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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K
                            ------------------------

(MARK ONE)

     [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 # 000-28229

                           CALIPER TECHNOLOGIES CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                 <C>
                     DELAWARE                                           33-0675808
             (STATE OF INCORPORATION)                     (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>

                              605 FAIRCHILD DRIVE
                          MOUNTAIN VIEW, CA 94043-2234
             (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 623-0700

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

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                         COMMON STOCK, $0.001 PAR VALUE
                                (TITLE OF CLASS)

     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 the Registrants 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.  [ ]

     Based on the closing sale price of common stock on the Nasdaq National
Market on February 15, 2001 the aggregate market value of the voting stock held
by non-affiliates of the registrant was $603,417,389. Excludes an aggregate of
5,108,838 shares of common stock held by officers and directors and by each
person known by the registrant to own 5% or more of the outstanding common
stock. Exclusion of shares held by any of these persons 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.

     The number of shares outstanding of Registrant's common stock, $0.001 par
value was 23,855,786 at February 15, 2001.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain information in Part III of this Annual Report on Form 10-K is
incorporated by reference to the Proxy Statement for the registrant's 2001
Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this Form 10-K.

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<PAGE>   2

                           CALIPER TECHNOLOGIES CORP.

                                   FORM 10-K
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
Item 1.   Business....................................................    1
Item 2.   Properties..................................................   14
Item 3.   Legal Proceedings...........................................   14
Item 4.   Submission of Matters to a Vote of Security Holders.........   15

                                  PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   16
Item 6.   Selected Financial Data.....................................   17
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   19
Item 7A.  Quantitative and Qualitative Disclosures about Market
          Risk........................................................   30
Item 8.   Financial Statements and Supplementary Data.................   31
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial
          Disclosure..................................................   31

                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........   32
Item 11.  Executive Compensation......................................   32
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   32
Item 13.  Certain Relationships and Related Transactions..............   32

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
          8-K.........................................................   32
Signatures............................................................   35
Financial Statements..................................................  F-1
</TABLE>

     This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Act of 1934. These statements relate to future events or our future
financial performance. We have attempted to identify forward-looking statements
by terminology including "anticipates," "believes," "can," "continue," "could,"
"estimates," "expects," "intends," "may," "plans," "potential," "predicts,"
"should" or "will" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks outlined under
"Factors Affecting Operating Results" contained in "Part II -- Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these
forward-looking statements.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Our expectations are as of the date we
file this Form 10-K, and we do not intend to update any of the forward-looking
statements after the date we file this Annual Report on Form 10-K to conform
these statements to actual results, unless required by law.

     LabChip, the LabChip logo, Caliper and the Caliper logo are registered
trademarks of Caliper. We have applied for registration for the LibraryCard
trademark.
                                        i
<PAGE>   3

                                     PART 1

ITEM 1. BUSINESS

OVERVIEW

     We are a leader in lab-on-a-chip technologies. We believe our LabChip
systems can assemble the power and reduce the size of entire laboratories full
of equipment and people. Our LabChip systems miniaturize, integrate and automate
many laboratory processes, and put them on a chip that can fit in the palm of a
child's hand. Each chip contains a network of microscopic channels through which
fluids and chemicals are moved, using electricity or pressure, in order to
perform experiments. The chips are the key components of our LabChip systems,
which also include reagents as well as instruments and software that together
control and read the chips. We believe our LabChip systems have the potential to
revolutionize experimentation in a wide range of industries by enabling
individuals and organizations to perform laboratory experiments at a speed, cost
and scale previously unattainable. Our initial commercialization focus is the
pharmaceutical industry, where there is an urgent need to improve the efficiency
and reduce the cost of drug discovery and development. Future target industries
potentially include agriculture, clinical diagnostics, chemicals and consumer
products. We believe that we are the first company to sell and deliver
lab-on-a-chip products to customers. During 1999 we introduced our first two
LabChip systems, a personal laboratory system and a high throughput system. In
March 2000, we recognized revenue from our first multi-capillary sipper chip
system, and Millennium Pharmaceuticals joined our Technology Access Program,
becoming our fourth Technology Access Program customer, and our joint
applications development program, which was formalized later in the year as our
Applications Developer Program. In May 2000, we introduced the DNA 500 LabChip
kit for the automated sizing and analysis of small DNA fragments. In August
2000, we introduced the Protein 200 LabChip kit for the automated sizing and
analysis of protein samples. In September 2000, we introduced the Automated
Microfluidics System 90 to perform automated high throughput nucleic acid
analysis. In December 2000, GlaxoSmithKline became our second Applications
Developer Program customer, with the goal of developing new applications in
synthetic chemistry using our LabChip technology.

OUR LABCHIP SYSTEMS

     We believe that our LabChip technology represents a revolutionary advance
in laboratory experimentation needed by the pharmaceutical and other industries
today. The chips are the key components of our LabChip systems that also include
a particular LabChip instrument together with experiment-specific reagents and
software. Our chips contain a network of microscopic channels through which
fluids and chemicals are moved to perform experiments. A single type of chip
used with particular reagents and software to perform a particular experiment
make up one LabChip application. Depending on the chip format, reagents are
introduced either automatically or by the user. The chip is placed in the
instrument, which uses software to control the movement of fluids with pressure
or electricity. The instrument also has an optical system for detecting the
results. Because we have great flexibility in channel design and can exert
split-second computer control over fluid flow, we have the ability to create
chips for a multitude of experiments. Our LabChip systems miniaturize, integrate
and automate experiments providing, we believe, the benefits of high speed,
reduced cost, expanded individual researcher capability, improved data accuracy
and improved enterprise-wide productivity.

  Features of LabChip Systems

     - Miniaturization. Conventional laboratory equipment typically uses about a
       drop of fluid, or 50 to 100 microliters, to perform each experiment. In
       some LabChip applications, this volume is reduced to 1 nanoliter, or one
       billionth of a liter, an improvement of up to 100,000-fold over
       conventional systems.

     - Integration. Integration is the compression of multiple processes into a
       single process. Today most laboratory systems perform only one or two
       steps of an experimental protocol. Our LabChip systems can integrate
       complete experiments involving half a dozen or more steps into one
       continuous process performed on a single chip.

                                        1
<PAGE>   4

     - Automation. Today most laboratory experiments are performed using
       multiple instruments in combination with multiple manual steps. With our
       LabChip systems, entire experiments can be automated and performed inside
       a chip using one instrument. The same instrument is used with different
       chips to perform other automated experiments.

  Key Benefits of LabChip Systems

     - High Speed. We believe our LabChip systems accelerate experiments as much
       as 10-fold or more, depending on the application. For example, molecular
       separations such as electrophoresis normally take one hour or more using
       conventional equipment. On a chip, we can perform these separations in
       less than one minute. Another example is that chemical reactions are
       usually incubated for 30 minutes or more before the results are
       determined. Often, these long incubation periods are necessary only to
       provide enough time for manual steps to be performed on large numbers of
       samples. By integrating sample processing and detection, we can perform
       reactions in one minute or less and achieve comparable results. We
       believe our customers can take advantage of this acceleration to increase
       throughput or to complete experiments faster, depending on their needs.

     - Reduced Reagent and Labor Cost. Our LabChip systems use only a small
       fraction of the normal amount of expensive reagents used in experiments
       performed in test tubes or 96-well plates, sometimes as little as
       1/100,000th, and also reduce labor involved in each experiment. We
       believe that saving on reagent cost and labor can enable pharmaceutical
       companies to expand the scale of experimentation in ways that would
       otherwise not be feasible.

     - Expanded Individual Researcher Capability. Because our LabChip systems
       can collapse a multi-step, complex experiment into one step, we believe
       that individual researchers can perform experiments previously outside
       their areas of expertise. By comparison, with conventional,
       non-integrated equipment researchers need to acquire the equipment and
       master the complexities of performing each individual step.

     - Improved Data Accuracy. We believe our LabChip systems generally produce
       more accurate and consistent data by reducing human error and the
       variability caused by the use of multiple instruments. With higher
       quality data, our customers can make better decisions. For example,
       biochemical determinations typically require accurate liquid measurements
       and precise incubation times. When these are manually performed
       significant variations can occur in liquid dispensing and in the duration
       of reaction times.

     - Improved Enterprise-Wide Productivity. We believe our LabChip systems can
       improve data quality to the point where researchers can rely on data
       generated outside their laboratory or organization. We believe this would
       improve enterprise-wide productivity by supporting data sharing and
       reducing the need to repeat experiments. When different research groups
       use different assortments of conventional equipment to perform
       experiments, they often produce data that is not strictly comparable.

     We believe that our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, to streamline and bring greater efficiency and speed to the
drug discovery and development process. Not all laboratory processes, however,
are ideally suited to be performed with our LabChip systems. For example,
detecting clinically important materials that appear in low concentrations in a
sample, such as the virus that causes AIDS or some hormones, is not always
practical with our LabChip systems. This is because there is a risk that these
materials will not be found in the very small volume employed by our chips. As a
result, without pre-processing the sample to increase the concentration our
LabChip system may fail to detect the material. Furthermore, if the analysis of
a sample must involve even one process that cannot currently be performed in the
LabChip system, then use of the LabChip system for the parts it can perform is
often impractical. This is because the very small scale of the chip experiment
does not generally produce enough material to be analyzed by conventional
laboratory equipment.

                                        2
<PAGE>   5

     The faster pharmaceutical companies can identify and validate targets,
screen massive numbers of compounds, optimize leads and identify promising
compounds to take into clinical development, the greater their chances of seeing
a return on investment for their research and development dollars. LabChip
technology has the potential to reduce the time it takes to discover and
commercialize new drugs. In the future, we believe we can bring similar benefits
to other industries.

PRODUCTS AND SERVICES

     We have developed three types of LabChip systems, based on distinct chip
formats: personal laboratory systems, high throughput systems, and application
development systems. Our personal laboratory systems use chips with reservoirs
for the various chemical reagents, which the user introduces manually. Our high
throughput systems use our sipper chip systems that have a short tube, or
capillary, that draws nanoliter volumes of reagents into the chip. Our
application development system is a microscope-based instrument that uses planar
chips capable of performing many different analytical experiments, also known as
assays, and analyses.

  Personal Laboratory Systems

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
PRODUCT                             DESCRIPTION                         STATUS
--------------------------------------------------------------------------------------------
<S>                                 <C>                                 <C>
     Agilent 2100 Bioanalyzer       Desktop LabChip instrument and      Marketed by Agilent
                                    software
--------------------------------------------------------------------------------------------
     DNA 12000 LabChip Kit          Chips and reagents for analyzing    Marketed by Agilent
                                    large DNA Fragments
--------------------------------------------------------------------------------------------
     DNA 7500 LabChip Kit           Chips and reagents for analyzing    Marketed by Agilent
                                    small DNA Fragments
--------------------------------------------------------------------------------------------
     DNA 500 LabChip Kit            Chips and reagents for analyzing    Marketed by Agilent
                                    small DNA fragments
--------------------------------------------------------------------------------------------
     Protein 200 LabChip Kit        Chips and reagents for analyzing    Marketed by Agilent
                                    protein samples
--------------------------------------------------------------------------------------------
     RNA 6000 LabChip Kit           Chips and reagents for analyzing    Marketed by Agilent
                                    RNA samples
--------------------------------------------------------------------------------------------
     New LabChip Kits               A series of kits containing chips   In development
                                    and reagents for applications in
                                    molecular and cell biology
</TABLE>

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

     Agilent 2100 Bioanalyzer System. Our first personal laboratory system is
based on the Agilent 2100 Bioanalyzer, a desktop instrument designed to perform
a wide range of everyday scientific applications using a menu of different
LabChip kits. Each kit contains a chip and reagents designed specifically for
the application. This LabChip system brings the benefits of miniaturized,
integrated and automated experimentation to the researcher's desktop. Agilent
launched this product in September 1999.

     Agilent is selling the Agilent 2100 Bioanalyzer with a menu of three
LabChip kits for DNA sizing and concentration analysis, one for RNA sizing and
concentration analysis, and one for protein sample sizing and concentration
analysis. For these applications, we believe the system's principal advantages
are that it:

     - reduces analysis time from hours to minutes

     - integrates several experimentation steps into one

     - significantly reduces consumption of costly reagents

     - produces higher quality data than conventional methods

                                        3
<PAGE>   6

     Because these applications are among the most common experiments performed
in genetic research, the potential customer base for these applications includes
most pharmaceutical and biotechnology companies, as well as human genome
research centers and other academic laboratories.

     We are developing additional applications, for example, to analyze cells,
as well as additional applications involving DNA, RNA and protein analysis. We
believe that the protein and cell applications on the Agilent 2100 Bioanalyzer
may be particularly attractive to researchers in those disciplines because their
existing tools are generally less advanced than those available to genetic
researchers.

  High Throughput Systems

     Our high throughput systems are being designed to perform thousands or tens
of thousands of pharmaceutical experiments per day on each chip. The hardware
platforms on which these systems run today include the Caliper 100, Caliper 110,
and Caliper 220. We are also developing new instrument platforms that have the
potential to offer customers greater functionality and flexibility for high
throughput experimentation. We believe the principal advantages of Caliper's
high throughput systems are that they:

     - reduce costly reagent consumption up to 100,000-fold

     - integrate multiple experimental functions

     - reduce the need for user intervention

     - produce higher data quality than conventional methods

     Caliper 100 System. We sell assay development equipment, to our Technology
Access Program customers for use with the Caliper high throughput screening
systems. Using the Caliper 100, our customers can modify experimental conditions
used with our standard assay chips for each new pharmaceutical target. This
process is comparable to current assay development procedures, which typically
take one to three months to complete. In fact, we believe that the development
process will likely be accelerated and improved using chip-based systems.

     Caliper 110 Sipper System. The Caliper 110 uses chips with a single
capillary. Like the Agilent 2100 Bioanalyzer, the Caliper 110 is designed to
perform a wide range of experiments using a menu of different chips. We
currently offer four types of chips used for performing drug screening
experiments for several classes of enzymes and cell lines. High throughput
enzyme and cell-based experiments are among the most common assays used in
primary drug screening. Some of the reagents used in these experiments are
expensive and it can take months to produce them in the quantities required for
conventional screening systems. We expect to add several more types of chips,
enabling our Technology Access Program customers to use the Caliper 110 for a
significant percentage of the types of experiments they run. Another important
advantage of the Caliper 110 is that it can be used not only for primary
screening but also for lead optimization. Furthermore, the Caliper 110 is
compact and could be placed in locations outside the centralized screening
group, allowing for more efficient drug development efforts.

     Caliper 220 Ultra High Throughput System. We increase throughput by
increasing the number of channels and capillaries on each chip. We have
introduced systems with four sippers that run on the Caliper 220 and that are
designed to perform approximately 40,000 experiments per day, per chip. Our
throughput goal is to offer systems that can perform more than 100,000
experiments per day. Toward that end, we intend to introduce chips with twelve
capillaries per chip and to enable customers to effectively utilize multiple
instruments by providing integrated plate handling capabilities. We have
delivered a Caliper 220 ultra high throughput instrument to our Technology
Access Program customers.

     We sell our current high throughput systems to Technology Access Program
customers and provide training and support. We also develop initial assays for
them and offer some level of customization in order to integrate our systems
most effectively into each customer's production processes.

     Automated Microfluidics System 90 System. The Automated Microfluidics
System 90, or AMS 90, is designed to meet the needs of microarray and cloning
laboratories that analyze hundreds of samples per day.

                                        4
<PAGE>   7

The initial application will perform DNA fragment sizing, separation and
quantitation analyses. The AMS 90 was introduced in the third quarter of 2000,
and we shipped instruments to customers in the first quarter of 2001. Through a
collaboration with Structural GenomiX, we intend to develop a protein analysis
application for the AMS 90. We believe this application will be commercially
available in the second half of 2001.

  Application Development Systems
        ------------------------------------------------------------------------

<TABLE>
<CAPTION>
        PRODUCT                      DESCRIPTION                    STATUS
-----------------------
<S>                      <C>                                   <C>
 Caliper 42 Instrument   Workstation for creating and using    In development
                         microfluidic applications
-----------------------
 Standard Chip Set       Planar chips for testing new assays,  In development
                         gaining microfluidic proficiency
-----------------------
 Custom Chips            Chips designed specifically to meet   In development
                         customer needs
-----------------------
</TABLE>

     The newly-created Applications Developer Program, enables customers to
develop proficiency in fundamental microfluidics and to develop novel chip-based
microfluidic applications using our proprietary LabChip technology. Customers
that participate in the Applications Developer Program purchase instruments, the
Caliper 42 applications development workstation, chips and Caliper know-how to
develop new microfluidic applications. We believe that this new initiative will
help to create new applications and new markets for our LabChip technology.

  Services

     We are using our high throughput systems internally to offer screening
services to pharmaceutical and biotechnology customers that prefer to outsource
this activity. Under our Value Added Screening Collaboration program, we develop
LabChip assays for targets selected by a customer. We then screen the targets
against the customer's compound library, our own library, or both, and provide
the data to the customer.

     We believe that our screening services also add substantial value to our
product businesses. We deploy our most advanced high throughput screening
systems in our internal screening services operation. By making intensive use of
those systems in this business, we can provide critical feedback to our product
development groups. This accelerates development and enables us to deliver
better systems to our Technology Access Program customers. We also intend to use
our screening services capability to demonstrate to potential Technology Access
Program customers how our LabChip systems can streamline screening operations
and enhance productivity.

COMMERCIALIZATION

     We currently are selling our first personal laboratory system, the Agilent
2100 Bioanalyzer system, through our collaboration with Agilent. We are directly
selling our high throughput systems for drug screening through our Technology
Access Program and we also directly sell the AMS 90. We are also providing high
throughput screening services through our Value Added Screening Collaboration
program. In addition, through our Applications Developer Program, we intend to
directly sell instrumentation and custom chip design service that will enable
customers to develop their own applications. Three of our Technology Access
Program customers, Amgen, Eli Lilly and Millennium, and our commercial partner,
Agilent, each accounted for in excess of 10% of our revenue in the year ended
December 31, 2000. Agilent alone accounted for 45% of our revenue in this
period, and the three Technology Access Program customers collectively accounted
for 45% of our revenue in the year ended December 31, 2000.

  Strategic Alliance with Agilent

     We have established a broad relationship with Agilent to create a line of
commercial research products based on our LabChip technologies. This
relationship provides us with the scale and expertise of a leading analytical
instrumentation company to bring these novel products to market. When this
relationship was established in May 1998, Agilent and Caliper publicly stated
their intention to invest over $100 million collectively to create and
commercialize this line of products over the ensuing five years. In September
1999,

                                        5
<PAGE>   8

Agilent introduced the Agilent 2100 Bioanalyzer with three different LabChip
kits, our first LabChip products under this agreement. In May 2000, we
introduced the DNA 500 LabChip kit for the automated analysis of DNA fragments
to determine their size and concentration. In August 2000, we introduced the
Protein 200 LabChip kit for the automated sizing and analysis of protein
samples.

     In this collaboration, Caliper primarily focuses on developing core
technology and LabChip applications. We also manufacture the chips and supply
the chips and reagents to Agilent. If we elect, however, not to manufacture
chips for a LabChip application or we are unable to meet minimum supply
commitments to be mutually established in the future, Agilent would have the
right to manufacture those chips. Agilent primarily focuses on developing
instruments and software, manufacturing instruments, and marketing, selling and
supporting complete systems. Agilent has the contractual right to develop the
marketing plan under the collaboration, although to date we and Agilent have
made these decisions in a collaborative manner.

     Agilent funds our product development efforts under the collaboration,
reimburses our costs of supplying chips and reagents, and pays us a share of the
gross margin on all components of LabChip systems. The gross margin share varies
depending on the type of collaboration product, whether we or Agilent
manufacture the collaboration product, and whether the collaboration product is
sold during the collaboration or after the collaboration has terminated. These
financial arrangements allow us to offset a portion of the substantial risks
inherent in introducing novel technologies. At the same time, they enable us to
support a broad product development program and to retain a substantial
financial interest in the products we create.

     Our agreement with Agilent is mutually exclusive in the field of
lab-on-a-chip technologies for the research products market. It requires our
consent before Agilent may offer products exceeding established sample
throughput limits, and it requires Agilent's consent before we may offer these
products outside the collaboration in excess of established volume limitations.

     The term of the Agilent agreement is eight years, beginning in May 1998.
After three years, Agilent may elect not to meet annual funding requirements, in
which case either party may terminate the agreement. In any event either party
may terminate the agreement after five years. If the agreement terminates after
three years, we will continue to offer the collaboration's products through
Agilent but Agilent will have no rights to our technologies for the development
of new products. If either party terminates the agreement after five years, we
will grant Agilent a non-exclusive license to use the lab-on-a-chip technologies
that we have developed up to that time in order to develop new products in
substantially the same field that applied during the collaboration. We will also
transfer chip manufacturing know-how and receive royalties on Agilent's sales of
systems that employ our patented technologies. Regardless of whether the
collaboration terminates after three or five years, both Caliper and Agilent
will have the right to sell collaboration products, with reciprocal supply
arrangements.

  Technology Access Program

     Our Technology Access Program is initially focused on high throughput
systems for drug screening. In this program, we work directly with
pharmaceutical company customers during the product development process to
create successive generations of products. We provide Technology Access Program
customers with access to existing technology, a multi-year subscription for
technology developed during the subscription period, development and support
services and access to prototype LabChip systems developed during the
subscription period. By working closely with these customers, we focus our
technology and product development efforts where we believe they can have
maximum impact for the pharmaceutical marketplace.

     Our Technology Access Program customers have non-exclusive access to all of
the high throughput screening products we offer during the term of the
agreement. These agreements generally provide for customers to pay an up-front
license fee and annual subscription fees, and to reimburse us for our costs of
providing development and support services. Instruments and chips are generally
sold separately on a product-by-product basis, although some agreements
establish prices for critical instruments or estimates of the price we will
charge them for sipper chips based on the amount of data they generate. Our
Technology Access Program customers can terminate their participation in the
program and still have the right to purchase those products that we offered to
them during their participation in the program.
                                        6
<PAGE>   9

     We currently have four Technology Access Program customers for our high
throughput screening systems: Millennium Pharmaceuticals, Eli Lilly, Amgen and
Hoffmann-La Roche. Our agreements with these customers generally contain the
terms described above. Key terms unique to each agreement are described below.

     Millennium Pharmaceuticals. We announced the formation of a broad
technology access and application development collaboration with Millennium
Pharmaceuticals in March 2000 based on our LabChip microfluidic high throughout
technology platform. The collaboration provides for Millennium to subscribe to
our Technology Access Program as well as for joint investment in and development
of novel LabChip applications focused on genomics and other areas of mutual
interest. The term is two years with an option to renew in the third year.
Millennium, a leading drug discovery and development company, employs
large-scale genetics, genomics, high throughput screening and informatics in an
integrated science and technology platform. This collaboration has the potential
to lead to the development of new LabChip applications in genomics and other
areas that can be of high value to Millennium and, at the same time, enable us
to make these applications available to other customers of our high throughput
systems.

     Eli Lilly. We signed a technology access agreement with Eli Lilly in August
1999. The term is three years, although Eli Lilly may temporarily suspend its
Technology Access Program participation and later reinitiate participation,
during which time our support and assistance obligations will also be suspended.
Under this agreement our obligations include support for assay development for
targets, training for Eli Lilly personnel, and support for custom development
projects. Eli Lilly may terminate the agreement on any anniversary.

     Amgen. We entered into a technology access agreement with Amgen in December
1998. The term of this agreement is three years, although Amgen may terminate
the agreement on any anniversary.

     Hoffmann-La Roche. We entered into a technology access agreement with Roche
in November 1998, which concluded in July 2000. This agreement may be extended
by mutual consent and discussions are currently underway concerning an extension
of the agreement. This agreement superseded an earlier agreement under which
Roche funded early development of the high throughput screening technology in
exchange for exclusive rights to an ultra high throughput screening system.
Under this agreement Roche had non-exclusive rights similar to other Technology
Access Program customers. We did not receive an up-front license fee or annual
subscription fee from Roche.

  Value Added Screening Collaboration Program

     In our Value Added Screening Collaboration program we offer high throughput
screening services using our LabChip systems. This can enable companies that may
not choose to participate in our Technology Access Program to take advantage of
our high throughput systems. Our first Value Added Screening Collaboration
agreement was established with Neurocrine Biosciences in December 1998. We
receive screening fees based on the amount of data generated, preclinical
milestones and royalties on Neurocrine products emerging from the collaboration.
This agreement has a three-year term, but may be terminated by either party
under limited circumstances after the first year. In August 2000, we announced
that SUGEN, a wholly-owned subsidiary of Pharmacia Corporation and leader in
transduction research, became our second screening customer. Using SUGEN's
compound library and target, we completed a screen and identified which of the
compounds have potential for development as drug candidates.

  Automated Microfluidics Systems 90

     We began shipping the AMS 90 to customers in the first quarter of 2001. We
sell proprietary reagents and chips required for operation of the AMS 90
directly to customers as well as support services. Assays for high-throughput
DNA analysis are currently available and we intend to introduce additional
assays in the second half of 2001.

                                        7
<PAGE>   10

  Applications Developer Program

     The Applications Developer Program is the first formal program to implement
our strategy of distributed applications development. The Applications Developer
Program is designed to enable customers to establish their own in-house
microfludics research programs using our LabChip technology and developmental
tool set. Participation in the Applications Developer Program involves the
purchase of instrumentation, training in microfluidics, custom-chip design
services and a supply of both standard and custom microfluidic chips. During
participation in the Applications Developer Program, customers identify an assay
to address their specific needs and we customdesign a chip to perform that
assay. We intend to provide the training and support to customers to help them
develop sufficient microfluidic expertise to use the instrumentation and chips
efficiently. We also intend to assist customers who wish to commercialize the
resulting custom chip by facilitating the development of instrumentation and
supply any necessary chips to fully enable the customer to develop and
commercialize entirely new LabChip systems.

     We and GlaxoSmithKline announced the formation of a collaboration under our
Applications Developer Program to jointly develop new applications in snythetic
chemistry using our LabChip microfluidic technology. Together, we will focus on
exploiting our microfluidic solutions with GlaxoSmithKline's innovative approach
to medicinal chemistry and lead discovery. The goal of the collaboration is to
create novel tools and methods for performing chemical synthesis in a
microfluidic chip. The term of the collaboration is one year, with the ability
to renew annually. We possess the right to commercialize any chip products
resulting from the collaboration.

TECHNOLOGY

     We believe that we have established a leading position in three areas of
lab-on-a-chip technology.

  Microfabrication

     We create lab-on-a-chip devices using the same manufacturing methods that
are used to make microchips in the computer industry called "microfabrication."
Microfabrication makes it possible to create intricate designs of interconnected
channels that are extremely small. Each pattern is designed to produce the
series of fluid manipulation steps that will execute an experiment. We use the
principles of fluid dynamics, chemical and electrical engineering and biophysics
to create initial designs using computer-aided design tools. Because we have
designed, manufactured and tested hundreds of different chips, we have developed
proprietary design rules that make each round of chip creation more predictable
and likely to succeed. We design our chips to be disposable and relatively
inexpensive to manufacture. We place the more expensive electronic controls and
sensing capability in a separate instrument.

     Once a design pattern is completed, we use microchip manufacturing methods
to recreate the design as channels in a sheet of quartz, glass or plastic. This
process creates highly precise channels with dimensions that can be varied by
width and depth. A typical channel is roughly 50 microns wide and 10 microns
deep, approximately the size of a strand of hair.

     In the next step, a second sheet of quartz, glass or plastic with a precise
pattern of holes is fused to the first sheet using a proprietary process. This
covers the channels and converts them to closed microfluidic conduits. The end
of each channel connects to an open reservoir through which fluids are
introduced. The sheets are then cut into individual chips, which can be less
than one inch to a few inches on a side. The individual chips are then packaged
into plastic holders that make them easier for the user to handle.

     We currently make two basic chip formats. In our planar chips, such as
those used in the Agilent 2100 Bioanalyzer, the user introduces all of the
chemical reagents into the reservoirs, including the various samples to be
tested, using pipettes. In our Sipper chip devices, such as those used in the
Caliper 110 and Caliper 220, a small tube, or capillary, inserted into the chip
draws a few nanoliters of each sample into the channel network. In this way,
minute quantities of a large number of samples can be tested in a single chip.
The samples are introduced into the capillary one after the other, spaced by
buffer solution. They proceed through

                                        8
<PAGE>   11

the channel network in a continuous flow, assembly-line fashion to perform a
complete experiment. We have an issued U.S. patent claiming this assay
technique.

  Microfluidics

     In our LabChip systems the movement of minute quantities of fluids, or
"microfluidics," is actively controlled by computer programs. We use two
different methods of generating fluid motion in microchannels: electrokinetics
and pressure.

     Electrokinetic flow is generated when electrodes attached to
computer-driven power supplies are placed in the reservoirs at each end of a
channel and activated to generate electrical current through the channel. Under
these conditions, fluids of the appropriate type will move by a process known as
"electro-osmosis." Typical flow rates within the channel are about a millimeter
per second and the flow rate can be controlled with a high degree of precision.
Programs can then be written to generate highly specific and complex networks of
flow. One key to designing complex systems is controlling and directing the flow
at intersections. Fundamental techniques for accomplishing this were invented by
Dr. J. Michael Ramsey, one of our co-founders and a Scientific Advisor , and are
covered by a series of issued and pending U.S. patent applications. We hold an
exclusive license to these patents for most applications and a non-exclusive
license for remaining applications.

     Another electrokinetic phenomenon known as "electrophoresis" occurs in the
channels. This is the movement of charged molecules or particles in an electric
field. Electrophoresis is often used in conventional laboratories for analyzing
molecules since they move differently according to their physical make-up.
Electrophoresis can be used to move molecules in solution, or to separate
molecules with very subtle differences. Electrophoresis and electro-osmosis
generally occur at the same time in channels. However, we have developed
proprietary techniques for minimizing either force while maintaining the other,
as appropriate, for a given application.

     Pressure can also be used to move fluid in the channels. On the
microfluidic scale, small amounts of pressure produce highly predictable and
reproducible fluid flow. We use both computer-controlled pressure and
electrokinetic forces to gain precise control over fluid flow in the
microfluidic channel network. It is possible to use electrokinetic forces alone,
pressure forces alone, or a combination of the two methods.

  Lab-on-a-Chip Applications Development

     We have developed a large amount of expertise at discovering new functions
that microfluidic chips can perform. We have generated proprietary computer
models of how an experiment can be carried out. We store these functional
designs and we can incorporate them into new designs that simulate complete
experiment pathways. In this way, we believe the value of new microfluidic
inventions can be rapidly expanded across many application development projects.

     We have also developed expertise at making experiments work in our chips.
Currently, all of our systems use fluorescent chemical reagents and optical
detection instruments to read experimental results. We often need to explore
chemical strategies for labeling relevant reagents that can reveal how different
molecular interactions take place. Another area of investigation addresses the
fact that in these small dimensions, the amount of channel surface material
relative to the amount of liquid is many times higher than in a test tube or
microwell plate. Because of this, the surface material can exert a chemical
influence on the biochemical reactions taking place. We have created strategies
to avoid the problems this can cause, or benefit from it if possible. We have
developed Sipper chips that perform and analyze enzyme reactions using part of
the channel design as a tiny, continuously operating electrophoresis machine.
Thus, reactions with one sample are going on in one area of the chip while
electrophoretic separation of the products of another sample is taking place in
a different part of the chip. We have also found that, in many cases,
fluorescence polarization spectroscopy, an optical detection method that can
determine the proportion of a fluorescent molecule that is attached to a larger
molecule or is unbound in solution, can be used to read reaction results without
needing to electrophoretically separate the biochemicals. We have built this
optical detection capability into our high

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<PAGE>   12

throughput systems. In general, our experience is that microfabrication and
microfluidics provide a rich tool set with which to create innovative new
applications.

RESEARCH AND DEVELOPMENT

     We have made substantial investments in lab-on-a-chip research and product
development since our inception. We explored fundamental issues of lab-on-a-chip
technology as early as possible in order to find solutions to important
technical challenges and seek patent protection for our solutions. Today we are
supplementing these core technology research efforts with applied product
development efforts in several areas.

  Technology Research

     Our technology research activities fall into several classes.

     Chemical Engineering. We are increasing our understanding of the design
rules guiding the development of new chips. Using the principles of chemical
engineering we create patterns of interconnected channels that permit execution
of the various common steps of experimentation. Designs from one chip can be
used for other chips needing similar fluidic functions for a different
application. Mathematics and computer models also help minimize the number of
iterations necessary to achieve new functional chip designs.

     Chip Manufacturing. We continue to seek ways to improve the yield and
decrease the cost of manufacturing our chips. We are exploring novel fabrication
techniques and the use of new materials that offer functional advantages, such
as manufacturing in quartz to take advantage of its superior optical features.
We have development programs in manufacturing technology for chips made of
plastic. Plastic devices potentially offer cost advantages and can offer
favorable surface chemical features for some applications. A major area of
development is micromachining technology for precisely attaching capillaries to
our Sipper chips to access reagents. In high throughput experimentation, the
number of capillaries and channels determines the level of throughput.
Accordingly we are developing high yield fabrication methods to enable us to
cost-effectively manufacture chips with many capillaries to perform ultra high
throughput experimentation.

     Engineering and Software. We use the skills of electrical engineers,
optical engineers, mechanical engineers, product designers and software
engineers to create new instrumentation to run our chips. These instruments
control fluid movement inside the chip, present the reagents to the chip from
conventional fluid sources, and detect the results of biochemical or cell-based
experiments with optical methods. Software engineers write computer programs
that control the sources of fluid motion, communicate between different
instrument components and interpret signals from the detection system. Currently
we develop the software for our high throughput systems. We collaborate with
Agilent to develop software for our personal laboratory systems.

  Product Development

     Our product development efforts are currently focused on new applications
and capabilities for our existing instruments, our LibraryCard system, and high
throughput genomic systems.

     Extensions of Existing Product Lines. For each of our first generation
instruments, we are expanding the menu of applications to address other stages
of the pharmaceutical development process. For the Agilent 2100 Bioanalyzer, we
intend to introduce new applications that address everyday productivity needs in
many areas of genomics, protein chemistry and cell biology. We are broadening
the application menu for high throughput systems as well to include assays that
measure many important activities of cells and proteins.

     LibraryCard System. We are developing a new format for storing and
accessing reagents, which we call the LibraryCard reagent array. We have learned
how to reconstitute very small quantities of dried reagents stored at high
density on a planar surface. We can conveniently access reagents stored in this
way using our Sipper chips. The LibraryCard reagent array could produce a
fundamental change in the way large libraries of reagents are used. Today, these
libraries are only accessible in centralized reference-style laboratories that
are set up to work with automated warehouses of reagents. When libraries can be
reduced to the size of a postcard,
                                        10
<PAGE>   13

high throughput experimentation involving massive data acquisition can be
decentralized. We believe that this will increase the size of the market for
applications that run on this type of system. We believe this type of system
could significantly impact several stages of the pharmaceutical development
process, particularly primary screening and pharmacogenetic studies. We made
progress in key areas of development of the LibraryCard system in 2000 and our
goal is to have a prototype system available in late 2001.

     SNP Genotyping. Genotyping is the determination of the DNA sequence
variation present at a particular site in an individual's DNA. One type of these
variations, called single nucleotide polymorphisms or "SNPs," are believed to be
important determinants of disease. Like all experimentation processes, these
applications are a combination of various fluid manipulations, biochemical
reactions, molecular separations and detection. We believe the processes
required for SNP analysis can be performed on the same basic high throughput
platform we have built for other applications. We are developing an integrated
SNP genotyping application that is designed to perform the steps of reagent
assembly, amplification and genotyping in rapid, serial fashion inside the
channels of a microfluidic chip. We believe that our SNP genotyping systems will
offer the advantages of nanoliter-scale processing of valuable reagents,
automated reagent assembly and computer-controlled heating and mixing for high
quality data production. In 2000, we made progress in developing our SNP
genotyping application by demonstrating serial amplification of nanoliter-size
fluid plugs. Our goal is to have a prototype system available in late 2001. This
program had its origins in a 1999 project funded in part by the Advanced
Technology Program of the National Institute of Standards and Technology, to
adapt the platform and develop chips to run high throughput nucleic acids
analyses.

     Our research and development expenses for the years ended 2000, 1999, and
1998 were approximately $36.0, $18.4 million, and $9.6 million, respectively. We
expect research and development spending to continue to increase in proportion
to our revenue growth over the next several years as we expand our research and
product development efforts. As of December 31, 2000, we had 111 employees
engaged in research and development, including 70 with advanced degrees.

MANUFACTURING

     We manufacture our chips in-house and are currently manufacturing high
throughput instruments in limited volumes. In the fourth quarter of year 2000,
we received a recommendation from Underwriters Laboratories for ISO 9001
certification for the manufacture of our chips and reagents. ISO, the
International Standards Organization, sets international standards for quality
in product manufacturing and production. We rely upon Agilent to manufacture the
Agilent 2100 Bioanalyzer. Our high throughput instruments are generally
integrated with plate stacking and handling units offered commercially by other
companies. We contract with third parties to supply most reagents for the
research products business. We currently depend on suppliers to supply prepared
materials for use in the manufacture of chips. We intend to continue and may
extend the subcontracting of portions of our manufacturing processes to
subcontractors where we feel it best leverages the supplier's manufacturing
experience, costs, and/or improves our ability to meet customer demands. For a
discussion of the methods we use to manufacture our chips see "-- Technology"
and "-- Research and Development."

COMPETITION

     Although we believe that we are currently the only company selling and
delivering lab-on-a-chip products to customers, we expect to encounter intense
competition from a number of companies that offer products for laboratory
experimentation. We anticipate that our competitors will come primarily from the
following two sectors:

     - companies providing conventional products based on established
       technologies

     - companies developing their own microfluidics or lab-on-a-chip
       technologies

     In order to compete against vendors of conventional products, we will need
to demonstrate the advantages of our LabChip products over alternative
well-established technologies and products. We will also need to demonstrate the
potential economic value of our LabChip products relative to these conventional
technologies

                                        11
<PAGE>   14

and products. Some of the companies that provide these products include the
Applied Biosystems division of Applera (formerly PE Corporation), Agilent,
Beckman-Coulter, Amersham Pharmacia Biotech, Bio-Rad Laboratories, and Molecular
Devices.

     We will also need to compete effectively with companies developing their
own microfluidics or lab-on-a-chip technologies and products, such as Aclara
Biosciences and Orchid Biosciences. Other companies known to have initiated
microfluidic programs include Motorola, 3M, Applera, Amersham Pharmacia Biotech
and Cepheid. Microfluidic technologies have undergone and are expected to
continue to undergo rapid and significant change. Our future success will depend
in large part on our ability to establish and maintain a competitive position in
these and future technologies which we may not be able to do. Rapid
technological development may result in our products or technologies becoming
obsolete. Products offered by us could be made obsolete either by less expensive
or more effective products based on similar or other technologies.

     In addition, there is the possibility that we may experience competition
from Agilent if they, or we, terminate our agreement after May 2003. Under the
terms of our agreement, upon termination we will grant to Agilent a
non-exclusive license to our LabChip technologies as then developed for use in
the research products field.

     In many instances, our competitors have or will have substantially greater
financial, technical, research, and other resources and larger, more established
marketing, sales, distribution, and service organizations than we do. Moreover,
competitors may have greater name recognition than we do, and may offer
discounts as a competitive tactic. We cannot assure you that our competitors
will not succeed in developing or marketing technologies or products that are
more effective or commercially attractive than our products, or that would
render our technologies and products obsolete. Also, we may not have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. Our success will depend in
large part on our ability to maintain a competitive position with our
technologies.

INTELLECTUAL PROPERTY

     We seek patent protection on our lab-on-a-chip technologies. As of March 1,
2001, we owned or held licenses to 77 issued U.S. patents and 167 pending U.S.
patent applications, some of which derive from a common parent application. The
issued U.S. patents expire between 2012 and 2019. Foreign counterparts of many
of these patents and applications have been filed and/or issued in one or more
other countries, resulting in a total of more than 487 issued patents and
pending patent applications in the United States and foreign countries. These
patents and applications are directed to various technological areas which we
believe are valuable to our business, including:

     - control of movement of fluid and other material through interconnected
       microchannels

     - continuous flow high throughput screening assay methods and systems

     - analytical and control instrumentation

     - analytical system architecture

     - chip-based assay chemistries and methods

     - chip compatible sample accession

     - software for control of microfluidic based systems and data analysis

     - chip manufacturing processes

     We also rely upon copyright protection, trade secrets, know-how, continuing
technological innovation and licensing opportunities to develop and maintain our
competitive position. Our success will depend in part on our ability to obtain
patent protection for our products and processes, to preserve our copyrights and
trade secrets, to operate without infringing the proprietary rights of third
parties and to acquire licenses related to enabling technology or products used
with our lab-on-a-chip technology.

                                        12
<PAGE>   15

     We are party to various exclusive and non-exclusive license agreements with
third parties which give us rights to use certain technologies. For example, we
have an exclusive license in the fields we are currently operating in from
Lockheed Martin Energy Research Corporation, relating to patents covering
inventions by Dr. J. Michael Ramsey. A failure to maintain some or all of the
rights to these technologies could seriously harm our business.

EMPLOYEES

     As of December 31, 2000, we had a total of 185 employees, including 111 in
research and development, 42 in manufacturing and 32 in administration and
finance. None of our employees is represented by a collective bargaining
agreement, nor have we experienced any work stoppage. We consider our relations
with our employees to be good.

EXECUTIVE OFFICERS OF THE REGISTRANT

     Daniel L. Kisner, M.D., has served as our President and Chief Executive
Officer since February 1999 and as a Director since March 1999. From May 1994 to
January 1999, Dr. Kisner served as President and Chief Operating Officer of Isis
Pharmaceuticals, Inc., a biotechnology company. From February 1993 to May 1994,
Dr. Kisner served as Executive Vice President and Chief Operating Officer of
Isis Pharmaceuticals, Inc. From March 1991 to February 1993, he served as
Executive Vice President of Isis Pharmaceuticals, Inc. and was responsible for
business and product development, and manufacturing. From December 1988 to March
1991, Dr. Kisner served as Division Vice President of Pharmaceutical Development
for Abbott Laboratories. Dr. Kisner has held a tenured position in the Division
of Oncology at the University of Texas, San Antonio School of Medicine and is
certified by the American Board of Internal Medicine and certified in Medical
Oncology. Dr. Kisner holds a B.A. from Rutgers University and an M.D. from
Georgetown University.

     Calvin Y. H. Chow, co-founded Caliper and has served as our Chief Operating
Officer since February 1998. Mr. Chow also served as our Vice President of
Development from September 1995 to February 1998. From October 1985 to September
1995, Mr. Chow served as Vice President of Engineering and Operations of
Molecular Devices Corporation, a bioanalytical instrumentation company, where he
was responsible for product development and company-wide manufacturing. Mr. Chow
holds a B.S. in Electrical Engineering from Illinois Institute of Technology and
an M.S. in Electrical Engineering from Stanford University.

     James L. Knighton, has served as our Chief Financial Officer since
September 1999. From October 1998 to September 1999, Mr. Knighton served as
Senior Vice President and Chief Financial Officer of SUGEN, Inc., a
biotechnology company. From July 1997 to October 1998, Mr. Knighton served as
Vice President of Investor Relations and Corporate Communications at Chiron
Corporation, a biotechnology company. From 1985 to 1994, Mr. Knighton served in
various operations, planning and R&D functions at E. I. DuPont de Nemours Inc.,
a global, diversified chemical and life science company. Mr. Knighton holds a
B.S. in Biology from the University of Notre Dame, an M.S. in Genetics from the
University of Pennsylvania and an M.B.A. from the Wharton School at the
University of Pennsylvania.

     Michael R. Knapp, Ph.D., co-founded Caliper and has served as our Vice
President of Science and Technology since September 1995. From November 1994
through August 1995, Dr. Knapp was engaged in activities related to forming
Caliper, including securing our core technology license and procuring financing.
From October 1988 to October 1994, Dr. Knapp served as President and Scientific
Director at Molecular Tool, Inc., a genetics technology company he co-founded in
1988. Previously, Dr. Knapp was on the staff of the Center for Neurobiology and
Behavior at Columbia University and was a Scientific Director of Genetica SARL,
an affiliate of Rhone Poulenc SA in Paris, France. Dr. Knapp holds a B.S. in
Biology from Trinity College (Hartford) and a Ph.D. in Medical Microbiology from
Stanford University.

     J. Wallace Parce, Ph.D., co-founded Caliper and has served as our Vice
President of Research since October 1995. Prior to joining Caliper, Dr. Parce
spent 12 years with Molecular Devices Corporation as a founder, consultant,
Director of Research and Vice President of Research. From 1980 until 1984 he was
an Assistant Professor in the Department of Biochemistry at Wake Forest
University, from 1982 until 1987 an associate in the Department of Microbiology
and Immunology, and from 1984 until 1987, an Associate
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<PAGE>   16

Professor of Biochemistry. Dr. Parce holds a B.A. in Chemistry from Western
Maryland College in 1972 and a Ph.D. in Biochemistry from Wake Forest University
in 1976. From 1976 until 1980 Dr. Parce was a Post Doctoral Fellow in Chemistry
at Stanford University.

     E. William Radany, Ph.D., has served as our Vice President of Drug
Discovery Programs since December 1999. From June 1997 to December 1999, Dr.
Radany was Vice President, General Manager of the Discovery Systems Business for
Stratagene, a biotechnology company responsible for research and development,
tactical and strategic marketing and business development. From August 1996 to
February 1997, Dr. Radany was President of the North American Subsidiary of
Biacore A.B., a biotechnology company responsible for microfluidic
instrumentation. From January 1993 to August 1996, Dr. Radany held various
positions at Pharmacia Biosensor, most recently as Vice President of Sales and
Marketing for Region I. Dr. Radany holds a B.S. in Cell Biology from Colorado
State University and a Ph.D. in Biochemistry and Physiology from the University
of Wyoming.

     William M. Wright III, has served as our Vice President of Operations since
September 1998. From November 1995 to May 1998, Mr. Wright served as Vice
President of Operations of Biocircuits Corporation, a medical diagnostic
company, where he was responsible for instrument and immunoassay cartridge
manufacturing. From 1984 to 1995, Mr. Wright was Vice President of Site
Operations with Dade International Inc., formerly a division of Baxter
International, Inc., a medical products manufacturing company, where he assisted
in the start-up and launch of the Baxter International Paramax Analytical
Clinical Chemistry Business. Mr. Wright holds a B.S. in Industrial Technology
from California State University at Long Beach.

     Anthony T. Hendrickson, has served as our Corporate Controller since April
2000. From April 1997 to April 2000, Mr. Hendrickson was the Corporate
Controller and Chief Accounting Officer for Sequus Pharmaceuticals, Inc., a
biotechnology company. From April 1995 to March 1997, Mr. Hendrickson was the
Director of Finance and Administration of a U.S. operating division of Lanier
Worldwide, Inc. that specialized in electronic imaging. From 1993 to April 1995,
Mr. Hendrickson was a Senior Manager for KPMG LLP, a public accounting firm. Mr.
Hendrickson is a Certified Public Accountant and holds a B.A. in Accounting and
Finance from the University of Cincinnati and an M.B.A. from The Ohio State
University.

ITEM 2. PROPERTIES

     Our principal research and development, manufacturing and administrative
facilities are currently located in approximately 82,000 square feet of leased
space in Mountain View, California. The lease for this space will expire in
2008. We believe that our current facilities are adequate for our needs through
the first quarter of 2002, and we are currently assessing the need for
additional facilities to meet our future needs. If we are unable to locate
additional facilities, we will be required to delay our planned expansion. Any
facilities that we are able to locate and lease may be on terms that are
expensive to us, especially since we are located in the Silicon Valley in
California where such facilities are in short supply and lease rates are high.

ITEM 3. LEGAL PROCEEDINGS

     On March 22, 1999, we filed a lawsuit in California Superior Court for the
County of Santa Clara (Case No. CV 780743), against Aclara Biosciences Inc., a
patent attorney named Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
our trade secrets relating to our business plans, patents and intellectual
property strategy. The suit also alleges that Dr. Rowland and Flehr Hohbach
committed a breach of the duties they owed to us as our former attorneys. The
suit seeks damages and equitable remedies to prevent Aclara, Dr. Rowland and
Flehr Hohbach from benefiting from the alleged misappropriation and breach of
duties. On September 14, 2000, we reached a settlement agreement with Dr.
Rowland and Flehr Hohbach in the case pending in Santa Clara County. The
settlement provided Caliper with a $12.0 million cash payment by Dr. Rowland and
Flehr Hohbach, as well as other terms. This settlement has no effect on
Caliper's lawsuits with Aclara. In this same case, on October 27, 2000, the jury
returned a verdict in favor of Caliper and against Aclara on Caliper's claims
for misappropriation of trade secrets and conversion of property. The jury
awarded Caliper $52.6 million for damages to Caliper and unjust enrichment to
Aclara, which the court reduced to $35.6 million.

                                        14
<PAGE>   17

     On January 12, 2000, we filed a lawsuit in the United States District Court
for the Northern District of California against Aclara (Case No.
C-00-0145CRB(JCS)) alleging that Aclara is infringing four U.S. patents that
have been licensed to us by Lockheed Martin Energy Research Corporation, which
operates the Department of Energy's Oak Ridge National Laboratory where the
inventions were made. These patents cover technology for controlling the flow of
materials in microfluidic chips, as well as devices, systems and applications
that make use of this technology. We subsequently amended this complaint to add
a fifth, related patent. Aclara counterclaimed for a declaratory judgment that
the patents in this suit are invalid, unenforceable and are not infringed by
Aclara.

     On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California (Case No. C-99-1968BZ)
alleging that we are making, using, selling or offering for sale microfluidic
devices that infringe United States Patent Number 5,750,015 in willful disregard
of Aclara's patent rights. This patent concerns methods and devices for moving
molecules by the application of electrical fields. The Aclara action seeks
damages for past and future reduced sales or lost profits based upon our alleged
fabrication, use, sale or offer for sale of allegedly infringing products and
processes, and seeks to enjoin our continued activities relating to these
products. We counterclaimed for a declaratory judgment of noninfringement,
invalidity and unenforceability of all claims of the Aclara patent. On July 19,
2000, the federal judge in this action issued an order finding that eight of the
eleven claims asserted against us are invalid, and interpreting the remaining
asserted claims. On October 27, 2000, the federal judge issued a second order
holding that our products do not literally infringe Aclara's patent, but
allowing the suit to proceed on the issue of whether our products infringe under
a legal theory known as the doctrine of equivalents and whether the patent is
valid and enforceable.

     On January 7, 2001, we announced that we had reached a comprehensive
settlement agreement with Aclara Biosciences on all pending litigation between
the two companies. Under the terms of the settlement both companies agreed to
dismiss all suits and countersuits in the federal and state court actions and to
cross-license selected patents. The settlement provides us with freedom to
operate under Aclara's '022 family of patents, which includes the '015 and other
patents, for our glass chips and related instruments through a fully paid,
royalty-free license. Under the terms of the agreement, Aclara will also pay us
$37.5 million over the next three years in a combination of stock, cash, and
committed minimum royalties. We have agreed to license to Aclara the "Ramsey"
family of patents for use with Aclara's polymer chips and related instruments in
exchange for license fees and royalties. The two companies have also agreed to
an alternative dispute resolution procedure for handling potential future patent
disagreements out of court.

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

     No matters were submitted to a vote of our Security holders during the
quarter ended December 31, 2000.

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<PAGE>   18

                                    PART II

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

MARKET FOR REGISTRANT'S COMMON EQUITY

     Our common stock has been quoted on the Nasdaq National Market under the
symbol "CALP" since our initial public offering in December 1999. Prior to this
time, there was no public market for our common stock. The following table shows
the high and low sale prices per share of our common stock as reported on the
Nasdaq National Market for the periods indicated:

<TABLE>
<CAPTION>
                                                             HIGH       LOW
                                                            -------    ------
<S>                                                         <C>        <C>
FISCAL 2000:
  First Quarter...........................................  $202.00    $47.00
  Second Quarter..........................................  $ 79.69    $22.50
  Third Quarter...........................................  $ 68.50    $40.00
  Fourth Quarter..........................................  $ 71.63    $38.50
FISCAL 1999:
  Fourth Quarter..........................................  $ 73.00    $27.81
</TABLE>

     As of December 31, 2000, there were approximately 241 holders of record of
our common stock. We have never declared or paid any dividends on our capital
stock. We currently expect to retain future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.

USE OF PROCEEDS FROM SALES OF REGISTERED SECURITIES

     Our initial public offering of Common Stock was effected through a
Registration Statement on Form S-1 (File No. 333-88827) that was declared
effective by the SEC on December 14, 1999 and pursuant to which we sold all
5,175,000 shares of our Common Stock registered.

     The aggregate offering price of the 5,175,000 shares registered and sold
was $82.8 million. Of this amount, $5.8 million was paid in underwriting
discounts and commissions, and an additional $1.1 million of expenses was
incurred through December 31, 1999. None of the expenses were paid, directly or
indirectly, to directors, officers or persons owning 10 percent or more of our
common stock, or to our affiliates.

     As of December 31, 2000, we had applied the estimated aggregated net
proceeds of $75.9 million from our initial public offering as follows:

<TABLE>
<S>                                                      <C>
Temporary investments..................................  $27.5 million
Working capital........................................  $40.9 million
Capital expenditures...................................  $ 5.8 million
Repayment of indebtedness..............................  $ 1.7 million
</TABLE>

     The foregoing amounts represent our best estimate of our use of proceeds
for the period indicated. No such payments were made to our directors or
officers or their associates, holders of 10% or more of any class of our equity
securities or to our affiliates, other than payments to officers for salaries in
the ordinary course of business.

                                        16
<PAGE>   19

ITEM 6. SELECTED FINANCIAL DATA

     The statements of operations data for each of the years ended December 31,
1998, 1999 and 2000, and the balance sheet data as of December 31, 1999 and
2000, have been derived from our audited financial statements included elsewhere
in this Annual Report on Form 10-K which have been audited by Ernst & Young LLP,
independent auditors. The statements of operations data for the years ended
December 31, 1996, and 1997, and the balance sheet data as of December 31, 1996,
1997, and 1998 have been derived from our audited financial statements not
included in this Annual Report on Form 10-K. Our historical results are not
necessarily indicative of results to be expected for any future period. The data
presented below have been derived from financial statements that have been
prepared in accordance with generally accepted accounting principles and should
be read with our financial statements, including the notes, and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                 -------------------------------------------------
                                                   2000       1999      1998      1997      1996
                                                 --------   --------   -------   -------   -------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                              <C>        <C>        <C>       <C>       <C>
STATEMENTS OF OPERATIONS DATA:
Revenue........................................  $ 18,564   $ 12,087   $ 8,155   $ 2,266   $   132
Costs and expenses:
  Research and development.....................    35,997     18,415     9,584     7,200     2,734
  General and administrative...................     9,787      5,312     2,932     2,478     1,240
  Amortization of deferred stock
     compensation(1)...........................     4,545      3,885        --        --        --
  Acquired in-process research and
     development...............................        --         --        --        --       978
                                                 --------   --------   -------   -------   -------
          Total costs and expenses.............    50,329     27,612    12,516     9,678     4,952
                                                 --------   --------   -------   -------   -------
Operating loss.................................   (31,765)   (15,525)   (4,361)   (7,412)   (4,820)
Interest income, net...........................     7,468      1,152     1,386     1,131       110
Litigation settlement and reimbursement........    13,274         --        --        --        --
                                                 --------   --------   -------   -------   -------
Loss before cumulative effect of a change in
  accounting principle.........................   (11,023)   (14,373)   (2,975)   (6,281)   (4,710)
Cumulative effect of a change in accounting
  principle....................................    (2,294)        --        --        --        --
                                                 --------   --------   -------   -------   -------
Net loss.......................................   (13,317)   (14,373)   (2,975)   (6,281)   (4,710)
Accretion on redeemable convertible preferred
  stock........................................        --     (2,328)   (2,174)   (1,470)     (262)
                                                 --------   --------   -------   -------   -------
Net loss attributable to common stockholders...  $(13,317)  $(16,701)  $(5,149)  $(7,751)  $(4,972)
                                                 ========   ========   =======   =======   =======
Net loss per common share, basic and diluted...  $  (0.61)  $  (4.56)  $ (2.39)  $ (4.38)  $ (3.90)
                                                 ========   ========   =======   =======   =======
Shares used in computing net loss per common
  share, basic and diluted.....................    21,853      3,663     2,157     1,768     1,274
Loss before cumulative effect of a change in
  accounting principle.........................  $  (0.50)  $  (0.92)
Cumulative effect of a change in accounting
  principle....................................  $  (0.11)        --
                                                 --------   --------
Net loss per share, basic and diluted..........  $  (0.61)  $  (0.92)
                                                 ========   ========
Pro forma amounts assuming the change in
  accounting principle are applied
  retroactively (unaudited):
Net loss.......................................  $(13,317)  $(14,267)
Net loss per share, basic and diluted..........  $  (0.61)  $  (0.92)
                                                 ========   ========
Shares used in computing pro forma net loss per
  share, basic and diluted (unaudited).........    21,853     15,578
</TABLE>

                                        17
<PAGE>   20

<TABLE>
<CAPTION>
                                                 2000       1999       1998       1997      1996
                                               --------   --------   --------   --------   -------
                                                                 (IN THOUSANDS)
<S>                                            <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
  securities.................................  $191,699   $100,216   $ 31,052   $ 26,549   $12,450
Working capital..............................   138,373     68,310     21,604     24,679    11,783
Total assets.................................   212,514    108,847     35,730     29,107    13,112
Long-term obligations, less current
  portion....................................     4,366      3,906      2,008      1,430       417
Redeemable convertible preferred stock.......        --         --     48,716     38,283    16,913
Total stockholders' equity (deficit).........   196,457     97,863    (17,654)   (12,665)   (4,986)
</TABLE>

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

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                               2000      1999
                                                              ------    ------
<S>                                                           <C>       <C>
(1) Amortization of deferred stock compensation related to
  the following:
       Research and development.............................  $1,601    $1,094
       General and administrative...........................   2,944     2,791
                                                              ------    ------
          Total.............................................  $4,545    $3,885
                                                              ======    ======
</TABLE>

     Accretion on redeemable convertible preferred stock ceased upon conversion
of all of the outstanding preferred stock to common stock at the close of our
initial public offering in December 1999.

     The financial data as of December 31, 1996 and for the year then ended
reflects the acquisition of ChemCore Corporation in February 1996. This
acquisition was accounted for as a purchase.

     See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.

     See Note 1 of notes to our financial statements for an explanation of the
cumulative effect of a change in accounting principle related to revenue
recognition.

                                        18
<PAGE>   21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following discussion and analysis should be read with "Selected
Financial Data" and our financial statements and notes included elsewhere in
this Annual Report on Form 10-K. The discussion in this Annual Report on Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of our plans, objectives, expectations and intentions. The
cautionary statements made in this Annual Report on Form 10-K should be read as
applying to all related forward-looking statements wherever they appear in this
Annual Report on Form 10-K. Our actual results could differ materially from
those discussed here. Factors that could cause or contribute to these
differences include those discussed in "-- Factors Affecting Operating Results'
below as well as those discussed elsewhere.

OVERVIEW

     We are a leader in lab-on-a-chip technologies that miniaturize, integrate
and automate many laboratory processes. We develop, manufacture and sell our
proprietary LabChip systems to pharmaceutical and other companies. We believe
our LabChip systems have the potential to assemble the power and reduce the
scale of entire laboratories full of equipment and people. From inception in
July 1995 through September 2000, our operating activities were primarily
devoted to research, development and commercialization of technologies involving
the manipulation of very small amounts of fluid, which are referred to as
"microfluidic technologies," and first-generation products such as the Agilent
2100 Bioanalyzer, LabChip kits and our high throughput systems, recruiting
personnel, business development, raising capital and acquiring assets. In 1999,
we recognized revenue from our first product sales when we sold initial versions
of our high throughput system for drug screening to three of our Technology
Access Program customers Amgen, Eli Lilly and Roche. In addition, in September
1999, Agilent Technologies, Inc., our commercial partner, introduced our first
LabChip system for use by individual researchers. In March 2000, we recognized
revenue from our first multi-capillary sipper chip system and Millennium
Pharmaceuticals joined our Technology Access Program, becoming our fourth
Technology Access Program customer, and also joined our joint applications
development program, which was formalized later in the year as our Applications
Developer Program. In May 2000, we introduced the DNA 500 LabChip kit for the
automated analysis of small DNA fragments to determine their size and
concentration. In August 2000, we introduced the Protein 200 LabChip kit for the
automated sizing and analysis of protein samples. In September 2000, we
introduced the Automated Microfluidics System 90 to perform automated high
throughput nucleic acid analysis In December 2000, GlaxoSmithKline became our
second Applications Developer Program customer, with the goal of developing new
applications in synthetic chemistry using our LabChip technology.

     Since our inception, we have incurred significant losses and, as of
December 31, 2000, we had an accumulated deficit of $48.4 million. Our losses
have resulted principally from costs incurred in research and development,
manufacturing scale-up, and from general and administrative costs associated
with our operations. We expect to continue to incur substantial research and
development, manufacturing scale-up, and general and administrative costs. As a
result, we will need to generate significantly higher revenue to achieve
profitability.

     Our revenue has been derived principally from contract revenue earned under
our collaboration agreement with Agilent and from our Technology Access Program
customers. To a lesser extent, we have derived revenue from the sale of products
and government grants. Although we are developing and plan to introduce future
products, we cannot assure you that we will be successful in these efforts. To
date, we have generated a substantial portion of our revenue from a limited
number of sources. Three of our Technology Access Program customers, Amgen, Eli
Lilly and Millennium, and our commercial partner, Agilent, each accounted for in
excess of 10% of our revenue in the year ended December 31, 2000. Agilent alone
accounted for 45% of our revenue in this period, and the three Technology Access
Program customers collectively accounted for 45% of our revenue in the year
ended December 31, 2000. Agilent alone accounted for 50% of our revenue in the
year ended December 31, 1999 and our two Technology Access Program customers,
Amgen and Eli Lilly, collectively accounted for 38% of our revenue in this
period. Roche and Agilent each accounted for 40% of our revenue in the year
ended December 31, 1998, and Amgen accounted for 17% of our

                                        19
<PAGE>   22

revenue in this period. Although we are seeking to expand our customer base, we
cannot assure you that these efforts will be successful.

     Under our agreement, Agilent funds our research and development
expenditures related to the collaboration, reimburses us for our costs of
supplying chips and reagents to Agilent and pays us a share of the gross margin
earned on all components of LabChip systems they sell. Revenue from development
and support activities under our collaboration agreement is recorded in the
period in which the costs are incurred. Direct costs associated with this
contract are reported as research and development expense. Revenue related to
the reimbursement of costs for the supply of chips and reagents to Agilent is
recognized upon shipment. Our share of gross margin on components of the LabChip
system sold by Agilent is recognized as revenue upon shipment to the end user.
Agilent only began in late 1999 the marketing and sales efforts for the Agilent
2100 Bioanalyzer. Sales of new and innovative instrumentation such as the
Agilent 2100 Bioanalyzer involve a long sales cycle, requiring customer training
and demonstration periods. Sales of the Agilent 2100 Bioanalyzer increased
during the course of 2000 indicating, we believe, a growing market acceptance of
this technology.

     Under our Technology Access Program agreements, we recognize as revenue
non-refundable license fees over the contract period, product sales upon the
transfer of title to the customer, and development and support fees in the
period in which the costs are incurred. Subscription fees and development and
support fees may be received annually or quarterly in advance depending upon the
terms of the agreement. Payments received in advance under all of these
agreements are recorded as deferred revenue until earned. We have evaluated the
applicability of SAB 101 to our existing Technology Access Program agreements.
We have concluded that the approach described in SAB 101 is preferable and have
changed our method of accounting effective January 1, 2000 to recognize such
fees over the term of the related agreement. The cumulative effect of this
change in accounting principle is approximately $2.3 million as of January 1,
2000 and has been recognized as a charge in the quarter ended March 31, 2000.
The cumulative effect was recorded as deferred revenue and is being recognized
as revenue over the remaining contractual terms of the Technology Access Program
agreements. As of December 31, 2000, a total of $4.0 million of revenue was
deferred. We expect to recognize this deferred revenue through the third quarter
of year 2002.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2000 AND 1999

     Revenue. Revenue increased to $18.6 million in 2000 from $12.1 million in
1999. Of the $6.5 million increase, $2.4 million was derived from our
collaboration with Agilent, which began in May 1998. With regard to our
collaboration with Agilent, the increase in revenue was primarily attributed to
product revenue resulting from increased volume and product offerings. The
remaining increase was derived from our Technology Access Program customers,
primarily from the addition of a new partner and the application of SAB 101,
which contributed $1.3 million to revenue.

     Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers for chip development, material costs
for prototype and test units, legal expenses resulting from intellectual
property prosecution and litigation, and other expenses related to the design,
development, testing, and enhancement of our products. We expense our research
and development costs as they are incurred. Research and development expenses
increased to $36.0 million during 2000 from $18.4 million in 1999. The increase
of $17.6 million was primarily attributable to continued growth of research and
development activities, including $7.1 million related to increased personnel
and services to support our Technology Access Program, partner collaboration and
initial product launches, $6.3 million for costs related to intellectual
property matters, primarily legal fees, $1.1 million for supplies required to
assemble, build and test prototype LabChip systems and the remainder due to
expansion in operating activities. We expect research and development spending
to continue to increase in proportion to our revenue growth over the next
several years as we expand our research and product development efforts.

     General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance and
other administrative personnel, recruiting expenses, profes-

                                        20
<PAGE>   23

sional fees, and other corporate expenses including business development and
general legal activities. General and administrative expenses increased to $9.8
million during 2000 from $5.3 million in 1999. The increase of $4.5 million was
due primarily to $2.9 million related to employment costs for general and
administrative personnel, $472,000 for general legal fees as a result of being a
public company and $405,000 for travel expenses to expand our business
initiatives. We expect general and administrative expenses to continue to
increase over the next several years to support our growing business activities,
the commercialization of our products, and costs associated with operating as a
public company.

     Amortization of Deferred Stock Compensation. Deferred stock compensation
represents the difference between the deemed fair value of our common stock for
accounting purposes and the exercise price of options at the date of grant.
During 1998 and 1999, we recorded deferred stock compensation totaling $13.2
million. This amount is being amortized over the respective vesting periods of
the individual stock options using the graded vesting method. We recorded
amortization of deferred compensation of $4.5 million for 2000 and $3.9 million
for 1999. We expect to record future amortization expense for deferred
compensation as follows: $2.5 million during 2001, $1.4 million during 2002,
$670,000 during 2003 and $122,000 during 2004. The amount of deferred
compensation expense to be recorded in future periods may decrease if unvested
options for which deferred compensation has been recorded are subsequently
canceled.

     Interest Income (Expense), Net. Net interest income consists of income from
our cash and investments offset by expenses related to our financing
obligations. Net interest income increased to $7.5 million in 2000 from net
interest income of $1.2 million in 1999.

     This increase primarily resulted from proceeds of $104.9 million raised in
August 2000 from the sale of 2,300,000 shares of common stock in a private
placement.

     Litigation settlement and reimbursement. Litigation settlement and
reimbursement increased to $13.3 million in 2000 as a result of a settlement
agreement with a former patent attorney and his former law firm. Of the $13.3
million, $12.0 million was a settlement with Bertram Rowland and the law firm of
Flehr, Hohbach, Test, Albritton and Herbert LLP in a breach of fiduciary duty
and trade secret misappropriation case. The remainder relates to reimbursement
of litigation fees and expenses from one of our collaborators.

     Income Taxes. As of December 31, 2000, we had federal and California net
operating loss carryforwards of approximately $31.5 million and $2.7 million. We
also had federal and California research and other development tax credit
carryforwards of approximately $900,000 and $400,000. The net operating loss and
credit carryforwards will expire at various dates beginning on 2003 through
2020, if not utilized. Utilization of the net operating losses and credits may
be substantially limited due to the change in ownership provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.

     As of December 31, 2000 and 1999 we had deferred tax assets of
approximately $16.7 million and $10.5 million. The net deferred tax asset has
been fully offset by a valuation allowance. The net valuation allowance
increased by $6.2 million during the year ended December 31, 2000. Deferred tax
assets relate primarily to net operating loss carryforwards, research credit
carryforwards, and capitalized research and development costs.

YEARS ENDED DECEMBER 31, 1999 AND 1998

     Revenue. Revenue increased to $12.1 million in 1999 from $8.2 million in
1998. Of the $3.9 million increase, $2.8 million was derived from our
collaboration with Agilent, which began in May 1998, and $709,000 was derived
from our grant from the Advanced Technology Program of the National Institute of
Standards and Technology, which began in January 1999. This grant is for $2
million in aggregate and will continue until December 2001. The remaining
increase was derived from our Technology Access Program customers.

     Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers for chip development, material costs
for prototype and test units, legal expenses resulting from intellectual
property prosecution and
                                        21
<PAGE>   24

litigation, and other expenses related to the design, development, testing, and
enhancement of our products. We expense our research and development costs as
they are incurred. Research and development expenses increased to $18.4 million
during 1999 from $9.6 million in 1998. The increase of $8.8 million was
attributable to continued growth of research and development activities,
including $3.7 million related to increased personnel and services to support
our Technology Access Program and initial product launches, $1.9 million for
costs related to intellectual property protection, $1.8 million related to
higher operating expenses as a result of our move to a larger facility in
January 1999, $1.0 million for supplies required to assemble, build and test
prototype LabChip systems and the remainder due to expansion in operating
activities. We expect research and development spending to increase
significantly over the next several years as we expand our research and product
development efforts.

     General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance and
other administrative personnel, recruiting expenses, professional fees, and
other corporate expenses including business development and general legal
activities. General and administrative expenses increased to $5.3 million during
1999 from $2.9 million in 1998. The increase of $2.4 million was due to $1.7
million related to compensation for general and administrative personnel,
$425,000 related to higher operating expenses as a result of our move to a
larger facility in January 1999, and $349,000 related to recruiting and
relocation of key personnel. We expect general and administrative expenses to
continue to increase over the next several years to support our growing business
activities, the commercialization of our products, and due to the costs
associated with operating a public company.

     Interest Income (Expense), Net. Net interest income consists of income from
our cash and investments offset by expenses related to our financing
obligations. Net interest income decreased to $1.2 million in 1999 from net
interest income of $1.4 million in 1998. This decrease resulted from higher
financing obligation balances.

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations from inception primarily through equity
sales, contract and milestone payments to us under our collaboration and
Technology Access Program agreements, and equipment financing arrangements. As
of December 31, 2000, we had received net proceeds of $225.8 million from
issuances of common and preferred stock which primarily includes $104.9 million
raised in August 2000 from the sale of 2,300,000 shares of common stock in a
private placement and $75.9 million raised from our initial public offering in
December 1999. In addition, from inception through December 31, 2000 we had
received $42.2 million from collaborations, Technology Access Program customers
and government grants and had financed equipment purchases and leasehold
improvements totaling approximately $8.9 million. We have used leases and loans
to finance capital expenditures. As of December 31, 2000, we had $5.2 million in
capitalized lease obligations. These obligations are secured by the equipment
financed, bear interest at a weighted-average fixed rate of approximately 11.1%,
and are due in monthly installments through December 2004. Under the terms of
one equipment financing agreement, the financed equipment may be purchased by us
at a fair value at the end of the financing term. Other equipment financing
agreements require a balloon payment at the end of each loan term.

     As of December 31, 2000, we had $191.7 million in cash, cash equivalents
and marketable securities, as compared to $100.2 million as of December 31,
1999. We used $9.7 million for operations in 2000. This consisted of the net
loss for the period of $13.3 million and working capital changes of $5.9 million
offset in part by non-cash charges of $9.5 million related to change in
accounting principle, amortization of deferred stock compensation, stock options
issued to non-employees, stock issued for services and depreciation and
amortization expense.

     Net cash used in investing activities was $105.0 million for 2000,
consisting primarily of purchases of available for sale investments offset by
proceeds from sales and maturities of available for sale investments, as well as
capital expenditures. We received $106.2 million from financing activities for
2000, which consisted principally of $104.9 million raised in August 2000 from
our private placement and $1.7 million from

                                        22
<PAGE>   25

equipment financing, offset in part by repayments of equipment financing
arrangements of $1.7 million. See Note 6 of notes to our financial statements.

     In May 2000, we drew down the remaining $855,000 balance of equipment
financing credit line which existed as of December 31, 1999 at a
weighted-average interest rate of 12.9% and entered into a $5.0 million
financing arrangement for the purchase of property and equipment. As of December
31, 2000, we had drawn down approximately $887,000 under the new line and had
$4.1 million remaining available under this arrangement. As of December 31,
2000, we had $5.2 million in capitalized lease obligations outstanding compared
to $5.1 million at December 31, 1999. See Note 6 of notes to our financial
statements.

     Our capital requirements depend on numerous factors, including market
acceptance of our products, the resources we devote to developing and supporting
our products, and other factors. We expect to devote substantial capital
resources to continue our research and development efforts, to expand our
support and product development activities, and for other general corporate
activities. We believe that our current cash balances, together with the revenue
to be derived from our collaboration with Agilent and our Technology Access
Program agreements will be sufficient to fund our operations at least through
the year 2002. During or after this period, if cash generated by operations is
insufficient to satisfy our liquidity requirements, we may need to sell
additional equity or debt securities or obtain additional credit arrangements.
Additional financing may not be available on terms acceptable to us or at all.
The sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders.

IMPACT OF INFLATION

     The effect of inflation and changing prices on our operations was not
significant during the periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board or FASB issued
statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Financial Instruments and for Hedging Activities" or SFAS 133 which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. In June 1999, FASB issued Financial
Accounting Standards No. 137 which deferred the effective date of SFAS 133 to
fiscal years beginning after June 15, 2000. The adoption of SFAS 133 is not
anticipated to have an impact on the Company's results of operations of
financial condition when adopted as the Company holds no derivative financial
instruments and does not currently engage in hedging activities. In June 2000,
the FASB issued SFAS 138, a significant amendment of SFAS 133 which is effective
simultaneously with SFAS 133. SFAS 138 does not amend any of the fundamental
precepts of SFAS 133, but addresses some of the impractical aspects of the
original statement, which were incompatible with many common current hedging
approaches.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 -- Revenue Recognition in Financial Statements, or
SAB 101, which, among other things, describes the SEC Staff's position on the
recognition of certain nonrefundable upfront fees received in connection with
research collaborations. Effective January 1, 2000, we changed our method of
accounting for non-refundable license fees to recognize such fees ratably over
the term of the committed related Technology Access Program agreement. We
believe the change in accounting principle is preferable based on guidance
provided by SAB 101. The $2.3 million cumulative effect of the change in
accounting principle was reported as a charge in the quarter ended March 31,
2000. The cumulative effect was initially recorded as deferred revenue and is
being recognized as revenue over the remaining contractual terms of the
Technology Access Program agreements.

     In March 2000, the FASB issued No. 44, "Accounting for Certain Transactions
Involving Stock Compensation -- an Interpretation of APB 25" or FIN 44. This
Interpretation clarifies (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a
                                        23
<PAGE>   26

business combination. This Interpretation is effective July 1, 2000, but certain
conclusions reached in FIN 44 cover specific events that occur after either
December 15, 1998, or January 12, 2000, but before the effective date of July 1,
2000. The effects of applying FIN 44 are recognized on a prospective basis from
July 1, 2000. The adoption of FIN 44 did not have a material impact on the
Company's financial statements.

FACTORS AFFECTING OPERATING RESULTS

RISKS RELATED TO OUR BUSINESS

OUR LABCHIP SYSTEMS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD CAUSE OUR
REVENUE TO GROW SLOWLY OR DECLINE.

     Our technologies are still in the early stages of development, and our
LabChip systems incorporating these technologies have only recently been made
commercially available. If our LabChip systems do not gain market acceptance, we
will be unable to generate sales and our revenue will decline. The commercial
success of our LabChip systems will depend upon market acceptance of the merits
of our LabChip systems by pharmaceutical and biotechnology companies, academic
research centers and other companies that rely upon laboratory experimentation.
We have not yet demonstrated these benefits. Market acceptance will depend on
many factors, including:

     - our ability to demonstrate the advantages and potential economic value of
       our LabChip systems over alternative well-established technologies and
       products

     - the extent of Agilent's efforts to market the Agilent 2100 Bioanalyzer

     - our ability to market our high throughput systems through our Technology
       Access Program

     Because the products comprising our LabChip systems have been in operation
for a limited period of time, their accuracy, reliability, ease of use and
commercial value have not been fully established. If the initial Agilent 2100
Bioanalyzer customers or our initial Technology Access Program customers do not
approve of our initial LabChip systems because these systems fail to generate
the quantities and quality of data they expect, are too difficult or costly to
use, or are otherwise deficient, market acceptance of these LabChip systems
would suffer and further sales may be limited. We cannot assure you that these
customers' efforts to put our LabChip systems into use will continue or will be
expeditious or effective. Potential customers for our high throughput systems
may also wait for indications from our four initial Technology Access Program
customers that our high throughput systems work effectively and generate
substantial benefits. Further, non-acceptance by the market of our initial
LabChip systems could undermine not only those systems but subsequent LabChip
systems as well.

WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NOT ACHIEVE PROFITABILITY.

     We have experienced significant operating losses each year since our
inception and expect to incur substantial additional operating losses for at
least the next two years, primarily as a result of expected increases in
expenses for manufacturing capabilities, research and product development costs
and general and administrative costs. We may not achieve profitability. For
example, we experienced net losses of approximately $3.0 million in 1998, $14.4
million in 1999 and $13.3 million in 2000. As of December 31, 2000, we had an
accumulated deficit of approximately $48.4 million. Our losses have resulted
principally from costs incurred in research and development and from general and
administrative costs associated with our operations. These costs have exceeded
our litigation settlement and reimbursement, interest income and revenue which,
to date, have been generated principally from collaborative research and
development agreements, technology access fees, cash and investment balances
and, to a lesser extent, product sales and government grants.

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

     Our quarterly operating results have fluctuated significantly 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. For example, our revenues

                                        24
<PAGE>   27

have varied dramatically as a result of new customers joining our Technology
Access Program and product shipments. 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 revenue 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.

     If revenue declines in a quarter, whether due to a delay in recognizing
expected revenue or otherwise, our earnings will decline because many of our
expenses are relatively fixed. In particular, research and development and
general and administrative expenses and amortization of deferred stock
compensation are not affected directly by variations in revenue.

IF AGILENT DETERMINES THAT WE MAY BE VIOLATING A THIRD-PARTY PATENT, IT MAY
TERMINATE SALES OF THE AGILENT 2100 BIOANALYZER, WHICH WILL DECREASE OUR
REVENUE.

     Under our collaboration agreement with Agilent, Agilent may elect at any
time to stop developing, manufacturing or distributing any product that it
reasonably determines, on the advice of counsel, poses a substantial risk of
infringing a third-party patent. For example, if a third-party claims that we
are violating their patent, then Agilent may terminate marketing and selling of
the Agilent 2100 Bioanalyzer system, which Agilent began marketing in September
1999, which will decrease our future revenue.

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, such as the Aclara litigation that was recently settled and is
described under "Part I -- Item 3. Legal Proceedings." 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, we may be prohibited from selling our products before we obtain
a license, 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. We are aware of third-party patents that may relate to
our technology or potential products. We have also been notified that third
parties have attempted to provoke an interference with one issued U.S. patent
that we have exclusively licensed to determine the priority of inventions. Any
public announcements related to litigation or interference proceedings initiated
or threatened against us could cause our stock price to decline. We recently
settled intellectual property litigation with Aclara concerning one family of
Aclara patents. However, Aclara could assert other patent infringement claims
against us in the future in alternative dispute resolution proceedings
established under our settlement agreement. If we are found to be infringing any
valid patent claims asserted by Aclara in alternative dispute resolution
proceedings, we may be prohibited from selling our products before we obtain a
license, which, if available at all, may require us to pay substantial
royalties.

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 the patent
infringement suit against Aclara that was recently settled and is described
under "Part I -- Item 3. Legal Proceedings." These lawsuits could be expensive,
take significant time, and could 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 these 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
                                        25
<PAGE>   28

hearings, motions and other interim proceedings or developments in the
litigation. If securities analysts or investors perceive any of these results to
be negative, it could cause our stock to decline.

THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

     In addition to patents, we rely on a combination of trade secrets,
copyright and trademark laws, nondisclosure agreements and other contractual
provisions and technical measures to protect our intellectual property rights.
Nevertheless, these measures may not be adequate to safeguard the technology
underlying our products. If they do not protect our rights, third parties could
use our technology, and our ability to compete in the market would be reduced.
In addition, employees, consultants and others who participate in the
development of our products may breach their agreements with us regarding our
intellectual property, and we may not have adequate remedies for the breach. We
also may not be able to effectively protect our intellectual property rights in
some foreign countries. For a variety of reasons, we may decide not to file for
patent, copyright or trademark protection outside of the United States. 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. For further information on
our intellectual property and the difficulties in protecting it, see "Part
I -- Item 1. Business -- Intellectual Property."

IF WE DO NOT SUCCESSFULLY INTRODUCE NEW PRODUCTS AND EXPAND THE RANGE OF
APPLICATIONS FOR OUR LABCHIP SYSTEMS, WE MAY EXPERIENCE A DECLINE IN REVENUE OR
SLOW REVENUE GROWTH AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.

     We intend to develop LabChip systems with increasingly high throughput
capabilities and develop a broad range of applications for our LabChip
technology. If we are unable to do so, our LabChip systems may not become widely
used and we may experience a decline in revenue or slow revenue growth and may
not achieve or maintain profitability.

     In order for our high throughput systems to achieve the levels of
throughput necessary to meet customers' demands, we need to develop and
manufacture sipper chips with more than four capillaries. Our current high
throughput systems operate with sipper chips with one and four capillaries,
small glass tubes used to draw compounds into the chip. In order to achieve the
levels of throughput that our customers desire, we may need to develop a LabChip
system accommodating more than four capillaries, which we may not be able to do.
If we cannot cost-effectively deliver chips with more than four capillaries, we
may not be able to attract new customers to purchase our high throughput
systems, which would seriously harm our future prospects. Further, our existing
Technology Access Program customers may decide not to renew their annual access
subscriptions, which would seriously reduce our revenue.

     We must develop new applications for existing LabChip instruments, which we
may not be able to do. The Agilent 2100 Bioanalyzer uses LabChip kits that we
specifically design for each application. We currently have LabChip kits
commercially available for five applications relating to DNA, RNA and protein
sizing and quantification. DNA and RNA are commonly used acronyms for chemicals
that contain, or transmit, genetic information in living things. We currently
are developing LabChip kits for other applications. If we are unable to develop
LabChip kits for specific applications required by potential customers, those
customers may not purchase the Agilent 2100 Bioanalyzer.

     We must also continue to develop applications for our high throughput
systems. If we are not able to complete the development of these applications,
or if we experience difficulties or delays, we may lose our current Technology
Access Program customers and may not be able to obtain new customers.

                                        26
<PAGE>   29

WE RELY HEAVILY ON AGILENT TO MANUFACTURE, MARKET AND DISTRIBUTE THE AGILENT
2100 BIOANALYZER. IF AGILENT FAILS TO PERFORM UNDER OUR AGREEMENT OR
SUCCESSFULLY COMMERCIALIZE OUR COLLABORATIVE PRODUCTS, OUR REVENUE FROM THE
AGILENT 2100 BIOANALYZER MAY NOT BE MATERIAL AND WE MAY LOSE THE DEVELOPMENT
FUNDING WE CURRENTLY RECEIVE FROM AGILENT.

     Agilent manufactures, markets and distributes the Agilent 2100 Bioanalyzer
under an agreement we entered into in May 1998. We also rely on Agilent for
significant financial and technical contributions in the development of products
covered by the agreement. Our ability to develop, manufacture and market these
products successfully depends significantly on Agilent's performance under this
agreement. Sales of new and innovative instrumentation such as the Agilent 2100
Bioanalyzer involve a long sales cycle, requiring customer training and
demonstration periods. Although sales of the Agilent 2100 Bioanalyzer increased
in 2000, we cannot predict whether this trend will continue at its current pace,
if at all. If Agilent experiences manufacturing or distribution difficulties,
does not actively market the Agilent 2100 Bioanalyzer, or does not otherwise
perform under this agreement, our revenue from the Agilent 2100 Bioanalyzer may
not be material. In addition, Agilent may terminate the agreement at their
discretion at any time after May 2001. If Agilent terminates this agreement, we
would need to obtain development funding from other sources, and we may be
required to find one or more other collaborators for the development and
commercialization of our products. Our inability to enter into agreements with
commercialization partners or develop our own marketing, sales, and distribution
capabilities would increase costs and impede the commercialization of our
products.

AGILENT MAY COMPETE WITH US IF OUR COLLABORATION TERMINATES AFTER MAY 2003,
WHICH COULD REDUCE THE POTENTIAL REVENUE FROM OUR INDEPENDENT PRODUCT SALES.

     Under the terms of our agreement with Agilent, if they, or we, terminate
our agreement after May 2003, we will grant to Agilent a non-exclusive license
to our LabChip technologies as then developed for use in the research products
field. Consequently, there is the possibility that we may experience competition
from Agilent after May 2003, which would reduce our ability to sell products
independently or through other commercial partners. See "Part I -- Item 1.
Business -- Commercialization -- Strategic Alliance with Agilent" for a further
description of the terms of our collaboration with Agilent.

WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND MAY ENCOUNTER
MANUFACTURING PROBLEMS OR DELAYS, WHICH COULD RESULT IN LOST REVENUE.

     Although Agilent manufactures the Agilent 2100 Bioanalyzer, we manufacture
the chips used in this instrument and also currently manufacture instruments and
sipper chips for our high throughput systems. We currently have limited
manufacturing capacity for our LabChip system products and experience
variability in manufacturing yields for chips. If we fail to deliver chips and
high throughput screening products in a timely manner, our relationships with
our customers could be seriously harmed, and revenue would decline. We currently
have one manufacturing location in Mountain View, California. The actual number
of chips we are able to sell or use depends in part upon the manufacturing
yields for these chips. We have only recently begun to manufacture significant
numbers of sipper chips and are continuing to develop our manufacturing
procedures for these chips. In order to offer sipper chips with more than four
capillaries for high throughput applications, we will need to continue to
achieve consistently high yields in this process. We cannot assure you that
manufacturing or quality problems will not arise as we attempt to scale-up our
production of chips or that we can scale-up manufacturing in a timely manner or
at commercially reasonable costs. If we are unable to consistently manufacture
sipper chips or chips for the Agilent 2100 Bioanalyzer on a timely basis because
of these or other factors, our product sales will decline. We are currently
manufacturing high throughput instruments in-house and in limited volumes. If
demand for our high throughput instruments increases, we will either need to
expand our in-house manufacturing capabilities or outsource to Agilent or other
manufacturers.

                                        27
<PAGE>   30

WE ARE DEPENDENT ON A SOLE-SOURCE SUPPLIER FOR OUR GLASS AND IF WE ARE UNABLE TO
BUY THIS COMPONENT ON A TIMELY BASIS, WE WILL NOT BE ABLE TO DELIVER OUR
PRODUCTS TO CUSTOMERS.

     We currently purchase a key component for our chips from a sole-source
supplier located in Germany. Although we keep surplus inventory in our Mountain
View manufacturing facility, if we are unable to replenish this component on a
timely basis, we will not be able to deliver our chips to our customers which
would harm our business.

OUR BUSINESS OPERATIONS MAY BE ADVERSELY AFFECTED BY THE CALIFORNIA ENERGY
CRISIS.

     Our principal facilities are located in the Silicon Valley in Northern
California. California has been experiencing an energy crisis that has resulted
in disruptions in power supply and increases in utility costs to consumers and
business throughout the State. Should the energy crisis continue, together with
many other Silicon Valley companies, we may experience power interruptions and
shortages and be subject to significantly higher costs of energy. Although, we
have not experienced any material disruption to our business to date, if the
energy crisis continues and power interruptions or shortages occur in the
future, they may adversely affect our business. Any material increase in energy
costs may also adversely affect our financial results.

IF A NATURAL DISASTER STRIKES OUR MANUFACTURING FACILITY WE WOULD BE UNABLE TO
MANUFACTURE OUR PRODUCTS FOR A SUBSTANTIAL AMOUNT OF TIME AND WE WOULD
EXPERIENCE LOST REVENUE.

     We rely on a single manufacturing location to produce our chips and high
throughput systems, and have no alternative facilities. The facility and some
pieces of manufacturing equipment are difficult to replace and could require
substantial replacement lead-time. Our manufacturing facility may be affected by
natural disasters such as earthquakes and floods. Earthquakes are of particular
significance since the manufacturing facility is located in Mountain View,
California, an earthquake-prone area. In the event our existing manufacturing
facility or equipment is affected by man-made or natural disasters, we would be
unable to manufacture products for sale, meet customer demands or sales
projections. If our manufacturing operations were curtailed or ceased, it would
harm our business.

BECAUSE A SMALL NUMBER OF CUSTOMERS AND AGILENT HAVE ACCOUNTED FOR, AND ARE
LIKELY TO CONTINUE TO ACCOUNT FOR, A SUBSTANTIAL PORTION OF OUR REVENUE, OUR
REVENUE COULD DECLINE DUE TO THE LOSS OF ONE OF THESE CUSTOMERS OR THE
TERMINATION OF OUR AGREEMENT WITH AGILENT.

     Historically we have had very few customers and one commercial partner,
Agilent, from which we have derived the majority of our revenue and, if we were
to lose any one of these, our revenue would decrease substantially. Agilent and
three customers accounted for 90% of total revenue ended December 31, 2000.
Agilent and four customers accounted for 88% of total revenue in 1999, and
Agilent and two customers accounted for 97% of total revenue in 1998. We and
Agilent introduced the Agilent 2100 Bioanalyzer system in September 1999 and
have not yet derived significant revenue from the sale of this product on a
commercial scale. Although we anticipate that future sales of the Agilent 2100
Bioanalyzer system will further expand our revenue base, we expect that we will
continue to rely on our large customers and on Agilent for the majority of our
revenue.

FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUE.

     We anticipate that our existing capital resources will enable us to
maintain currently planned operations at least into the year 2002. However, we
premise this expectation on our current operating plan, which may change as a
result of many factors. Consequently, we may need additional funding sooner than
anticipated. Our inability to raise capital would seriously harm our business
and product development efforts. In addition, we may choose to raise additional
capital due to market conditions or strategic considerations even if we believe
we have sufficient funds for our current or future operating plans. To the
extent that additional capital is raised through the sale of equity or
convertible debt securities, the issuance of these securities could result in
dilution to our stockholders.

                                        28
<PAGE>   31

     We currently have no credit facility or committed sources of capital other
than an equipment lease line with $4.1 million unused and available as of
December 31, 2000. To the extent operating and capital resources are
insufficient to meet future requirements, we will have to raise additional funds
to continue the development and commercialization of our technologies. These
funds may not be available on favorable terms, or at all. If adequate funds are
not available on attractive terms, we may be required to curtail operations
significantly or to obtain funds by entering into financing, supply or
collaboration agreements on unattractive terms.

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 and
scientific staff. The loss of services 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 business is located in Silicon Valley,
California, where demand for personnel with these skills is extremely high and
is likely to remain high. As a result, competition for and retention of
personnel, particularly for employees with technical expertise, is intense and
the turnover rate for these people is high. If we are unable to hire, train and
retain a sufficient number of qualified employees, our ability to conduct and
expand our business could be seriously reduced. The inability to retain and hire
qualified personnel could also hinder the planned expansion of our business.

POTENTIAL ACQUISITIONS MAY HAVE UNEXPECTED CONSEQUENCES OR IMPOSE ADDITIONAL
COSTS ON US.

     Our business is dependent upon growth in the market for microfluidic
products and our ability to enhance our existing products and introduce new
products on a timely basis. One of the ways we may address the need to develop
new products is through acquisitions of complementary businesses and
technologies. From time to time, we may consider and evaluate potential
acquisitions or business combinations, which may include a possible merger or
consolidation of our business with another entity. We may engage in discussions
relating to these types of transactions in the future. Acquisitions involve
numerous risks, including the following:

     - difficulties in integration of the operations, technologies, and products
       of the acquired companies

     - the risk of diverting management's attention from normal daily operations
       of the business

     - accounting consequences, including charges for in-process research and
       development expenses, resulting in variability in our quarterly earnings

     - potential difficulties in completing projects associated with purchased
       in-process research and development

     - risks of entering markets in which we have no or limited direct prior
       experience and where competitors in such markets have stronger market
       positions

     - the potential loss of key employees of the acquired company

     - the assumption of unforeseen liabilities of the acquired company

     We cannot assure you that future acquisitions or business combinations in
which we are involved, if any, will be successful and will not adversely affect
our financial condition or results of operations. Failure to manage growth
effectively and successfully integrate acquisitions we make could harm our
business and operating results.

                                        29
<PAGE>   32

RISKS RELATED TO OWNING OUR COMMON STOCK

OUR STOCK PRICE IS EXTREMELY VOLATILE, AND YOU COULD LOSE A SUBSTANTIAL PORTION
OF YOUR INVESTMENT.

     Our stock has been trading on the Nasdaq National Market only since
mid-December 1999. We initially offered our common stock to the public at $16.00
per share. Since then our stock price has been extremely volatile and has
ranged, through March 7, 2001, from a high of approximately $202.00 per share to
a low of $22.50 per share. Our stock price may drop substantially following an
investment in our common stock. We expect that our stock price will remain
volatile as a result of a number of factors, including:

     - announcements by analysts regarding their assessment of Caliper and its
       prospects

     - announcements of our financial results, particularly if they differ from
       investors' expectations

     - general market volatility for technology stocks

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.

     As of December 31, 2000, our directors, entities affiliated with our
directors, our executive officers and principal stockholders beneficially own,
in the aggregate approximately 23% of our outstanding common stock. These
stockholders as a group are able to substantially influence the management and
affairs of Caliper and, if acting together, would be able to influence most
matters requiring the approval by our stockholders, including the election of
directors, any merger, consolidation or sale of all or substantially all of our
assets and any other significant corporate transaction. The concentration of
ownership may also delay or prevent a change of control of Caliper at a premium
price if these stockholders oppose it.

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. 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 including us. These provisions
could limit the price that investors might be willing to pay in the future for
our common stock.

7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     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. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. Declines of interest rates over
time will reduce our interest income from our investments. To minimize this risk
in the future, we intend to maintain our portfolio of cash equivalents and
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities.

                                        30
<PAGE>   33

     The table below presents our investment portfolio by expected maturity and
related weighted average interest rates at December 31, 2000:

<TABLE>
<CAPTION>
                                                                                        FAIR
                                   2001         2002         2003        TOTAL         VALUE
                                 --------      -------      ------      --------      --------
<S>                              <C>           <C>          <C>         <C>           <C>
Money market fund..............  $ 36,294           --          --      $ 36,294      $ 36,294
Average interest rate..........      6.37%          --          --          6.37%
Available for sale marketable
  securities...................  $106,118      $41,533      $7,126      $154,777      $155,405
Average interest rate..........      6.48%        6.69%       6.51%         6.53%
Total securities...............  $142,412      $41,533      $7,126      $191,071      $191,699
Average interest rate..........      6.45%        6.69%       6.51%         6.50%
</TABLE>

     Our equipment financings, amounting to $5.2 million as of December 31,
2000, are all at fixed rates and therefore, have minimal exposure to changes in
interest rates.

     We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Report of Independent Auditors, Financial Statements and Notes to
Financial Statements begin on page F-1 immediately following the signature page
and are incorporated here by reference, including the unaudited quarterly
information for the last two years in Note 11.

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

     Not Applicable.

                                        31
<PAGE>   34

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information concerning our directors is incorporated by reference to the
section entitled "Proposal 1 -- Election of Directors" contained in our
definitive Proxy Statement with respect to our Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission not later than April 30,
2001 (the "Proxy Statement"). Information concerning our Executive Officers is
set forth under "Executive Officers of the Registrant" in Part I of this Annual
Report on Form 10-K and is incorporated herein by reference. Information
concerning compliance with Section 16(a) of the Securities Exchange Act of 1934
is incorporated by reference to the section entitled "Section 16(a) Beneficial
Ownership Reporting Compliance" contained in our Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

     Information concerning executive compensation is incorporated by reference
to the sections entitled "Executive Compensation" contained in our Proxy
Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information concerning the security ownership of certain beneficial owners
and management is incorporated by reference to the section entitled "Security
Ownership of Certain Beneficial Owners and Management" contained in our Proxy
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information concerning certain relationships is incorporated by reference
to the section entitled "Certain Transactions" contained in our Proxy Statement.

                                    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:

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
     Report of Ernst & Young LLP, Independent Auditors......  F-2
     Balance Sheets at December 31, 2000 and 1999...........  F-3
     Statements of Operations -- Fiscal Years ended December
      31, 2000, 1999 and 1998...............................  F-4
     Statements of Redeemable Convertible Stock and
      Stockholders' Equity -- Fiscal Years ended December
      31, 2000, 1999 and 1998...............................  F-5
     Statements of Cash flows -- Fiscal Years ended December
      31, 2000, 1999 and 1998...............................  F-6
     Notes to Financial Statements..........................  F-7
</TABLE>

          (2) FINANCIAL STATEMENT SCHEDULES:

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

                                        32
<PAGE>   35

        (3) EXHIBITS:

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                         DESCRIPTION OF DOCUMENT
      -------                        -----------------------
    <S>            <C>
     3.1(1)        Amended and Restated Certificate of Incorporation of
                   Caliper.
     3.2(2)        Bylaws of Caliper.
     4.1           Reference is made to Exhibits 3.1 and 3.2.
     4.2(3)        Specimen Stock Certificate.
    10.1(3)        Lease Agreement, dated December 1, 1998, between Caliper and
                   605 East Fairchild Associates, L.P.
    10.2(3)(4)     1996 Equity Incentive Plan.
    10.3(3)(4)     1999 Equity Incentive Plan.
    10.4(3)(4)     1999 Employee Stock Purchase Plan.
    10.5(3)(4)     1999 Non-Employee Directors' Stock Option Plan.
    10.6(3)(4)     Employment Agreement, dated January 18, 1999, between
                   Caliper and Daniel L. Kisner, M.D.
    10.7(3)(4)     Promissory Note, dated July 29, 1999, between Caliper and
                   Daniel L. Kisner, M.D.
    10.8(3)        Amended and Restated Investor Rights Agreement, dated May 7,
                   1998, among Caliper and certain stockholders of Caliper.
    10.9(3)(4)     Form of Indemnification Agreement entered into between
                   Caliper and its directors and executive officers.
    10.10(3)(5)    Collaboration Agreement, dated May 2, 1998, between Caliper
                   and Hewlett-Packard Company.
    10.11(3)(5)    Termination, Transition and Technology Access Program
                   Agreement, dated November 24, 1998, between Caliper and
                   Hoffmann-La Roche Inc.
    10.12(3)(5)    Technology Access Agreement, dated December 21, 1998,
                   between Caliper and Amgen, Inc.
    10.13(3)(5)    Technology Access Agreement, dated August 12, 1999, between
                   Caliper and Eli Lilly and Company.
    10.14(3)(5)    Screening Collaboration Agreement, dated December 16, 1998,
                   between Caliper and Neurocrine Biosciences, Inc.
    10.15(3)(5)    Sole Commercial Patent License Agreement, effective
                   September 1, 1995, between Lockheed Martin Energy Research
                   Corporation and Caliper, as amended (domestic).
    10.16(3)(5)    Sole Commercial Patent License Agreement, effective
                   September 1, 1995, between Lockheed Martin Energy Research
                   Corporation and Caliper, as amended (international).
    10.17(3)(4)    Consulting Agreement, dated April 30, 1997, between Caliper
                   and Dr. David V. Milligan.
    10.18(3)(4)    Employment Agreement, dated September 23, 1999, between
                   Caliper and James L. Knighton.
    10.19(3)(4)    Consulting Agreement, dated May 1, 1997, between Caliper and
                   Regis McKenna.
    10.20(3)(4)    Promissory Note, dated March 25, 1997, between Caliper and
                   Michael R. Knapp, Ph.D.
    10.21(3)(4)    Option Agreement, dated August 9, 1995, between Caliper and
                   Michael R. Knapp, Ph.D.
    10.22(3)(4)    Amendment to Option Agreement, dated August 25, 1995,
                   between Caliper, Michael R. Knapp, Ph.D., J. Michael Ramsey,
                   Ph.D. and Avalon Medical Partners.
    10.23(3)(4)    The Corporate Plan for Retirement Select Plan Adoption
                   Agreement and related Basic Plan Document.
    10.24(6)       Warrant for the purchase of shares of Common Stock issued to
                   Michael R. Knapp, dated October 11, 1996.
    10.25(6)       Warrant for the purchase of shares of Common Stock issued to
                   Michael R. Knapp, dated February 2, 2000.
</TABLE>

                                        33
<PAGE>   36

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                         DESCRIPTION OF DOCUMENT
      -------                        -----------------------
    <S>            <C>
    10.26(5)(7)    Technology Access and Applications Development Agreement,
                   dated March 24, 2000, between Caliper and Millennium
                   Pharmaceuticals, Inc.
    10.27(8)       Lease Agreement, dated June 23, 2000 and effective July 5,
                   2000, between Caliper and Martin CBP Associates, L.P.
    10.28(8)       Promissory Note, dated July 17, 2000, between Caliper and
                   Daniel L. Kisner, M.D.
    23.1           Consent of Ernst & Young LLP, independent auditors.
    24.1           Power of Attorney (reference is made to the signature page
                   of this report).
</TABLE>

---------------
(1) Previously filed as Exhibit 3.3 to our Registration Statement on Form S-1,
    as amended, File No. 333-88827, filed on October 12, 1999 and incorporated
    by reference herein.

(2) Previously filed as Exhibit 3.4 to our Registration Statement on Form S-1,
    as amended, File No. 333-88827, filed on October 12, 1999 and incorporated
    by reference herein.

(3) Previously filed as the like-numbered Exhibit to our Registration Statement
    on Form S-1, as amended, File No. 333-88827, filed on October 12, 1999 and
    incorporated by reference herein.

(4) Management contract or compensatory plan or arrangement.

(5) Confidential treatment has been granted for a portion of this exhibit.

(6) Filed as the like-numbered exhibit to Annual Report of Form 10-K for the
    year ended December 31, 1999 and incorporated by reference herein.

(7) Previously filed as Exhibit 10.26 to Form 10-Q for the quarterly period
    ended March 31, 2000 and incorporated by reference herein.

(8) Previously filed as the like-numbered Exhibit to our Registration Statement
    on Form S-1, as amended, File No. 333-45942, filed on September 15, 2001,
    and incorporated by reference herein.

     (b) Reports on Form 8-K

     No Current Report was filed during the three months ended December 31,
2000.

                                        34
<PAGE>   37

                                   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 to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 16, 2001.

                                          CALIPER TECHNOLOGIES CORP.

                                          By:     /s/ DANIEL L. KISNER
                                            ------------------------------------
                                                   Daniel L. Kisner, M.D.
                                               President and Chief Executive
                                                           Officer

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Daniel L. Kisner, M.D., and James L. Knighton,
and each or any one of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Report, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.

     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>
                     SIGNATURES                                     TITLE                    DATE
                     ----------                                     -----                    ----
<C>                                                    <C>                              <S>
                /s/ DANIEL L. KISNER                     President, Chief Executive     March 16, 2001
-----------------------------------------------------  Officer and Director (principal
               Daniel L. Kisner, M.D.                        executive officer)

                /s/ JAMES L. KNIGHTON                      Chief Financial Officer      March 16, 2001
-----------------------------------------------------   (principal financial officer)
                  James L. Knighton

               /s/ ANTHONY HENDRICKSON                 Corporate Controller (principal  March 16, 2001
-----------------------------------------------------        accounting officer)
                 Anthony Hendrickson

                /s/ DAVID V. MILLIGAN                     Chairman of the Board of      March 12, 2001
-----------------------------------------------------             Directors
              David V. Milligan, Ph.D.

                /s/ ANTHONY B. EVNIN                              Director              March 16, 2001
-----------------------------------------------------
               Anthony B. Evnin, Ph.D.

               /s/ CHARLES M. HARTMAN                             Director              March 16, 2001
-----------------------------------------------------
                 Charles M. Hartman

                /s/ REGIS P. MCKENNA                              Director              March 16, 2001
-----------------------------------------------------
                  Regis P. McKenna

                /s/ ROBERT T. NELSEN                              Director              March 16, 2001
-----------------------------------------------------
                  Robert T. Nelsen

                /s/ MICHAEL STEINMETZ                             Director              March 13, 2001
-----------------------------------------------------
              Michael Steinmetz, Ph.D.
</TABLE>

                                        35
<PAGE>   38

                           CALIPER TECHNOLOGIES CORP.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........   F-2
Balance Sheets..............................................   F-3
Statements of Operations....................................   F-4
Statement of Redeemable Convertible Preferred Stock and
  Stockholders' Equity......................................   F-5
Statements of Cash Flows....................................   F-6
Notes to Financial Statements...............................   F-7
</TABLE>

                                       F-1
<PAGE>   39

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Caliper Technologies Corp.

     We have audited the accompanying balance sheets of Caliper Technologies
Corp. as of December 31, 2000 and 1999, and the related statements of
operations, redeemable convertible preferred stock and stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

     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 provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Caliper Technologies Corp.
at December 31, 2000 and 1999, and the results of its operations and its 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.

                                          /s/  ERNST & YOUNG LLP

Palo Alto, California
January 26, 2001

                                       F-2
<PAGE>   40

                           CALIPER TECHNOLOGIES CORP.

                                 BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                2000        1999
                                                              --------    --------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $ 36,294    $ 44,772
  Marketable securities.....................................   106,303      28,520
  Accounts receivable.......................................     2,991       1,055
  Inventories...............................................     2,206         287
  Prepaid expenses and other current assets.................     1,237         754
  Other receivable..........................................     1,033          --
                                                              --------    --------
          Total current assets..............................   150,064      75,388
Marketable securities.......................................    49,102      26,924
Security deposits...........................................     3,000          --
Property and equipment, net.................................     9,101       5,346
Notes receivable from officers..............................       615         625
Other assets, net...........................................       632         564
                                                              --------    --------
          Total assets......................................  $212,514    $108,847
                                                              ========    ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  2,960    $  1,321
  Accrued compensation......................................     1,946       1,082
  Other accrued liabilities.................................     1,351       1,011
  Deferred revenue..........................................     3,763       2,210
  Current portion of equipment financing....................     1,671       1,454
                                                              --------    --------
          Total current liabilities.........................    11,691       7,078
Noncurrent portion of equipment financing...................     3,534       3,671
Deferred revenue............................................       194          --
Other noncurrent liabilities................................       638         235
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.001 par value; 5,000,000 shares
     authorized in 2000 and 1999; no shares issued and
     outstanding in 2000 and 1999...........................        --          --
  Common stock, $0.001 par value; 70,000,000 shares
     authorized in 2000 and 1999 respectively; 23,688,455
     and 21,002,095 shares issued and outstanding in 2000
     and 1999, respectively.................................        23          21
  Additional paid-in capital................................   249,004     142,401
  Deferred stock compensation...............................    (4,772)     (9,317)
  Accumulated deficit.......................................   (48,426)    (35,109)
  Accumulated other comprehensive income/(loss).............       628        (133)
                                                              --------    --------
          Total stockholders' equity........................   196,457      97,863
                                                              --------    --------
                                                              $212,514    $108,847
                                                              ========    ========
</TABLE>

                            See accompanying notes.

                                       F-3
<PAGE>   41

                           CALIPER TECHNOLOGIES CORP.

                            STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              --------    --------    -------
<S>                                                           <C>         <C>         <C>
Revenue.....................................................  $ 18,564    $ 12,087    $ 8,155
Costs and expenses:
  Research and development..................................    35,997      18,415      9,584
  General and administrative................................     9,787       5,312      2,932
  Amortization of deferred stock compensation(1)............     4,545       3,885         --
                                                              --------    --------    -------
          Total costs and expenses..........................    50,329      27,612     12,516
                                                              --------    --------    -------
Operating loss..............................................   (31,765)    (15,525)    (4,361)
Interest income.............................................     8,088       1,564      1,581
Interest expense............................................      (620)       (412)      (195)
Litigation settlement and reimbursement.....................    13,274          --         --
                                                              --------    --------    -------
Loss before cumulative effect of a change in accounting
  principle.................................................   (11,023)    (14,373)    (2,975)
Cumulative effect of a change in accounting principle.......    (2,294)         --         --
                                                              --------    --------    -------
Net loss....................................................   (13,317)    (14,373)    (2,975)
Accretion on redeemable convertible preferred stock.........        --      (2,328)    (2,174)
                                                              --------    --------    -------
Net loss attributable to common stockholders................  $(13,317)   $(16,701)   $(5,149)
                                                              ========    ========    =======

Loss before cumulative effect of a change in accounting
  principle.................................................  $  (0.50)   $  (4.56)   $ (2.39)
Cumulative effect of a change in accounting principle.......     (0.11)         --         --
                                                              --------    --------    -------
Net loss per common share, basic and diluted................  $  (0.61)   $  (4.56)   $ (2.39)
                                                              ========    ========    =======
Shares used in computing net loss per common share, basic
  and diluted...............................................    21,853       3,663      2,157

Pro forma amounts assuming the change in accounting
  principle was applied retroactively (unaudited):
Net loss....................................................  $(13,317)   $(14,267)   $(5,375)
Net loss per share, basic and diluted.......................  $  (0.61)   $  (0.92)   $ (0.37)
                                                              ========    ========    =======
Shares used in computing pro forma net loss per share, basic
  and diluted (unaudited)...................................                15,578     14,347
</TABLE>

---------------
(1) Amortization of deferred stock compensation related to the following:

<TABLE>
<S>                                                           <C>         <C>         <C>
    Research and development................................  $  1,601    $  1,094    $    --
    General and administrative..............................     2,944       2,791         --
                                                              --------    --------    -------
          Total.............................................  $  4,545    $  3,885    $    --
                                                              ========    ========    =======
</TABLE>

                            See accompanying notes.

                                       F-4
<PAGE>   42

                           CALIPER TECHNOLOGIES CORP.

              STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
                            AND STOCKHOLDERS' EQUITY
                         (IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
                                                                                   STOCKHOLDERS EQUITY
                                        REDEEMABLE         -------------------------------------------------------------------
                                       CONVERTIBLE            CONVERTIBLE
                                     PREFERRED STOCK        PREFERRED STOCK       COMMON STOCK       ADDITIONAL     DEFERRED
                                  ----------------------   -----------------   -------------------    PAID-IN        STOCK
                                    SHARES       AMOUNT     SHARES    AMOUNT     SHARES     AMOUNT    CAPITAL     COMPENSATION
                                  -----------   --------   --------   ------   ----------   ------   ----------   ------------
<S>                               <C>           <C>        <C>        <C>      <C>          <C>      <C>          <C>
Balances at December 31, 1997...   10,774,309     38,283    829,142      1      2,478,711      3           590            --
Issuance of Series D redeemable
 convertible preferred stock for
 services.......................      141,026        880         --     --             --     --            --            --
Issuance of Series E redeemable
 convertible preferred stock for
 cash...........................      788,357      7,379         --     --             --     --            --            --
Issuance of common stock upon
 exercise of stock options......           --         --         --     --        191,831     --            84            --
Issuance of common stock for
 services.......................           --         --         --     --        101,801     --            76            --
Accretion on redeemable
 convertible preferred stock....           --      2,174         --     --             --     --            --            --
Deferred stock compensation.....           --         --         --     --             --     --           500          (500)
Net loss and comprehensive
 loss...........................           --         --         --     --             --     --            --            --
                                  -----------   --------   --------    ---     ----------    ---      --------      --------
Balances at December 31, 1998...   11,703,692     48,716    829,142      1      2,772,343      3         1,250          (500)
Net loss........................           --         --         --     --             --     --            --            --
Accretion on redeemable
 convertible preferred stock....           --      2,328         --     --             --     --            --            --
Change in unrealized loss on
 available-for-sale
 securities.....................           --         --         --     --             --     --            --            --
Comprehensive loss..............           --         --         --     --             --     --            --            --
Issuance of shares of common
 stock in the initial public
 offering, net of offering costs
 of $6,896......................           --         --         --     --      5,175,000      5        75,899            --
Conversion of redeemable
 convertible preferred stock
 into common stock, in
 connection with the initial
 public offering................  (11,703,692)   (51,044)        --     --     11,703,692     12        51,032            --
Conversion of convertible
 preferred stock into common
 stock, in connection with the
 initial public offering........           --         --   (829,142)    (1)       829,142      1            --            --
Issuance of common stock upon
 exercise of stock options......           --         --         --     --        512,624     --           274            --
Issuance of common stock for
 services.......................           --         --         --     --          9,294     --            83            --
Deferred stock compensation.....           --         --         --     --             --     --        12,702       (12,702)
Amortization of deferred stock
 compensation...................           --         --         --     --             --     --            --         3,885
Warrants issuable in connection
 with milestone Achievement.....           --         --         --     --             --     --           568            --
Stock options issued to non-
 employees......................                                                              --           593            --
                                  -----------   --------   --------    ---     ----------    ---      --------      --------
Balances at December 31, 1999...           --         --         --     --     21,002,095     21       142,401        (9,317)
Net loss........................           --         --         --     --             --     --            --            --
Change in unrealized gain on
 available-for-sale
 securities.....................           --         --         --     --             --     --            --            --
Comprehensive loss..............           --         --         --     --             --     --            --            --
Issuance of shares of common
 stock in a private placement
 offering, net of offering costs
 of $200........................           --         --         --     --      2,300,000      2       104,679            --
Issuance of common stock upon
 exercise of stock options and
 in connection with the employee
 stock purchase plan............           --         --         --     --        306,154     --         1,463            --
Issuance of common stock upon
 exercise of warrants...........           --         --         --     --         72,514     --                          --
Issuance of common stock for
 services.......................           --         --         --     --          7,692     --           207            --
Amortization of deferred stock
 compensation...................           --         --         --     --             --     --            --         4,545
Stock options issued to non-
 employees......................           --         --         --     --             --     --           254            --
                                  -----------   --------   --------    ---     ----------    ---      --------      --------
Balances at December 31, 2000...           --   $     --         --    $--     23,688,455    $23      $249,004      $ (4,772)
                                  ===========   ========   ========    ===     ==========    ===      ========      ========

<CAPTION>
                                              STOCKHOLDERS EQUITY
                                  -------------------------------------------
                                                 ACCUMULATED
                                                    OTHER           TOTAL
                                  ACCUMULATED   COMPREHENSIVE   STOCKHOLDERS'
                                    DEFICIT     INCOME/(LOSS)      EQUITY
                                  -----------   -------------   -------------
<S>                               <C>           <C>             <C>
Balances at December 31, 1997...    (13,259)           --          (12,665)
Issuance of Series D redeemable
 convertible preferred stock for
 services.......................         --            --               --
Issuance of Series E redeemable
 convertible preferred stock for
 cash...........................         --            --               --
Issuance of common stock upon
 exercise of stock options......         --            --               84
Issuance of common stock for
 services.......................         --            --               76
Accretion on redeemable
 convertible preferred stock....     (2,174)           --           (2,174)
Deferred stock compensation.....         --            --               --
Net loss and comprehensive
 loss...........................     (2,975)           --           (2,975)
                                   --------         -----         --------
Balances at December 31, 1998...    (18,408)           --          (17,654)
Net loss........................    (14,373)           --          (14,373)
Accretion on redeemable
 convertible preferred stock....     (2,328)           --           (2,328)
Change in unrealized loss on
 available-for-sale
 securities.....................         --          (133)            (133)
                                                                  --------
Comprehensive loss..............         --            --          (16,834)
Issuance of shares of common
 stock in the initial public
 offering, net of offering costs
 of $6,896......................         --            --           75,904
Conversion of redeemable
 convertible preferred stock
 into common stock, in
 connection with the initial
 public offering................         --            --           51,044
Conversion of convertible
 preferred stock into common
 stock, in connection with the
 initial public offering........         --            --               --
Issuance of common stock upon
 exercise of stock options......         --            --              274
Issuance of common stock for
 services.......................         --            --               83
Deferred stock compensation.....         --            --               --
Amortization of deferred stock
 compensation...................         --            --            3,885
Warrants issuable in connection
 with milestone Achievement.....         --            --              568
Stock options issued to non-
 employees......................         --            --              593
                                   --------         -----         --------
Balances at December 31, 1999...    (35,109)         (133)          97,863
Net loss........................    (13,317)           --          (13,317)
Change in unrealized gain on
 available-for-sale
 securities.....................         --           761              761
                                                                  --------
Comprehensive loss..............         --            --          (12,556)
Issuance of shares of common
 stock in a private placement
 offering, net of offering costs
 of $200........................         --            --          104,681
Issuance of common stock upon
 exercise of stock options and
 in connection with the employee
 stock purchase plan............         --            --            1,463
Issuance of common stock upon
 exercise of warrants...........         --            --               --
Issuance of common stock for
 services.......................         --            --              207
Amortization of deferred stock
 compensation...................         --            --            4,545
Stock options issued to non-
 employees......................         --            --              254
                                   --------         -----         --------
Balances at December 31, 2000...   $(48,426)        $ 628         $196,457
                                   ========         =====         ========
</TABLE>

                            See accompanying notes.

                                       F-5
<PAGE>   43

                           CALIPER TECHNOLOGIES CORP.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                            ---------------------------------
                                                              2000         1999        1998
                                                            ---------    --------    --------
<S>                                                         <C>          <C>         <C>
OPERATING ACTIVITIES
Net loss..................................................  $ (13,317)   $(14,373)   $ (2,975)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Cumulative effect of a change in accounting principle...      2,294          --          --
  Depreciation and amortization...........................      2,155       1,325         921
  Amortization of deferred stock compensation.............      4,545       3,885          --
  Issuance of common and preferred stock for services.....        207          83         956
  Stock options issued to non-employees...................        254         593          --
  Changes in operating assets and liabilities:
     Accounts receivable and other receivable.............     (2,969)         27      (1,082)
     Notes receivable from officers.......................         10        (425)         --
     Inventories..........................................     (1,919)       (287)         --
     Prepaid expenses and other current assets............       (483)       (154)       (411)
     Deposits and other assets............................     (3,182)         --         119
     Accounts payable and other accrued liabilities.......      1,979       1,611        (569)
     Accrued compensation.................................        864         650         149
     Deferred revenue.....................................       (547)      1,584         626
     Other noncurrent liabilities.........................        403         235          --
                                                            ---------    --------    --------
          Net cash used in operating activities...........     (9,706)     (5,246)     (2,266)
                                                            ---------    --------    --------
INVESTING ACTIVITIES
Purchases of available-for-sale securities................   (184,078)    (52,380)    (39,996)
Proceeds from sales of available-for-sale securities......     32,910       9,199       6,233
Proceeds from maturities of available-for-sale
  securities..............................................     51,968      13,498      34,106
Purchases of property and equipment.......................     (5,794)     (3,871)     (1,667)
                                                            ---------    --------    --------
          Net cash used in investing activities...........   (104,994)    (33,554)     (1,324)
                                                            ---------    --------    --------
FINANCING ACTIVITIES
Proceeds from equipment financing.........................      1,745       3,419       1,586
Payments of obligations under equipment financing.........     (1,665)     (1,183)       (613)
Proceeds from issuance of common and preferred stock......    106,142      76,178       7,463
                                                            ---------    --------    --------
          Net cash provided by financing activities.......    106,222      78,414       8,436
                                                            ---------    --------    --------
Net increase (decrease) in cash and cash equivalents......     (8,478)     39,614       4,846
Cash and cash equivalents at beginning of year............     44,772       5,158         312
                                                            ---------    --------    --------
Cash and cash equivalents at end of year..................  $  36,294    $ 44,772    $  5,158
                                                            =========    ========    ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid.............................................  $     620    $    412    $    195
                                                            =========    ========    ========
SCHEDULE OF NONCASH TRANSACTIONS
Issuance of warrants......................................  $      --    $    568    $     --
                                                            =========    ========    ========
Deferred stock compensation...............................  $      --    $ 12,702    $    500
                                                            =========    ========    ========
</TABLE>

                            See accompanying notes.

                                       F-6
<PAGE>   44

                           CALIPER TECHNOLOGIES CORP.

                         NOTES TO FINANCIAL STATEMENTS

 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

     Caliper Technologies Corp. ("Caliper") was incorporated in the state of
Delaware on July 26, 1995. Caliper develops lab-on-a-chip technologies and
manufactures LabChip systems. These systems perform laboratory experiments for
use in the pharmaceutical industry and other industries. Caliper has determined
that it operates in only one segment, all sourced in the United States.

INITIAL PUBLIC OFFERING

     In December 1999, Caliper completed an initial public offering of 4,500,000
shares of its common stock to the public, at a per share price of $16.00. In
conjunction with the initial public offering, Caliper's underwriters exercised
an option to purchase an additional 675,000 shares of common stock at a price of
$16.00 per share to cover over-allotments. Caliper received net proceeds from
the offering of approximately $75.9 million. Upon the closing of the initial
public offering, each of the outstanding 11,703,692 redeemable convertible
preferred stock and 829,142 convertible preferred stock was automatically
converted into one share of common stock.

STOCK SPLIT

     In October 1999, Caliper's board of directors approved a 1-for-1.56 reverse
stock split. The reverse stock split became effective in December 1999. The
accompanying financial statements have been adjusted retroactively to reflect
the reverse split of all outstanding common and convertible preferred stock.

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 AND MARKETABLE SECURITIES

     Caliper considers all highly liquid investments with maturities of three
months or less from the date of purchase to be cash equivalents. Management
determines the appropriate classification of its cash equivalents and investment
securities at the time of purchase and reevaluates such determination as of each
balance sheet date. Management has classified Caliper's cash equivalents and
marketable securities as available-for-sale securities in the accompanying
financial statements. Available-for-sale securities are carried at fair value
based on quoted market prices, with unrealized gains and losses reported in a
separate component of stockholders' equity. Realized gains and losses are
included in interest income. The cost of securities sold is based on the
specific identification method.

     Caliper invests its excess cash in U.S. government and agency securities,
debt instruments of financial institutions and corporations, and money market
funds with strong credit ratings. Caliper has established guidelines regarding
diversification of its investments and their maturities should maintain safety
and liquidity.

                                       F-7
<PAGE>   45
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

INVENTORIES

     Inventories are stated at the lower of standard cost (which approximates
actual cost) or market.

<TABLE>
<CAPTION>
                                                     DECEMBER 31,    DECEMBER 31,
                                                         2000            1999
                                                     ------------    ------------
<S>                                                  <C>             <C>
Raw material.......................................     $2,018           $253
Work-in-process....................................        151             13
Finished goods.....................................         37             21
                                                        ------           ----
          Total....................................     $2,206           $287
                                                        ======           ====
</TABLE>

PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost and are depreciated using the
straight-line method over the shorter of the financing period or the estimated
useful lives of the assets, generally four years. Furniture and equipment
acquired under equipment financing is amortized over the shorter of the useful
lives or the financing period. Leasehold improvements are amortized over the
shorter of the estimated useful life of the assets or lease term.

REVENUE RECOGNITION

     Revenues are earned from services performed pursuant to Caliper's
collaboration agreement, Technology Access Program agreements and government
grants.

  Collaboration Agreement

     Revenue from development and support activities under Caliper's
collaboration agreement is recorded in the period in which the costs are
incurred. Direct costs associated with this contract are reported as research
and development expense. Revenue related to the reimbursement of costs for the
supply of chips and reagents to Caliper's collaboration partner is recognized
upon shipment. Caliper's share of gross margin on components of the LabChip
system sold by the collaboration partner is recognized as revenue upon shipment
by the collaboration partner to the end user.

  Technology Access Program Agreements

     Caliper has entered into a number of multi-year Technology Access Program
agreements that include : (1) access to existing technology; (2) a multi-year
subscription for technology developed during the subscription period; (3)
development and support services; and (4) access to prototype LabChip systems
developed during the subscription period. Caliper allocates the total
arrangement fees to each element based on fair value. Fair value is based on
renewal rates for subscriptions, prices established by Caliper's management
having the relevant authority for development and support services and the price
at which a program participant has the ability to purchase unspecified
quantities of a specific prototype product.

     Prior to January 1, 2000, Caliper recognized non-refundable license fees
under its Technology Access Programs as revenues upon transfer of the license to
third parties and when no further performance obligations existed. Effective
January 1, 2000, Caliper changed its method of accounting for non-refundable
license fees to recognize such fees ratably over the term of the committed
related Technology Access Program agreement. Caliper believes the change in
accounting principle is preferable based on guidance provided in SEC Staff
Accounting Bulletin No. 101 -- Revenue Recognition in Financial Statements.
Caliper further believes that the change is preferable as it is possible that
Technology Access Program participants would not pay the non-refundable license
fees without Caliper's continuing involvement in the subscription period, in
providing support services, and in making prototype products available for
purchase during the subscription period. The

                                       F-8
<PAGE>   46
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

$2.3 million cumulative effect of the change in accounting principle was
reported as a charge in the period ended March 31, 2000. The cumulative effect
was initially recorded as deferred revenue and is being recognized as revenue
over the remaining contractual terms of the Technology Access Program
agreements. During the year ended December 31, 2000, the impact of the change in
accounting was to increase net loss by $1.250 million, or $(0.06) per share,
comprised of the $2.3 million cumulative effect of the change as described above
($0.11 per share), less $1.3 million of the related deferred revenue which was
recognized as revenue during the year ended December 31, 2000 ($0.06 per share)
and $250,000 ($0.01 per share) recorded as deferred revenue as of December 31,
2000 that would have been recognized as revenue had SAB 101 not been adopted.
The remainder of the related deferred revenue is expected to be recognized as
revenue approximately as follows: $800,000 in 2001 and $194,000 in 2002. Had the
change in accounting been adopted as of January 1, 1998, revenue for the year
ended December 31, 1999 and 1998 would have increased by $106,000 and decreased
by $2.4 million, respectively. Pro forma net loss would have decreased by $0.01
per share for the year ended December 31, 1999 and pro forma net loss per share
for the year ended December 31, 1998 would have increased by $0.17 per share.

     Subscription fees are recognized ratably over the subscription period. When
payment of the subscription fee is contingent upon reaching a milestone, revenue
is deferred until the milestone is met. Support and development services revenue
is recognized in the periods the costs are incurred. Product revenue is
recognized upon transfer of title to the customer.

  Government Grants

     Caliper's grant from the National Institute of Standards and Technology
provides for the reimbursement of qualified expenses for research and
development as defined under the terms of the grant agreement. Revenue under
grant agreements is recognized when the related research expenses are incurred.

RESEARCH AND DEVELOPMENT

     Caliper expenses research and development costs as incurred.

DEFERRED COMPENSATION ARRANGEMENTS

     Caliper maintains certain marketable equity securities to generate returns
that offset changes in certain liabilities related to deferred compensation
arrangements. The marketable equity securities are stated at fair value. Both
realized and unrealized gains and losses generally offset the change in the
deferred compensation liability and to date have not been material.

COMPREHENSIVE INCOME (LOSS)

     Caliper has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income". The only component of comprehensive
income(loss) is unrealized gains and losses on the available-for-sale
securities. Comprehensive income (loss) has been disclosed in the Statement of
Redeemable Convertible Preferred Stock and Stockholders' Equity.

STOCK-BASED COMPENSATION

     Caliper accounts for its stock options and equity awards in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and has elected to follow the "disclosure only"
alternative prescribed by Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). Caliper accounts for stock options issued to
non-employees in accordance with the provisions of SFAS No. 123 and

                                       F-9
<PAGE>   47
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Emerging Issues Task Force 96-18. For the year ended December 31, 2000,
compensation expense related to stock options issued to non-employees was
$254,000.

NET LOSS PER SHARE

     Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded from the diluted earnings per
share computations as they have an antidilutive effect due to Caliper's net
loss.

     Proforma net loss per share has been computed to give effect to the
automatic conversion of preferred stock into common stock which occurred at the
completion of Caliper's initial public offering in December 1999 (using the
as-if converted method) from the original date of issuance.

     A reconciliation of shares used in the calculations is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                      -------------------------------
                                                        2000        1999       1998
                                                      --------    --------    -------
<S>                                                   <C>         <C>         <C>
Basic and diluted:
  Net loss..........................................  $(13,317)   $(14,373)   $(2,975)
  Accretion on redeemable convertible preferred
     stock..........................................        --      (2,328)    (2,174)
                                                      --------    --------    -------
Net loss attributable to common stockholders........  $(13,317)   $(16,701)   $(5,149)
                                                      ========    ========    =======
Weighted-average shares of common stock
  outstanding.......................................    21,939       3,909      2,596
Less: weighted-average shares subject to
  repurchase........................................       (86)       (246)      (439)
                                                      --------    --------    -------
Weighted-average shares used in basic and diluted
  net loss per share................................    21,853       3,663      2,157
                                                      ========    ========    =======
Pro forma basic and diluted (unaudited):
  Net loss..........................................              $(14,373)   $(2,975)
                                                                  ========    =======
Shares used above...................................                 3,663      2,157
Adjustment to reflect weighted-average effect of
  assumed conversion of preferred stock.............                11,915     12,190
                                                                  --------    -------
Weighted-average shares used in pro forma basic and
  diluted net loss per share (unaudited)............                15,578     14,347
                                                                  ========    =======
</TABLE>

     The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect (in thousands):

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                             2000     1999      1998
                                                             -----    -----    ------
<S>                                                          <C>      <C>      <C>
Options and warrants.......................................  3,082    2,497     1,263
Convertible preferred stock................................     --       --    12,533
</TABLE>

SIGNIFICANT CONCENTRATIONS

     Financial instruments that potentially subject Caliper to concentrations of
credit risk primarily consist of cash equivalents and marketable securities (see
Note 3).

     In 1998, Roche, Agilent Technologies and Amgen represented 40%, 40%, and
17% of total revenues, respectively. In 1999, Agilent Technologies represented
50% of total revenues and two of Caliper's Technology Access Program customers
accounted for 21% and 17% of total revenues. In 2000, Agilent Technologies

                                       F-10
<PAGE>   48
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

represented 45% of total revenues and three of Caliper's Technology Access
Program customers accounted for 18%, 14% and 13% of total revenues.

     Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board or FASB issued
statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Financial Instruments and for Hedging Activities" or SFAS 133 which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. In June 1999, FASB issued Financial
Accounting Standards No. 137 which deferred the effective date of SFAS 133 to
fiscal years beginning after June 15, 2000. Caliper will adopt the new statement
effective January 1, 2001. The adoption of SFAS 133 is not anticipated to have
an impact on the Company's results of operations of financial condition when
adopted as the Company holds no derivative financial instruments and does not
currently engage in hedging activities. In June 2000, the FASB issued SFAS 138,
a significant amendment of SFAS 133 which is effective simultaneously with SFAS
133. SFAS 138 does not amend any of the fundamental precepts of SFAS 133, but
addresses some of the impractical aspects of the original statement, which were
incompatible with many common current hedging approaches.

     In March 2000, the FASB issued No. 44, "Accounting for Certain Transactions
Involving Stock Compensation -- an Interpretation of APB 25" or FIN 44. This
Interpretation clarifies (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions recorded in
FIN 44 cover specific events that occur after either December 15, 1998, or
January 12, 2000, but before the effective date of July 1, 2000. The effects of
applying FIN 44 are recognized on a prospective basis from July 1, 2000. The
adoption of FIN 44 does not have a material impact on the Company's financial
statements.

 2. CONTRACTS AND GRANTS

  Strategic Alliance with Agilent

     In May 1998, Caliper executed a collaboration agreement with
Hewlett-Packard Company ("Hewlett-Packard") to create a line of commercial
research products based on LabChip technologies. In November 1999,
Hewlett-Packard transferred this collaboration to its subsidiary, Agilent
Technologies, Inc. ("Agilent"). In this collaboration, Caliper primarily focuses
on developing core technology and LabChip applications. Caliper also
manufactures the chips and supplies the chips and reagents to Agilent. If
Caliper elects, however, not to manufacture chips for a LabChip application or
is unable to meet minimum supply commitments to be mutually established in the
future, Agilent would have the right to manufacture those chips. Agilent
primarily focuses on developing instruments and software, manufacturing
instruments, and marketing, selling and supporting complete systems.

     Agilent funds Caliper's product development efforts under the
collaboration, reimburses Caliper's costs of supplying chips and reagents, and
pays Caliper a share of the gross margin on all components of LabChip systems.
The gross margin share varies depending on the type of collaboration product,
whether Caliper or Agilent manufacture the collaboration product, and whether
such collaboration product is sold during the collaboration or after the
collaboration has terminated. Under this agreement, Hewlett-Packard purchased

                                       F-11
<PAGE>   49
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

534,188 shares of Caliper's redeemable convertible preferred stock Series E with
an aggregate cost of $5.0 million.

     The term of the Agilent agreement is eight years, beginning in May 1998.
After three years, Agilent may elect not to meet certain annual funding
requirements, in which case either party may terminate the agreement. In any
event either party may terminate the agreement after five years.

  Technology Access Program

     Caliper maintains a Technology Access Program which provides customers with
early access to new products, and offers technical training, support and
customization services. Technology Access Program customers have non-exclusive
access to all of the high throughput screening products Caliper offers during
the term of the agreement. These agreements generally provide for customers to
pay an up-front license fee and annual subscription fees, and to reimburse
Caliper for its costs of providing development and support services. Instruments
and chips are generally sold separately on a product-by-product basis, although
some agreements establish prices for initial instruments or estimates of per
data point charges for sipper chips.

     Caliper currently has four Technology Access Program customers for its high
throughput screening systems: Millennium Pharmaceuticals, Inc. ("Millennium"),
Eli Lilly and Company ("Eli Lilly"), Amgen, Inc. ("Amgen") and Hoffmann-La Roche
Inc. ("Roche").

     Millennium. Caliper signed a broad technology access and application
development collaboration with Millennium in March 2000. The term is two years
with an option to renew in the third year.

     Eli Lilly. Caliper signed a technology access agreement with Eli Lilly in
August 1999. The term is three years, although Eli Lilly may temporarily suspend
its Technology Access Program participation and later reinitiate participation,
during which time Caliper's support and assistance obligations will also be
suspended. Eli Lilly may terminate the agreement on any anniversary.

     Amgen. Caliper entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until Caliper has delivered an initial ultra high
throughput system. The term of this agreement is three years, although Amgen may
terminate the agreement on any anniversary.

     Hoffmann-La Roche. Caliper entered into a technology access agreement with
Roche in November 1998, which concluded in July 2000. This agreement supersedes
an earlier agreement under which Roche funded early development of the high
throughput screening technology in exchange for certain exclusive rights to an
ultra high throughput screening system. Under this earlier agreement, Roche
purchased 854,701 shares of Caliper's redeemable convertible preferred stock
Series C with an aggregate cost of $4.0 million. Roche now has non-exclusive
rights similar to other Technology Access Program customers. Caliper did not
receive an up-front license fee or annual subscription fee from Roche.

  Value Added Screening Collaboration Program

     Caliper's Value Added Screening Collaboration program offers high
throughput screening services using Caliper's LabChip systems. Caliper's first
Value Added Screening Collaboration agreement was established with Neurocrine
Biosciences in December 1998. Caliper receives screening fees on a per data
point basis, preclinical milestones and royalties on Neurocrine products
emerging from the collaboration. This agreement has a three-year term, but may
be terminated by either party under certain circumstances after the first year.

     Revenue from the alliance and programs discussed above were approximately
$17.8 million, $11.2 million and $ 7.9 million in 2000, 1999 and 1998
respectively. Revenue earned from reimbursement of development and support
activities approximated actual costs incurred.

                                       F-12
<PAGE>   50
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     In September 1998, Caliper received a grant from the Advanced Technology
Program of the National Institute of Standards and Technology ("NIST") to
develop a Reference Laboratory DNA Diagnostics System based on Caliper's
"lab-on-a-chip" technology of approximately $2 million over three years. The
grant period began in January 1999.

 3. CASH EQUIVALENTS AND MARKETABLE SECURITIES

     The following is a summary of available-for-sale securities as of December
31, 2000:

<TABLE>
<CAPTION>
                                                                 GROSS         GROSS
                                                  AMORTIZED    UNREALIZED    UNREALIZED    ESTIMATED
                                                    COST         LOSSES        GAINS       FAIR VALUE
                                                  ---------    ----------    ----------    ----------
                                                                    (IN THOUSANDS)
<S>                                               <C>          <C>           <C>           <C>
Money market fund...............................  $ 28,769        $ --          $ --        $ 28,769
Bonds of the U.S. Government and its agencies...    26,486          --            90          26,576
Commercial paper................................   135,816         (17)          555         136,354
                                                  --------        ----          ----        --------
                                                  $191,071        $(17)         $645        $191,699
                                                  ========        ====          ====        ========
Reported as:
  Cash equivalents..............................  $ 36,294        $ --          $ --        $ 36,294
  Short-term marketable securities..............   106,118         (17)          202         106,303
  Long-term marketable securities...............    48,659          --           443          49,102
                                                  --------        ----          ----        --------
                                                  $191,071        $(17)         $645        $191,699
                                                  ========        ====          ====        ========
</TABLE>

     At December 31, 2000, net unrealized gain on marketable securities has been
included in the Company's Statement of Redeemable Convertible Preferred Stock
and Stockholders' Equity.

     The following is a summary of the cost and estimated fair value of
available-for-sale securities at December 31, 2000, by contractual maturity:

<TABLE>
<CAPTION>
                                                         AMORTIZED    ESTIMATED
                                                           COST       FAIR VALUE
                                                         ---------    ----------
                                                             (IN THOUSANDS)
<S>                                                      <C>          <C>
Mature in one year or less.............................  $ 97,609      $ 97,665
Mature after one year through three years..............    93,462        94,034
                                                         --------      --------
          Total........................................  $191,071      $191,699
                                                         ========      ========
</TABLE>

     The following is a summary of available-for-sale securities as of December
31, 1999:

<TABLE>
<CAPTION>
                                                                 GROSS         GROSS
                                                  AMORTIZED    UNREALIZED    UNREALIZED    ESTIMATED
                                                    COST         LOSSES        GAINS       FAIR VALUE
                                                  ---------    ----------    ----------    ----------
                                                                    (IN THOUSANDS)
<S>                                               <C>          <C>           <C>           <C>
Money market fund...............................  $ 44,772       $  --          $--         $ 44,772
Bonds of the U.S. Government and its agencies...     6,255         (17)          --            6,238
Commercial paper................................    49,322        (161)          45           49,206
                                                  --------       -----          ---         --------
                                                  $100,349       $(178)         $45         $100,216
                                                  ========       =====          ===         ========
Reported as:
  Cash equivalents..............................  $ 44,772       $  --          $--         $ 44,772
  Short-term marketable securities..............    28,512         (36)          45           28,520
  Long-term marketable securities...............    27,065        (142)          --           26,924
                                                  --------       -----          ---         --------
                                                  $100,349       $(178)         $45         $100,216
                                                  ========       =====          ===         ========
</TABLE>

                                       F-13
<PAGE>   51
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     At December 31, 1999, net unrealized loss on marketable securities has been
included in the Company's Statement of Redeemable Convertible Preferred Stock
and Stockholders' Equity .

     Gross realized gains and losses on sales of available for sale securities
were immaterial.

 4. NOTES RECEIVABLE

     At December 31, 1999, Caliper held a note receivable of $200,000 from an
officer of Caliper. This note, which bears interest at 6.61% per year from
January 2002, is collateralized by certain personal assets of the officer and
has certain amortization schedules for periodic payments with the final payment
to be made at the end of 2006. In addition to the $200,000 note receivable,
Caliper held an unsecured promissory note of $425,000 in connection with a loan
to a second officer of Caliper. The note bears interest at 5.96% per year and is
repayable upon the earlier of July 29, 2005 or the voluntary termination of his
employment with Caliper. In February 2000 in connection with his performance
review, $85,000 of this loan was forgiven. In July 2000, an additional $75,000
was loaned to the second officer with the same provision.

 5. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           ------------------
                                                            2000       1999
                                                           -------    -------
                                                             (IN THOUSANDS)
<S>                                                        <C>        <C>
Machinery, equipment, and furniture......................  $11,099    $ 6,599
Leasehold improvements...................................    2,327      1,033
                                                           -------    -------
                                                            13,426      7,632
Accumulated depreciation and amortization................   (4,325)    (2,286)
                                                           -------    -------
Property and equipment, net..............................  $ 9,101    $ 5,346
                                                           =======    =======
</TABLE>

     As of December 31, 2000 and 1999 property and equipment includes assets
acquired under capital leases of approximately $8.2 million and $6.8 million.
Accumulated depreciation related to leased assets was approximately $4.0 million
and $2.3 million at December 31, 2000 and 1999.

 6. EQUIPMENT FINANCING AND RENTAL COMMITMENTS

     As of December 31, 2000, Caliper had $8.2 million of property and equipment
financed through capital lease obligations and approximately $4.1 million unused
and available under an equipment financing credit line. The obligations under
the equipment financings are secured by the equipment financed, bear interest at
a weighted-average fixed rate of approximately 11.4%, and are due in monthly
installments through December 2004. Under the terms of one equipment financing
agreement, ownership of the financed equipment may be purchased by Caliper at
fair value at the end of the financing term. Other equipment financing
agreements require a balloon payment at the end of each loan term.

                                       F-14
<PAGE>   52
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     As of December 31, 2000, future minimum lease payments under operating and
capital leases and principal payments on equipment loans are as follows:

<TABLE>
<CAPTION>
                                                                  CAPITAL LEASES
                                                     OPERATING          AND
                                                      LEASES      EQUIPMENT LOANS
                                                     ---------    ---------------
                                                            (IN THOUSANDS)
<S>                                                  <C>          <C>
Years ending December 31:
  2001.............................................   $ 3,686         $ 1,688
  2002.............................................     3,773           1,427
  2003.............................................     3,860           1,511
  2004.............................................     3,984             596
  2005.............................................     4,112              --
  Thereafter.......................................    11,774              --
                                                      -------         -------
          Total minimum lease and principal
            Payments...............................   $31,189           5,222
                                                      =======
Amount representing interest.......................                       (17)
                                                                      -------
Present value of future payments...................                     5,205
Current portion of equipment financing.............                    (1,671)
                                                                      -------
Noncurrent portion of equipment financing..........                   $ 3,534
                                                                      =======
</TABLE>

     In May 2000, Caliper drew down the remaining $855,000 balance of the
equipment financing credit line which existed as of December 31, 1999 at a
weighted-average interest rate of 12.9%. In May 2000, Caliper also entered into
a $5.0 million financing agreement with a financial institution for the purchase
of property and equipment which bears interest commensurate to the U.S. Treasury
yield to maturity for a note with a forty-eight month maturity plus a loan
margin. The drawdown period under the equipment financing credit line expires on
June 30, 2001. As of December 31, 2000, Caliper drew down approximately $887,000
under the new line at a weighted average interest rate of 12.8% and had $4.1
million remaining available under this arrangement.

     Rent expense relating to operating leases was approximately $2.5 million in
2000, $1.8 million in 1999, and $695,000 in 1998.

     In December 1998, Caliper entered into a 10-year facility operating lease
agreement. Caliper also entered into a sublease agreement pursuant to which it
received a monthly amount of $18,000 from December 1998 through November 1999
and a monthly amount of $24,000 in December 1999 and January 2000. In June 2000,
Caliper entered into an 8-year facility operating lease agreement and also
entered into a sublease agreement for a monthly amount of $42,000 from September
2000 through June 2001. The annual increase is 4% for the first operating lease
agreement and is 3% for the second agreement. In connection with both of these
facility leases, Caliper has a $3.0 million standby letter-of-credit arrangement
with a bank expiring in year 2008. Caliper has pledged a certificate of deposit
of $3.0 million as collateral on outstanding letters of credit related to
Caliper's operating lease agreements and is classified as security deposits on
the balance sheet.

 7. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

PRIVATE PLACEMENT

     In August 2000, Caliper completed a private placement of 2,300,000 shares
of its common stock to selected institutional investors, at a per share price of
$48.00. Caliper received aggregate gross proceeds from the offering of
approximately $110.4 million before payment of placement agent fees and other
expenses of approximately $5.5 million.

                                       F-15
<PAGE>   53
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

CONVERTIBLE PREFERRED STOCK

     During 1999 and 1998, Caliper recorded $2.3 million and $2.2 million,
respectively, for accretions up to the date of initial public offering. Upon the
closing of the initial public offering, each of the outstanding 11,703,692
redeemable convertible preferred stock and 829,142 convertible preferred stock
was automatically converted into one share of common stock.

WARRANTS

     In January 1996, in connection with an equipment financing agreement,
Caliper issued a warrant that entitles the holder to purchase 3,276 shares of
common stock at an exercise price of $1.22 per share. In June 2000, the warrant
was exercised under a net exercise provision and 3,194 shares of common stock
were issued.

     In May 1996, in connection with a capital lease agreement, Caliper granted
a warrant that entitles the holder to purchase 32,767 shares of Series B
preferred stock at an exercise price of $1.22 per share. In June 2000, the
warrant was exercised under a net exercise provision and 31,862 shares of common
stock were issued.

     In October 1996, in connection with certain agreements, Caliper issued two
warrants that entitle the holders to purchase a total of 38,460 shares of common
stock at an exercise price of $1.22 per share. One of these warrants is
exercisable through October 11, 2006. In July 2000, the warrant was exercised
under a net exercise provision and 18,729 shares of common stock were issued.

     No amounts have been recorded by Caliper for the above warrant issuances,
as the amounts were determined to be immaterial at the time of issuance.

     In August 1995, Caliper executed an agreement which called for the issue of
two warrants, upon achievement of a certain patent milestone, to purchase a
total of 38,460 shares of common stock at an exercise price of $1.22 per share.
This patent milestone was met in December 1999, and the two warrants were issued
in February 2000. These warrants will expire in January 2006. The fair value of
the warrants was capitalized in 1999 and is being amortized over 5 years. One of
these warrants is exercisable through January 17, 2006. In July 2000, one of
these warrants was exercised under a net exercise provision and 18,729 shares of
common stock were issued.

COMMON STOCK SUBJECT TO REPURCHASE

     Common stock issued to founders of Caliper vest generally over five years
at 20% one year from the date of grant and on a monthly, pro rata basis
thereafter. At December 31, 2000, 20,299 shares are unvested and remain subject
to repurchase at the original issuance price in the event of termination of
employment or services to Caliper. Caliper has not repurchased any shares in
accordance with these rights.

STOCK OPTION PLANS

     In October 1999, Caliper's board of directors and stockholders adopted the
1999 Equity Incentive Plan ("1999 Equity Plan"). The 1999 Equity Plan amended
and restated the 1996 Stock Incentive Plan and increased the shares reserved for
issuance to 4 million. In addition, the 1999 Equity Plan provides for an
automatic increase in the shares reserved for issuance by the greater of 5% of
outstanding shares on a fully-diluted basis or the number of shares that have
been made subject to awards granted under the 1999 Equity Plan during the prior
12-month period. The automatic share reserve increase may not exceed 12,820,000
shares in aggregate over the 10-year period. In June 2000, an additional
1,439,198 shares of common stock became issuable under this plan.

     In October 1999, Caliper's board of directors and stockholders adopted the
1999 Non-Employee Directors' Stock Option Plan ("1999 Directors' Plan") which
provides for the automatic grant of options to

                                       F-16
<PAGE>   54
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

non-employee directors. A total of 200,000 shares of common stock has been
reserved for issuance under this plan. The number of shares reserved for
issuance will automatically increase by the greater of 0.3% of outstanding
shares on a fully-diluted basis or the number of shares subject to options
granted under the 1999 Directors' Plan during the prior 12-month period. In June
2000, an additional 69,496 shares of common stock became issuable under this
plan.

     On August 31, 1996, Caliper's board of directors and stockholders adopted
the 1996 Stock Incentive Plan (the "1996 Stock Plan"). This plan supersedes the
1996 Equity Incentive Plan and provides for the issuance of common stock and the
granting of options to purchase common stock to employees, officers, directors,
and consultants of Caliper. Caliper granted shares of common stock for issuance
under the 1996 Stock Plan at no less than the fair value of the stock (no less
than 85% of fair value for nonqualified options). Options granted under the 1996
Stock Plan generally vest over 5 years at a rate of 20% one year from the grant
date and 1/60 monthly thereafter. Options canceled under the 1996 Equity
Incentive Plan are not available for future grants.

     A summary of activity under the plans is as follows:

<TABLE>
<CAPTION>
                                                             OPTIONS OUTSTANDING         WEIGHTED-
                                                        -----------------------------     AVERAGE
                                           OPTIONS      NUMBER OF        EXERCISE        EXERCISE
                                          AVAILABLE      OPTIONS          PRICE            PRICE
                                          ----------    ---------    ----------------    ---------
<S>                                       <C>           <C>          <C>                 <C>
Balance at December 31, 1997............     328,175    1,151,284    $ 0.06 - $  0.62     $ 0.43
  Authorized............................   1,282,038           --           --                --
  Granted...............................    (423,253)     423,253    $ 0.62 - $  0.97     $ 0.86
  Exercised.............................          --     (181,881)   $ 0.06 - $  0.62     $ 0.45
  Canceled..............................     318,088     (326,649)   $ 0.06 - $  0.62     $ 0.45
                                          ----------    ---------
Balance at December 31, 1998............   1,505,048    1,066,007    $ 0.06 - $  0.97     $ 0.59
  Authorized............................   1,474,109           --           --                --
  Granted...............................  (1,728,454)   1,728,454    $ 0.97 - $ 14.00     $ 2.88
  Exercised.............................          --     (389,638)   $ 0.06 - $  0.97     $ 0.59
  Canceled..............................      20,839      (20,839)   $ 0.62 - $  0.97     $ 0.70
                                          ----------    ---------
Balance at December 31, 1999............   1,271,542    2,383,984    $ 0.06 - $ 14.00     $ 2.25
  Authorized............................   1,508,694           --           --                --
  Awards................................      (6,250)          --           --                --
  Granted...............................    (916,681)     916,681    $24.13 - $162.00     $59.67
  Exercised.............................          --     (230,703)   $ 0.06 - $ 14.00     $ 1.05
  Canceled..............................      23,513      (27,060)   $ 0.06 - $ 77.00     $ 3.26
                                          ----------    ---------
Balance at December 31, 2000............   1,880,818    3,042,902    $ 0.06 - $162.00     $19.63
                                          ==========    =========
</TABLE>

     Caliper granted nonqualified options of 391,841, 303,845, and 79,484, and
for the years ended December 31, 2000, 1999 and 1998, respectively.

     The weighted-average fair value of options granted during 2000, 1999 and
1998 was $47.60, $0.73 and $0.20, respectively.

                                       F-17
<PAGE>   55
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     The following table summarizes information with respect to stock options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                               OPTIONS OUTSTANDING
                  ---------------------------------------------      OPTIONS EXERCISABLE
                                  WEIGHTED                        --------------------------
                                  AVERAGE           WEIGHTED      NUMBER        WEIGHTED
    RANGE OF       NUMBER        REMAINING          AVERAGE         OF      AVERAGE EXERCISE
 EXERCISE PRICE   OF SHARES   CONTRACTUAL LIFE   EXERCISE PRICE   SHARES         PRICE
----------------  ---------   ----------------   --------------   -------   ----------------
<S>               <C>         <C>                <C>              <C>       <C>
$ 0.06 - $  0.62    393,090         6.3             $  0.45       209,719        $ 0.38
$ 0.97 - $  0.97  1,014,802         8.1             $  0.97       275,797        $ 0.97
$ 3.12 - $  3.12    561,083         8.8             $  3.12       135,496        $ 3.12
$12.99 - $ 14.00    157,946         8.9             $ 13.82       32,089         $13.82
$24.13 - $ 36.00    157,451         9.3             $ 28.87           --             --
$37.50 - $ 56.02    267,800         9.6             $ 47.79           --             --
$56.38 - $ 79.50    453,080         9.3             $ 72.19       33,617         $58.35
$89.00 - $162.00     37,650         9.2             $122.04           --             --
                  ---------                                       -------
$0.06 - $162.00.. 3,042,902         8.4             $ 19.63       686,718        $ 4.62
                  ---------                                       -------
</TABLE>

     In February 1996, Caliper completed the acquisition of ChemCore Corporation
("ChemCore"), an early stage research and development entity. As part of the
ChemCore merger, Caliper exchanged, at the ratio of 0.552762 to 1, outstanding
options to purchase 240,499 shares of ChemCore common stock at an exercise price
of $0.20 for options to purchase 132,936 shares of Caliper's common stock at an
exercise price $0.36 per share. These options were initially granted at the fair
value of ChemCore's common stock and generally vest over five years at a rate of
20% per year.

     A summary of activity of options assumed as part of the ChemCore merger is
as follows:

<TABLE>
<CAPTION>
                                                           OPTIONS OUTSTANDING
                                                          ---------------------
                                                          NUMBER OF    EXERCISE
                                                           OPTIONS      PRICE
                                                          ---------    --------
<S>                                                       <C>          <C>
Balance at December 31, 1997............................   132,936      $0.36
Exercised...............................................    (9,950)     $0.36
                                                          --------
Balance at December 31, 1998............................   122,986      $0.36
Exercised...............................................  (122,986)     $0.36
                                                          --------
Balance at December 31, 1999............................        --
                                                          ========
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN

     In October 1999, the board of directors and stockholders adopted the 1999
Employee Stock Purchase Plan ("1999 Purchase Plan"). A total of 300,000 shares
of common stock has been reserved for issuance under the 1999 Purchase Plan. The
number of shares reserved automatically increases by the greater of 0.5% of
outstanding shares on a fully-diluted basis or the number of shares issued under
the 1999 Purchase Plan during the prior 12-month period. The automatic share
reserve increase may not exceed 3 million shares in aggregate over the 10-year
period. The 1999 Purchase Plan permits eligible employees to acquire shares of
Caliper's common stock through payroll deductions of up to 10% of their gross
earnings. No employee may participate in the 1999 Purchase Plan if immediately
after the grant the employee has voting power over 5% or more of the outstanding
capital stock. Under the 1999 Purchase Plan, the board may specify offerings of
up to 27 months. Unless the board determines otherwise, common stock may be
purchased at the lower of 85% of the fair market value of Caliper's common stock
on the first day of the offering or 85% of the fair market value of Caliper's
common stock on the purchase date. The initial offering period began on the
effective date of the initial public offering. Caliper issued 69,201 shares
under the 1999 Purchase Plan in the year 2000 at a

                                       F-18
<PAGE>   56
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

weighted average price of $14.27. In June 2000, an additional 115,827 shares of
common stock became issuable under the 1999 Purchase Plan. As of December 31,
2000, 346,626 shares remain available for future issuance.

STOCK BASED COMPENSATION

     Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if Caliper had accounted for its
employee stock options under the fair-value method of that Statement. The fair
value of these options was estimated at the date of grant using the
Black-Scholes method and the following assumptions for 1998 and 1999: volatility
of 0.01, risk-free interest rate of 6%, an expected life of five years and no
dividends. The assumptions used for 2000 were: volatility of 120%, risk-free
interest rate of 6.28%, an expected life of four years, and no dividends. The
following assumptions were used for the 1999 Purchase Plan: volatility of 120%,
risk-free interest rate of 5.68%, an expected life of six months, and no
dividends.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using the
graded vesting method. Caliper's pro forma information is as follows:

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                      -------------------------------------
                                                         2000          1999         1998
                                                      ----------    ----------    ---------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>           <C>           <C>
Net loss attributable to common stockholders:
  As reported.......................................   $(13,317)     $(16,701)     $(5,149)
  Pro forma.........................................   $(21,991)     $(17,319)     $(5,223)
Basic and diluted net loss per share:
  As reported.......................................   $  (0.61)     $  (4.56)     $ (2.39)
  Pro forma.........................................   $  (1.01)     $  (4.73)     $ (2.42)
</TABLE>

     The effects of applying SFAS 123 for pro forma disclosures are not likely
to be representative of the effects on reported net loss for future years.

     Caliper has recorded deferred stock compensation of approximately $500,000
for the year ended December 31, 1998 and $12.7 million for the year ended
December 31, 1999, representing the difference between the exercise price of the
options granted and the deemed fair value of the common stock. These amounts are
being amortized by charges to operations over the vesting periods of the
individual stock options using the graded vesting method. Such amortization
expense amounted to approximately $4.5 million and $3.9 million for the years
ended December 31, 2000 and December 31, 1999, respectively.

RESERVED STOCK

     As of December 31, 2000, Caliper had reserved shares of common stock for
future issuance as follows:

<TABLE>
<S>                                                         <C>
Stock options.............................................  4,654,224
Warrants..................................................     38,460
1999 Purchase Plan........................................    346,626
1999 Directors' Plan......................................    269,496
                                                            ---------
                                                            5,308,806
                                                            =========
</TABLE>

                                       F-19
<PAGE>   57
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 8. INCOME TAXES

     Caliper has no provision for U.S. federal or state income taxes for any
period as it has incurred operating losses.

     As of December 31, 2000, Caliper had federal and California net operating
loss carryforwards of approximately $31.5 million and $2.7 million. Caliper also
had federal research and development tax credit carryforwards of approximately
$900,000 and $400,000. The federal net operating loss and credit carryforwards
will expire at various dates beginning in the year 2003 through 2020, if not
utilized. The state of California net operating losses will begin to expire in
year 2003, if not utilized.

     Utilization of the federal and state net operating losses and credits may
be subject to a substantial limitation due to the change in ownership provisions
of the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting purposes and the
amounts used for income tax purposes. Significant components of Caliper's
deferred tax assets for federal and state income taxes are as follows:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Net operating loss carryforwards.......................  $ 10,900    $  7,000
Research credit carryforwards..........................     1,350       1,400
Capitalized research and development...................     1,658       1,500
Other, net.............................................     2,790         600
                                                         --------    --------
Net deferred tax assets................................    16,698      10,500
Valuation allowance....................................   (16,698)    (10,500)
                                                         --------    --------
          Total........................................  $     --    $     --
                                                         ========    ========
</TABLE>

     Because of Caliper's lack of earnings history, the deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
$6.2 million, $4.2 million and $1.0 million during the years ended December 31,
2000, 1999 and 1998.

 9. 401(k) PLAN

     Caliper has a 401(k) plan qualified under section 401(k) of the Internal
Revenue code that is available to all eligible employees. Caliper does not match
employee contributions.

10. LITIGATION

     On March 22, 1999, Caliper filed a lawsuit in California Superior Court for
the County of Santa Clara against Aclara Biosciences, Inc. and Caliper's former
patent counsel, a patent attorney named Bertram Rowland, and his former law
firm, Flehr, Hohbach, Test, Albritton and Herbert alleging that all the
defendants misappropriated certain of Caliper's trade secrets relating to
Caliper business plans, patents and intellectual property strategy. The suit
also alleges that Caliper's former patent counsel committed a breach of the
duties they owed to Caliper as its former attorneys. On September 14, 2000,
Caliper reached a settlement agreement with Dr. Rowland and Flehr, Hohbach,
Albritton, Test and Herbert in this case. The settlement provided Caliper with a
$12.0 million cash payment from these defendants as well as other terms. This
settlement has no effect on Caliper's lawsuits with Aclara. In this same case,
on October 27, 2000, the jury returned a verdict in favor of Caliper and against
Aclara on Caliper's claims for misappropriation of trade

                                       F-20
<PAGE>   58
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

secrets and conversion of property. The jury awarded Caliper $52.6 million for
damages to Caliper and unjust enrichment to Aclara, which the court reduced to
$35.6 million.

     On January 12, 2000, Caliper filed a lawsuit in United States District
Court for the Northern District of California alleging that Aclara is infringing
four U.S. patents licensed to Caliper by Lockheed Martin Energy Research
Corporation. These patents cover technology for controlling the flow of
materials in microfluidic chips, as well as devices, systems and applications
that make use of this technology. Caliper subsequently amended this complaint to
add a fifth, related patent. Aclara counterclaimed for a declaratory judgment
that the patents in this suit are invalid, unenforceable and are not infringed
by Aclara.

     On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California alleging that Caliper is
making, using, selling or offering for sale microfluidic devices that infringe
United States Patent Number 5,750,015 in willful disregard of Aclara's patent
rights. This patent concerns methods and devices for moving molecules by the
application of electrical fields. The Aclara action seeks damages for past and
future reduced sales or lost profits based upon Caliper's alleged fabrication,
use, sale or offer for sale of allegedly infringing products and processes, and
seeks to enjoin Caliper's continued activities relating to these products.
Caliper counterclaimed for a declaratory judgment of noninfringement, invalidity
and unenforceability of all claims of the Aclara patent. On July 19, 2000, the
federal judge in this action issued an order finding that eight of the eleven
claims asserted against Caliper are invalid, and interpreting the remaining
asserted claims. On October 27, 2000, the federal judge issued a second order
holding that our products do not literally infringe Aclara's patent, but
allowing the suit to proceed on the issue of whether our products infringe under
a legal theory known as the doctrine of equivalents and whether the patent is
valid and enforceable.

     On January 7, 2001, Caliper announced its comprehensive settlement
agreement with Aclara Biosciences on all pending litigation between the two
companies. Under the terms of the settlement both companies agreed to dismiss
all suits and countersuits in the federal and state court actions and to
cross-license selected patents. The settlement provides Caliper with freedom to
operate under Aclara's "022 family of patents, which includes the "015 and other
patents, for its glass chips and related instruments through a fully paid,
royalty-free license. Under the terms of the agreement, Aclara will also pay
Caliper $37.5 million over the next three years in a combination of stock, cash,
and committed minimum royalties. Caliper has agreed to license to Aclara the
"Ramsey" family of patents for use with Aclara's polymer chips and related
instruments in exchange for license fees and royalties. The two companies have
also agreed to an alternative dispute resolution procedure for handling
potential future patent disagreements out of court.

                                       F-21
<PAGE>   59
                           CALIPER TECHNOLOGIES CORP.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                      FIRST     SECOND      THIRD      FOURTH
                                                     QUARTER    QUARTER    QUARTER    QUARTER
                                                     -------    -------    -------    --------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>        <C>        <C>        <C>
2000
Revenue............................................  $ 3,912    $ 4,158    $ 5,507    $  4,987
Operating loss.....................................   (7,338)    (6,568)    (7,803)    (10,056)
Income (loss) before cumulative effect of a change
  in accounting principle..........................   (6,000)    (5,248)     6,067      (5,842)
Cumulative effecting of a change in accounting
  principle........................................   (2,294)        --         --          --
Net income (loss)..................................   (8,294)    (5,248)     6,067      (5,842)
Basic and pro forma basic income (loss) per share
  Income (loss) before cumulative effect of a
     change in accounting principle................  $ (0.29)   $ (0.25)   $  0.28    $  (0.25)
  Cumulative effect of a change in accounting
     principle.....................................    (0.11)        --         --          --
                                                     -------    -------    -------    --------
  Net income (loss)................................  $ (0.40)   $ (0.25)   $  0.28    $  (0.25)
                                                     =======    =======    =======    ========
Diluted and pro forma diluted income (loss) per
  share
  Income (loss) before cumulative effect of a
     change in accounting principle................  $ (0.29)   $ (0.25)   $  0.25    $  (0.25)
  Cumulative effect of accounting change...........    (0.11)        --         --          --
                                                     -------    -------    -------    --------
  Net income (loss)................................  $ (0.40)   $ (0.25)   $  0.25    $  (0.25)
                                                     =======    =======    =======    ========
1999
Revenue............................................  $ 2,283    $ 3,162    $ 3,414    $  3,228
Operating loss.....................................   (2,382)    (2,763)    (3,782)     (6,598)
Net loss...........................................   (2,063)    (2,493)    (3,570)     (6,247)
Net loss attributable to common stockholders.......   (2,670)    (3,100)    (4,178)     (6,753)
Net loss per common share, basic and diluted.......  $ (1.05)   $ (1.16)   $ (1.48)   $  (0.41)
                                                     =======    =======    =======    ========
Pro forma amounts assuming the change in accounting
  principle was applied retroactively (unaudited):
Net loss...........................................  $(1,946)   $(2,376)   $(4,147)   $ (5,797)
Net loss per share, basic and diluted
  (unaudited)......................................  $ (0.13)   $ (0.16)   $ (0.27)   $  (0.35)
                                                     =======    =======    =======    ========
</TABLE>

                                       F-22
<PAGE>   60

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                         DESCRIPTION OF DOCUMENT
  -------                        -----------------------
<S>            <C>
 3.1(1)        Amended and Restated Certificate of Incorporation of
               Caliper.
 3.2(2)        Bylaws of Caliper.
 4.1           Reference is made to Exhibits 3.1 and 3.2.
 4.2(3)        Specimen Stock Certificate.
10.1(3)        Lease Agreement, dated December 1, 1998, between Caliper and
               605 East Fairchild Associates, L.P.
10.2(3)(4)     1996 Equity Incentive Plan.
10.3(3)(4)     1999 Equity Incentive Plan.
10.4(3)(4)     1999 Employee Stock Purchase Plan.
10.5(3)(4)     1999 Non-Employee Directors' Stock Option Plan.
10.6(3)(4)     Employment Agreement, dated January 18, 1999, between
               Caliper and Daniel L. Kisner, M.D.
10.7(3)(4)     Promissory Note, dated July 29, 1999, between Caliper and
               Daniel L. Kisner, M.D.
10.8(3)        Amended and Restated Investor Rights Agreement, dated May 7,
               1998, among Caliper and certain stockholders of Caliper.
10.9(3)(4)     Form of Indemnification Agreement entered into between
               Caliper and its directors and executive officers.
10.10(3)(5)    Collaboration Agreement, dated May 2, 1998, between Caliper
               and Hewlett-Packard Company.
10.11(3)(5)    Termination, Transition and Technology Access Program
               Agreement, dated November 24, 1998, between Caliper and
               Hoffmann-La Roche Inc.
10.12(3)(5)    Technology Access Agreement, dated December 21, 1998,
               between Caliper and Amgen, Inc.
10.13(3)(5)    Technology Access Agreement, dated August 12, 1999, between
               Caliper and Eli Lilly and Company.
10.14(3)(5)    Screening Collaboration Agreement, dated December 16, 1998,
               between Caliper and Neurocrine Biosciences, Inc.
10.15(3)(5)    Sole Commercial Patent License Agreement, effective
               September 1, 1995, between Lockheed Martin Energy Research
               Corporation and Caliper, as amended (domestic).
10.16(3)(5)    Sole Commercial Patent License Agreement, effective
               September 1, 1995, between Lockheed Martin Energy Research
               Corporation and Caliper, as amended (international).
10.17(3)(4)    Consulting Agreement, dated April 30, 1997, between Caliper
               and Dr. David V. Milligan.
10.18(3)(4)    Employment Agreement, dated September 23, 1999, between
               Caliper and James L. Knighton.
10.19(3)(4)    Consulting Agreement, dated May 1, 1997, between Caliper and
               Regis McKenna.
10.20(3)(4)    Promissory Note, dated March 25, 1997, between Caliper and
               Michael R. Knapp, Ph.D.
10.21(3)(4)    Option Agreement, dated August 9, 1995, between Caliper and
               Michael R. Knapp, Ph.D.
10.22(3)(4)    Amendment to Option Agreement, dated August 25, 1995,
               between Caliper, Michael R. Knapp, Ph.D., J. Michael Ramsey,
               Ph.D. and Avalon Medical Partners.
10.23(3)(4)    The Corporate Plan for Retirement Select Plan Adoption
               Agreement and related Basic Plan Document.
</TABLE>
<PAGE>   61

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                         DESCRIPTION OF DOCUMENT
  -------                        -----------------------
<S>            <C>
10.24(6)       Warrant for the purchase of shares of Common Stock issued to
               Michael R. Knapp, dated October 11, 1996.
10.25(6)       Warrant for the purchase of shares of Common Stock issued to
               Michael R. Knapp, dated February 2, 2000.
10.26(5)(7)    Technology Access and Applications Development Agreement,
               dated March 24, 2000, between Caliper and Millennium
               Pharmaceuticals, Inc.
10.27(8)       Lease Agreement, dated June 23, 2000 and effective July 5,
               2000, between Caliper and Martin CBP Associates, L.P.
10.28(8)       Promissory Note, dated July 17, 2000, between Caliper and
               Daniel L. Kisner, M.D.
23.1           Consent of Ernst & Young LLP, independent auditors.
24.1           Power of Attorney (reference is made to the signature page
               of this report).
</TABLE>

---------------
(1) Previously filed as Exhibit 3.3 to our Registration Statement on Form S-1,
    as amended, File No. 333-88827, filed on October 12, 1999 and incorporated
    by reference herein.

(2) Previously filed as Exhibit 3.4 to our Registration Statement on Form S-1,
    as amended, File No. 333-88827, filed on October 12, 1999 and incorporated
    by reference herein.

(3) Previously filed as the like-numbered Exhibit to our Registration Statement
    on Form S-1, as amended, File No. 333-88827, filed on October 12, 1999 and
    incorporated by reference herein.

(4) Management contract or compensatory plan or arrangement.

(5) Confidential treatment has been granted for a portion of this exhibit.

(6) Filed as the like-numbered exhibit to Annual Report of Form 10-K for the
    year ended December 31, 1999 and incorporated by reference herein.

(7) Previously filed as Exhibit 10.26 to Form 10-Q for the quarterly period
    ended March 31, 2000 and incorporated by reference herein.

(8) Previously filed as the like-numbered Exhibit to our Registration Statement
    on Form S-1, as amended, File No. 333-45942, filed on September 15, 2001,
    and incorporated by reference herein.