable wavelength offering that
      provides kinetic capability and temperature control.

   -  SPECTRAmax 340PC. This product is a visible range microplate
      spectrophotometer, offering tunability and the additional capability of
      our patented PathCheck Sensor technology, which corrects common
      variability problems across wells of microplates.

   -  SPECTRAmax 190. The predecessor to this product was the world's first
      microplate reader that incorporated a monochromator for continuous
      wavelength selection. Wavelength selection provides for enhanced
      convenience and flexibility in assay design. In addition, the SPECTRAmax
      190 also includes our patented PathCheck Sensor technology.

   -  SPECTRAmax PLUS(384). The SPECTRAmax PLUS, introduced in 1997, was our
      first microplate reader aimed at the spectrophotometer market. It was the
      industry's first microplate reader that was able to combine the
      high-throughput of a microplate reader with the performance of a cuvette
      based spectrophotometer as a result of our patented PathCheck Sensor
      technology. The SPECTRAmax PLUS was also the first microplate reader with
      the ability to read wavelengths as short as 190 nanometers and as long as
      1,000 nanometers, the equivalent range to a spectrophotometer. The
      SPECTRAmax PLUS(384), introduced in 2000, addresses the needs of the
      high-throughput screening market by adding 384-well plate compatibility.

   -  SPECTRAmax GEMINI XS. SPECTRAmax GEMINI, introduced in late 1998, was the
      world's first dual-scanning microplate spectrofluorometer. By
      incorporating two scanning monochromators, the SPECTRAmax GEMINI allows
      the user to automatically optimize the instrument setting for the
      particular assay characteristics as well as for every fluorophore that is
      in use today. GEMINI also was our first microplate reader capable of
      multi-mode operation, in that the product is capable of fluorescence,
      luminescence and time-resolved fluorescence measurements. The GEMINI XS
      (Extra Sensitive), introduced in 2000, extends the GEMINI franchise by
      significantly improving sensitivity and adding well scanning capability
      which allows researchers to perform more complex cell based assays.

   -  SPECTRAmax LMax. SPECTRAmax LMax, introduced in 2000, is our first reader
      to offer customers sensitive luminescence detection in a bench-top
      instrument.

Skatron

   We acquired a line of liquid handling systems, primarily washers, through our
acquisition of Skatron in 1999. Washers are used to dispense and remove fluid
from microwell plates and are used as an integral step during the course of many
assays. The Skatron products bring a complete line of state-of-the-art microwell
plate washers and other related tools, including cell harvesters, to the Life
Sciences Research product family. These products include a variety of cell and
plate washers that offer 96, 384 and 1536 well washing capabilities.




                                       9
<PAGE>   10

Threshold System

   Our Threshold system is comprised of a detection instrument and proprietary
reagents. Our Threshold system incorporates our LAPS technology to quantitate a
variety of biomolecules such as DNA, proteins and mRNA rapidly and accurately.
The demand for systems which can quantitate contaminants in the manufacturing
and quality control of bioengineered products is in response to the growing
number of biopharmaceutical therapeutics both entering clinical trials and
receiving regulatory approval for commercial sale. The Threshold system emerged
from a need by biopharmaceutical companies for more sensitive and reproducible
methods to detect contaminants in biopharmaceuticals during the manufacturing
and quality control process. Traditional detection methods, such as DNA
hybridization, can be slow, difficult to use in a manner that provides
reproducible and transferable results, and often require the use of radioactive
materials for detection. We believe that the Threshold system is the only
commercially available, fully-integrated system capable of rapidly and
accurately quantitating DNA with picogram level sensitivity. The Threshold
family of products includes a workstation, software and consumable reagent kits.


SOFTWARE AND CUSTOMER SERVICE

   In addition to instruments and consumable products, we also offer software
products and support services. All of our instrument products are used with
internally designed and developed software which are sold as an integral part of
the instrument system. We believe that our software is an important
differentiator for our instrument products relative to the competition based on
its ease-of-use and advanced data analysis capabilities.

   Our service and support offerings include field service, customer support,
applications assistance and training through an organization of factory-trained
and educated service and application support personnel around the world. We
offer services to our installed base of customers on both a contract and time
and materials basis and we offer a variety of post-warranty contract options for
all our instrument offerings that customers may purchase. Our installed base
provides us with stable, recurring after-market service and support revenue, as
well as product upgrade and replacement opportunities.


RESEARCH AND DEVELOPMENT

   Our research and development team included 82 full time employees as of
December 31, 2000. Our combined operations have typically invested 17% to 21% of
our revenues in research and development, which has resulted in a track record
of technological innovation. Over 76% of our revenues in 2000 were derived from
products that we introduced in the last three years. Our research and
development expenditures were approximately $16.8 million in 2000, $14.1 million
in 1999 and $11.2 million in 1998.

   Our research and development activities are focused on:

   -  broadening our technology solution, including development of new
      proprietary reagent kits;

   -  providing more sensitive quantitative evaluation of biological events;

   -  providing greater throughput capability, especially with smaller sample
      volumes; and

   -  developing increasingly sophisticated data management and analysis
      capability.


MARKETING AND CUSTOMERS

   Our sales and marketing organization included 137 full time employees in
North America, Europe and Japan as of December 31, 2000. We distribute our
products primarily through direct sales representatives in North America. We
have subsidiaries in the United Kingdom, Germany and Japan responsible for
selling and servicing our products. Our direct sales effort is supported by a
team of service, technical and applications specialists employed by us. We also
sell our products through international distributors, most of which enter into
distribution agreements with us that provide for exclusive distribution
arrangements and minimum purchase targets. Such agreements also generally
prohibit the distributors from designing, manufacturing, promoting or selling
any products that are competitive with our products.




                                       10
<PAGE>   11

   Our customers include leading pharmaceutical and biotechnology companies as
well as medical centers, universities, government research laboratories and
other institutions throughout the world. No single customer accounted for more
than 5% of our total 2000 revenues.

   In 2000, sales to customers outside the United States accounted for 37% of
total revenues and total sales denominated in foreign currencies accounted for
20% of total revenues. We anticipate that international sales will account for
an increasing percentage of revenues in the future. We expect to continue
expanding our international operations in order to take advantage of increasing
international market opportunities resulting from worldwide growth in the life
sciences industry.


MANUFACTURING

   We manufacture our products at our facilities in Sunnyvale, California and
Norway. Our California facility is ISO 9001 certified. We manufacture our own
components where we believe it adds significant value, but we rely on suppliers
for the manufacture of selected components and subassemblies, which are
manufactured to our specifications. We conduct all final testing and inspection
of our products. We have established a quality control program, including a set
of standard manufacturing and documentation procedures intended to ensure that,
where required, our instruments are manufactured in accordance with Good
Manufacturing Practices.


PATENTS AND PROPRIETARY TECHNOLOGIES

   We protect our proprietary rights from unauthorized use by third parties to
the extent that our proprietary rights are covered by valid and enforceable
patents or are effectively maintained as trade secrets. Patents and other
proprietary rights are an essential element of our business. Our policy is to
file patent applications and to protect technology, inventions and improvements
to inventions that are commercially important to the development of our
business. As of December 31, 2000, we were maintaining 40 U.S. patents and other
corresponding foreign patents based on our discoveries that have been issued or
allowed. In addition, as of that date, we had 55 patent applications pending in
the United States and had filed several corresponding foreign patent
applications.

   We are a party to various license agreements that give us rights to use
certain technologies. We pay royalties to the parties from which we licensed or
acquired the core technologies.

   We also rely on trade secret, employee and third-party nondisclosure
agreements and other protective measures to protect our intellectual property
rights pertaining to our products and technology.


COMPETITION

   The market for life sciences instrumentation is highly competitive, and we
expect competition to increase. We compete for the allocation of customer
capital funds with many other companies marketing capital equipment, including
those not directly competitive with any of our products. Some of our products
also compete directly with similar products from other companies.

   The life sciences research market is characterized by intense competition
among a number of companies, including Bio-Tek Instruments, Packard BioScience,
PerkinElmer, Tecan and Thermo BioAnalysis, that offer, or may in the future
offer, products with performance capabilities generally similar to those offered
by our products. We expect that competition is likely to increase in the future,
as several current and potential competitors have the technological and
financial ability to enter the microplate reader market. Our Maxline products
are generally priced at a premium to other microplate readers. We compete in the
microplate reader market primarily on the basis of performance and productivity.
Many companies, research institutions and government organizations that might
otherwise be customers for our products employ methods for bioanalytical
analysis that are internally developed.

   The drug discovery market is also characterized by intense competition among
a number of companies, including AP Biotech, Applied Biosystems, Aurora
Biosciences, Cellomics, Packard BioScience, and PerkinElmer, that offer, or may
in the future offer, products with performance capabilities generally similar to
those offered by our products. We believe that the primary competitive factors
in the market for our products are throughput, quantitative accuracy, breadth of
applications, ease-of-use, productivity enhancement, quality, support and
price/performance. We believe that we compete favorably with respect to these
factors.

   Many of our competitors have significantly greater financial, technical,
marketing, sales and other resources than we do. In addition to competing with
us with respect to product sales, these companies and institutions compete with
us in recruiting and retaining highly qualified scientific and management
personnel.




                                       11
<PAGE>   12

GOVERNMENT REGULATION

   In the United States, the development, manufacturing, distribution, labeling
and advertising of products intended for use in the diagnosis of disease or
other conditions is extensively regulated by the U.S. Food and Drug
Administration, known as the FDA. These products generally require FDA clearance
before they may be marketed, and also are subject to postmarket manufacturing,
reporting and labeling requirements. With the exception of certain of our
Maxline microplate readers, none of our products is intended for use in the
diagnosis of disease or other conditions, and, therefore, they are not currently
subject to FDA regulation. The Maxline readers intended for diagnostic uses are
the subject of an FDA marketing clearance. If we were to offer any of our other
products for diagnostic uses, those products would become subject to FDA
regulation.


EMPLOYEES

   As of December 31, 2000, we employed 332 persons full time, including 82 in
research and development, 81 in manufacturing, 137 in marketing and sales and 32
in general administration and finance. Of these employees, 56 hold Ph.D. or
other advanced degrees. None of our employees is covered by collective
bargaining agreements, and we consider relations with our employees to be good.


BUSINESS RISKS

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

   VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR US TO SELL OUR PRODUCTS AND
   COLLECT ACCOUNTS RECEIVABLE AND THE TIMING OF CUSTOMER ORDERS MAY CAUSE
   FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH COULD CAUSE OUR STOCK PRICE TO
   DECLINE.

   The timing of capital equipment purchases by customers is expected to be
uneven and difficult to predict. Our products represent major capital purchases
for our customers. The list prices for our instruments range from $5,000 to
$494,500. Accordingly, our customers generally take a relatively long time to
evaluate our products, and a significant portion of our revenues is typically
derived from sales of a small number of relatively high-priced products.
Purchases are generally made by purchase orders and not long-term contracts.
Delays in receipt of anticipated orders for our relatively high priced products
could lead to substantial variability from quarter to quarter. Furthermore, we
have historically received purchase orders and made a significant portion of
each quarter's product shipments near the end of the quarter. If that pattern
continues, even short delays in the receipt of orders or shipment of products at
the end of a quarter could have a materially adverse affect on results of
operations for that quarter.

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

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

   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.




                                       12
<PAGE>   13

   WE DEPEND ON ORDERS THAT ARE RECEIVED AND SHIPPED IN THE SAME QUARTER AND
   THEREFORE HAVE LIMITED VISIBILITY OF FUTURE PRODUCT SHIPMENTS.

   Our net sales in any given quarter depend upon a combination of orders
received in that quarter for shipment in that quarter and shipments from
backlog. Our products are typically shipped within 30 to 90 days of purchase
order receipt. As a result, we do not believe that the amount of backlog at any
particular date is indicative of our future level of sales. Our backlog at the
beginning of each quarter does not include all product sales needed to achieve
expected revenues for that quarter. Consequently, we are dependent on obtaining
orders for products to be shipped in the same quarter that the order is
received. Moreover, customers may reschedule 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. Over 76% of our
revenues in 2000 were derived from the sale of products that were introduced in
the last three years, and our future success will depend on our ability to
enhance our current products and to develop and introduce, on a timely basis,
new products that address the evolving needs of our customers. We may experience
difficulties or delays in our development efforts with respect to new products,
and we may not ultimately be successful in developing them. Any significant
delay in releasing new systems could adversely affect our reputation, give a
competitor a first-to-market advantage or cause a competitor to achieve greater
market share. In addition, our future success depends on our continued ability
to develop new applications for our existing products. If we are not able to
complete the development of these applications, or if we experience difficulties
or delays, we may lose our current customers and may not be able to attract new
customers, which could seriously harm our business and our future growth
prospects.




                                       13
<PAGE>   14

   WE MUST EXPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP NEW
   PRODUCTS AND IF THESE PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, OUR
   OPERATING RESULTS MAY SUFFER.

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

   IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY WILL BE HARMED AND THE
   SALES AND MARKET ACCEPTANCE OF OUR PRODUCTS WILL DECREASE.

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

   MOST OF OUR CURRENT AND POTENTIAL CUSTOMERS ARE FROM THE PHARMACEUTICAL AND
   BIOTECHNOLOGY INDUSTRIES AND ARE SUBJECT TO RISKS FACED BY THOSE INDUSTRIES.

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

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

   OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS,
   WHICH MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT
   SUCCESSFUL, COULD ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US
   FROM SELLING OUR PRODUCTS.

   Third parties may assert infringement or other intellectual property claims
against us. We may have to pay substantial damages, including treble damages,
for past infringement if it is ultimately determined that our products infringe
a third party's proprietary rights. Further, any legal action against us could,
in addition to subjecting us to potential liability for damages, prohibit us
from selling our products before we obtain a license to do so from the party
owning the intellectual property, which, if available at all, may require us to
pay substantial royalties. Even if these claims are without merit, defending a
lawsuit takes significant time, may be expensive and may divert management
attention from other business concerns. 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.




                                       14
<PAGE>   15

   WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH
   WOULD BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR
   INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN
   THE MARKET.

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

-  assert claims of infringement;

-  enforce our patents;

-  protect our trade secrets or know-how; or

-  determine the enforceability, scope and validity of the proprietary rights of
   others.

   Lawsuits could be expensive, take significant time and divert management's
attention from other business concerns. They would put our patents at risk of
being invalidated or interpreted narrowly and our patent applications at risk of
not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. We cannot assure you that we will prevail in any of
these suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, 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 technology underlying our products. If they do
not protect our rights, third parties could use our technology, and our ability
to compete in the market would be reduced. In addition, employees, consultants
and others who participate in the development of our products may breach their
agreements with us regarding our intellectual property, and we may not have
adequate remedies for the breach. We




                                       15
<PAGE>   16

also may not be able to effectively protect our intellectual property rights in
some foreign countries. For a variety of reasons, we may decide not to file for
patent, copyright or trademark protection or prosecute potential infringements
of our patents. We also realize that our trade secrets may become known through
other means not currently foreseen by us. Notwithstanding our efforts to protect
our intellectual property, our competitors may independently develop similar or
alternative technologies or products that are equal or superior to our
technology and products without infringing on any of our intellectual property
rights or design around our proprietary technologies.

   WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS
   FROM A SINGLE SOURCE OR A LIMITED GROUP OF SUPPLIERS, AND THE PARTIAL OR
   COMPLETE LOSS OF ONE OF THESE SUPPLIERS COULD CAUSE PRODUCTION DELAYS AND A
   SUBSTANTIAL LOSS OF REVENUES.

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

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

-  we may be unable to obtain an adequate supply of required components;

-  we have reduced control over pricing and the timely delivery of components
   and subassemblies; and

-  our suppliers may be unable to develop technologically advanced products to
   support our growth and development of new systems.

   For example, we relied primarily on a single supplier of disposable plastic
tips used with our FLIPR(384) system for most of 2000, and we experienced delays
and customer dissatisfaction due to our supplier's inability to deliver an
adequate supply of tips. We now have an alternative supplier for the disposable
plastic tips but we cannot predict whether we will encounter additional similar
delays in the future. Our current supplier and known potential alternative
suppliers of disposable plastic tips used with our FLIPR(384) system are our
competitors.

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

   WE MAY ENCOUNTER MANUFACTURING AND ASSEMBLY PROBLEMS OR DELAYS, WHICH COULD
RESULT IN LOST REVENUES.

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

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

   As we develop new products, we must transition the manufacture of a new
product from the development stage to commercial manufacturing. We cannot
predict whether we will be able to complete these transitions on a timely basis
and with commercially




                                       16
<PAGE>   17

reasonable costs. We cannot assure you that manufacturing or quality control
problems will not arise as we attempt to scale-up our production for any future
new products or that we can scale-up manufacturing and quality control in a
timely manner or at commercially reasonable costs. If we are unable to
consistently manufacture our products on a timely basis because of these or
other factors, our product sales will decline.

   WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

   We expect to continue to experience significant growth in the number of our
employees and customers and the scope of our operations, including as a result
of potential acquisition. 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 2000, approximately 17% of our sales were made through distributors. We
often rely upon distributors to provide customer support to the ultimate end
users of our products. As a result, our success depends on the continued sales
and customer support efforts of our network of distributors. The use of
distributors involves certain risks, including risks that distributors will not
effectively sell or support our products, that they will be unable to satisfy
financial obligations to us and that they will cease operations. Any reduction,
delay or loss of orders from our significant distributors could harm our
revenues. We also do not currently have distributors in a number of significant
international markets that we have targeted and will need to establish
additional international distribution relationships. In January 2001, we
acquired our Japanese distributor, Nihon Molecular Devices. As a result, we will
be providing direct sales and service support to customers in this substantial
market. There can be no assurance that we will engage qualified distributors in
a timely manner, and the failure to do so could have a materially adverse affect
on our business, financial condition and results of operations.

   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 may choose to do so in the future. We do not know if we will be
able to complete any acquisitions, or whether we will be able to successfully
integrate any acquired business, operate it profitably or retain its key
employees. Integrating any business, product or technology we acquire could be
expensive and time consuming, disrupt our ongoing business and distract our
management. In addition, in order to finance any acquisitions, we might need to
raise additional funds through public or private equity or debt financings. In
that event, we could be forced to obtain financing on terms that are not
favorable to us and, in the case of equity financing, that may result in
dilution to our shareholders. If we are unable to integrate any acquired
entities, products or technologies effectively, our business will suffer. In
addition, any amortization of goodwill or other assets or charges resulting from
the costs of acquisitions could harm our business and operating results.

   WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
   COMPETE.

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




                                       17
<PAGE>   18

   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 37% our
revenues in 2000. We anticipate that international sales will continue to
account for a significant portion of our revenues.

   All of our sales to international distributors are denominated in U.S.
dollars. All of our direct sales in the United Kingdom, Germany, France and
Canada are denominated in local currencies and totaled $19.2 million (20% of
total revenues) in 2000. In early 2001, we acquired our Japanese distributor
and, as a result, our future direct sales there will be denominated in local
currency. To the extent that our sales and operating expenses are denominated in
foreign currencies, our operating results may be adversely affected by changes
in exchange rates. Historically, foreign exchange gains and losses have been
immaterial to our results of operations. However, we cannot predict whether
these gains and losses will continue to be immaterial, particularly as we
increase our direct sales outside North America. Owing to the number of
currencies involved, the substantial volatility of currency exchange rates, and
our constantly changing currency exposures, we cannot predict the effect of
exchange rate fluctuations on our future operating results. We do not currently
engage in foreign currency hedging transactions.

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

-  political, social and economic instability;

-  trade restrictions and changes in tariffs;

-  import and export license requirements and restrictions;

-  difficulties in staffing and managing international operations;

-  disruptions in international transport or delivery;

-  difficulties in collecting receivables; and

-  potentially adverse tax consequences.

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

   OUR OPERATING RESULTS FLUCTUATE AND ANY FAILURE TO MEET FINANCIAL
   EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
   DECLINE IN OUR STOCK PRICE.

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

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

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




                                       18
<PAGE>   19

   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. During
2000, our stock price ranged from $39.69 to $113.13. Our stock price could
decline regardless of our actual operating performance, and stockholders could
lose a substantial part of their investment as a result of industry or
market-based fluctuations. In the past, our stock has traded relatively thinly.
If a more active public market for our stock is not sustained, it may be
difficult for stockholders to resell shares of our common stock. Because we do
not anticipate paying cash dividends on our common stock for the foreseeable
future, stockholders will not be able to receive a return on their shares unless
they sell them.

   THE MARKET PRICE OF OUR COMMON STOCK WILL LIKELY FLUCTUATE IN RESPONSE TO A
   NUMBER OF FACTORS, INCLUDING THE FOLLOWING:

-  our failure to meet the performance estimates of securities analysts;

-  changes in financial estimates of our revenues and operating results or
   buy/sell recommendations by securities analysts;

-  the timing of announcements by us or our competitors of significant products,
   contracts or acquisitions or publicity regarding actual or potential results
   or performance thereof; and

-  general stock market conditions, other economic or external factors.

   PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
   WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE
   FOR OUR COMMON STOCK.

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

RISKS RELATING TO THE MERGER

   IF WE DO NOT SUCCESSFULLY INTEGRATE THE COMPANIES INTO A SINGLE BUSINESS AND
   REALIZE THE EXPECTED BENEFITS OF THE MERGER, WE WILL HAVE INCURRED
   SIGNIFICANT COSTS WHICH MAY HARM OUR BUSINESS.

   Molecular Devices expects to incur costs from integrating LJL BioSystems'
operations, products and personnel. These costs may be substantial and may
include costs for:

-    employee redeployment, relocation or severance;

-    conversion of information systems;

-    reorganization or closures of facilities; and

-    relocation or disposition of excess equipment.


   We do not know whether Molecular Devices will be successful in these
integration efforts and cannot assure you that we will realize the expected
benefits of the merger.

   IF CUSTOMER RELATIONSHIPS OR STRATEGIC PARTNERSHIPS ARE DISRUPTED BY THE
   MERGER, OUR SALES COULD DECLINE OR WE COULD LOSE CUSTOMERS.

   Customers of Molecular Devices and LJL BioSystems may not continue their
current buying patterns following the merger. Any significant delay or reduction
in orders for Molecular Devices' or LJL BioSystems' products could have a
materially adverse affect on the combined company's business, financial
condition and results of operations. Customers may defer purchasing decisions as
they evaluate the likelihood of successful integration of Molecular Devices' and
LJL BioSystems' products and the combined company's future product strategy.
Customers may also consider purchasing products of competitors. In addition, by
increasing the breadth of Molecular Devices' and LJL BioSystems' business, the
merger may make it more difficult for the combined company to enter into or
maintain relationships, including relationships with customers or partners.

   IF WE ARE NOT SUCCESSFUL IN INTEGRATING OUR ORGANIZATIONS, WE WILL NOT BE
   ABLE TO OPERATE EFFICIENTLY AFTER THE MERGER.

   Achieving the benefits of the merger will also depend in part on the
successful integration of Molecular Devices' and LJL BioSystems' operations and
personnel in a timely and efficient manner. For example, such integration
requires coordination of different development, engineering, sales, marketing,
manufacturing and administrative teams. This, too, will be difficult and
unpredictable because of possible cultural conflicts and different opinions on
technical decisions, product roadmaps and other decisions. If we cannot
successfully integrate our operations and personnel, we will not realize the
expected benefits of the merger and/or business results of operations may be
seriously harmed.

   INTEGRATING OUR COMPANIES MAY DIVERT MANAGEMENT'S ATTENTION AWAY FROM OUR
   OPERATIONS.

   Successful integration of Molecular Devices' and LJL BioSystems' operations,
products and personnel may place a significant burden on our management and our
internal resources. The diversion of management attention and any difficulties
encountered in the transition and integration process could have a materially
adverse affect on the combined company's business, financial condition and
operating results.

   FAILURE TO RETAIN KEY EMPLOYEES COULD DIMINISH THE BENEFITS OF THE MERGER.

   The successful combination of Molecular Devices and LJL BioSystems will
depend in part on the retention of key personnel. We cannot assure you that the
combined company will be able to retain key management, technical, sales,
customer support and other personnel, or that the anticipated benefits of their
expertise, experience and capabilities will be realized.

   IF WE DO NOT SUCCESSFULLY MANUFACTURE, PROMOTE, SELL AND SERVICE OUR
   PRODUCTS, AND INTEGRATE OUR TECHNOLOGIES TO DEVELOP NEW PRODUCTS, WE MAY LOSE
   CUSTOMERS AND FAIL TO ACHIEVE OUR FINANCIAL OBJECTIVES.

   Achieving the benefits of the merger will depend in part on our ability to
continue to successfully manufacture, promote, sell and service our products,
and integrate our technologies to develop new products and product features, in
a timely and efficient manner. In order to provide enhanced and more valuable
products to our customers after the merger, we will need to integrate our
development organizations. This will be difficult and unpredictable because our
products:

-    are highly complex;

-    involve different technologies;

-    have been developed independently; and

-    were designed without regard to such integration.


   If we cannot successfully manufacture, promote, sell and service our products
and integrate our technologies to provide customers with new products and
product features in the future on a timely basis, we may lose customers and our
business and results of operations may be seriously harmed.

   OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR
   FORWARD-LOOKING STATEMENTS.

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




                                       19
<PAGE>   20

ITEM 2.  PROPERTIES

   We lease four facilities with approximately 138,100 square feet of
laboratory, manufacturing and administrative space in Sunnyvale, California. We
also lease sales and service offices in the United Kingdom and Germany, and a
small manufacturing facility in Norway. We believe that our current facilities
will be sufficient for our operations through at least 2002. These properties
are described below:

<TABLE>
<CAPTION>
        LOCATION            OWNERSHIP                   FACILITIES                 LEASE EXPIRATION
-------------------------- ------------- ----------------------------------------- -----------------
<S>                        <C>           <C>                                       <C>
1311 Orleans Drive            Leased     Approximately  60,000 square feet of      October 31, 2007
Sunnyvale, CA  94089                     office and manufacturing space

1312 Crossman Avenue        Subleased    Approximately 54,400 square feet  of      April 30, 2003
Sunnyvale, CA  94089                     office and manufacturing space

404 Tasman Drive              Leased     Approximately 14,100 square feet of       January 31, 2001
Sunnyvale, CA  94089                     office and manufacturing space

405 Tasman Drive            Subleased    Approximately 9,600 square feet of        August 30, 2002
Sunnyvale, CA  94089                     office and manufacturing space

Wokingham, England            Leased     Approximately 4,200 square feet of        August 20, 2009
                                         office space

Munich, Germany               Leased     Approximately 3,500 square feet of        October 31, 2001
                                         office space

Oslo, Norway                  Leased     Approximately 17,500 square feet of       December 12, 2001
                                         office and manufacturing space
</TABLE>


ITEM 3. LEGAL PROCEEDINGS

   We are not currently a party to any material legal proceedings.

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

   None.




                                       20
<PAGE>   21

                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   Our common stock is traded on the Nasdaq National Market under the symbol
"MDCC."

   The prices per share reflected on the table below represent the range of high
and low closing sales prices of the common stock on the Nasdaq National Market,
for the period indicated.

<TABLE>
<CAPTION>
                                  2000                   1999
                           --------------------    -----------------
                             HIGH        LOW        HIGH      LOW
                           -------     --------    ------    -------
<S>                        <C>         <C>         <C>       <C>
First Quarter.........     113 1/8     42 3/8      31        20 1/2
Second Quarter........      77 3/4     39 11/16    37 1/2    21 3/4
Third Quarter.........     110 7/16    55 1/2      41 1/2    26 1/18
Fourth Quarter........      99 1/4     48 7/8      52        27 17/18
</TABLE>

   Historically, we have not paid cash dividends on our common stock and do not
intend to pay any cash dividends in the foreseeable future. Any future cash
dividends will be determined by the Board of Directors. As of March 26, 2001,
there were approximately 5,235 stockholders of record of Molecular Devices. On
March 26, 2001, the last sale price reported on the Nasdaq National Market for
our common stock was $45.50 per share.

   We entered into employment arrangements with each of Joseph D. Keegan, Ph.D.,
Mr. Timothy A. Harkness and Mr. John S. Senaldi pursuant to which we are
obligated to issue to each such officer shares of our common stock in exchange
for services rendered. As a result of these arrangements, we issued shares of
our common stock to these officers in 2000 on the dates and amounts indicated
below in reliance on the exemption from registration afforded by Section 4(2) of
the Securities Act of 1933, as amended.

<TABLE>
<CAPTION>
                                     NUMBER
                                    OF SHARES  DATE OF ISSUE
                                    ---------  -------------
             <S>                    <C>        <C>
             Dr. Keegan..........     3,750      03/30/2000

             Mr. Harkness........     1,250      01/09/2000
                                      1,250      04/09/2000
                                      1,250      07/09/2000

             Mr. Senaldi.........       312      02/06/2000
                                        312      05/06/2000
                                        312      08/06/2000
</TABLE>




                                       21
<PAGE>   22

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

   The following table sets forth selected historical financial information for
Molecular Devices, certain portions of which are based on, and should be read in
conjunction with, our audited consolidated financial statements that are being
filed as a part of this report.

<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                       -------------------------------------------------------
                                                         2000         1999      1998        1997        1996
                                                       ---------    -------   --------    --------    --------
<S>                                                    <C>          <C>       <C>         <C>         <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenues                                               $  96,035    $71,902   $ 52,234    $ 43,490    $ 40,211
Cost of revenues                                          35,583     26,299     20,203      16,745      14,496
                                                       ---------    -------   --------    --------    --------
Gross margin                                              60,452     45,603     32,031      26,745      25,715
Operating expenses:
  Research and development                                16,796     14,150     11,158       8,232       6,965
  Merger and acquisition expenses                         15,181      2,037        876          --       4,637
  Selling, general and administrative                     31,906     25,630     19,386      14,028      13,982
                                                       ---------    -------   --------    --------    --------
Total operating expenses                                  63,883     41,817     31,420      22,260      25,584
                                                       ---------    -------   --------    --------    --------
Income (loss) from operations (1)                         (3,431)     3,786        611       4,485         131
Other income, net                                          4,912      1,921      2,178       1,448       1,255
                                                       ---------    -------   --------    --------    --------
Income before income taxes                                 1,481      5,707      2,789       5,933       1,386
Income tax provision (benefit)                             6,415      2,056        956       2,017      (1,386)
                                                       ---------    -------   --------    --------    --------

Net income (loss)                                      $  (4,934)   $ 3,651   $  1,833    $  3,916    $  2,772
                                                       =========    =======   ========    ========    ========

Basic net income (loss) per share                      $   (0.32)   $  0.27   $   0.15    $   0.35    $   0.27
                                                       =========    =======   ========    ========    ========

Diluted net income (loss) per share                    $   (0.32)   $  0.26   $   0.14    $   0.33    $   0.25
                                                       =========    =======   ========    ========    ========

Shares used in computing basic net
income (loss) per share                                   15,246     13,347     12,407      11,107      10,178
                                                       =========    =======   ========    ========    ========
Shares used in computing diluted net
income (loss) per share                                   15,246     14,149     12,965      11,906      10,987
                                                       =========    =======   ========    ========    ========

PRO FORMA CONSOLIDATED STATEMENTS OF INCOME DATA(2):

  Pro forma operating income                           $  11,750    $ 5,823   $  1,487    $  4,485    $  4,768
                                                       =========    =======   ========    ========    ========
  Pro forma net income                                 $  10,247    $ 4,954   $  2,409    $  3,916    $  3,704
                                                       =========    =======   ========    ========    ========
  Pro forma diluted net income per share               $    0.62    $  0.35   $   0.19    $   0.33    $   0.34
                                                       =========    =======   ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                       -------------------------------------------------------
                                                         2000         1999      1998        1997        1996
                                                       ---------    -------   --------    --------    --------
                                                                          (IN THOUSANDS)
<S>                                                    <C>          <C>       <C>         <C>         <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments      $  97,091    $36,650   $ 40,030    $ 32,298    $ 24,893
Working capital                                          138,184     65,748     55,014      42,031      25,135
Total assets                                             180,033     86,849     72,319      50,752      37,326
Retained earnings (accumulated deficit)                   (4,833)       101     (3,550)     (5,383)     (9,297)
Total stockholders' equity                               163,633     74,304     60,700      44,098      27,125
</TABLE>

-----------------
(1) Our 2000 income from operations included a $15.2 million charge related to
    direct costs incurred due to the merger with LJL BioSystems, which was
    accounted for as a pooling of interests. Our 1999 income from operations
    included a $2.0 million write-off for the acquisition of in-process
    technology and acquisition costs relating to our acquisition of Skatron
    Instruments AS. Our 1998 income from operations included an $876,000
    write-off for the acquisition of in-process technology and acquisition costs
    relating to our acquisition of certain technology rights from Affymax
    Research Institute. Our 1996 income from operations included a $4.6 million
    write-off for the acquisition of in-process technology and acquisition costs
    related to our acquisition of NovelTech Systems.

(2) We have excluded the impact of the write-offs of in-process technology and
    acquisition costs in 2000, 1999, 1998 and 1996 described in footnote (1)
    above, net of tax. 1996 also excluded the tax benefits we realized from the
    utilization of net operating loss carryforwards and included a provision for
    taxes at a 38.5% effective rate.




                                       22
<PAGE>   23

ITEM 7.  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 area number of important factors that could
cause our results to differ materially from those indicated by these
forward-looking statements, including, among others, those discussed in this
section as well as under "Item I. Business--Business Risks" and "Qualitative and
Quantitative Disclosures about Market Risk" and the risks detailed from time to
time in the Company's SEC reports, including this Annual Report on Form 10-K for
they year ended December 31, 2000.

   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 and combinatorial chemistry by
facilitating the high-throughput and cost-effective identification and
evaluation of drug candidates. Molecular Devices instruments systems are based
on our advanced core technologies that integrate our expertise in engineering,
molecular and cell biology, and chemistry. We enable our customers to improve
research productivity and effectiveness, which ultimately accelerates the
complex process of discovering and developing new drugs.

   Molecular Devices acquired all of the outstanding stock of LJL BioSystems in
a tax-free, stock-for-stock transaction on August 30, 2000, as a result of which
LJL BioSystems became a wholly owned subsidiary of Molecular Devices. The
transaction was accounted for under the pooling-of-interests method of
accounting and, accordingly, all financial information has been restated to
include the operations of LJL BioSystems for all periods presented.

   Our combined operations have typically invested 17% to 21% of our revenues in
research and development, which has resulted in a track record of technological
innovation. Over 76% of our revenues in 2000 were derived from products that we
introduced in the last three years. We have sold over 15,000 instruments in our
history.

   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. No single
customer accounted for more than 5% of our consolidated revenues in 2000. We
recognize revenue on the sale of our products 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.
Service contract revenue is deferred at the time of sale and recognized ratably
over the period of performance. Total service revenue was less than 5% of total
revenues for all periods presented. In 2000, sales to customers outside the
United States accounted for 37% of total revenues and total sales denominated in
foreign currencies accounted for 20% of total revenues. 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. We expect this
trend to continue in future years.




                                       23
<PAGE>   24

RESULTS OF OPERATIONS

   The following table summarizes our consolidated statement of income as a
percentage of revenues:

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                               ------------------------
                                                                 2000     1999     1998
                                                               -------- -------- ------
<S>                                                             <C>      <C>      <C>
Revenues...................................................     100.0%   100.0%   100.0%
Cost of revenues...........................................      37.1     36.6     38.7
                                                                -----    -----    -----
Gross margin...............................................      62.9     63.4     61.3
Research and development...................................      17.5     19.7     21.4
Merger and acquisition expenses............................      15.8      2.8      1.7
Selling, general and administrative........................      33.2     35.6     37.1
                                                                -----    -----    -----
Income (loss) from operations..............................      (3.6)     5.3      1.1
Other income, net..........................................       5.2      2.7      4.2
                                                                -----    -----    -----
Income before income taxes.................................       1.6      8.0      5.3
Income tax provision.......................................       6.7      2.9      1.8
                                                                -----    -----    -----
Net income (loss)..........................................      (5.1)%    5.1%     3.5%
                                                                ======   =====    =====
Pro forma net income(1)....................................      10.7 %    6.9%     4.6%
                                                                ======   =====    =====
</TABLE>

----------

(1) Excludes the impact of the merger and acquisition expenses recorded in 2000,
    1999 and 1998, net of tax.


YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

   Revenues for 2000 increased by 34% to $96.0 million from $71.9 million in
1999. Revenues for 1999 increased by 38% to $71.9 million from $52.2 million in
1998. This top-line growth was driven by strong contributions from both our Life
Sciences Research and Drug Discovery product families in each year. Life
Sciences Research revenues increased in 2000 primarily due to the worldwide
strength of the SPECTRAmax PLUS (384) and SPECTRAmax Gemini XS, both introduced
in the first quarter of 2000, and increased Threshold revenues worldwide. In
1999, the Life Sciences Research revenues increased primarily due to the
worldwide strength of the SPECTRAmax Gemini. Drug Discovery growth was driven
primarily by the continued worldwide demand for our FLIPR(384) as well as
increased sales of LJL BioSystems' Analyst AD and Analyst HT.

   Gross margin decreased slightly to 62.9% in 2000 from 63.4% in 1999. Gross
margin increased to 63.4% in 1999 from 61.3% in 1998. The 1998 to 1999 increase
related to increased sales of higher margin products in both the Life Sciences
Research and Drug Discovery product families, primarily the SPECTRAmax GEMINI
and FLIPR(384) and LJL BioSystems' Analyst HT.

   Research and development expenses for 2000 increased to $16.8 million from
$14.2 million in 1999, an increase of 19%. Research and development expenses for
1999 increased to $14.2 million from $11.2 million in 1998, an increase of 27%.
The increased spending for both periods is primarily the result of additional
personnel as well as increased expenditures on development activities required
to support both the introduction and on-going development of new Life Sciences
Research and Drug Discovery products, including new reagent kits optimized for
use on our detection systems.

   We recorded a charge of $15.2 million during the third quarter of 2000
related to the merger with LJL BioSystems, including transition costs,
investment banking, legal and other advisory services. We recorded a charge of
$2.0 million during the second quarter of 1999 due to the write-off of acquired
in-process research and development related to our acquisition of Skatron. We
recorded a charge of $876,000 during the third quarter of 1998 due to the
write-off of acquired in-process technology and acquisition costs relating to
our acquisition of certain technology rights from Affymax Research Institute.
The acquired in-process research and development had no alternative future use
at the date of acquisition.

   Selling, general and administrative expenses for 2000 increased to $31.9
million from $25.6 million in 1999, an increase of 24%. Selling, general and
administrative expenses for 1999 increased to $25.6 million from $19.4 million
in 1998, an increase of 32%. The increased spending for both periods is
primarily the result of additional spending on marketing, sales and service
related activities (including additional personnel) as we continued our efforts
to expand worldwide market coverage and introduce new products. Selling, general
and administrative expenses as a percentage of revenues were 33.2% in 2000,
35.6% in 1999 and 37.1% in 1998, reflecting improved operating leverage as our
revenue base has grown.




                                       24
<PAGE>   25

   Other income (net), consisting primarily of interest income, increased by
156% in 2000 to $4.9 million from $1.9 million in 1999 due to an increased
average cash balance primarily as a result of the capital raised through our
secondary offering in May 2000 and the capital raised by LJL BioSystems' private
placement. Other income (net) decreased by 12% in 1999 to $1.9 million from $2.2
million in 1998 due to a decreased average cash balance primarily as a result of
the Skatron acquisition.

   We recorded income tax provisions of $6.4 million in 2000, $2.1 million in
1999 and $1.0 million in 1998. These provisions reflected a 38.5%, 36.0% and
34.3% effective tax rate in 2000, 1999 and 1998, respectively. The effective tax
rate for 2000 is calculated on profit before tax excluding the LJL BioSystems
merger expenses, which are not deductible for income tax purposes. The lower
rates in 1999 and 1998 are primarily due to the realization of net operating
loss carryforwards of LJL BioSystems in those years.


LIQUIDITY AND CAPITAL RESOURCES

   We had cash, cash equivalents and short-term investments of $97.1 million at
December 31, 2000 compared to $36.6 million at December 31, 1999. Prior to the
merger with LJL BioSystems, we had typically financed our operations primarily
from cash flows provided by operating activities. However, due to the $15.2
million merger charge in the third quarter of 2000 and LJL BioSystems' operating
losses, $7.1 million, $4.4 million and $1.2 million was used in operating
activities during 2000, 1999 and 1998, respectively. Net cash used in investing
activities was $69.7 million, $5.8 million and $10.5 million in 2000, 1999 and
1998, respectively. The substantial increase in 2000 was primarily due to: (1)
$50.7 million of net short-term investment purchases, (2) $11.5 million invested
in other assets, primarily a $10.0 million investment in Argonex, Inc. and a
$1.1 million strategic equity investment in a privately held company and (3)
$7.4 million of capital expenditures, primarily related to our facilities
expansion in Sunnyvale, California. The decrease from 1998 to 1999 was primarily
due to the maturity of short-term investments, offset by $7.1 million of cash
used for the acquisition of Skatron. Net cash provided by financing activities
was $87.0 million in 2000, $8.0 million in 1999 and $13.9 million in 1998. The
2000 proceeds were primarily generated by Molecular Devices' public offering in
the second quarter of 2000, the LJL BioSystems private placement in the first
quarter of 2000, as well as cash proceeds from stock option exercises during the
year. The 1999 and 1998 proceeds relate primarily to the private placement by
LJL BioSystems in 1999 and LJL BioSystems' initial public offering in 1998, as
well as stock option exercises in each of those years.

   We believe that our existing cash and investment securities and anticipated
cash flow from our operations will be sufficient to support our current
operating plan for the foreseeable future. Our forecast of the period of time
through which our financial resources will be adequate to support our operations
is a forward-looking statement that involves risks and uncertainties, and actual
results could vary as a result of a number of factors. We have based this
estimate on assumptions that may prove to be wrong. Our future capital
requirements will depend on many factors, including:

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

   We have generated sufficient cash flow to fund our capital requirements
primarily through 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.

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




                                       25
<PAGE>   26

RECENT PRONOUNCEMENTS

   In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS No. 137
and 138, which is effective for us for the year beginning January 1, 2001,
establishes accounting and reporting standards for derivative instruments and
for hedging activities. SFAS No. 133 requires a company to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Changes in the fair value
of derivatives will be reported currently in earnings or in other comprehensive
income, depending on their effectiveness pursuant to SFAS No. 133. As of
December 31, 2000, we had not engaged in hedging activities. However, we
anticipate engaging in hedging activity in the future, and therefore, expect to
be impacted by the pronouncement at such time.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   We are exposed to market risk, including changes in interest rates and
foreign currency exchange rates. The primary objective of our investment
activities is to preserve principal while at the same time maximizing the income
we receive from our investments without significantly increasing risk. A
discussion of our accounting policies for financial instruments and further
disclosures relating to financial institutions is included in the Summary of
Significant Accounting Policies note in the Notes to Consolidated Financial
Statements included in this report.

   Our interest income is sensitive to changes in the general level of interest
rates, primarily U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on our cash equivalents and short-term
investments. We invest our excess cash primarily in demand deposits with United
States banks and money market accounts and short-term securities. These
securities, consisting of $45.3 million of commercial paper and $10.0 million of
U.S. government agency securities, are carried at market value, which
approximate cost, typically mature or are redeemable within 90 to 360 days, and
bear minimal risk. We have not experienced any significant losses on the
investments.

   We are exposed to changes in exchange rates primarily in the United Kingdom,
Germany and Canada, where we sell direct in local currencies. All other export
sales, with the exception of sales into Canada, are denominated in U.S. dollars
and bear no exchange rate risk. However, a strengthening of the U.S. dollar
could make our products less competitive in overseas markets. Gains and losses
resulting from foreign currency transactions in Canada have historically been
immaterial. Translation gains and losses related to our foreign subsidiaries in
the United Kingdom, Germany and Norway are accumulated as a separate component
of stockholders' equity. Those gains and losses have historically been
immaterial.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   The following consolidated financial statements of Molecular Devices and
financial statement schedules are attached to this report as pages 32 through
52.

   Financial Statements:

   -  Report of Ernst & Young LLP, Independent Auditors

   -  Report of PricewaterhouseCoopers LLP, Independent Auditors

   -  Consolidated Balance Sheets at December 31, 2000 and 1999

   -  Consolidated Statements of Operations for each of the three years in the
      period ended December 31, 2000

   -  Consolidated Statements of Stockholders' Equity for the three years in the
      period ended December 31, 2000

   -  Consolidated Statements of Cash Flows for each of the three years in the
      period ended December 31, 2000

   -  Notes to Consolidated Financial Statements




                                       26
<PAGE>   27

   Financial Statement Schedules:

   Schedule II -- Valuation and Qualifying Accounts

   All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

   Not applicable.




                                       27
<PAGE>   28

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Information with respect to Directors and Executive Officers may be found in
the sections entitled "Proposal 1 -- Election of Directors," and "Executive
Officers of the Company," respectively, appearing in the definitive Proxy
Statement to be delivered to stockholders in connection with the solicitation of
proxies for our Annual Meeting of Stockholders to be held on May 24, 2001 (the
"Proxy Statement"). Such information is incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION

   The information required by this item is set forth in the Proxy Statement
under the heading "Executive Compensation," which information is incorporated
herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required by this item is set forth in the Proxy Statement
under the heading "Security Ownership of Certain Beneficial Owners and
Management," which information is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required by this item is set forth in the Proxy Statement
under the heading "Certain Transactions," which information is incorporated
herein by reference.




                                       28
<PAGE>   29

                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this report:

   1.  Financial Statements -- See Index to Consolidated Financial Statements as
       Item 8 on page 26 of this report.

   2.  Financial Statement Schedules -- See Index to Consolidated Financial
       Statements as Item 8 on page 26 of this report.

   3.  Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION OF DOCUMENT
-------                             -----------------------
<S>            <C>
 2.1(1)        Form of Agreement and Plan of Merger between the Registrant and
               Molecular Devices Corporation, a California Corporation
 2.2(2)        Stock and Asset Purchase Agreement, dated as of May 17, 1999,
               among Molecular Devices Corporation, a Delaware corporation,
               Helge Skare, Wiel Skare, Steinar Faanes and Sten Skare, each an
               individual resident in Norway, Skatron Instruments AS, a
               Norwegian company, and Skatron Instruments, Inc., a Virginia
               corporation
 2.3(2)        Escrow Agreement, dated as of May 17, 1999, among Molecular
               Devices Corporation, a Delaware corporation, Helge Skare, Wiel
               Skare and Greater Bay Trust Company, as Escrow Agent
 2.4(6)        Agreement and Plan of Merger and Reorganization dated as of June
               7, 2000 by and among Molecular Devices Corporation, Mercury
               Acquisition Sub, Inc. and LJL BioSystems, Inc.
 3.1(1)        Amended and Restated Certificate of Incorporation of Registrant
 3.2(1)        Bylaws of the Registrant
 4.1(1)        Specimen Certificate of Common Stock of Registrant
10.1(1)*       1988 Stock Option Plan
10.2(1)*       Form of Incentive Stock Option under the 1988 Stock Option Plan
10.3(1)*       Form of Supplemental Stock Option under the 1988 Stock Option
               Plan
10.4(1)*       1995 Employee Stock Purchase Plan
10.6(1)*       Form of Nonstatutory Stock Option under the 1995 Non-Employee
               Directors' Stock Option Plan
10.8(1)*       Form of Incentive Stock Option under the 1995 Stock Option Plan
10.9(1)*       Form of Nonstatutory Stock Option under the 1995 Stock Option
               Plan
10.10(1)*      Form of Early Exercise Stock Purchase Agreement under the 1995
               Stock Option Plan
10.11(1)*      Form of Indemnity Agreement between the Registrant and its
               Directors and Executive Officers
10.12(1)*      Consulting Agreement dated July 20, 1988 by and between the
               Registrant and Harden M. McConnell, Ph.D.
10.19(2)*      Key Employee Agreement for Joseph D. Keegan dated March 11, 1998,
               as amended
10.20(3)       Exclusive License and Technical Support Agreement dated August
               28, 1998 by and between the Registrant and Affymax
10.21(3)*      Employee Offer Letter for Tim Harkness
10.22(3)*      Employee Offer Letter for Tony Lima
10.23(3)*      Employee Offer Letter for John Senaldi
10.24(5)*      1995 Non-Employee Director's Stock Option Plan, as amended
10.25(5)*      1995 Stock Option Plan, as amended
10.26(7)*      Employee Offer Letter for Patricia Sharp
10.27(8)*      LJL BioSystems 1994 Equity Incentive Plan and Forms of Agreements
10.28(8)*      LJL BioSystems 1997 Stock Plan and Forms of Agreements
10.29(8)*      LJL BioSystems 1998 Directors' Stock Option Plan and Forms of
               Agreements
</TABLE>




                                       29
<PAGE>   30

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION OF DOCUMENT
-------                             -----------------------
<S>            <C>
10.30(8)       Equipment Financing Agreement dated February 16, 1998 between LJL
               BioSystems and Lease Management Services, Inc.
10.31(9)       Lease between the Company and Coptech West
10.32          Sublease Agreement dated September 9, 1999 by and between
               Medtronic, Inc. and the Registrant
10.33          Lease Agreement dated May 26, 2000 by and between Aetna Life
               Insurance Company and the Registrant
21.1           Subsidiaries of the Registrant
23.1           Consent of Ernst & Young LLP, Independent Auditors
23.2           Consent of PricewaterhouseCoopers LLP, Independent Auditors
</TABLE>

----------

(1) Incorporated by reference to the similarly described exhibit in our
    Registration Statement on Form S-1 (File No. 33-98926), as amended.

(2) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated June 30, 1998, and filed August 13, 1998.

(3) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated September 30, 1998, and filed November 13, 1998.

(4) Incorporated by reference to the similarly described exhibit in our Current
    Report on Form 8-K filed May 26, 1999.

(5) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated June 30, 1999 and filed August 10, 1999.

(6) Incorporated by reference to the similarly described exhibit in our Current
    Report on Form 8-K filed June 12, 2000.

(7) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated September 30, 2000 and filed on November 13,
    2000.

(8) Incorporated by reference to the similarly described exhibit filed with LJL
    BioSystems' Registration Statement on Form S-1 (File No. 333-43529) declared
    effective on March 12, 1998.

(9) Incorporated by reference to the similarly described exhibit filed with LJL
    BioSystems' Form 10-Q for the quarter ended March 31, 1998.

 *  Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

    No reports on Form 8-K were filed during the quarter ended December 31,
   2000.

(c) Exhibits

    See Item 14(a) above.

(d) Financial Statement Schedule

    See Item 14(a) above.




                                       30
<PAGE>   31

                                   SIGNATURES


   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on March
30, 2001.


                                     MOLECULAR DEVICES CORPORATION


                                     By:     /s/ JOSEPH D. KEEGAN, PH.D.
                                         --------------------------------------
                                                 Joseph D. Keegan, Ph.D.
                                          President and Chief Executive Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
                  SIGNATURE                                       TITLE                            DATE
                  ---------                                       -----                            ----
<S>                                            <C>                                            <C>


         /s/ JOSEPH D. KEEGAN, PH.D.              President, Chief Executive Officer          March 30, 2001
--------------------------------------------                  and  Director
           Joseph D. Keegan, Ph.D.                    (Principal Executive Officer)

           /s/ TIMOTHY A. HARKNESS             Vice President, Finance and Chief Financial    March 30, 2001
--------------------------------------------                   and Officer
             Timothy A. Harkness               (Principal Financial and Accounting Officer)

             /s/ MOSHE H. ALAFI                                  Director                     March 30, 2001
--------------------------------------------
               Moshe H. Alafi

            /s/ DAVID L. ANDERSON                                Director                     March 30, 2001
--------------------------------------------
              David L. Anderson

            /s/ A. BLAINE BOWMAN                                 Director                     March 30, 2001
--------------------------------------------
              A. Blaine Bowman

           /s/ PAUL GODDARD, PH.D.                               Director                     March 30, 2001
--------------------------------------------
             Paul Goddard, Ph.D.

              /s/ LEV J. LEYTES                                  Director                     March 30, 2001
--------------------------------------------
                Lev J. Leytes

             /s/ ANDRE F. MARION                                 Director                     March 30, 2001
--------------------------------------------
               Andre F. Marion

       /s/ HARDEN M. MCCONNELL, PH.D.                            Director                     March 30, 2001
--------------------------------------------
         Harden M. McConnell, Ph.D.

          /s/ J. ALLAN WAITZ, PH.D.                              Director                     March 30, 2001
--------------------------------------------
            J. Allan Waitz, Ph.D.
</TABLE>




                                       31
<PAGE>   32

                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors and Stockholders
Molecular Devices Corporation and Subsidiaries


We have audited the accompanying consolidated balance sheets of Molecular
Devices Corporation and its subsidiaries as of December 31, 2000 and 1999 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2000.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. In August 2000, the Company merged
with LJL BioSystems, Inc. in a transaction which was accounted for as a pooling
of interests. We did not audit the consolidated financial statements of LJL
BioSystems, Inc., for the years prior to fiscal 2000, which statements reflect
total assets of $14.4 million as of December 31, 1999 and total revenues of $9.9
million and $4.4 million and net loss available to common stockholders of $8.1
million and $8.5 million for the years ended December 31, 1999 and 1998,
respectively. Those statements were audited by other auditors whose report dated
January 25, 2000, except as to Note 11, which is as of February 2, 2000,
expressed an unqualified opinion on those statements, has been furnished to us,
and our opinion, insofar as it relates to data included for LJL BioSystems,
Inc., is based solely on the report of the other auditors.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.

      In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Molecular Devices Corporation and its
subsidiaries as of December 31, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.




                                          /s/ Ernst & Young LLP

Palo Alto, California
January 23, 2001




                                       32
<PAGE>   33

            REPORT OF PRICEWATERHOUSECOOPERS, INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of LJL BioSystems, Inc.


   In our opinion, the consolidated balance sheet as of December 31, 1999 and
the related consolidated statements of operations, of stockholders' equity and
of cash flows for each of the two years in the period ended December 31, 1999 of
LJL BioSystems, Inc, and its subsidiary (not presented separately herein)
present fairly, in all material respects, the financial position, results of
operations and cash flows of LJL BioSystems, Inc. and its subsidiary at December
31, 1999 and for each of the two years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule for each
of the two years in the period ended December 31, 1999 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. We have not audited the
consolidated financial statements and financial statement schedules of LJL
BioSystems, Inc. for any period subsequent to December 31, 1999.



/s/ PricewaterhouseCoopers LLP

San Jose, California
January 25, 2000, except as to Note 11,
which is as of February 2, 2000




                                       33
<PAGE>   34

                 MOLECULAR DEVICES CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                   ------------------------
                                                                     2000            1999
                                                                   ---------       --------
<S>                                                                <C>             <C>
                                     ASSETS
Current assets:
Cash and cash equivalents                                          $  41,832       $ 32,083
Short-term investments                                                55,259          4,567
Accounts receivable net of allowance for doubtful
  accounts of $561 and $452 in
  2000 and 1999, respectively                                         27,561         19,463
Inventories                                                           13,056         10,509
Deferred tax asset                                                    10,816         10,205
Other current assets                                                   5,791            880
                                                                   ---------       --------
Total current assets                                                 154,315         77,707
Equipment and leasehold  improvements, net                             9,015          3,656
Other assets                                                          16,703          5,486
                                                                   ---------       --------
                                                                   $ 180,033       $ 86,849
                                                                   =========       ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable                                                   $   4,902       $  3,869
Accrued compensation                                                   4,139          3,215
Other accrued liabilities                                              4,285          3,061
Deferred revenue                                                       2,488          1,532
Current portion of long-term debt                                        317            282
                                                                   ---------       --------
Total current liabilities                                             16,131         11,959

Long-term debt, net of current portion                                   269            586

Commitments

Stockholders' equity:
Preferred stock, no par value, issuable in series;
  3,000,000 shares authorized, no shares issued and
  outstanding at December 31, 2000 and 1999,
  respectively                                                            --             --
Common stock, $.001 par value; 30,000,000
  shares authorized; 16,331,167 and 13,488,821 shares issued
  and outstanding at December 31, 2000 and 1999, respectively             17             14
Additional paid-in capital                                           169,820         75,271
Deferred compensation                                                   (443)          (589)
Retained earnings (accumulated deficit)                               (4,833)           101
Accumulated other comprehensive loss                                    (928)          (493)
                                                                   ---------       --------
Total stockholders' equity                                           163,633         74,304
                                                                   ---------       --------
                                                                   $ 180,033       $ 86,849
                                                                   =========       ========
</TABLE>


                             See accompanying notes.




                                       34
<PAGE>   35

                 MOLECULAR DEVICES CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                             -----------------------------------
                                               2000           1999         1998
                                             --------       -------      -------
<S>                                          <C>            <C>          <C>
REVENUES                                     $ 96,035       $71,902      $52,234

COST OF REVENUES                               35,583        26,299       20,203
                                             --------       -------      -------

GROSS MARGIN                                   60,452        45,603       32,031
                                             --------       -------      -------

OPERATING EXPENSES:
Research and development                       16,796        14,150       11,158
Merger and acquisition expenses                15,181         2,037          876
Selling, general and administrative            31,906        25,630       19,386
                                             --------       -------      -------
Total operating expenses                       63,883        41,817       31,420
                                             --------       -------      -------

Income (loss) from operations                  (3,431)        3,786          611
Other income, net                               4,912         1,921        2,178
                                             --------       -------      -------
Income before income taxes                      1,481         5,707        2,789
Income tax provision                            6,415         2,056          956
                                             --------       -------      -------

NET INCOME (LOSS)                            $ (4,934)      $ 3,651      $ 1,833
                                             ========       =======      =======

Basic net income (loss) per share            $  (0.32)      $  0.27      $  0.15
                                             ========       =======      =======

Diluted net income (loss) per share          $  (0.32)      $  0.26      $  0.14
                                             ========       =======      =======
</TABLE>


                             See accompanying notes.




                                       35
<PAGE>   36

                 MOLECULAR DEVICES CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                                         Retained   Accumulated
                                             Common Stock      Additional                Earnings      Other         Total
                                        ---------------------   Paid-In     Deferred   (Accumulated Comprehensive Stockholders'
                                          Shares       Amount   Capital   Compensation    Deficit)     Loss          Equity
                                        ----------     ------  ---------- ------------ ------------ ------------- -------------
<S>                                     <C>            <C>     <C>        <C>          <C>          <C>           <C>
BALANCE AT DECEMBER 31, 1997            11,806,004      $12     $ 50,572     $  (903)     $(5,383)     $(200)     $  44,098
  Comprehensive income
   Net income                                   --       --           --          --        1,833         --          1,833
   Currency translation                         --       --           --          --           --        (20)           (20)
                                                                                                                  ---------
     Total comprehensive income                                                                                       1,813
                                                                                                                  ---------
   Issuance of shares of common stock
    in public offering, net                626,400        1       12,820          --           --         --         12,821
   Issuance of shares of common stock
    for options exercised                  176,634       --          599          --           --         --            599
   Issuance of shares of common stock
    under Employee Stock Purchase Plan      24,383       --          373          --           --         --            373
   Tax benefits from employee stock
    transactions                                --       --          477          --           --         --            477
   Deferred stock compensation                  --       --          816        (816)          --         --             --
   Amortization of deferred stock
    compensation                                --       --           --         519           --         --            519
                                       -----------      ---     --------     -------      -------      -----      ---------
BALANCE AT DECEMBER 31, 1998            12,633,421       13       65,657      (1,200)      (3,550)      (220)        60,700
                                       -----------      ---     --------     -------      -------      -----      ---------
  Comprehensive income
   Net income                                   --       --           --          --        3,651         --          3,651
   Currency translation                         --       --           --          --           --       (273)          (273)
                                                                                                                  ---------
     Total comprehensive income                                                                                       3,378
                                                                                                                  ---------
   Issuance of shares of common stock
   in public offering, net                 600,000        1        6,729          --           --         --          6,730
   Issuance of shares of common stock
    for options exercised                  202,397       --        1,205          --           --         --          1,205
   Issuance of shares of common stock
    under Employee Stock Purchase Plan      31,755       --          529          --           --         --            529
   Stock compensation expense                   --       --          335          --           --         --            335
   Tax benefits from employee stock
    transactions                                --       --          816          --           --         --            816
   Amortization of deferred stock
    compensation                            21,248       --           --         611           --         --            611
                                       -----------      ---     --------     -------      -------      -----      ---------
BALANCE AT DECEMBER 31, 1999            13,488,821       14       75,271        (589)         101       (493)        74,304
                                       -----------      ---     --------     -------      -------      -----      ---------
  Comprehensive loss
   Net loss                                     --       --           --          --       (4,934)        --         (4,934)
   Currency translation                         --       --           --          --           --       (435)          (435)
                                                                                                                  ---------
     Total comprehensive loss                                                                                        (5,369)
                                                                                                                  ---------
   Issuance of shares of common stock
    in public offering, net              2,234,000        2       79,341          --           --         --         79,343
   Issuance of shares of common stock
    for options exercised, net             567,162        1        7,074          --           --         --          7,075
   Issuance of shares of common stock
    under Employee Stock Purchase Plan      32,748       --          847          --           --         --            847
   Stock compensation expense                   --       --          798          --           --         --            798
   Tax benefits from employee stock
    transactions                                --       --        6,266          --           --         --          6,266
   Deferred stock compensation                  --       --          223        (223)          --         --             --
   Amortization of deferred stock
    compensation                             8,436       --           --         369           --         --            369
                                        ----------      ---     --------     -------      -------      -----      ---------
BALANCE AT DECEMBER 31, 2000            16,331,167      $17     $169,820     $  (443)     $(4,833)     $(928)     $ 163,633
                                        ==========      ===     ========     =======      =======      =====      =========
</TABLE>


                             See accompanying notes.




                                       36
<PAGE>   37

                 MOLECULAR DEVICES CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                                     -------------------------------------
                                                                                       2000           1999          1998
                                                                                     ---------      --------      --------
<S>                                                                                  <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                                    $  (4,934)     $  3,651      $  1,833
Adjustments to reconcile net income (loss) to net
  cash used in operating activities:
  Depreciation                                                                           2,077         1,330         1,049
  Charge for acquired in-process research and development                                   --         2,037            --
  Amortization of deferred compensation                                                    369           611           519
  Stock compensation expense                                                               798           335            --
  Amortization of goodwill and developed technology                                        314           196            --
  Income tax benefit realized as a result of employee exercises of stock options         6,266           816           477
  (Increase) decrease in assets:
    Accounts receivable                                                                 (8,098)       (5,361)       (4,840)
    Inventories                                                                         (2,547)       (4,768)       (1,480)
    Deferred tax asset                                                                    (611)       (4,119)       (3,052)
    Other current assets                                                                (4,911)           88          (344)
  Increase (decrease) in liabilities:
    Accounts payable                                                                     1,033         1,125           646
    Accrued compensation                                                                   924           497           476
    Other accrued liabilities                                                            1,224          (839)        3,035
    Deferred revenue                                                                       956            30           494
                                                                                     ---------      --------      --------
Net cash used in operating activities                                                   (7,140)       (4,371)       (1,187)
                                                                                     ---------      --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments                                                              (113,113)       (7,730)      (14,762)
Proceeds from sales and maturities of investments                                       62,421        11,488         6,406
Capital expenditures                                                                    (7,436)       (1,993)       (2,014)
Acquisition of Skatron Instruments AS, net of cash on hand                                  --        (7,118)           --
Other assets                                                                           (11,531)         (472)         (102)
                                                                                     ---------      --------      --------
Net cash used in investing activities                                                  (69,659)       (5,825)      (10,472)
                                                                                     ---------      --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing                                                                     --           361           785
Repayment of borrowings                                                                   (282)         (429)         (161)
Issuance of long-term loans receivable to employees                                         --           (33)         (190)
Issuance of common stock                                                                87,265         8,085        13,483
                                                                                     ---------      --------      --------
Net cash provided by financing activities                                               86,983         7,984        13,917
                                                                                     ---------      --------      --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                   (435)         (225)          (36)
                                                                                     ---------      --------      --------

Net (decrease) increase in cash and cash equivalents                                     9,749        (2,437)        2,222
Cash and cash equivalents at beginning of year                                          32,083        34,520        32,298
                                                                                     ---------      --------      --------
Cash and cash equivalents at end of year                                             $  41,832      $ 32,083      $ 34,520
                                                                                     =========      ========      ========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest                                                                           $      88      $     90      $     35
                                                                                     =========      ========      ========
  Income taxes                                                                       $   4,300      $  6,070      $  2,932
                                                                                     =========      ========      ========

SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Disposals of fully depreciated equipment
  and leasehold improvements                                                         $     538      $    108      $     --
                                                                                     =========      ========      ========
</TABLE>


                             See accompanying notes.




                                       37
<PAGE>   38

                 MOLECULAR DEVICES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

   Molecular Devices acquired all of the outstanding stock of LJL BioSystems,
Inc. ("LJL BioSystems") in a tax-free, stock-for-stock transaction on August 30,
2000. LJL BioSystems was also engaged in the design, development, manufacture,
sale and service of bioanalytical measurement systems for life sciences and drug
discovery applications. Molecular Devices has accounted for the transaction as a
pooling of interests, and accordingly, the consolidated financial statements and
all financial information have been restated to reflect the combined operations,
financial position and cash flows of both companies. (See Note 5)

   The consolidated financial statements include the accounts of Molecular
Devices, its wholly owned foreign subsidiaries in Germany, the United Kingdom
and Norway, and LJL BioSystems. All significant intercompany balances and
transactions have been eliminated.

Use of Estimates

   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.

Cash Equivalents

   Cash equivalents consist of highly liquid investments, principally money
market accounts and marketable debt securities, with maturities of three months
or less at the time of purchase.

Investments

   Molecular Devices' short-term investments consist of marketable securities
classified as "available-for-sale," with maturities of one year or less at the
time of purchase. Available-for-sale securities are carried at fair market
value, with unrealized gains and losses, net of tax, included in accumulated
other comprehensive income in stockholders' equity. Gains and losses on
securities sold are based on the specific identification method and are included
in the results of operations.

   Fair values of marketable securities are based on quoted market values at
December 31, 2000. At December 31, 2000, the difference between the fair value
and amortized cost of marketable securities was not significant. As of December
31, 2000, short-term investments consisted of $10.0 million in federal
government securities and $45.3 million of corporate securities maturing within
twelve months or less.




                                       38
<PAGE>   39

Concentration of Credit Risk

   Financial instruments, which potentially subject Molecular Devices to
concentrations of credit risk, are primarily cash, cash equivalents, short-term
investments, loans receivable from employees and accounts receivable. Molecular
Devices deposits cash with high credit quality financial institutions. Molecular
Devices' cash equivalents and marketable securities are primarily invested in
federal government agency obligations and corporate securities that have various
maturities during 2001.

   Molecular Devices sells its products primarily to corporations, academic
institutions, government entities and distributors within the drug discovery and
life sciences research markets. Molecular Devices performs ongoing credit
evaluations of its customers and generally does not require collateral.
Molecular Devices maintains reserves for potential credit losses and such losses
have been historically within management's expectations.

Inventories

   Inventories are stated on a first-in, first-out basis at the lower of cost or
market.

Capitalized Software Costs

   Software development costs incurred subsequent to the establishment of
technological feasibility are capitalized in accordance with SFAS No. 86;
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed." No amounts have been capitalized to date as costs incurred after the
establishment of technological feasibility have not been material.

Equipment and Leasehold Improvements

   Equipment is recorded at cost and depreciated using the straight-line method
over the estimated useful lives of the assets (ranging from three to five
years). Leasehold improvements are amortized over the remaining term of the
lease or the life of the asset, whichever is shorter. Maintenance and repairs
are expensed as incurred.

Other Assets

   Other assets include intangible assets acquired in a purchase business
combination (see Note 5) and strategic investments in privately held companies
that have been accounted for under the cost method. The goodwill and various
intangible assets related to the acquisition of Skatron AS in May 1999 are being
amortized over a 15-year period using the straight-line method. At December 31,
2000 and December 31, 1999, gross intangible assets were $4,717,000 and related
accumulated amortization was $510,000 and $196,000, respectively.

Impairment of Long-Lived Assets

   Molecular Devices evaluates long-lived assets, including goodwill and
investments accounted for under the cost method, for impairment whenever events
or changes in circumstances indicate that the carrying value of an asset may not
be recoverable based on expected undiscounted cash flows attributable to that
asset. The amount of any impairment is measured as the difference between the
carrying value and the fair value of the impaired asset. There were no
long-lived assets which were considered to be impaired during any period
presented.

Income Taxes

   Income taxes are accounted for under the liability method whereby deferred
tax asset or liability account balances are calculated at the balance sheet date
using current tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized
in the future.




                                       39
<PAGE>   40

Foreign Currency Translation

   Molecular Devices translates the assets and liabilities of its foreign
subsidiaries into dollars at the rates of exchange in effect at the end of the
period and translates revenues and expenses using rates in effect during the
period. Gains and losses from these translations are accumulated as a separate
component of stockholders' equity. Gains and losses resulting from foreign
currency transactions are immaterial and are included in the statements of
operations.

Revenue Recognition and Warranty

   Molecular Devices recognizes product revenue at the time of product shipment
and transfer of title either to a customer or to a distributor and provides for
estimated warranty expense at the time of sale. There are no significant
customer acceptance requirements or post shipment obligations on the part of
Molecular Devices. Amounts received prior to completion of the earnings process
are recorded as customer deposits or deferred revenue, as appropriate. Service
contract revenue is deferred at the time of sale and recognized ratably over the
period of performance.

Advertising Costs

   Molecular Devices expenses the cost of advertising as incurred. Molecular
Devices incurred advertising costs of approximately $1,452,000, $1,339,000, and
$1,079,000 for 2000, 1999, and 1998, respectively.

Recent Technical Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," ("SFAS 133"). This statement,
which is effective for the company for the year beginning January 1, 2001,
established accounting and reporting standards for derivative instruments and
for hedging activities. SFAS 133 requires a company to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. Changes in the fair value of
derivatives will be reported currently in earnings or in other comprehensive
income depending on their effectiveness pursuant to SFAS 133. As of December 31,
2000, Molecular Devices had not engaged in hedging activities. However,
Molecular Devices anticipates engaging in hedging activity in the future, and
therefore, expects to be impacted by the pronouncement.

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements,
referred to as SAB 101. SAB 101 summarizes certain of the SEC staff's views in
applying generally accepted accounting principles to revenue recognition. The
adoption of SAB 101 had no material effect on Molecular Devices' financial
position or results of operations.

Per Share Data

   Basic net income per share is computed based on the weighted average number
of shares of Molecular Devices' common stock outstanding. Dilutive net income
per share is computed based on the weighted average number of shares of
Molecular Devices' common stock and other dilutive securities. Dilutive
securities consist of the incremental common shares issuable upon the exercise
of stock options and warrants (using the treasury stock method).




                                       40
<PAGE>   41

   Computation of diluted earnings per share is as follows (in thousands except
per share amounts):

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                                   ---------------------------------
                                                     2000          1999        1998
                                                   --------      -------     -------
<S>                                                <C>           <C>         <C>
DILUTED

Weighted average common shares outstanding for
the period                                           15,246       13,347      12,407

Common equivalent shares assuming exercise of
stock options under the treasury stock method            --          802         558
                                                   --------      -------     -------

Shares used in per share calculation                 15,246       14,149      12,965
                                                   ========      =======     =======

Net income (loss)                                  $ (4,934)     $ 3,651     $ 1,833
                                                   ========      =======     =======

Net income (loss) per share                        $  (0.32)     $  0.26     $  0.14
                                                   ========      =======     =======
</TABLE>

   Options to purchase 103,000 and 469,000 shares of common stock at weighted
average per share prices of $31.60 and $18.96 were outstanding during 1999 and
1998, respectively, but were not included in the computation of diluted earnings
per share for those years as the options' exercise price was greater than the
average market price of the common shares and, therefore, the effect would have
been anti-dilutive. In 2000, the total number of shares excluded from the
calculation of diluted net loss per share was 1,163,000. Such securities, had
they been dilutive, would have been included in the computations of diluted net
loss per share using the treasury stock method.

Stock Based Compensation

   As permitted by SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," Molecular Devices applies APB Opinion 25 and related
Interpretations in accounting for its Stock Option Plans and, accordingly,
recognizes 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. Note 7
to the Consolidated Financial Statements contains a summary of the pro forma
effects on reported net income and earnings per share for each of the three
years in the period ended December 31, 2000, if Molecular Devices had elected to
recognize compensation cost based on the fair value of the options granted as
prescribed by SFAS 123.

401(k) Plan

   Molecular Devices' 401(k) Plan ("Plan") covers substantially all of its U.S.
based employees. Under the Plan, eligible employees may contribute up to 25% of
their eligible compensation, subject to certain Internal Revenue Service
restrictions. Molecular Devices began matching a portion of employee
contributions in 1997, up to a maximum of 3% or $2,500, whichever is less, of
each employee's eligible compensation. The match is effective December 31 of
each year and vests over a period of four years of service. For the years ended
December 31, 2000, 1999 and 1998, Molecular Devices provided approximately
$270,000, $158,000 and $126,000, respectively, under the Plan.

   LJL BioSystems maintained the tax deferred LJL BioSystems, Inc. 401(k) Plan,
that covered all employees over twenty-one years of age whom became eligible to
enroll the first day of the calendar month following their employment date.
Employees were allowed to contribute up to 15% of their compensation to the
401(k) Plan on a pre-tax basis, subject to the maximum amount allowable under
IRS regulations. Effective November 1, 2001, the plan was discontinued and
employee account balances were merged into the Molecular Devices plan.




                                       41
<PAGE>   42

Comprehensive Income.

   Comprehensive income is comprised of net income and other comprehensive
income. Other comprehensive income includes unrealized gains or losses from the
translation of foreign subsidiaries' financial statements, and unrealized gains
and losses on available-for-sale securities, if material.

NOTE 2. BALANCE SHEET AMOUNTS

<TABLE>
<CAPTION>
                                                                       December 31,
                                                                 -----------------------
                                                                   2000           1999
                                                                 --------       --------
                                                                      (in thousands)
          <S>                                                    <C>            <C>
          Inventories:
            Raw materials                                        $  4,909       $  4,391
            Work-in-process                                         2,227            762
            Finished goods and demonstration equipment              5,920          5,356
                                                                 --------       --------
                                                                 $ 13,056       $ 10,509
                                                                 ========       ========

          Equipment and leasehold improvements:
            Machinery and equipment                              $ 10,492       $  8,384
            Furniture and fixtures                                  1,552          1,645
            Leasehold improvements                                  5,973          1,055
                                                                 --------       --------
                                                                   18,017         11,084
          Less accumulated depreciation                            (9,002)        (7,428)
                                                                 --------       --------
          Net equipment and leasehold improvements               $  9,015       $  3,656
                                                                 ========       ========

          Other current assets:
            Taxes receivable                                     $  3,999       $     --
            Interest receivable                                     1,247            241
            Other                                                     545            639
                                                                 --------       --------
                                                                 $  5,791       $    880
                                                                 ========       ========

          Other assets:
            Equity investments                                   $ 11,108       $     --
            Goodwill, net                                           4,207          4,521
            Other                                                   1,388            965
                                                                 --------       --------
                                                                 $ 16,703       $  5,486
                                                                 ========       ========

          Other accrued liabilities:
            Accrued income tax                                   $    503       $     --
            Warranty accrual                                        1,429            725
            Sales tax payable                                        (196)           306
            Accrued merger and acquisition related expenses           968             --
            Other                                                   1,581          2,030
                                                                 --------       --------
                                                                 $  4,285       $  3,061
                                                                 ========       ========
</TABLE>




                                       42
<PAGE>   43

NOTE 3. LONG-TERM DEBT

   In February 1998, LJL BioSystems entered into an equipment financing
agreement that provided a $1.3 million line of credit. The initial term of this
agreement was through February 16, 1999. Amounts borrowed under this agreement
bear interest at 11.08% to 12.16%. The agreement was extended twice with the
latest extension expiring on December 31, 1999. At December 31, 2000, LJL
BioSystems had an obligation to repay $586,000 under this agreement through
2003. Future principal payments under this line of credit are as follows (in
thousands):

<TABLE>
<CAPTION>
        Years Ending December 31,
        -------------------------
        <S>                                                             <C>
                 2001                                                   $ 317
                 2002                                                     243
                 2003                                                      26
                                                                        -----
                                                                        $ 586
                                                                        =====
</TABLE>


NOTE 4. COMMITMENTS

   Molecular Devices' and LJL BioSystems' facilities are leased under
noncancelable operating leases. The leases generally require payment of taxes,
insurance and maintenance costs on leased facilities. Minimum annual rental
commitments under these noncancelable operating leases for the years ended 2001,
2002, 2003, 2004, 2005, and thereafter, are approximately $2,639,000,
$4,284,000, $3,541,000, $3,261,000, $3,386,000 and $7,349,000, respectively.

   Net rental expense under operating leases related to Molecular Devices' and
LJL BioSystems' facilities was approximately $2,486,000, $1,206,000, and
$1,045,000, respectively for each of the three years ended December 31, 2000,
1999 and 1998.

   Molecular Devices has a contractual commitment for the purchase of certain
resale products and manufacturing components with two vendors. The minimum
purchase commitment is based on a set percentage of our forecasted production,
and for 2001, 2002 and 2003, at current prices, is approximately $3,112,000,
$660,000 and $660,000, respectively. These purchase commitments are not expected
to result in a loss.


NOTE 5. ACQUISITIONS AND INVESTMENTS

LJL BioSystems

   On August 30, 2000, Molecular Devices acquired all of LJL BioSystems'
outstanding stock in a tax-free, stock-for-stock transaction. LJL BioSystems'
stockholders received 0.30 of a share of Molecular Devices' common stock for
each share of LJL BioSystems' common stock. Molecular Devices issued
approximately 4.5 million shares of common stock to acquire the outstanding LJL
BioSystems shares on the closing date. In addition, Molecular Devices assumed
outstanding options to acquire LJL BioSystems shares, which were converted into
options to acquire approximately 557,000 shares of Molecular Devices' common
stock. Molecular Devices has accounted for the transaction as a pooling of
interests, and, accordingly, the consolidated financial statements and all
financial information have been restated to reflect the combined operations,
financial position and cash flows of both companies. During the quarter ended
September 30, 2000, Molecular Devices incurred approximately $15,181,000 in
merger related expenses, including transition costs, investment banking, legal
and other advisory services, which were charged to operations as incurred. As of
December 31, 2000, the remaining liability related to these expenses was
approximately $968,000, substantially all of which related to transition costs.




                                       43
<PAGE>   44

   The following table summarizes the separate and combined results of
operations of Molecular Devices and LJL BioSystems:

<TABLE>
<CAPTION>
                                      Molecular            LJL         Pooling
                                       Devices          BioSystems   Adjustments       Combined
                                      ---------------------------------------------------------
                                                         (in thousands)
     <S>                               <C>               <C>            <C>            <C>
     Year ended December 31, 2000
     Revenues                          $ 85,926          $ 10,109 (2)   $    0         $ 96,035
     Net income (loss)                   (1,900)(1)        (4,977)(2)    1,943(3)        (4,934)
</TABLE>

<TABLE>
<CAPTION>
                                      Molecular            LJL         Pooling
                                       Devices          BioSystems   Adjustments       Combined
                                      ---------------------------------------------------------
                                                         (in thousands)
     <S>                               <C>               <C>            <C>            <C>
     Year ended December 31, 1999
     Revenues                          $ 61,985          $  9,917       $    0         $ 71,902
     Net income (loss)                    8,505(1)         (8,138)       3,284(3)         3,651
</TABLE>

<TABLE>
<CAPTION>
                                      Molecular            LJL         Pooling
                                       Devices          BioSystems   Adjustments       Combined
                                      ---------------------------------------------------------
                                                         (in thousands)
     <S>                               <C>               <C>            <C>            <C>
     Year ended December 31, 1998
     Revenues                          $ 47,798          $  4,436       $    0         $ 52,234
     Net income (loss)                    6,781(1)         (8,491)       3,543(3)         1,833
</TABLE>
------------------------
(1) Includes merger and acquisition related expenses

(2) LJL results for 2000 are through the date of consummation of the
    transaction.

(3) Represents the tax benefit derived from LJL BioSystems' net loss position.
    This adjustment is based on the evaluation of a variety of factors including
    the combined companies' statutory and state tax rates.

Argonex, Inc.

   In December 2000, Molecular Devices acquired an equity interest in Argonex,
Inc., the parent company of Upstate Biotechnology, Inc. and Argonex Discovery,
Ltd., for $10 million in cash. The companies also announced the launch of a
ten-year strategic partnership to provide new consumable reagent kits to the
high-throughput screening market. Under the partnership agreement, Molecular
Devices will be the exclusive distributor of all kits co-developed by Argonex
and Molecular Devices, which will be optimized to perform on Molecular Devices'
drug discovery instrumentation platforms. Upstate Biotechnology is a leading
supplier of reagents to the drug discovery and life sciences research markets,
with particular strength in "cell-signaling" reagents such as kinases.

Skatron Instruments AS

   On May 17, 1999, Molecular Devices acquired all of the outstanding stock of
Skatron Instruments AS, a Norwegian company ("Skatron"), and certain assets from
Skatron Instruments Inc., a Virginia corporation and wholly-owned subsidiary of
Skatron, for a cash payment at closing of $7,118,000 (including $300,000 of
acquisition related expenses). Skatron was principally involved in the design,
development, manufacture and sale and service of a complete line of microwell
plate washers. The acquisition was accounted for as a purchase and the total
purchase price was allocated based on an independent appraisal as follows (in
thousands):

<TABLE>
      <S>                                                               <C>
      Acquired developed technology and goodwill.....................   $ 4,717
      Acquired in-process research and development...................     2,037
      Net book value of acquired assets and liabilities which
        Approximate fair value.......................................       364
                                                                        -------
                Total purchase price.................................   $ 7,118
                                                                        =======
</TABLE>

   The purchase price allocation resulted in a $2,037,000 charge related to the
value of acquired in-process research and development in the second quarter of
1999. The value of acquired in-process research and development represents the
appraised value of technology in the development stage that had not yet reached
economic and technological feasibility. In reaching this determination,
Molecular Devices used a present value net income approach and considered, among
other factors, the stage of development of each product, the time and resources
needed to complete each product, and expected income and associated risks. The
developed




                                       44
<PAGE>   45

technology, goodwill and other intangibles are being amortized over periods of
up to 15 years, the estimated useful lives of these acquired assets. The results
of Skatron are included in the consolidated statements of operations from May
18, 1999.

   Pro forma consolidated results for Molecular Devices had the acquisition been
consummated January 1, 1998, excluding the charge for acquired in-process
research and development recorded in 1999, are as follows (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                           Years ended December 31,
                                               1999         1998
                                             -------      -------
          <S>                                <C>          <C>
          Revenues.........................  $72,952      $56,485
          Net income.......................  $ 4,947      $ 2,006
          Diluted net income per share.....  $  0.25      $  0.10
</TABLE>

Other

   On August 28, 1998, Molecular Devices acquired license rights to a
Telecentric Lens Luminometer technology from Affymax Research Institute. Under
the agreement, Molecular Devices received the rights to develop, manufacture,
market and distribute commercial systems based on this technology in exchange
for payment of up-front consideration and continuing royalties to Affymax based
on future product sales. The $876,000 write-off of acquired in-process research
and development during 1998 represented the entire amount of up-front
consideration that was paid to Affymax as well as all related transaction costs
associated with this technology license agreement. Based on the stage of
development of this technology and the assessment of the time and resources
needed to complete product development, Molecular Devices believed that the
acquired technology had not yet reached economic or technological feasibility
and had no alternative future uses at the time of the agreement.


NOTE 6. STOCKHOLDERS' EQUITY

   In connection with its Series A preferred stock private placement in June
1997, LJL BioSystems issued to a placement agent two warrants to purchase a
total of 65,653 shares of its Series A preferred stock (19,695 Molecular Devices
equivalent shares) at an exercise price of $5.20 per share ($17.33 Molecular
Devices equivalent per share price). The warrants originally were to expire on
the earlier of June 6, 2002, the closing of an initial public offering of LJL
BioSystems' common stock pursuant to a registration statement under the
Securities Act of 1933 or a merger or sale of substantially all of LJL
BioSystems' assets, and were exercisable immediately. In March 1998, the terms
of the warrants were amended such that the warrants are now exercisable to
purchase 65,653 shares of LJL BioSystems' common stock (19,695 Molecular Devices
equivalent shares) at an exercise price of $7.00 per share ($23.33 Molecular
Devices equivalent per share price) and expire in 2001. Molecular Devices
determined that the value of the amended warrants was not material.


NOTE 7.  EQUITY INCENTIVE PLANS

   Under Molecular Devices' 1995 Stock Option Plan ("1995 Plan"), a total of
1,750,000 shares of Molecular Devices' common stock have been reserved for
issuance as either incentive or nonqualified stock options to officers,
directors, employees and consultants of Molecular Devices. Option grants expire
in ten years and generally become exercisable in increments over a period of
four to five years from the date of grant. Options may be granted with different
vesting terms from time to time.

   In September 1995, Molecular Devices established the 1995 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). Under the Directors' Plan,
Molecular Devices is authorized to grant nonqualified stock options to purchase
up to 347,500 shares of common stock at the fair market value of the common
shares at the date of grant. Options granted under the Directors' Plan vest and
become exercisable in three equal annual installments commencing one year from
the date of the grant.

   LJL BioSystems' stock plans included the 1994 Equity Incentive Plan (the
"1994 Plan"), the 1997 Stock Plan (the "1997 Plan"), and the 1998 Directors'
Plan (the "Directors' Plan"). Upon closing of the merger, Molecular Devices
assumed all outstanding options under these plans, which were converted into
options to purchase Molecular Devices common stock. Molecular Devices also
assumed the shares available for grant under the 1994 and 1997 Plans to LJL
BioSystems' employees. Options granted under the 1994 Plan and 1997 Plan
generally vest over a five-year period. The following descriptions describe
these plans (adjusted to Molecular Devices equivalent shares).

   In January 1994, LJL BioSystems adopted the 1994 Plan, under which 149,850
shares were reserved for issuance to employees, directors and consultants of LJL
BioSystems, as approved by the Board of Directors. On March 14, 1997, LJL
BioSystems reduced




                                       45
<PAGE>   46

the number of shares reserved for issuance under the 1994 Plan to 143,775. The
1994 Plan, which expires in 2004, provides for the grant of incentive as well as
nonstatutory stock options, stock bonuses, stock appreciation rights and
restricted stock purchase rights.

   In March 1997, LJL BioSystems adopted the 1997 Plan. As amended, 756,225
shares were reserved for issuance to employees, directors and consultants of LJL
BioSystems under the 1997 Plan. The 1997 Plan, which expires in 2007, provides
for the grant of incentive as well as nonstatutory stock options and restricted
stock purchase rights.

   On December 16, 1997, LJL BioSystems' Board of Directors adopted the 1998
Directors' Plan and reserved 45,000 shares of common stock for issuance under
the Plan, which was approved by the stockholders in February 1998. The 1998
Directors' Plan provided for certain automatic grants of nonstatutory stock
options to nonemployee directors of LJL BioSystems. Options granted under the
1998 Directors' Plan vested over four years, had a term of ten years and were
granted at exercise prices equal to the fair market value of LJL BioSystems'
common stock on the date of grant. The 1998 Directors' Plan terminated in
connection with the acquisition of LJL BioSystems by Molecular Devices, and
there are currently no outstanding options under the 1998 Directors' Plan.

   The following table summarizes the activity under all of the Molecular
Devices' plans and LJL BioSystems' plans on a combined basis:

<TABLE>
<CAPTION>
                                                                             Weighted
                                            Shares                            Average
                                         Available for      Options          Exercise
                                         Future Grant     Outstanding         Price
                                         -------------    -----------        -------
          <S>                            <C>              <C>                <C>
          Balance December 31, 1997       1,192,835        1,042,723         $  6.69
            Granted                        (852,924)         852,924           16.13
            Exercised                            --         (176,634)           3.39
            Cancelled                       151,484         (151,484)          11.16
                                          ---------        ---------
          Balance December 31, 1998         491,395        1,567,529           11.77
            Authorized                    1,280,000               --
            Granted                        (757,291)         757,291           23.96
            Exercised                            --         (202,397)           5.96
            Cancelled                       120,641         (120,641)          16.22
                                          ---------        ---------
          Balance December 31, 1999       1,134,745        2,001,782           16.70
            Authorized                      242,500               --
            Granted                        (768,034)         765,534           52.49
            Exercised                            --         (577,254)          13.74
            Cancelled                       342,594         (342,594)          31.19
                                          ---------        ---------
          Balance December 31, 2000         951,805        1,847,468         $ 29.89
                                          =========        =========
</TABLE>

   As permitted by Statement of Financial Accounting Standards No. 123 (SFAS
123), "Accounting for Stock-Based Compensation," Molecular Devices applies APB
Opinion 25 and related Interpretations in accounting for its stock option plans
and, accordingly, recognizes 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 Molecular Devices and LJL BioSystems 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 earnings per share would have been reduced to the pro forma amounts
indicated in the table below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                   2000           1999          1998
                                                                 -------          -----        ------
          <S>                                                    <C>              <C>          <C>
          Net income (loss) as reported .....................    $(4,934)        $3,651        $1,833
          Pro forma .........................................     (9,365)         1,648           697
          Basic net income (loss) per share as reported .....      (0.32)          0.27          0.15
          Pro forma .........................................      (0.61)          0.12          0.06
          Diluted  net  income (loss) per share reported ....      (0.32)          0.26          0.14
          Pro forma .........................................      (0.61)          0.12          0.05
</TABLE>

   The pro forma net income and net income per share disclosed above is not
likely to be representative of the effects on net income and net income per
share on a pro forma basis in future years, as subsequent years may include
additional grants and years of vesting.




                                       46
<PAGE>   47

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                 2000             1999            1998
                                             ---------------------------------------------
         <S>                                 <C>               <C>             <C>
         Expected dividend yield............             0%              0%              0%
         Expected stock price volatility....      84 - 100%        66 - 90%        51 - 84%
         Risk-free interest rate............   5.48 - 5.85%    4.60 - 6.40%    4.40 - 5.85%
         Expected life of options...........    3 - 5 years     3 - 5 years     3 - 5 years
</TABLE>

   The weighted average fair value of options granted during the year ended
December 31, 2000, 1999 and 1998 was $38.37, $15.14 and $8.22, respectively.

   The following table is a summary of Molecular Devices' outstanding and
exercisable options at December 31, 2000:

<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                    ---------------------------------- ----------------------------
                                    WEIGHTED
                                    AVERAGE     WEIGHTED                   WEIGHTED
                                   REMAINING    AVERAGE                    AVERAGE
RANGE OF               NUMBER     CONTRACTUAL   EXERCISE     NUMBER        EXERCISE
EXERCISE PRICE      OUTSTANDING    LIFE (YR.)     PRICE   EXERCISABLE       PRICE
--------------      -----------   -----------   --------  -----------      --------
<S>                 <C>           <C>           <C>       <C>              <C>
$ 0.33                   1,125        5.0        $  0.33        450        $  0.33
$ 2.00 - 3.00           25,780        4.7           2.65     19,810           2.85
$ 3.33                  27,644        6.4           3.33     15,734           3.33
$ 5.25 - 6.67          116,731        4.8           5.28    115,231           5.26
$ 8.00 - 12.00          86,350        8.0           9.40     19,412           9.29
$ 12.92 - 19.17        551,922        7.5          16.64    204,204          16.26
$ 19.50 - 29.19        366,723        8.3          26.27     62,075          25.82
$ 35.25 - 49.38        542,658        9.1          45.78     12,357          44.36
$ 53.33 - 78.75        118,335        9.7          76.26        888          61.83
$ 93.33                 10,200        9.2          93.33         --             --
                     ---------                              -------
$ 0.33 - 93.33       1,847,468        8.1          29.89    450,161          14.27
                     =========                              =======
</TABLE>

   There were 450,161, 554,812 and 412,225 options exercisable under the various
plans at December 31, 2000, 1999 and 1998, respectively.

Deferred Compensation

   Deferred compensation is recorded when the exercise price of an option is
less than the deemed fair value of the underlying stock on the date of grant.
For options granted in September 1995, Molecular Devices recognized $578,000 as
deferred compensation. The deferred compensation expense was being amortized
ratably over the vesting period of the options, generally 3 - 5 years. The
amortization of this deferred compensation was completed during 2000.

   For options granted in 1997, LJL BioSystems recognized $772,000 as deferred
compensation. On March 10, 1998, LJL BioSystems granted an option to an employee
to purchase shares of common stock at a price 15% below fair market value at the
date of the grant. Deferred compensation of $33,600 was recorded based on the
estimated fair value of the options granted. Deferred compensation is amortized
over the vesting period of the options, generally four to five years.

   During 1998, Molecular Devices granted 42,500 shares of restricted stock to
certain employees. These restricted shares vested in quarterly increments from
the date of grant over two years. Molecular Devices recognized $782,000 of
deferred compensation for the total value of these shares on their respective
dates of grant. The deferred compensation expense was being recognized ratably
over the two-year vesting period. The amortization of this deferred compensation
was completed during 2000.

   During 2000, Molecular Devices granted 2,500 shares of restricted stock to an
employee. These restricted shares vest in quarterly increments from the date of
grant over two years. Molecular Devices recognized $223,000 of deferred
compensation for the total value of these shares on the date of grant. The
deferred compensation expense is being recognized ratably over the two-year
vesting period.




                                       47
<PAGE>   48

   Stock compensation expense for options granted to consultants has been
determined using the Black-Scholes option pricing model to measure the fair
value of the option. The fair value of such options is periodically remeasured
as the options vest.

Employee Stock Purchase Plans

   Under the Molecular Devices' Employee Stock Purchase Plan (the "Molecular
Devices Purchase Plan"), 200,000 shares of common stock have been authorized for
issuance. Shares may be purchased under the Molecular Devices Purchase Plan at
85% of the lesser of the fair market value of the common stock on the grant or
purchase date. As of December 31, 2000, 82,005 shares remained available for
purchase.

   Under the LJL BioSystems' Employee Stock Purchase Plan ("LJL BioSystems'
Purchase Plan"), which was terminated upon closing of the merger on August 30,
2000, 300,000 shares of common stock (90,000 equivalent Molecular Devices
shares) were reserved for issuance. Shares could be purchased under LJL
BioSystems' Purchase Plan at 85% of the lesser of the fair market value of the
common stock on the grant or purchase date. In 2000, through the close of the
merger, 69,558 shares of LJL BioSystems' common stock (20,867 equivalent
Molecular Devices shares) were purchased by the participants under the terms of
this plan.

NOTE 8. INCOME TAXES

   The components of the provisions for income taxes consist of the following:

<TABLE>
<CAPTION>
                                YEARS ENDED DECEMBER 31,
                         -----------------------------------
                           2000          1999          1998
                         -------       -------       -------
                                   (IN THOUSANDS)
          <S>            <C>           <C>           <C>
          Current:
            Federal .... $ 5,498       $ 4,920       $ 2,671
            State ......   1,012           861           756
            Foreign ....     516           394           581
                         -------       -------       -------
                         $ 7,026       $ 6,175       $ 4,008
          Deferred:
            Federal ....    (488)       (3,371)       (2,369)
            State ......    (123)         (748)         (683)
            Foreign ....      --            --            --
                         -------       -------       -------
                            (611)       (4,119)       (3,052)
                         -------       -------       -------
                         $ 6,415       $ 2,056       $   956
                         =======       =======       =======
</TABLE>

   The provisions for income taxes differ from the amounts computed by applying
the statutory federal income tax rate to income before income taxes. The source
and tax effects of the differences are as follows:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                          -----------------------------------
                                                            2000          1999          1998
                                                          -------       -------       -------
                                                                    (IN THOUSANDS)
          <S>                                             <C>           <C>           <C>
          Income before provisions for income taxes ...   $ 1,481       $ 5,707       $ 2,789
                                                          =======       =======       =======

          Income tax at statutory federal rate (35%) ..       519         1,997           976
          Non-deductible merger expenses ..............     5,313            --            --
          State income tax, net of federal benefit ....       580            73            47
          Net operating loss carryforwards ............        --           (90)          (62)
          Foreign sales corporation ...................      (248)         (243)         (173)
          Research and development credits ............        --          (150)           --
          Foreign losses not currently benefited ......       182           469           168
          Other .......................................        69            --            --
                                                          -------       -------       -------
                                                          $ 6,415       $ 2,056       $   956
                                                          =======       =======       =======
</TABLE>

   Foreign pretax income was $308,000, $900,000 and $1,500,000 in 2000, 1999 and
1998, respectively.




                                       48
<PAGE>   49

   Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amount used for income tax purposes.

<TABLE>
<CAPTION>
                                                         YEARS ENDED
                                                         DECEMBER 31,
                                                   -----------------------
                                                     2000           1999
                                                   --------       --------
                                                        (IN THOUSANDS)
          <S>                                      <C>            <C>
          Deferred tax assets:
            Non-deductible reserves ............   $  1,299       $    840
            Warranty and accrued expenses ......        563            408
            Net operating losses ...............      9,177          7,761
            Foreign loss carryforwards .........      1,298            869
            Other ..............................        925          1,196
            Valuation allowance ................     (2,446)          (869)
                                                   --------       --------
                    Total deferred tax assets ..   $ 10,816       $ 10,205
                                                   ========       ========
</TABLE>

   The net valuation allowance increased by $1,577,000 and $339,000 during 2000
and 1999 respectively. $1,394,000 of the valuation allowance relates to stock
option deductions that will be credited to equity when realized.

   As of December 31, 2000, Molecular Devices had net operating loss
carryforwards for federal income tax purposes of approximately $23,000,000,
which expire in the years 2010 through 2020 and federal research and development
tax credits of approximately $1,000,000, which expire in the years 2012 through
2020.

   Utilization of the net operating loss carryforwards may be subject to
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code and similar state provisions. Such an annual
limitation could result in the expiration of the net operating loss
carryforwards before utilization.

NOTE 9. INDUSTRY SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION

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

   Foreign operations of European subsidiaries consist of sales, service,
manufacturing and distribution. Intercompany transfers between geographic areas
are accounted for at prices that approximate those negotiated in arm's-length
transactions. Summarized data for Molecular Devices' domestic and international
operations was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  ADJUSTMENTS
                                                                      AND
                                    UNITED STATES     EUROPE      ELIMINATIONS        TOTAL
                                    -------------     -------     ------------      ---------
          <S>                       <C>               <C>           <C>             <C>
          YEAR ENDED
            DECEMBER 31, 2000
            Revenues                  $  90,478       $  17,302      $(11,745)      $  96,035
            Income from operations       (3,657)(1)         732          (506)         (3,431)
            Identifiable assets         170,468          12,738        (3,173)        180,033

          YEAR ENDED
            DECEMBER 31, 1999
            Revenues                  $  67,585       $  14,984      $(10,667)      $  71,902
            Income from operations        2,890 (1)       1,209          (313)          3,786
            Identifiable assets          85,641           9,117        (7,909)         86,849

          YEAR ENDED
            DECEMBER 31, 1998
            Revenues                  $  48,000       $  10,540      $ (6,306)      $  52,234
            Income from operations         (866)(1)       1,429            48             611
            Identifiable assets          71,103           5,567        (4,351)         72,319
</TABLE>
-----------------------
(1)     Includes merger and acquisition related expenses




                                       49
<PAGE>   50

   Molecular Devices divides their business into two product families. The Drug
Discovery family includes the FLIPR, CLIPR, Cytosensor, and LJL BioSystems
product lines, and the combined entity's consumables business. The Life Sciences
Research family includes the Maxline, Threshold and Skatron product lines.
Consolidated revenue from Molecular Devices' product families was as follows (in
thousands):

<TABLE>
<CAPTION>
                                           Years ended December 31,
                                      ---------------------------------
                                        2000         1999         1998
                                      -------      -------      -------
          <S>                         <C>          <C>          <C>
          Drug Discovery              $49,168      $33,177      $20,934
          Life Sciences Research       46,867       38,725       31,300
                                      -------      -------      -------
             Total revenues           $96,035      $71,902      $52,234
                                      =======      =======      =======
</TABLE>

   Sources of consolidated revenue from significant geographic regions were as
follows (in thousands):

<TABLE>
<CAPTION>
                                           Years ended December 31,
                                      ---------------------------------
                                        2000         1999         1998
                                      -------      -------      -------
          <S>                         <C>          <C>          <C>
          North America               $63,477      $46,976      $33,799
          Europe                       25,381       19,338       13,821
          Rest of World                 7,177        5,588        4,614
                                      -------      -------      -------
             Total revenues           $96,035      $71,902      $52,234
                                      =======      =======      =======
</TABLE>

NOTE 10. COMPARATIVE QUARTERLY FINANCIAL DATA (UNAUDITED)

   Summarized quarterly financial data is as follows:

<TABLE>
<CAPTION>
                                                      FIRST        SECOND            THIRD            FOURTH
                                                     -------      --------          --------          -------
                                                              (in thousands, except per share amounts)
          <S>                                        <C>          <C>               <C>               <C>
          FISCAL 2000
            Revenues                                 $ 20,179      $ 24,038          $ 24,341          $ 27,477
            Gross margin                               12,818        15,053            15,274            17,307
            Net income (loss)                           1,186         2,037           (12,395)(1)         4,238
            Basic net income (loss) per share            0.09          0.14             (0.77)             0.26
            Diluted net income (loss) per share          0.08          0.13             (0.77)             0.25
          FISCAL 1999
            Revenues                                 $ 14,866      $ 16,819          $ 18,401          $ 21,816
            Gross margin                                8,904        10,654            11,875            14,170
            Net income (loss)                             572          (413)(2)         1,207             2,285
            Basic net income (loss) per share            0.04         (0.03)             0.09              0.17
            Diluted net income (loss) per share          0.04         (0.03)             0.08              0.16
</TABLE>

----------------
(1) Includes a charge of approximately $15.2 million of direct costs related to
    the LJL BioSystems merger

(2) Includes a charge of approximately $2.0 million for the write-off of
    acquired in-process research and development related to the acquisition of
    Skatron.




                                       50
<PAGE>   51

NOTE 11. SUBSEQUENT EVENTS

   On January 5, 2001, Molecular Devices acquired all of the capital stock of
Nihon Molecular Devices (NMD), its Japanese distributor, in exchange for
$3,150,000. NMD was jointly established by JCR Pharmaceuticals Co., Ltd. and
Molecular Devices in 1995 to import and sell Molecular Devices' products in
Japan. NMD became a wholly owned subsidiary of Molecular Devices. The
acquisition was accounted for as a purchase. The excess of the purchase price
over the identified net assets of NMD will be allocated to goodwill and
amortized over ten years.





                                       51
<PAGE>   52

                 MOLECULAR DEVICES CORPORATION AND SUBSIDIARIES

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                              BALANCE AT                                  BALANCE AT
                                              BEGINNING       CHARGED TO                     END
                 DESCRIPTION                   OF YEAR           COSTS     DEDUCTIONS      OF YEAR
                 -----------                  ----------      ----------   ----------     ----------
<S>                                           <C>             <C>          <C>            <C>
Allowance for doubtful accounts  receivable
  for the year ended December 31, 1998:            $ 184       $ 195        $ (10)         $ 369

Allowance for doubtful accounts  receivable
  for the year ended December 31, 1999:              369           83           --           452

Allowance for doubtful accounts  receivable
  for the year ended December 31, 2000:            $ 452        $ 161        $ (52)        $ 561
</TABLE>




                                       52
<PAGE>   53

                                 EXHIBIT INDEX



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION OF DOCUMENT
-------                             -----------------------
<S>            <C>
 2.1(1)        Form of Agreement and Plan of Merger between the Registrant and
               Molecular Devices Corporation, a California Corporation
 2.2(2)        Stock and Asset Purchase Agreement, dated as of May 17, 1999,
               among Molecular Devices Corporation, a Delaware corporation,
               Helge Skare, Wiel Skare, Steinar Faanes and Sten Skare, each an
               individual resident in Norway, Skatron Instruments AS, a
               Norwegian company, and Skatron Instruments, Inc., a Virginia
               corporation
 2.3(2)        Escrow Agreement, dated as of May 17, 1999, among Molecular
               Devices Corporation, a Delaware corporation, Helge Skare, Wiel
               Skare and Greater Bay Trust Company, as Escrow Agent
 2.4(6)        Agreement and Plan of Merger and Reorganization dated as of June
               7, 2000 by and among Molecular Devices Corporation, Mercury
               Acquisition Sub, Inc. and LJL BioSystems, Inc.
 3.1(1)        Amended and Restated Certificate of Incorporation of Registrant
 3.2(1)        Bylaws of the Registrant
 4.1(1)        Specimen Certificate of Common Stock of Registrant
10.1(1)*       1988 Stock Option Plan
10.2(1)*       Form of Incentive Stock Option under the 1988 Stock Option Plan
10.3(1)*       Form of Supplemental Stock Option under the 1988 Stock Option
               Plan
10.4(1)*       1995 Employee Stock Purchase Plan
10.6(1)*       Form of Nonstatutory Stock Option under the 1995 Non-Employee
               Directors' Stock Option Plan
10.8(1)*       Form of Incentive Stock Option under the 1995 Stock Option Plan
10.9(1)*       Form of Nonstatutory Stock Option under the 1995 Stock Option
               Plan
10.10(1)*      Form of Early Exercise Stock Purchase Agreement under the 1995
               Stock Option Plan
10.11(1)*      Form of Indemnity Agreement between the Registrant and its
               Directors and Executive Officers
10.12(1)*      Consulting Agreement dated July 20, 1988 by and between the
               Registrant and Harden M. McConnell, Ph.D.
10.19(2)*      Key Employee Agreement for Joseph D. Keegan dated March 11, 1998,
               as amended
10.20(3)       Exclusive License and Technical Support Agreement dated August
               28, 1998 by and between the Registrant and Affymax
10.21(3)*      Employee Offer Letter for Tim Harkness
10.22(3)*      Employee Offer Letter for Tony Lima
10.23(3)*      Employee Offer Letter for John Senaldi
10.24(5)*      1995 Non-Employee Director's Stock Option Plan, as amended
10.25(5)*      1995 Stock Option Plan, as amended
10.26(7)*      Employee Offer Letter for Patricia Sharp
10.27(8)*      LJL BioSystems 1994 Equity Incentive Plan and Forms of Agreements
10.28(8)*      LJL BioSystems 1997 Stock Plan and Forms of Agreements
10.29(8)*      LJL BioSystems 1998 Directors' Stock Option Plan and Forms of
               Agreements
</TABLE>




<PAGE>   54

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION OF DOCUMENT
-------                             -----------------------
<S>            <C>
10.30(8)       Equipment Financing Agreement dated February 16, 1998 between LJL
               BioSystems and Lease Management Services, Inc.
10.31(9)       Lease between the Company and Coptech West
10.32          Sublease Agreement dated September 9, 1999 by and between
               Medtronic, Inc. and the Registrant
10.33          Lease Agreement dated May 26, 2000 by and between Aetna Life
               Insurance Company and the Registrant
21.1           Subsidiaries of the Registrant
23.1           Consent of Ernst & Young LLP, Independent Auditors
23.2           Consent of PricewaterhouseCoopers LLP, Independent Auditors
</TABLE>

----------

(1) Incorporated by reference to the similarly described exhibit in our
    Registration Statement on Form S-1 (File No. 33-98926), as amended.

(2) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated June 30, 1998, and filed August 13, 1998.

(3) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated September 30, 1998, and filed November 13, 1998.

(4) Incorporated by reference to the similarly described exhibit in our Current
    Report on Form 8-K filed May 26, 1999.

(5) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated June 30, 1999 and filed August 10, 1999.

(6) Incorporated by reference to the similarly described exhibit in our Current
    Report on Form 8-K filed June 12, 2000.

(7) Incorporated by reference to the similarly described exhibit in our Form
    10-Q Quarterly Report dated September 30, 2000 and filed on November 13,
    2000.

(8) Incorporated by reference to the similarly described exhibit filed with LJL
    BioSystems' Registration Statement on Form S-1 (File No. 333-43529) declared
    effective on March 12, 1998.

(9) Incorporated by reference to the similarly described exhibit filed with LJL
    BioSystems' Form 10-Q for the quarter ended March 31, 1998.


* Management contract or compensatory plan or arrangement.