##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





FOR ANNUAL AND TRANSITION REPORTS


PURSUANT TO SECTION 13 OR 15(D) OF THE


SECURITIES EXCHANGE ACT OF 1934


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|           |  | For the fiscal year ended December 31, 2004                                                 
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from           to          .                                  

Commission file number 000-28229


Caliper Life Sciences, Inc.


(Exact name of registrant as specified in its charter)


|                                                              |  |                                            
|------------------------------------------------------------- |  | -------------------------------------------
|Delaware                                                      |  | 33-0675808                                 
|(State or Jurisdiction of
     Incorporation or organization) |  | (I.R.S. Employer
    Identification Number)

68 Elm Street


Hopkinton, MA 01748


(Address and zip code of principal executive offices)


Registrants telephone number, including area code:
(508) 435-9500


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)


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE












---










CALIPER LIFE SCIENCES, INC.


FORM 10-K


For the Fiscal Year Ended December 31, 2004


TABLE OF CONTENTS


|                                                                                                   |  |                                                                                                                       |    |      |    | 
|-------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                                                                   |  |                                                                                                                       |    | Page |   
|                                                                                                   |  |                                                                                                                       |    |      |   
|PART I                                                                                            
|Item 1.                                                                                            |  | Business                                                                                                              |    |      | 2  | 
|Item 2.                                                                                            |  | Properties                                                                                                            |    |      | 20 | 
|Item 3.                                                                                            |  | Legal Proceedings                                                                                                     |    |      | 20 | 
|Item 4.                                                                                            |  | Submission of Matters to a Vote of Security
    Holders                                                               |    |      | 21 | 
|                                                                                                  
|PART II                                                                                           
|Item 5.                                                                                            |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities. |    |      | 22 | 
|Item 6.                                                                                            |  | Selected Financial Data                                                                                               |    |      | 23 | 
|Item 7.                                                                                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                             |    |      | 25 | 
|Item 7A.                                                                                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                        |    |      | 45 | 
|Item 8.                                                                                            |  | Financial Statements and Supplementary
    Data                                                                       |    |      | 47 | 
|Item 9.                                                                                            |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                              |    |      | 47 | 
|Item 9A.                                                                                           |  | Controls and Procedures                                                                                               |    |      | 47 | 
|Item 9B.                                                                                           |  | Other Information                                                                                                     |    |      | 50 | 
|                                                                                                  
|PART III                                                                                          
|Item 10.                                                                                           |  | Directors and Executive Officers of the
    Registrant                                                                |    |      | 50 | 
|Item 11.                                                                                           |  | Executive Compensation                                                                                                |    |      | 50 | 
|Item 12.                                                                                           |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                    |    |      | 50 | 
|Item 13.                                                                                           |  | Certain Relationships and Related
    Transactions                                                                    |    |      | 50 | 
|Item 14.                                                                                           |  | Principal Accountant Fees and Services                                                                                |    |      | 50 | 
|                                                                                                  
|PART IV                                                                                           
|Item 15.                                                                                           |  | Exhibits and Financial Statement
    Schedules                                                                        |    |      | 51 | 
|Signatures                                                                                         |  |                                                                                                                       | 54 |     
|EX-4.2 Specimen Stock Certificate                                                                 
|EX-10.6 Form of Grant Agreement for 1999 Equity Incentive Plan- Option Awards                     
|EX-10.7 Form of Grant Agreement for 1999 Equity Incentive Plan- Restricted Stock Unit Awards      
|EX-10.8 Form of Grant Agreement for 1999 Non-Employee Directors' Stock Option Plan                
|EX-10.11 Form of Stock Option Grant Agreement for Acquisition Equity Incentive Plan               
|EX-10.12 Form of Stock Award Agreement for Acquisition Equity Incentive (pro rata vesting)        
|EX-10.13 Form of Stock Award Agreement for Acquisition Equity Incentive (5 year cliff vesting)    
|EX-10.17 Non-Employee Directors' Cash Compensation Plan                                           
|EX-10.19 Employment Offer Letter dated November 30, 2005 between Caliper and Mr. Thomas T. Higgins
|EX-10.29 Key Employee Change of Control and Severance Benefit Plan                                
|EX-10.46 Form of Grant Agreement for 2001 Non-Statutory Stock Option Plan                         
|EX-11.1 Subsidiaries of the Registrant                                                            
|EX-23.1 Consent of Ernst & Young LLP                                                              
|EX-31.1 Section 302 Certification of CEO                                                          
|EX-31.2 Section 302 Certification of CFO                                                          
|EX-32.1 Section 906 Certification of CFO                                                          
|EX-32.2 Section 906 Certification of CFO                                                          



1



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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS











PART I







|        |         
|------- | --------
|Item 1. | Business

Overview






2



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Technologies




| |                                  
| | ---------------------------------
| | LabChip Microfluidic Technologies



3



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| |                            
| | ---------------------------
| | Features of LabChip Systems



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Miniaturization. Conventional laboratory equipment
    typically uses at least a drop of fluid, or 1 to 100
    microliters, to perform each experiment. In many LabChip
    applications, the sample volume needed from external sources is
    reduced to below 1 nanoliter, a reduction of up to 100,000-fold
    over conventional systems. In some processes within the chip,
    reagents are dispensed in the microchannels in volumes down to
    tens of picoliters, another 10-100 fold reduction, which speeds
    analysis times and increases sample throughput. A microliter is
    one millionth of a liter, a nanoliter is one billionth of a
    liter, and a picoliter is one trillionth of a liter.
|
| |  | Integration. Integration is the combining of multiple
    processes into a single process, or the inclusion of multiple
    functions into one device. Today many 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.                                                                                                                                                                                                                                                                                                   
|
| |  | Automation. Many laboratory experiments are performed in
    multiple manual steps. With our LabChip systems, entire
    experiments can be automated and performed inside a chip using
    one instrument, freeing up valuable research time and laboratory
    space and reducing labor requirements.                                                                                                                                                                                                                                                                                                                                                                                                               



| |                                
| | -------------------------------
| | Key Benefits of LabChip Systems



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Improved Data Quality and Accuracy. Our LabChip systems
    are designed to produce more accurate, consistent and
    reproducible data by reducing human error, reducing the
    variability caused by the use of multiple instruments, and
    enabling more analytical approaches to experimentation that are
    impractical in traditional systems. For example, biochemical
    screening assays typically call for fast, bulk
    measurements of an experimental mixture. Reducing the size of
    the experiment allows for rapid separation and measurement of
    individual molecular species in the test mixture, which in turn
    enhances the accuracy of the overall result. With higher quality
    data, our customers can make better decisions earlier in the
    drug discovery and development process. This enables our
    customers to avoid the time and expense of performing additional
    analyses and experiments on false positive results
    from their primary screening experiments.
|
| |  | Improved Sensitivity. When screening against drug
    targets, such as kinases, the higher quality data from our
    LabChip systems allows customers to detect lower levels of
    inhibition than can be detected with traditional microplate
    well-based assays. This has two advantages: (1) an increase
    in the pool of potential lead compounds, and (2) the
    possibility that a hit found at lower levels of
    inhibition will be more selective for the target of interest
    than a hit found at higher levels of inhibition because
    compounds that hit at higher levels of inhibition may also
    produce unacceptable levels of inhibition on other, non-target
    kinases.                                                                                                                                                                                                                                                                                                                   
|
| |  | Reduced Reagent and Labor Cost. Our LabChip systems
    utilize only a small fraction of the usual amount of expensive
    reagents used in experiments performed in test tubes, 96-well
    plates, or 384-well plates, and also reduce the 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 commercially
    feasible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | High Speed. We believe our LabChip systems can, depending
    on the application, accelerate some experiments as much as
    100-fold or more. For example, molecular separations such as
    electrophoresis may take two hours or more using conventional
    equipment. On a chip, however, we can perform these separations
    in less than one minute.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Faster Assay Development. Traditional assays,
    particularly those used for enzymatic screening, can require
    complex and time-consuming assay development. For example, some
    popular assays rely on                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

4



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | developing specific antibodies for the assay  a
    process that can take up to six weeks or more. Because they
    eliminate the requirement for assay development steps such as
    antibody preparation, LabChip assays are much faster to develop.
    In addition, Caliper has exploited the predictable nature of
    fluid and reagent movement inside microfluidic channels and has
    developed software tools to facilitate the process of optimizing
    the experimental conditions necessary for a successful enzymatic
    assay on a LabChip device, such as separating a substrate
    peptide from its product. Typically, our customers have found
    that these combined benefits translate into a two- to
    three-month assay development process for a traditional assay
    being shortened to just a few weeks for a LabChip assay.                                                                                                                                                                                               
|
| |  | Expanded Individual Researcher Capability. Because our
    LabChip systems can combine 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 master the complexities of performing each
    individual step.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Improved Enterprise-Wide Productivity. We believe our
    LabChip systems can improve data quality and reproducibility to
    the point where researchers can utilize data generated outside
    their laboratory or organization. This has the potential to
    greatly improve enterprise-wide productivity by supporting data
    sharing and reducing the need to repeat experiments. For
    example, a typical primary screen produces approximate,
    yes/no answers about the activity of library
    compounds against a particular kinase target, and therefore the
    information from such primary screens is only useful for one
    primary screening experiment. With LabChip assays, the primary
    screening data is more specific, in terms of the degree of
    inhibition, and more reproducible. This should enable an
    organization to build a database of primary screening data that
    could ultimately be mined by other scientists within the
    organization interested in a particular compound/target
    interaction.





| |                                            
| | -------------------------------------------
| | Liquid Handling and Automation Technologies









5



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,


Products and Services






| |                                                                  
| | -----------------------------------------------------------------
| | High-Throughput Screening Systems and Integrated
    Workstations

LabChip 3000 Drug Discovery System.








Staccato Automated Workstations.


6



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Allegro Automated Systems.




| |                         
| | ------------------------
| | Advanced Liquid Handling

Caliper Sciclone ALH 3000.




Caliper Sciclone inL10.




RapidPlate.


7



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| |                             
| | ----------------------------
| | Plate Management and Storage

Twister I and II.




| |                         
| | ------------------------
| | Separations and Analysis

LabChip 90 Automated Electrophoresis System.






| |                                               
| | ----------------------------------------------
| | Pharmaceutical Development and Quality Control

MultiDose G3.


Tablet Processing Workstation II (TPW II).


Prelude Workstation.




8



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| |         
| | --------
| | Services



Product Support.


Validation Services.


Assay Development Services.


Key Corporate Partnerships






| |           
| | ----------
| | Affymetrix







| |                     
| | --------------------
| | Agilent Technologies



9



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Agilent 2100 Bioanalyzer.






Agilent 5100 Lab-on-a-Chip (ALP) Instrument.






| |                        
| | -----------------------
| | Amphora Discovery Corp.



10



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| |                     
| | --------------------
| | Bio-Rad Laboratories







| |                      
| | ---------------------
| | Predicant Biosciences







| |                              
| | -----------------------------
| | Wako Pure Chemical Industries



11



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Customers








|        | 
|------- | 
|Backlog | 





Research and Development






12



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| |                    
| | -------------------
| | Technology Research



Chip Design.


Chip Manufacturing.


Instrument Manufacturing and Software Design.




| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the miniaturization of fluidics,                                                                                                                                                               
|
| |  | robotics for target preparation and handling of microarray chips,                                                                                                                              
|
| |  | the development of modular microfluidic instrument components
    that can be combined with other types of instruments and liquid
    handling equipment, depending on the desired application,
|
| |  | high-efficiency liquid handling workstations,                                                                                                                                                  
|
| |  | the development of software to promote integration
    capability, and                                                                                                                         
|
| |  | continued development of productivity workstations for genomics
    and biotech.                                                                                                               

Systems Integration.


13



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| |                         
| | ------------------------
| | Applications Development











| |                    
| | -------------------
| | Product Development



Extensions of Existing Product Lines.




Polymerase Chain Reaction on a Chip.


14



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Manufacturing












| |          
| | ---------
| | Suppliers





15



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Competition








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Companies providing competitive liquid handling, automation
    products and integration services for applications similar to
    ours. We believe the primary competitive factors in these
    markets are productivity enhancement, breadth of applications,
    accuracy, ease-of-use, price versus performance, product
    reliability and service support. Competition for these types of
    products and services comes from many companies, including
    Tecan, Beckman Coulter, Velocity 11, Applied Biosystems
    division of Applera, and PerkinElmer.
|
| |  | Companies supplying conventional technologies for gel
    electrophoresis separations for proteins, DNA and RNA. We
    believe the primary competitive factors in these markets are
    cost per sample analyzed, throughput and productivity
    enhancement, data quality, ease-of-use, and service support.
    Competition for these types of products and services comes from
    many companies, including Agilent, Bio-Rad Laboratories, and
    Beckman Coulter.                                                                                           
|
| |  | Companies supplying products for high throughput screening for
    the discovery of new drug compounds. We believe the primary
    competitive factors in these markets are cost per compound
    analyzed, throughput, data quality, ease-of-use, and reliability
    and service support. Competition for these types of products and
    services comes from many companies, including G.E. Healthcare,
    Molecular Devices, PerkinElmer, and Tecan.                                                                                                           







16



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Intellectual Property






| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | 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;                                                          
|
| |  | automated liquid handling systems;                                                       
|
| |  | chip-based assay chemistries and methods;                                                
|
| |  | chip-compatible sample accession;                                                        
|
| |  | software for control of microfluidic based systems and data
    analysis; and            
|
| |  | chip manufacturing processes.                                                            





Environmental Matters




17



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Other Business Risks




Employees




Executive Officers of the Registrant




E. Kevin Hrusovsky, ,


Bruce J. Bal, ,


Enrique Bernal,


Andrea Chow, Ph.D.,


18



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##### Table of Contents





Stephen E. Creager,


Thomas T. Higgins,


William C. Kruka,


Peter F. McAree,


19



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##### Table of Contents



Auro Nair, Ph.D.,


Mark Roskey, Ph.D.,


Jean-Louis Rufener,







|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

In re Caliper Technologies
Corp. Initial Public Offering Securities Litigation, In re Initial Public Offering
Securities Litigation,


20



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



21



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market for Registrants Common Equity




|             |                |      |   |      |     |  |   |      | 
|------------ | -------------- | ---- | - | ---- | --- |  | - | ---- | 
|             |                | High |   |      | Low | 
|             |                |      |   |      |     | 
|Fiscal 2004: |                |      |   |      |     |  |   |     
|             | First Quarter  |      | $ | 9.75 |     |  | $ | 5.75 | 
|             | Second Quarter |      | $ | 7.78 |     |  | $ | 4.64 | 
|             | Third Quarter  |      | $ | 7.13 |     |  | $ | 4.67 | 
|             | Fourth Quarter |      | $ | 8.15 |     |  | $ | 6.54 | 
|Fiscal 2003: |                |      |   |      |     |  |   |     
|             | First Quarter  |      | $ | 3.50 |     |  | $ | 2.92 | 
|             | Second Quarter |      | $ | 4.56 |     |  | $ | 3.41 | 
|             | Third Quarter  |      | $ | 6.25 |     |  | $ | 5.21 | 
|             | Fourth Quarter |      | $ | 6.66 |     |  | $ | 5.61 | 







22



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |         |        |        |   |         |        |        | 
|-------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------- | ------- | ------ | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                       |                                     | Year Ended December 31,               |        
|                                                                                       |                                     |                                       |        
|                                                                                       |                                     | 2004                                  |         |        | 2003    |   |         | 2002   |         |   | 2001    |        |        | 2000 |        
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|                                                                                       |                                     | (In thousands, except per share data) |        
|Statements of Operations Data(1):                                                      |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |         |        |        |   |         |       
|Revenue:                                                                               |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |         |        |        |   |         |       
|                                                                                       | Product revenue                     |                                       | $       | 57,808 |         |   | $       | 31,916 |         |   | $       | 15,644 |        |      | $       | 12,468 |        |   | $       | 3,201  |       
|                                                                                       | Service revenue                     |                                       |         | 13,448 |         |   |         | 5,879  |         |   |         | 37     |        |      |         |       |        |   |         |       |       
|                                                                                       | License fees and contract revenue   |                                       |         | 8,871  |         |   |         | 11,616 |         |   |         | 10,152 |        |      |         | 17,120 |        |   |         | 15,363 |       
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|                                                                                       |                                     | Total revenue                         |         | $      | 80,127  |   |         |        | 49,411  |   |         |        | 25,833 |      |         |        | 29,588 |   |         |        | 18,564 | 
|Costs and expenses:                                                                    |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |         |        |        |   |         |       
|                                                                                       | Cost of product revenue             |                                       |         | 38,350 |         |   |         | 23,494 |         |   |         | 10,927 |        |      |         | 6,887  |        |   |         | 2,519  |       
|                                                                                       | Cost of service revenue             |                                       |         | 6,673  |         |   |         | 2,486  |         |   |         |       |        |      |         |       |        |   |         |       |       
|                                                                                       | Research and development            |                                       |         | 22,728 |         |   |         | 33,691 |         |   |         | 43,317 |        |      |         | 38,263 |        |   |         | 33,478 |       
|                                                                                       | Selling, general and administrative |                                       |         | 32,325 |         |   |         | 27,292 |         |   |         | 17,534 |        |      |         | 15,545 |        |   |         | 9,787  |       
|                                                                                       | Employee stock compensation, net(2) |                                       |         | 2,770  |         |   |         | 1,000  |         |   |         | 378    |        |      |         | 2,540  |        |   |         | 4,545  |       
|                                                                                       | Amortization of intangible assets   |                                       |         | 3,805  |         |   |         | 2,756  |         |   |         |       |        |      |         |       |        |   |         |       |       
|                                                                                       | Restructuring charges               |                                       |         | 5,774  |         |   |         | 11,535 |         |   |         | 314    |        |      |         |       |        |   |         |       |       
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|                                                                                       |                                     | Total costs and expenses              |         |        | 112,425 |   |         |        | 102,254 |   |         |        | 72,470 |      |         |        | 63,235 |   |         |        | 50,329 | 
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|Operating loss                                                                         |                                     |                                       | (32,298 | )      |         |   | (52,843 | )      |         |   | (46,637 | )      |        |      | (33,647 | )      |        |   | (31,765 | )     
|Interest income, net                                                                   |                                     |                                       | 602     |        |         |   | 2,227   |        |         |   | 4,353   |        |        |      | 9,970   |        |        |   | 7,468   |       
|Other income, net                                                                      |                                     |                                       | 517     |        |         |   | 1,279   |        |         |   | 1,320   |        |        |      |        |        |        |   |        |       
|Litigation settlement and reimbursement                                                |                                     |                                       |        |        |         |   |        |        |         |   |        |        |        |      | 27,500  |        |        |   | 13,274  |       
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|Income (loss) before taxes and cumulative effect of change in
    accounting principle |                                     |                                       | (31,179 | )      |         |   | (49,337 | )      |         |   | (40,964 | )      |        |      | 3,823   |        |        |   | (11,023 | )     
|Provisions for income taxes                                                            |                                     |                                       | (377    | )      |         |   | (190    | )      |         |   |        |        |        |      |        |        |        |   |        |       
|Cumulative effect of a change in accounting principle(3)                               |                                     |                                       |        |        |         |   |        |        |         |   |        |        |        |      |        |        |        |   | (2,294  | )     
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|Net income (loss)                                                                      |                                     | $                                     | (31,556 | )      |         | $ | (49,527 | )      |         | $ | (40,964 | )      |        | $    | 3,823   |        |        | $ | (13,317 | )     
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|Net income (loss) per common share, basic:                                             |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |         |        |        |   |         |       
|Net income (loss) before cumulative effect of a change in
    accounting principle     |                                     | $                                     | (1.08   | )      |         | $ | (1.88   | )      |         | $ | (1.68   | )      |        | $    | 0.16    |        |        | $ | (0.50   | )     
|Cumulative effect of a change in accounting principle                                  |                                     |                                       |        |        |         |   |        |        |         |   |        |        |        |      |        |        |        |   | (0.11   | )     
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        
|Net income (loss) per common share, basic                                              |                                     | $                                     | (1.08   | )      |         | $ | (1.88   | )      |         | $ | (1.68   | )      |        | $    | 0.16    |        |        | $ | (0.61   | )     
|                                                                                       |                                     |                                       |         |        |         |   |         |        |         |   |         |        |        |      |        

23



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|                                                                                   |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |        |  |  |   |        |  
|---------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ |  |  | - | ------ | -
|                                                                                   |  | Year Ended December 31,               |       
|                                                                                   |  |                                       |       
|                                                                                   |  | 2004                                  |        |   | 2003 |   |        | 2002 |  |   | 2001   |   |  | 2000 |       
|                                                                                   |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |       
|                                                                                   |  | (In thousands, except per share data) |       
|Shares used in computing net income (loss) per common share,
    basic             |  |                                       | 29,273 |   |      |   | 26,396 |      |  |   | 24,403 |   |  |      | 23,997 |  |  |   | 21,853 |  
|Net income (loss) per common share, diluted:                                       |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |        |  |  |   |        |  
|Net income (loss) before cumulative effect of a change in
    accounting principle |  | $                                     | (1.08  | ) |      | $ | (1.88  | )    |  | $ | (1.68  | ) |  | $    | 0.15   |  |  | $ | (0.50  | )
|Cumulative effect of a change in accounting principle                              |  |                                       |       |   |      |   |       |      |  |   |       |   |  |      |       |  |  |   | (0.11  | )
|                                                                                   |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |       
|Net income (loss) per share, diluted                                               |  | $                                     | (1.08  | ) |      | $ | (1.88  | )    |  | $ | (1.68  | ) |  | $    | 0.15   |  |  | $ | (0.61  | )
|                                                                                   |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |       
|Shares used in computing net income (loss) per common share,
    diluted           |  |                                       | 29,273 |   |      |   | 26,396 |      |  |   | 24,403 |   |  |      | 25,634 |  |  |   | 21,853 |  

|                                                                                 |  |                    |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|-------------------------------------------------------------------------------- |  | ------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                                                                 |  | As of December 31, |        
|                                                                                 |  |                    |        
|                                                                                 |  | 2004               |         |  | 2003 |   |         | 2002 |  |   | 2001    |  |  | 2000 |        
|                                                                                 |  |                    |         |  |      |   |         |      |  |   |         |  |  |      |        
|                                                                                 |  | (In thousands)     |        
|Balance Sheet Data(1):                                                           |  |                    |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash, cash equivalents, marketable securities and short-term
    restricted cash |  | $                  | 50,237  |  |      | $ | 66,996  |      |  | $ | 154,602 |  |  | $    | 166,176 |  |  | $ | 191,699 | 
|Working capital                                                                  |  |                    | 52,234  |  |      |   | 66,577  |      |  |   | 155,583 |  |  |      | 195,310 |  |  |   | 187,475 | 
|Total assets                                                                     |  |                    | 147,947 |  |      |   | 168,230 |      |  |   | 179,878 |  |  |      | 222,543 |  |  |   | 212,514 | 
|Long-term obligations, less current portion                                      |  |                    |        |  |      |   | 646     |      |  |   | 1,986   |  |  |      | 3,749   |  |  |   | 3,534   | 
|Total stockholders equity                                                       |  |                    | 111,579 |  |      |   | 134,797 |      |  |   | 167,558 |  |  |      | 206,564 |  |  |   | 196,457 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The statement of operations data include the results of Zymark
    beginning July 14, 2003, the date of acquisition. The
    balance sheet includes the balances of Zymark as of
    December 31, 2004 and 2003. As such, comparison of the 2004
    and 2003 selected financial data to selected financial data for
    the prior years presented may not be meaningful. See Note 3
    of Notes to Consolidated Financial Statements.

|                                                                                                               |  |                          |       |  |      |   |       |      |  |   |      |   |  |      |       |  |  |   |       | 
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----- |  | ---- | - | ----- | ---- |  | - | ---- | - |  | ---- | ----- |  |  | - | ----- | 
|                                                                                                               |  | Years Ended December 31, |      
|                                                                                                               |  |                          |      
|                                                                                                               |  | 2004                     |       |  | 2003 |   |       | 2002 |  |   | 2001 |   |  | 2000 |      
|                                                                                                               |  |                          |       |  |      |   |       |      |  |   |      |   |  |      |      
|(2) Includes employee stock compensation, net, related to
    employees classified within expenses as follows: |  |                          |       |  |      |   |       |      |  |   |      |   |  |      |       |  |  |   |       | 
|Cost of revenue                                                                                                |  | $                        | 208   |  |      | $ | 56    |      |  | $ |     |   |  | $    |      |  |  | $ |      | 
|Research and development                                                                                       |  |                          | 515   |  |      |   | 384   |      |  |   | (315 | ) |  |      | 610   |  |  |   | 1,601 | 
|Selling, general and administrative                                                                            |  |                          | 2,047 |  |      |   | 560   |      |  |   | 693  |   |  |      | 1,930 |  |  |   | 2,944 | 
|                                                                                                               |  |                          |       |  |      |   |       |      |  |   |      |   |  |      |      
|Total                                                                                                          |  | $                        | 2,770 |  |      | $ | 1,000 |      |  | $ | 378  |   |  | $    | 2,540 |  |  | $ | 4,545 | 
|                                                                                                               |  |                          |       |  |      |   |       |      |  |   |      |   |  |      |      



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | 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 related agreement. This change
    resulted in a $2.3 million cumulative effect of a change in
    accounting principle which was reported as a change in 2000. The
    cumulative effect was initially recorded as deferred revenue
    over the remaining terms of the underlying contractual
    agreements.

24



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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








| |                 
| | ----------------
| | 2004 Performance



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our $80 million of revenue in 2004 was consistent with our
    previous estimates. Revenue growth was principally the result of
    having the benefit of a full year of sales from Zymark products
    and services in 2004. Revenue from products and services,
    totaled $71 million, or 89% of total revenue. We believe
    that product and service revenue provides more stability for the
    growth of Caliper in comparison to less predictable license and
    contract revenues.
|
| |  | Our 2004 SG&A and R&D expenses of $55 million were
    lower than our initial projections for the year. We were able to
    achieve better than expected efficiencies as a result of our new
    commercial philosophy toward R&D investments.
    This, in turn, enabled us to further reduce costs in R&D and
    enabled us to complete the closure of a second building in our
    Mountain View, California facilities.                                                                
|
| |  | We ended 2004 with $50 million in cash, cash equivalents,
    marketable securities and short-term restricted cash and believe
    our current cash balances are adequate to meet our cash needs,
    at least through the end of 2006.                                                                                                                                                                                                                                                       



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##### Table of Contents



LabChip 3000 Product Adoption.




LabChip 90 Product Adoption.


Chip Sales from OEM Products.




26



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##### Table of Contents





Caliper Sciclone Liquid Handling Sales.




| |                                  
| | ---------------------------------
| | Key Issues for Future Performance





| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenues  We must grow revenues significantly to meet
    the companys goal of reaching positive cash flow from
    operations.                                                                                                                                                                             
|
| |  | Improvement in Gross Margins  We need to improve our
    gross margins by increasing volume, especially in the area of
    chip production, to increase capacity utilization, and by
    achieving a larger proportion of our sales from higher margin
    products such as consumable products and services.
|
| |  | Cost Control  It is essential for us to continue to
    control costs in order to allow us to reach operating cash flow
    break-even.                                                                                                                                                                      









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##### Table of Contents



Results of Operations






| |        
| | -------
| | Revenue

|                                  |  |                |        |  |          |   |        |          |              |  |      |    |  |          |        |              |          |   |        |      |  |  |     |   |  |   |        | 
|--------------------------------- |  | -------------- | ------ |  | -------- | - | ------ | -------- | ------------ |  | ---- | -- |  | -------- | ------ | ------------ | -------- | - | ------ | ---- |  |  | --- | - |  | - | ------ | 
|                                  |  | Year Ended     |        |  |          |   |        |          | Year Ended   |  |      |    |  |          |        | Year Ended   |         
|                                  |  | December 31,   |        |  |          |   |        |          | December 31, |  |      |    |  |          |        | December 31, |         
|                                  |  | 2004           |        |  | $ Change |   |        | % Change |              |  | 2003 |    |  | $ Change |        |              | % Change |   |        | 2002 | 
|                                  |  |                |        |  |          |   |        |          |              |  |      |    |  |          |        |              |          |   |        |      | 
|                                  |  | (In thousands) |       
|Product revenue                   |  | $              | 57,808 |  |          | $ | 25,892 |          |              |  | 81   | %  |  | $        | 31,916 |              |          | $ | 16,272 |      |  |  | 104 | % |  | $ | 15,644 | 
|Service revenue                   |  |                | 13,448 |  |          |   | 7,569  |          |              |  | 129  | %  |  |          | 5,879  |              |          |   | 5,842  |      |  |  | n/a |   |  |   | 37     | 
|License fees and contract revenue |  |                | 8,871  |  |          |   | (2,745 | )        |              |  | (24  | )% |  |          | 11,616 |              |          |   | 1,464  |      |  |  | 14  | % |  |   | 10,152 | 
|                                  |  |                |        |  |          |   |        |          |              |  |      |    |  |          |        |              |          |   |        |      | 
|Total Revenue                     |  | $              | 80,127 |  |          | $ | 30,716 |          |              |  | 62   | %  |  | $        | 49,411 |              |          | $ | 23,578 |      |  |  | 91  | % |  | $ | 25,833 | 
|                                  |  |                |        |  |          |   |        |          |              |  |      |    |  |          |        |              |          |   |        |      | 

Total Revenue.


Product Revenue.


Service Revenue.


License Fees and Contract Revenue.


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| |                
| | ---------------
| | Cost of Revenue

|                      |                 |                |        |        |          |   |        |          |              |  |      |     |   |          |        |              |          |   |        |        |  |  |     |     |   |   |        |        | 
|--------------------- | --------------- | -------------- | ------ | ------ | -------- | - | ------ | -------- | ------------ |  | ---- | --- | - | -------- | ------ | ------------ | -------- | - | ------ | ------ |  |  | --- | --- | - | - | ------ | ------ | 
|                      |                 | Year Ended     |        |        |          |   |        |          | Year Ended   |  |      |     |   |          |        | Year Ended   |         
|                      |                 | December 31,   |        |        |          |   |        |          | December 31, |  |      |     |   |          |        | December 31, |         
|                      |                 | 2004           |        |        | $ Change |   |        | % Change |              |  | 2003 |     |   | $ Change |        |              | % Change |   |        | 2002   | 
|                      |                 |                |        |        |          |   |        |          |              |  |      |     |   |          |        |              |          |   |        |        | 
|                      |                 | (In thousands) |       
|Cost of               |                 |                |        |        |          |   |        |          |              |  |      |     |   |          |        |              |          |   |        |        |  |  |     |     |   |   |        |       
|                      | Product revenue |                | $      | 38,350 |          |   | $      | 14,856   |              |  |      | 63  | % |          | $      | 23,494       |          |   | $      | 12,567 |  |  |     | 115 | % |   | $      | 10,927 | 
|                      | Service revenue |                |        | 6,673  |          |   |        | 4,187    |              |  |      | 168 | % |          |        | 2,486        |          |   |        | 2,486  |  |  |     | n/a |   |   |        |       | 
|                      |                 |                |        |        |          |   |        |          |              |  |      |     |   |          |        |              |          |   |        |        | 
|Total Cost of Revenue |                 | $              | 45,023 |        |          | $ | 19,043 |          |              |  | 73   | %   |   | $        | 25,980 |              |          | $ | 15,053 |        |  |  | 138 | %   |   | $ | 10,927 |       
|                      |                 |                |        |        |          |   |        |          |              |  |      |     |   |          |        |              |          |   |        |        | 

Cost of Product Revenue. Restructuring Charges


Cost of Service Revenue.


Gross Margins.




| |                   
| | ------------------
| | Operating Expenses

|                                    |  |                |        |  |          |   |         |          |              |  |      |    |  |          |        |              |          |   |        |      |  |  |     |    |  |   |        | 
|----------------------------------- |  | -------------- | ------ |  | -------- | - | ------- | -------- | ------------ |  | ---- | -- |  | -------- | ------ | ------------ | -------- | - | ------ | ---- |  |  | --- | -- |  | - | ------ | 
|                                    |  | Year Ended     |        |  |          |   |         |          | Year Ended   |  |      |    |  |          |        | Year Ended   |         
|                                    |  | December 31,   |        |  |          |   |         |          | December 31, |  |      |    |  |          |        | December 31, |         
|                                    |  | 2004           |        |  | $ Change |   |         | % Change |              |  | 2003 |    |  | $ Change |        |              | % Change |   |        | 2002 | 
|                                    |  |                |        |  |          |   |         |          |              |  |      |    |  |          |        |              |          |   |        |      | 
|                                    |  | (In thousands) |       
|Research and development            |  | $              | 22,728 |  |          | $ | (10,963 | )        |              |  | (33  | )% |  | $        | 33,691 |              |          | $ | (9,626 | )    |  |  | (22 | )% |  | $ | 43,317 | 
|Selling, general and administrative |  |                | 32,325 |  |          |   | 5,033   |          |              |  | 18   | %  |  |          | 27,292 |              |          |   | 9,758  |      |  |  | 56  | %  |  |   | 17,534 | 
|Employee stock compensation, net    |  |                | 2,770  |  |          |   | 1,770   |          |              |  | 177  | %  |  |          | 1,000  |              |          |   | 622    |      |  |  | 165 | %  |  |   | 378    | 
|Amortization of intangible assets   |  |                | 3,805  |  |          |   | 1,049   |          |              |  | 38   | %  |  |          | 2,756  |              |          |   | 2,756  |      |  |  | n/a |    |  |   |       | 
|Restructuring charges               |  |                | 5,774  |  |          |   | (5,761  | )        |              |  | (50  | )% |  |          | 11,535 |              |          |   | 11,221 |      |  |  | n/a |    |  |   | 314    | 
|                                    |  |                |        |  |          |   |         |          |              |  |      |    |  |          |        |              |          |   |        |      | 
|                                    |  | $              | 67,402 |  |          | $ | (8,872  | )        |              |  | (12  | )% |  | $        | 76,274 |              |          | $ | 14,731 |      |  |  | 24  | %  |  | $ | 61,543 | 
|                                    |  |                |        |  |          |   |         |          |              |  |      |    |  |          |        |              |          |   |        |      | 

29



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##### Table of Contents



Research and Development Expenses. Restructuring Charges


Selling, General and Administrative Expenses.


Employee Stock Compensation.


Restructuring Charges.




| |     
| | ----
| | 2004



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We recorded charges totaling $5.7 million related to
    facility closures. As a result of efficiencies achieved
    following our prioritization of research and development
    programs, in June 2004 we were able to shut down one-half of a
    Mountain View, CA facility that was primarily used for research
    and development activities. In December, we completed the full
    closure of this building, and we reassessed our previous
    estimates regarding the sublease potential of our two idled
    facilities. We adjusted our previous restructuring charges on
    the basis of recent market information that indicated a low
    probability of obtaining sublease income from these properties.
    The ongoing payments will reduce the liability we have recorded
    as of December 31, 2004, of $11.6 million (see
    Note 12 of Notes to Consolidated Financial Statements in
    this report), and the only expected ongoing impact to our
    statement of operations will be accretion of interest, provided
    that the assumptions considered in determining the restructuring
    charge do not change.

30



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We recorded a charge of $180,000 in June 2004 as a result of a
    downsizing that reduced manufacturing headcount in our LabChip
    manufacturing operation by 14 positions. All separation payments
    were completed in 2004. We believe that this downsizing will
    result in an estimated annual savings of approximately
    $1.1 million. We also recognized a $134,000 credit related
    to severance payments made in 2004 which were less than the
    provision estimate we made in 2003.



| |     
| | ----
| | 2003



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We recorded a $7.7 million charge, based upon the estimated
    net present value of our future lease payments related to the
    closure of one of our Mountain View facilities, net of
    anticipated sublease rentals, including leasehold improvement
    write-offs and other asset disposals of $319,000 related to the
    building closure. The facility lease accrual charge involved
    certain key assumptions including the amount, if any, of future
    sublease rentals which we subsequently revised to zero in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | We recorded total charges of $3.8 million during 2003 for
    three downsizing actions related to severance and benefits,
    including $401,000 of non-cash charges related to acceleration
    of stock option vesting for certain terminated employees. Two of
    these reductions in force were completed following our
    acquisition of Zymark, and were principally related to
    elimination of redundant positions, the relocation of instrument
    manufacturing to Hopkinton, MA, and the prioritization of
    research and development programs. These actions resulted in the
    elimination of approximately 100 positions, including 52% in
    research and development, 24% in manufacturing operations and
    service, and 24% in selling, general and administration. As of
    December 31, 2003, approximately $2.1 million of the
    $3.8 million remained in accrued restructuring charges, and
    remaining payments were completed by December 2004.



| |     
| | ----
| | 2002



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We recorded a charge of $314,000 in September 2002, due to a
    reduction in force carried out in response to depressed market
    conditions. This action resulted in the elimination of 28
    positions, including 75% in research and development with the
    remaining divided equally between manufacturing and
    administrative functions. All of the associated cash payments
    were completed in 2002.



| |                                       
| | --------------------------------------
| | Interest and Other Income and Expenses

|                  |  |                |       |   |          |   |        |          |              |  |      |    |  |          |       |              |          |   |        |      |  |  |     |    |  |   |        |  
|----------------- |  | -------------- | ----- | - | -------- | - | ------ | -------- | ------------ |  | ---- | -- |  | -------- | ----- | ------------ | -------- | - | ------ | ---- |  |  | --- | -- |  | - | ------ | -
|                  |  | Year Ended     |       |   |          |   |        |          | Year Ended   |  |      |    |  |          |       | Year Ended   |         
|                  |  | December 31,   |       |   |          |   |        |          | December 31, |  |      |    |  |          |       | December 31, |         
|                  |  | 2004           |       |   | $ Change |   |        | % Change |              |  | 2003 |    |  | $ Change |       |              | % Change |   |        | 2002 | 
|                  |  |                |       |   |          |   |        |          |              |  |      |    |  |          |       |              |          |   |        |      | 
|                  |  | (In thousands) |      
|Interest income   |  | $              | 1,012 |   |          | $ | (1,627 | )        |              |  | (62  | )% |  | $        | 2,639 |              |          | $ | (3,607 | )    |  |  | (58 | )% |  | $ | 6,246  |  
|Interest expense  |  |                | (410  | ) |          |   | 2      |          |              |  | n/a  |    |  |          | (412  | )            |          |   | 1,481  |      |  |  | 78  | %  |  |   | (1,893 | )
|Other income, net |  |                | 517   |   |          |   | (762   | )        |              |  | (60  | )% |  |          | 1,279 |              |          |   | (41    | )    |  |  | (3  | )% |  |   | 1,320  |  
|                  |  |                |       |   |          |   |        |          |              |  |      |    |  |          |       |              |          |   |        |      | 
|                  |  | $              | 1,119 |   |          | $ | (2,387 | )        |              |  | (68  | )% |  | $        | 3,506 |              |          | $ | (2,167 | )    |  |  | (38 | )% |  | $ | 5,673  |  
|                  |  |                |       |   |          |   |        |          |              |  |      |    |  |          |       |              |          |   |        |      | 

Interest Income (Expense), Net.


Other Income, Net.


31



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##### Table of Contents



Liquidity and Capital Resources






Cash Flows


|                           |  |                |         |   |            |   |            |              |  |   |            |            |  |              |         |   |  |   |         |  
|-------------------------- |  | -------------- | ------- | - | ---------- | - | ---------- | ------------ |  | - | ---------- | ---------- |  | ------------ | ------- | - |  | - | ------- | -
|                           |  | Year Ended     |         |   |            |   | Year Ended |              |  |   |            | Year Ended | 
|                           |  | December 31,   |         |   | Increase   |   |            | December 31, |  |   | Increase   |            |  | December 31, |        
|                           |  | 2004           |         |   | (Decrease) |   |            | 2003         |  |   | (Decrease) |            |  | 2002         |        
|                           |  |                |         |   |            |   |            |              |  |   |            |            |  |              |        
|                           |  | (In thousands) |        
|Cash provided by (used in) |  |                |         |   |            |   |            |              |  |   |            |            |  |              |         |   |  |   |         |  
|Operating Activities       |  | $              | (17,614 | ) |            | $ | 13,810     |              |  | $ | (31,424    | )          |  | $            | (20,738 | ) |  | $ | (10,686 | )
|Investing Activities       |  | $              | 13,934  |   |            | $ | (11,515    | )            |  | $ | 25,449     |            |  | $            | 9,484   |   |  | $ | 15,965  |  
|Financing Activities       |  | $              | 4,587   |   |            | $ | 6,052      |              |  | $ | (1,465     | )          |  | $            | (1,715  | ) |  | $ | 250     |  

Operating Activities.




Investing Activities.


Financing Activities.


32



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|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |     |     |   |     |     |     | 
|------------------------------------ | ---------- | ------------------------------------------ | - | ----- | --------------- | - | -------------- | ------------ | ------ | --------- | ----------- | --- | --- | - | --- | --- | --- | 
|                                     |            |                                            |   |       |                 |   |                | Other        |       
|                                     |            | Operating                                  |   |       |                 |   | Sale-Leaseback |              |        | Long-term |            
|                                     |            | Leases                                     |   |       | Idle Facilities |   |                | Arrangements |        |           | Obligations |    
|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |    
|Years ending December 31:            |            |                                            |   |       |                 |   |                |              |        |           |             |     |     |   |     |    
|                                     | 2005       |                                            | $ | 4,174 |                 |   | $              | 3,535        |        |           | $           | 312 |     |   | $   | 409 |    
|                                     | 2006       |                                            |   | 2,776 |                 |   |                | 3,657        |        |           |             |    |     |   |     |    |    
|                                     | 2007       |                                            |   | 2,442 |                 |   |                | 3,784        |        |           |             |    |     |   |     |    |    
|                                     | 2008       |                                            |   | 2,227 |                 |   |                | 1,922        |        |           |             |    |     |   |     |    |    
|                                     | 2009       |                                            |   | 283   |                 |   |                |             |        |           |             |    |     |   |     |    |    
|                                     | Thereafter |                                            |   | 490   |                 |   |                |             |        |           |             |    |     |   |     |    |    
|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |    
|                                     |            | Total minimum lease and principal payments |   | $     | 12,392          |   |                |              | 12,898 |           |             |     | 312 |   |     |     | 409 | 
|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |    
|Less: Amount representing interest   |            |                                            |   |       |                 |   | 1,293          |              |        |           | 11          |     |     |   |    |    
|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |    
|Present value of future payments     |            |                                            |   |       |                 |   | 11,605         |              |        |           | 301         |     |     |   | 409 |    
|Less: Current portion of obligations |            |                                            |   |       |                 |   | 3,177          |              |        |           | 301         |     |     |   | 409 |    
|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |    
|Noncurrent portion of obligations    |            |                                            |   |       |                 | $ | 8,428          |              |        | $         |            |     |     | $ |    |    
|                                     |            |                                            |   |       |                 |   |                |              |        |           |             |    







| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | continued market acceptance of our microfluidic and lab
    automation products;                                  
|
| |  | the magnitude and scope of our research and product development
    programs;                                     
|
| |  | our ability to maintain existing, and establish additional,
    corporate partnerships and licensing arrangements;
|
| |  | the time and costs involved in expanding and maintaining our
    manufacturing facilities;                        
|
| |  | the potential need to develop, acquire or license new
    technologies and products; and                          
|
| |  | other factors not within our control.                                                                             



33



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Financial Outlook.




| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We project first quarter revenues in the range of $17 to
    $19 million, and full year revenues in the range of
    $87-92 million.                     
|
| |  | We project combined gross margins from products and services in
    the range of 36% to 38% in the first quarter and 37% to 40% on a
    full-year basis.



Impact of Inflation




Critical Accounting Estimates




Restructuring Charges.


34



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Revenue Recognition.


Accounts Receivable Reserves.


Inventory Reserves.


Warranty Provision.


35



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Goodwill.


Impairment.


Recent Accounting Pronouncements


requires





Factors Affecting Operating Results




| |                              
| | -----------------------------
| | Risks Related to Our Business



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Our LabChip products may not achieve widespread market
    acceptance, which could cause our revenue to grow slowly or
    decline.



36



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| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to demonstrate the advantages and potential economic
    value of our LabChip drug discovery systems over alternative
    well-established technologies;                                                          
|
| |  | our ability to develop a broader range of standard assays and
    applications that enable customers and potential customers to
    perform many different types of experiments on a single LabChip
    instrument system; and
|
| |  | our ability to market and sell our drug discovery systems and
    related consumable products.                                                                                                                                



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not successful in developing new and enhanced
    liquid handling, LabChip and other life sciences products, we
    may lose market share to our competitors.





| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not successful in improving the cost of our LabChip
    products relative to the performance delivered, we may not be
    successful in displacing alternative or more established
    products and technologies that are competitive with our LabChip
    products.



37



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| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not successfully expand the range of applications
    for our drug discovery systems, we may experience a decline in
    revenue or slow revenue growth and may not achieve or maintain
    profitability.





| |                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to the capital spending patterns of the
    pharmaceutical industry, which over the past several years have
    been adversely impacted by general economic conditions, industry
    consolidation and increased competition.





| |                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A significant portion of our business depends upon
    collaborations with OEM business partners, and our financial
    success depends upon our ability to develop new product concepts
    with compelling value propositions to generate new OEM
    collaboration relationships, as well as our ability to manage
    our existing OEM relationships.



38



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| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Potential future acquisitions may have unexpected
    consequences or impose additional costs on us.





| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                               
|
| |  | potential cost and disruptions caused by the integration of
    financial reporting systems and development of uniform
    standards, controls, procedures and policies;                                     
|
| |  | accounting consequences, including amortization of acquired
    intangible assets or other required purchase accounting
    adjustments, resulting in variability or reductions of our
    reported 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 these markets have
    stronger market positions;                                              
|
| |  | the potential loss of key employees of Caliper or the acquired
    company due to the employment uncertainties inherent in the
    acquisition process;                                                      
|
| |  | the assumption of known and potentially unknown liabilities of
    the acquired company;                                                                                                                     
|
| |  | the risk that we may find that the acquired company or business
    does not further our business strategy or that we paid more than
    what the company or business was worth;                             
|
| |  | our relationship with current and new employees and customers
    could be impaired;                                                                                                                         
|
| |  | the acquisition may result in litigation from terminated
    employees or third parties who believe a claim against us would
    be valuable to pursue;                                                      
|
| |  | our due diligence process may fail to identify significant
    issues with product quality, product architecture and legal
    contingencies, among other matters; and                                       
|
| |  | insufficient revenues to offset increased expenses associated
    with acquisitions.                                                                                                                         





| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | issue common stock that would dilute our current
    stockholders percentage ownership;                                                           
|
| |  | record goodwill and non-amortizable intangible assets that will
    be subject to impairment testing and potential periodic
    impairment charges;
|
| |  | incur amortization expenses related to certain intangible
    assets; or                                                                           
|
| |  | incur other large and immediate write-offs.                                                                                                        

39



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| |                                                                                  
| | ---------------------------------------------------------------------------------
| | We expect to incur future operating losses and may not
    achieve profitability.





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.







| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have limited experience in manufacturing our products and
    may encounter manufacturing problems or delays, which could
    result in lost revenue.



40



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| |                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because Agilent and a small number of other customers have
    accounted for, and may continue to account for, a substantial
    portion of our revenue, our revenue could decline due to the
    loss of one of these customers.





| |                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our revenue could decline due to the termination of our
    agreement with Agilent because of a number of different factors,
    including a reduction in our gross margin share of Agilent 2100
    Bioanalyzer and LabChip products sold by Agilent or reduced
    sales of such products by Agilent due to competition from us or
    our other commercial partners.







41



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





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





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





| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



42



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| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on a single-source supplier for the glass
    used in our LabChip products and if we are unable to buy this
    glass on a timely basis, we will not be able to deliver our
    LabChip products to customers.





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







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





| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



43



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| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.







| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Our tax net operating losses and credit carryforwards may
    expire if we do not achieve or maintain profitability.







Risks Related to Owning Our Common Stock




| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Our stock price is extremely volatile, and you could lose a
    substantial portion of your investment.



44



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| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | announcements by analysts regarding their assessment of Caliper
    and its prospects;                   
|
| |  | announcements by our competitors of complementary or competing
    products and technologies;            
|
| |  | announcements of our financial results, particularly if they
    differ from investors expectations; and
|
| |  | general market volatility for technology stocks.                                                         





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | We have been sued, and are at risk of future securities class
    action litigation.





| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk

Foreign Currency




Interest Rate Sensitivity




45



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|                                          |               |                       |        |        |      |   |        |        |      |   |      |              |   |       |       |       |      |   |        |        |       |   |        |        |  | 
|----------------------------------------- | ------------- | --------------------- | ------ | ------ | ---- | - | ------ | ------ | ---- | - | ---- | ------------ | - | ----- | ----- | ----- | ---- | - | ------ | ------ | ----- | - | ------ | ------ |  | 
|                                          |               |                       |        |        |      |   |        |        |      |   |      | Fair Value   |  
|                                          |               |                       |        |        |      |   |        |        |      |   |      | December 31, |  
|                                          |               | 2005                  |        |        | 2006 |   |        | 2007   |      |   | 2008 |              |   | Total |       |       | 2004 |  
|                                          |               |                       |        |        |      |   |        |        |      |   |      |              |   |       |       |       |      |  
|Cash and money market funds:              |               |                       |        |        |      |   |        |        |      |   |      |              |   |       |       |       |      |   |        |        |       |   |        |       
|                                          | Fixed rate    |                       | $      | 10,403 |      |   |        |       |      |   |      |             |   |       |       |      |      |   | $      | 10,403 |       |   | $      | 10,403 | 
|                                          |               | Average interest rate |        |        | 0.03 | % |        |        |     |   |      |              |  |       |       |       |     |   |        |        | 0 .03 | % |        |        |  | 
|Available for sale marketable securities: |               |                       |        |        |      |   |        |        |      |   |      |              |   |       |       |       |      |   |        |        |       |   |        |       
|                                          | Fixed rate    |                       | $      | 17,006 |      |   | $      | 21,742 |      |   |      |             |   |       | $     | 1,261 |      |   | $      | 40,009 |       |   | $      | 39,834 | 
|                                          |               | Average interest rate |        |        | 3.70 | % |        |        | 3.37 | % |      |              |  |       |       |       | 4.16 | % |        |        | 3.53  | % |        |        |  | 
|                                          | Variable rate |                       |        |        |      |   |        |        |      |   |      |              |   |       |       |       |      |   |        |        |       |   |        |        | 
|                                          |               | Average interest rate |        |        |      |   |        |        |      |   |      |              |   |       |       |       |      |   |        |        |       |   |        |        |  | 
|Total securities                          |               | $                     | 27,409 |        |      | $ | 21,742 |        |      |   |     |              |   | $     | 1,261 |       |      | $ | 50,412 |        |       | $ | 50,237 |       
|                                          |               | Average interest rate |        |        | 2.31 | % |        |        | 3.37 | % |      |              |  |       |       |       | 4.16 | % |        |        | 2.81  | % |        |        |  | 



|                                          |               |                       |        |        |      |   |        |        |      |              |        |        |      |      |        |        |      |   |        |        |  | 
|----------------------------------------- | ------------- | --------------------- | ------ | ------ | ---- | - | ------ | ------ | ---- | ------------ | ------ | ------ | ---- | ---- | ------ | ------ | ---- | - | ------ | ------ |  | 
|                                          |               |                       |        |        |      |   |        |        |      | Fair Value   |       
|                                          |               |                       |        |        |      |   |        |        |      | December 31, |       
|                                          |               | 2004                  |        |        | 2005 |   |        | 2006   |      |              | Total  |        |      | 2003 |       
|                                          |               |                       |        |        |      |   |        |        |      |              |        |        |      |      |       
|Cash and money market funds:              |               |                       |        |        |      |   |        |        |      |              |        |        |      |      |        |        |      |   |        |       
|                                          | Fixed rate    |                       | $      | 9,168  |      |   |        |       |      |              |        |       |      |      | $      | 9,168  |      |   | $      | 9,168  | 
|                                          |               | Average interest rate |        |        | 0.07 | % |        |        |     |              |        |        |     |      |        |        | 0.07 | % |        |        |  | 
|Available for sale marketable securities: |               |                       |        |        |      |   |        |        |      |              |        |        |      |      |        |        |      |   |        |       
|                                          | Fixed rate    |                       | $      | 12,391 |      |   | $      | 28,723 |      |              | $      | 11,268 |      |      | $      | 52,382 |      |   | $      | 52,710 | 
|                                          |               | Average interest rate |        |        | 5.23 | % |        |        | 4.07 | %            |        |        | 2.75 | %    |        |        | 4.05 | % |        |        |  | 
|                                          | Variable rate |                       | $      | 3,253  |      |   | $      | 1,853  |      |              |        |       |      |      | $      | 5,106  |      |   | $      | 5,118  | 
|                                          |               | Average interest rate |        |        | 1.45 | % |        |        | 1.36 | %            |        |        |     |      |        |        | 1.42 | % |        |        |  | 
|Total securities                          |               | $                     | 24,812 |        |      | $ | 30,576 |        |      | $            | 11,268 |        |      | $    | 66,656 |        |      | $ | 66,996 |       
|                                          |               | Average interest rate |        |        | 2.85 | % |        |        | 3.90 | %            |        |        | 2.75 | %    |        |        | 3.30 | % |        |        |  | 

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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of disclosure controls and procedures.




Limitations on the Effectiveness of Disclosure Controls and
Procedures.


Changes in internal controls.


Managements report on internal control over financial
reporting.


47



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48



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





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|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant










|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation






Item 12.     Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters











|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



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PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |                          
| | -------------------------
| | (1) Financial Statements:

|                                                                                                          |  |      |     | 
|--------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                          |  | Page |    
|                                                                                                          |  |      |    
|Report of Ernst & Young LLP, Independent Registered
    Public Accounting Firm                            |  |      | F-2 | 
|Consolidated Balance Sheets at December 31, 2004 and 2003                                                 |  |      | F-3 | 
|Consolidated Statements of Operations  For the Years
    ended December 31, 2004, 2003 and 2002          |  |      | F-4 | 
|Consolidated Statement of Stockholders Equity 
    For the Years ended December 31, 2004, 2003 and 2002 |  |      | F-5 | 
|Consolidated Statements of Cash Flows  For the Years
    ended December 31, 2004, 2003 and 2002          |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                                |  |      | F-7 | 



| |                                   
| | ----------------------------------
| | (2) Financial Statement Schedules:





| |              
| | -------------
| | (3) Exhibits:

|        |    |                         |  |                                                                                                                                                     
|------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 2  | .1(17)                  |  | Stock Purchase Agreement, by and among Caliper, Berwind
    Corporation and The Berwind Company LLC, dated June 9, 2003.                            
|        | 2  | .2(17)                  |  | Amendment No. 1 to the Stock Purchase Agreement, by and
    among Caliper, Berwind Corporation and The Berwind Company LLC,
    dated July 10, 2003.
|        | 2  | .3(20)                  |  | Amendment No. 2 to the Stock Purchase Agreement, by and
    among Caliper, Berwind Corporation and The Berwind Company LLC,
    dated April 1, 2004.
|        | 3  | .1(20)                  |  | Amended and Restated Certificate of Incorporation of Caliper.                                                                                       
|        | 3  | .2(9)                   |  | Certificate of Designation Of Series A Junior Participating
    Preferred Stock.                                                                    
|        | 3  | .3(1)                   |  | Restated Bylaws of Caliper.                                                                                                                         
|        | 3  | .4(18)                  |  | Amendment No. 1 to Bylaws of Caliper.                                                                                                               
|        | 4  | .1                      |  | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.                                                                                                
|        | 4  | .2                      |  | Specimen Stock Certificate.                                                                                                                         
|        | 4  | .3(9)                   |  | Rights Agreement, dated as of December 18, 2001, between
    Caliper and Wells Fargo Bank Minnesota, N.A., as Rights Agent.                         
|        | 10 | .1(2)                   |  | Lease Agreement, dated December 1, 1998, between Caliper
    and 605 East Fairchild Associates, L.P.                                                
|        | 10 | .2(2)(3)                |  | 1996 Equity Incentive Plan.                                                                                                                         
|        | 10 | .3(2)(3)                |  | 1999 Equity Incentive Plan.                                                                                                                         
|        | 10 | .4(2)(3)                |  | 1999 Employee Stock Purchase Plan.                                                                                                                  
|        | 10 | .5(2)(3)                |  | 1999 Non-Employee Directors Stock Option Plan.                                                                                                     
|        | 10 | .6(3)                   |  | Form of Grant Agreement for 1999 Equity Incentive
    Plan  Option Awards.                                                                         
|        | 10 | .7(3)                   |  | Form of Grant Agreement for 1999 Equity Incentive
    Plan  Restricted Stock Unit Awards.                                                          
|        | 10 | .8(3)                   |  | Form of Grant Agreement for 1999 Non-Employee Directors
    Stock Option Plan.                                                                     
|        | 10 | .9(2)(3)                |  | Form of Indemnification Agreement entered into between Caliper
    and its directors and executive officers.                                        
|        | 10 | .10(2)(4)               |  | Collaboration Agreement, dated May 2, 1998, between Caliper
    and Hewlett-Packard Company (now Agilent Technologies, Inc.).                       

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|        |    |            |                         |                                                                                                                                                                                                                        
|------- | -- | ---------- | ----------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            |                        
|Number  |    |            | Description of Document
|        |    |            |                        
|        | 10 | .11(3)     |                         | Form of Stock Option Grant Agreement for Acquisition Equity
    Incentive Plan.                                                                                                                                        
|        | 10 | .12(3)     |                         | Form of Stock Award Agreement for Acquisition Equity Incentive
    Plan (pro rata vesting).                                                                                                                            
|        | 10 | .13(3)     |                         | Form of Stock Award Agreement for Acquisition Equity Incentive
    Plan (5 year cliff vesting).                                                                                                                        
|        | 10 | .17(3)     |                         | Non-Employee Directors Cash Compensation Plan.                                                                                                                                                                        
|        | 10 | .18(3)(12) |                         | Caliper Performance Bonus Plan.                                                                                                                                                                                        
|        | 10 | .19(3)     |                         | Employment Offer Letter dated November 30, 2004 between
    Caliper and Mr. Thomas T. Higgins.                                                                                                                         
|        | 10 | .20(3)(12) |                         | Summary Cash Compensation Sheet.                                                                                                                                                                                       
|        | 10 | .23(2)(3)  |                         | The Corporate Plan for Retirement Select Plan Adoption Agreement
    and related Basic Plan Document.                                                                                                                  
|        | 10 | .27(6)     |                         | Lease Agreement, dated June 23, 2000 and effective
    July 5, 2000, between Caliper and Martin CBP Associates,
    L.P.                                                                                               
|        | 10 | .28(3)(6)  |                         | Amended Promissory Note, dated July 17, 2000, between
    Caliper and Dr. Daniel L. Kisner.                                                                                                                            
|        | 10 | .29(3)     |                         | Key Employee Change of Control and Severance Benefit Plan.                                                                                                                                                             
|        | 10 | .30(5)(9)  |                         | Cross-License Agreement, dated March 12, 2001 between
    Aclara Biosciences, Inc. and Caliper.                                                                                                                        
|        | 10 | .32(4)(7)  |                         | Settlement Agreement and Mutual General Release, dated
    March 12, 2001 between Aclara Biosciences, Inc. and Caliper.                                                                                                
|        | 10 | .33(4)(8)  |                         | LabChip Solutions Agreement, dated September 21, 2001,
    between Amphora Discovery Corp. and Caliper.                                                                                                                
|        | 10 | .39(3)(10) |                         | 2001 Non-Statutory Stock Option Plan.                                                                                                                                                                                  
|        | 10 | .46(3)     |                         | Form of Grant Agreement for 2001 Non-Statutory Stock Option Plan.                                                                                                                                                      
|        | 10 | .48(3)(11) |                         | Key Employee Agreement, dated July 1, 2002, between Caliper
    and Dr. Daniel Kisner.                                                                                                                                 
|        | 10 | .52(4)(18) |                         | Sole Commercial Patent License Agreement, effective
    September 1, 1995, between UT-Battelle, LLC, the successor
    to Lockheed Martin Energy Research Corporation, and Caliper, as
    amended on November 1, 2002.
|        | 10 | .53(4)(18) |                         | Modification of LabChip Solutions Agreement, dated
    December 12, 2002, between Amphora Discovery Corp. and
    Caliper.                                                                                             
|        | 10 | .55(4)(14) |                         | Collaboration Agreement, dated June 4, 2003, between
    Caliper and Bio-Rad Laboratories, Inc.                                                                                                                        
|        | 10 | .56(3)(15) |                         | Key Employee Agreement, dated July 14, 2003, between
    Caliper and E. Kevin Hrusovsky.                                                                                                                               
|        | 10 | .61(15)    |                         | Letter Agreement, dated September 17, 2003, between Caliper
    and Berwind Company LLC regarding the appointment of a Berwind
    nominee to the Caliper Board of Directors.                                          
|        | 10 | .62(3)(16) |                         | Acquisition Equity Incentive Plan.                                                                                                                                                                                     
|        | 10 | .63(3)(19) |                         | Key Employee Agreement Amendment, dated December 24, 2003,
    between Caliper and Dr. Daniel L. Kisner.                                                                                                               
|        | 10 | .64(3)(19) |                         | Consulting Agreement, dated January 1, 2004, between
    Caliper and Dr. David V. Milligan.                                                                                                                            
|        | 10 | .66(4)(19) |                         | Collaboration and Supply Agreement, dated January 9, 2004,
    among Caliper, Zymark Corporation and Affymetrix, Inc.                                                                                                  
|        | 10 | .69(4)(19) |                         | Letter Amendment to Modification Agreement, dated
    December 22, 2003, between Caliper and Amphora Discovery
    Corp.                                                                                               
|        | 11 | .1         |                         | Subsidiaries of the Registrant.                                                                                                                                                                                        
|        | 23 | .1         |                         | Consent of Ernst & Young LLP, independent registered
    public accounting firm.                                                                                                                                       
|        | 24 | .1         |                         | Power of Attorney (reference is made to the signature page of
    this report).                                                                                                                                        
|        | 31 | .1         |                         | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                

52



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|        |    |    |                         |                                                                                                                                
|------- | -- | -- | ----------------------- | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |                        
|Number  |    |    | Description of Document
|        |    |    |                        
|        | 31 | .2 |                         | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                        
|        | 32 | .1 |                         | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.
|        | 32 | .2 |                         | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.






| |     |                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | 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.                 
|
| | (2) | 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.   
|
| | (3) | Management contract or compensatory plan or arrangement.                                                                                                                                               
|
| | (4) | Confidential treatment has been granted for a portion of this
    exhibit.                                                                                                                             
|
| | (5) | 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.                                                    
|
| | (6) | 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, 2000, and
    incorporated by reference herein.
|
| | (7) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended March 31, 2001 and
    incorporated by reference herein.                                                 
|
| | (8) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended September 30, 2001 and
    incorporated by reference herein.                                             
|
| | (9) | Previously filed as Exhibit 99.1 to Current Report on
    Form 8-K filed December 19, 2001 and incorporated by
    reference herein.                                                                   



|     |                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Previously filed as Exhibit 99.1 to our Registration
    Statement on Form S-8, File No. 333-76636, filed
    January 11, 2002 and incorporated by reference herein.
|    
|(11) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended September 30, 2002 and
    incorporated by reference herein.          
|    
|(12) | Previously filed as the like-numbered Exhibit to Current Report
    on Form 8-K filed March 16, 2005 and incorporated by
    reference herein.                      
|    
|(13) | Confidential treatment has been requested for a portion of this
    exhibit.                                                                                        
|    
|(14) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended June 30, 2003 and
    incorporated by reference herein.               
|    
|(15) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended September 30, 2003 and
    incorporated by reference herein.          
|    
|(16) | Previously filed as Exhibit 99.1 to our Registration
    Statement on Form S-8, File No. 333-106946, filed
    June 10, 2003 and incorporated by reference herein.  
|    
|(17) | Previously filed as the like-numbered Exhibit to Form 8-K
    filed July 25, 2003 and incorporated by reference herein.                                             
|    
|(18) | Previously filed as the like-numbered Exhibit to Form 10-K
    for the year ended December 31, 2002 and incorporated by
    reference herein.                       
|    
|(19) | Previously filed as the like-numbered Exhibit to Form 10-K
    for the year ended December 31, 2003 and incorporated by
    reference herein.                       
|    
|(20) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended March 31, 2004 and
    incorporated by reference herein.              

53



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SIGNATURES






| |                            
| | ---------------------------
| | Caliper Life Sciences, Inc.



| |     |                       
| | --- | ----------------------
| | By: | /s/ E. Kevin Hrusovsky

| |                        
| | -----------------------
| |                        
| | E. Kevin Hrusovsky     
| | Chief Executive Officer



POWER OF ATTORNEY






|                                                             |  |                                                                                    |  |                |  | 
|------------------------------------------------------------ |  | ---------------------------------------------------------------------------------- |  | -------------- |  | 
|Signatures                                                   |  | Title                                                                              |  | Date          
|                                                             |  |                                                                                    |  |               
|                                                            
|/s/ E. Kevin HrusovskyE.
    Kevin Hrusovsky                 |  | Chief Executive Officer, President, and Director
    (principal executive officer) |  | March 16, 2005
|                                                            
|/s/ Thomas T. HigginsThomas
    T. Higgins                   |  | Chief Financial Officer
    (principal financial officer)                          |  | March 16, 2005
|                                                            
|/s/ Peter F. McAreePeter
    F. McAree                       |  | Vice President, Finance
    (principal accounting officer)                         |  | March 16, 2005
|                                                            
|/s/ Daniel L.
    Kisner, M.D.Daniel
    L. Kisner, M.D.     |  | Chairman of the Board of Directors                                                 |  | March 16, 2005
|                                                            
|/s/ David V.
    Milligan, Ph.D.David
    V. Milligan, Ph.D. |  | Vice Chairman of the Board of
    Directors                                        |  | March 16, 2005
|                                                            
|/s/ Van BilletVan
    Billet                                 |  | Director                                                                           |  | March 16, 2005
|                                                            
|/s/ Robert C.
    Bishop, Ph.D.Robert
    C. Bishop, Ph.D.   |  | Director                                                                           |  | March 16, 2005

54



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|                                         |  |          |  |                |  | 
|---------------------------------------- |  | -------- |  | -------------- |  | 
|Signatures                               |  | Title    |  | Date          
|                                         |  |          |  |               
|                                        
|/s/ Edgar J. CumminsEdgar
    J. Cummins |  | Director |  | March 16, 2005
|                                        
|/s/ Kathryn TunstallKathryn
    Tunstall |  | Director |  | March 16, 2005

55



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CALIPER LIFE SCIENCES, INC.


INDEX TO FINANCIAL STATEMENTS


|                                                                               |  |      |     | 
|------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                               |  | Page |    
|                                                                               |  |      |    
|Report of Ernst & Young LLP,
    Independent Registered Public Accounting Firm |  |      | F-2 | 
|Consolidated Balance Sheets                                                    |  |      | F-3 | 
|Consolidated Statements of Operations                                          |  |      | F-4 | 
|Consolidated Statement of
    Stockholders Equity                             |  |      | F-5 | 
|Consolidated Statements of Cash Flows                                          |  |      | F-6 | 
|Notes to Consolidated Financial
    Statements                                 |  |      | F-7 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





F-2



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.





CONSOLIDATED BALANCE SHEETS


|                                                 |                                                                                                                                                              |                            |                                            |          |         |         |        |          |         |         | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------------------------------------ | -------- | ------- | ------- | ------ | -------- | ------- | ------- | 
|                                                 |                                                                                                                                                              | December 31,               |                                           
|                                                 |                                                                                                                                                              |                            |                                           
|                                                 |                                                                                                                                                              | 2004                       |                                            |          | 2003    |        
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                 |                                                                                                                                                              | (In thousands, except      |                                           
|                                                 |                                                                                                                                                              | share and per share data)  |                                           
|ASSETS                                          
|Current assets:                                  |                                                                                                                                                              |                            |                                            |          |         |         |        |         
|                                                 | Cash and cash equivalents, including restricted cash of $962 and
    $279, respectively                                                                      |                            | $                                          | 10,403   |         |         | $      | 9,168    |        
|                                                 | Marketable securities                                                                                                                                        |                            |                                            | 39,834   |         |         |        | 57,828   |        
|                                                 | Accounts receivable, net of allowance for doubtful accounts of
    $475 and $252, respectively                                                               |                            |                                            | 17,040   |         |         |        | 9,700    |        
|                                                 | Inventories                                                                                                                                                  |                            |                                            | 9,828    |         |         |        | 11,580   |        
|                                                 | Note receivable from officer                                                                                                                                 |                            |                                            | 146      |         |         |        |         |        
|                                                 | Prepaid expenses and other current assets                                                                                                                    |                            |                                            | 1,992    |         |         |        | 3,451    |        
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                 |                                                                                                                                                              | Total current assets       |                                            |          | 79,243  |         |        |          | 91,727  |        
|Restricted cash                                  |                                                                                                                                                              |                            | 2,151                                      |          |         |         | 3,102  |         
|Property and equipment, net                      |                                                                                                                                                              |                            | 6,186                                      |          |         |         | 9,106  |         
|Note receivable from officer                     |                                                                                                                                                              |                            |                                           |          |         |         | 178    |         
|Goodwill and intangibles, net                    |                                                                                                                                                              |                            | 59,960                                     |          |         |         | 63,890 |         
|Other assets                                     |                                                                                                                                                              |                            | 407                                        |          |         |         | 227    |         
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                 |                                                                                                                                                              | Total assets               |                                            | $        | 147,947 |         |        | $        | 168,230 |        
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                
|LIABILITIES AND STOCKHOLDERS EQUITY            
|Current liabilities:                             |                                                                                                                                                              |                            |                                            |          |         |         |        |         
|                                                 | Accounts payable                                                                                                                                             |                            | $                                          | 3,164    |         |         | $      | 3,212    |        
|                                                 | Accrued compensation                                                                                                                                         |                            |                                            | 6,348    |         |         |        | 4,148    |        
|                                                 | Other accrued liabilities                                                                                                                                    |                            |                                            | 5,841    |         |         |        | 4,759    |        
|                                                 | Deferred revenue and customer deposits                                                                                                                       |                            |                                            | 7,769    |         |         |        | 7,203    |        
|                                                 | Current portion of accrued restructuring                                                                                                                     |                            |                                            | 3,177    |         |         |        | 3,930    |        
|                                                 | Current portion of long-term obligations                                                                                                                     |                            |                                            | 409      |         |         |        | 377      |        
|                                                 | Current portion of sale-leaseback arrangements                                                                                                               |                            |                                            | 301      |         |         |        | 1,521    |        
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                 |                                                                                                                                                              | Total current liabilities  |                                            |          | 27,009  |         |        |          | 25,150  |        
|Long-term portion of sale-leaseback arrangements |                                                                                                                                                              |                            |                                           |          |         |         | 331    |         
|Noncurrent portion of accrued restructuring      |                                                                                                                                                              |                            | 8,428                                      |          |         |         | 5,972  |         
|Other noncurrent liabilities                     |                                                                                                                                                              |                            | 931                                        |          |         |         | 1,980  |         
|Commitments and contingencies (Note 11)          |                                                                                                                                                              |                            |                                            |          |         |         |        |         
|Stockholders equity:                            |                                                                                                                                                              |                            |                                            |          |         |         |        |         
|                                                 | Preferred stock, $0.001 par value; 5,000,000 shares
    authorized; no shares issued and outstanding                                                         |                            |                                            |         |         |         |        |         |        
|                                                 | Common stock, $0.001 par value; 70,000,000 shares
    authorized; 30,360,288 and 28,382,043 shares issued and
    outstanding in 2004 and 2003, respectively |                            |                                            | 30       |         |         |        | 28       |        
|                                                 | Additional paid-in capital                                                                                                                                   |                            |                                            | 280,709  |         |         |        | 271,232  |        
|                                                 | Deferred stock compensation                                                                                                                                  |                            |                                            | (2,666   | )       |         |        | (1,808   | )      
|                                                 | Accumulated deficit                                                                                                                                          |                            |                                            | (166,649 | )       |         |        | (135,093 | )      
|                                                 | Accumulated other comprehensive income                                                                                                                       |                            |                                            | 155      |         |         |        | 438      |        
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                 |                                                                                                                                                              | Total stockholders equity |                                            |          | 111,579 |         |        |          | 134,797 |        
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        
|                                                 |                                                                                                                                                              |                            | Total liabilities and stockholders equity |          | $       | 147,947 |        |          | $       | 168,230 | 
|                                                 |                                                                                                                                                              |                            |                                            |          |         |        



F-3



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                          |                                     |                                       |                          |        |       |         |         |        |       |         |         |        |        |        | 
|------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------- | ------------------------ | ------ | ----- | ------- | ------- | ------ | ----- | ------- | ------- | ------ | ------ | ------ | 
|                                                                          |                                     | Years Ended December 31,              |                         
|                                                                          |                                     |                                       |                         
|                                                                          |                                     | 2004                                  |                          |        | 2003  |         |         | 2002   |      
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|                                                                          |                                     | (In thousands, except per share data) |                         
|Revenue:                                                                  |                                     |                                       |                          |        |       |         |         |        |       |         |         |       
|                                                                          | Product revenue                     |                                       | $                        | 57,808 |       |         | $       | 31,916 |       |         | $       | 15,644 |       
|                                                                          | Service revenue                     |                                       |                          | 13,448 |       |         |         | 5,879  |       |         |         | 37     |       
|                                                                          | License fees and contract revenue   |                                       |                          | 8,871  |       |         |         | 11,616 |       |         |         | 10,152 |       
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|                                                                          |                                     |                                       | Total revenue            |        |       | 80,127  |         |        |       | 49,411  |         |        |        | 25,833 | 
|Costs and expenses:                                                       |                                     |                                       |                          |        |       |         |         |        |       |         |         |       
|                                                                          | Cost of product revenue             |                                       |                          | 38,350 |       |         |         | 23,494 |       |         |         | 10,927 |       
|                                                                          | Cost of service revenue             |                                       |                          | 6,673  |       |         |         | 2,486  |       |         |         |       |       
|                                                                          | Research and development            |                                       |                          | 22,728 |       |         |         | 33,691 |       |         |         | 43,317 |       
|                                                                          | Selling, general and administrative |                                       |                          | 32,325 |       |         |         | 27,292 |       |         |         | 17,534 |       
|                                                                          | Employee stock compensation, net(1) |                                       |                          | 2,770  |       |         |         | 1,000  |       |         |         | 378    |       
|                                                                          | Amortization of intangible assets   |                                       |                          | 3,805  |       |         |         | 2,756  |       |         |         |       |       
|                                                                          | Restructuring charges               |                                       |                          | 5,774  |       |         |         | 11,535 |       |         |         | 314    |       
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|                                                                          |                                     |                                       | Total costs and expenses |        |       | 112,425 |         |        |       | 102,254 |         |        |        | 72,470 | 
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|Operating loss                                                            |                                     |                                       | (32,298                  | )      |       |         | (52,843 | )      |       |         | (46,637 | )     
|                                                                          |                                     | Interest income                       |                          |        | 1,012 |         |         |        | 2,639 |         |         |        | 6,246  |       
|                                                                          |                                     | Interest expense                      |                          |        | (410  | )       |         |        | (412  | )       |         |        | (1,893 | )     
|                                                                          |                                     | Other income, net                     |                          |        | 517   |         |         |        | 1,279 |         |         |        | 1,320  |       
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|Loss before income taxes                                                  |                                     |                                       | (31,179                  | )      |       |         | (49,337 | )      |       |         | (40,964 | )     
|Provision for income taxes                                                |                                     |                                       | (377                     | )      |       |         | (190    | )      |       |         |        |       
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|Net loss                                                                  |                                     | $                                     | (31,556                  | )      |       | $       | (49,527 | )      |       | $       | (40,964 | )     
|                                                                          |                                     |                                       |                          |        |       |         |         |        |      
|Net loss per common share, basic and diluted                              |                                     | $                                     | (1.08                    | )      |       | $       | (1.88   | )      |       | $       | (1.68   | )     
|Shares used in computing net loss per common share, basic and
    diluted |                                     |                                       | 29,273                   |        |       |         | 26,396  |        |       |         | 24,403  |       






|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(1) | Includes employee stock compensation, net, related to employees
    classified within expenses as follows:

|                                    |       |   |       |       |  |   |     |       |  |   |      |     | 
|----------------------------------- | ----- | - | ----- | ----- |  | - | --- | ----- |  | - | ---- | --- | 
|Cost of revenue                     |       | $ | 208   |       |  | $ | 56  |       |  | $ |     |    
|Research and development            |       |   | 515   |       |  |   | 384 |       |  |   | (315 | )  
|Selling, general and administrative |       |   | 2,047 |       |  |   | 560 |       |  |   | 693  |    
|                                    |       |   |       |       |  |   |     |       | 
|                                    | Total |   | $     | 2,770 |  |   | $   | 1,000 |  |   | $    | 378 | 
|                                    |       |   |       |       |  |   |     |       | 



F-4



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.





CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY


|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |   |   |       |        |   |   |         |         |  
|----------------------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ---------- | --------- | ---------- | ----------- | -- | -------- |  | - | ------------ | ------ | ----- | ------------- | ------ | ------ | ------------- | - | -------- | ------- | - | - | ----- | ------ | - | - | ------- | ------- | -
|                              |                                                                                                                     | Stockholders Equity          |           
|                              |                                                                                                                     |                               |           
|                              |                                                                                                                     |                               |            |           |            | Accumulated |    |          | 
|                              |                                                                                                                     | Common Stock                  |            |           | Additional |             |    | Deferred |  |   |              |        | Other |               |        | Total  |              
|                              |                                                                                                                     |                               |            |           | Paid-In    |             |    | Stock    |  |   | Accumulated  |        |       | Comprehensive |        |        | Stockholders |  
|                              |                                                                                                                     | Shares                        |            |           | Amount     |             |    | Capital  |  |   | Compensation |        |       | Deficit       |        |        | Income/(Loss) |   |          | Equity  |  
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|                              |                                                                                                                     | (In thousands, except shares) |           
|Balances at December 31, 2001 |                                                                                                                     |                               | 24,200,097 |           |            | $           | 24 |          |  | $ | 251,357      |        |       | $             | (2,232 | )      |               | $ | (44,602  | )       |   | $ | 2,017 |        |   | $ | 206,564 |        
|                              | Net loss                                                                                                            |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          | (40,964 | ) |   |       |       |   |   |         | (40,964 | )
|                              | Change in unrealized gain on available-or-sale securities                                                           |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       | (500   | ) |   |         | (500    | )
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|                              | Comprehensive loss                                                                                                  |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | (41,464 | )
|                              | Issuance of common stock upon exercise of stock options and in
    connection with the employee stock purchase plan |                               |            | 494,354   |            |             |    | 1        |  |   |              | 1,627  |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 1,628   |  
|                              | Amortization and reversals of deferred stock compensation                                                           |                               |            |          |            |             |    |         |  |   |              | (1,217 | )     |               |        | 1,595  |               |   |          |        |   |   |       |       |   |   |         | 378     |  
|                              | Stock options issued to non-employees                                                                               |                               |            |          |            |             |    |         |  |   |              | 452    |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 452     |  
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|Balances at December 31, 2002 |                                                                                                                     |                               | 24,694,451 |           |            |             | 25 |          |  |   | 252,219      |        |       |               | (637   | )      |               |   | (85,566  | )       |   |   | 1,517 |        |   |   | 167,558 |        
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|                              | Net loss                                                                                                            |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          | (49,527 | ) |   |       |       |   |   |         | (49,527 | )
|                              | Foreign currency translation gain/loss                                                                              |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       | 98     |   |   |         | 98      |  
|                              | Change in unrealized gain on available-for-sale securities                                                          |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       | (1,177 | ) |   |         | (1,177  | )
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|                              | Comprehensive loss                                                                                                  |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | (50,606 | )
|                              | Issuance of common stock upon exercise of stock options and in
    connection with the employee stock purchase plan |                               |            | 537,592   |            |             |    |         |  |   |              | 1,419  |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 1,419   |  
|                              | Issuance of common stock for the purchase of Zymark Corporation                                                     |                               |            | 3,150,000 |            |             |    | 3        |  |   |              | 14,588 |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 14,591  |  
|                              | Issuance of restricted common stock to employees and related
    deferred compensation                              |                               |            |          |            |             |    |         |  |   |              | 2,188  |       |               |        | (2,188 | )             |   |          |        |   |   |       |       |   |   |         |        |  
|                              | Amortization and reversals of deferred stock compensation                                                           |                               |            |          |            |             |    |         |  |   |              | (17    | )     |               |        | 1,017  |               |   |          |        |   |   |       |       |   |   |         | 1,000   |  
|                              | Compensation expense associated with modifications to certain
    stock options                                     |                               |            |          |            |             |    |         |  |   |              | 401    |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 401     |  
|                              | Stock options issued to non-employees                                                                               |                               |            |          |            |             |    |         |  |   |              | 434    |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 434     |  
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|Balances at December 31, 2003 |                                                                                                                     |                               | 28,382,043 |           |            |             | 28 |          |  |   | 271,232      |        |       |               | (1,808 | )      |               |   | (135,093 | )       |   |   | 438   |        |   |   | 134,797 |        
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|                              | Net loss                                                                                                            |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          | (31,556 | ) |   |       |       |   |   |         | (31,556 | )
|                              | Foreign currency translation gain/loss                                                                              |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       | 232    |   |   |         | 232     |  
|                              | Change in unrealized gain on available-for-sale securities                                                          |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       | (515   | ) |   |         | (515    | )
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|                              | Comprehensive loss                                                                                                  |                               |            |          |            |             |    |         |  |   |              |       |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | (31,839 | )
|                              | Issuance of common stock upon exercise of stock options and in
    connection with the employee stock purchase plan |                               |            | 1,738,137 |            |             |    | 2        |  |   |              | 6,343  |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 6,345   |  
|                              | Issuance of common stock upon exercise of warrants                                                                  |                               |            | 38,460    |            |             |    |         |  |   |              | 47     |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 47      |  
|                              | Issuance of restricted common stock to employees and related
    deferred compensation                              |                               |            | 201,648   |            |             |    |         |  |   |              | 2,585  |       |               |        | (2,585 | )             |   |          |        |   |   |       |       |   |   |         |        |  
|                              | Amortization and reversals of deferred stock compensation                                                           |                               |            |          |            |             |    |         |  |   |              | (96    | )     |               |        | 1,743  |               |   |          |        |   |   |       |       |   |   |         | 1,647   |  
|                              | Compensation expense associated with modifications to certain
    stock options                                     |                               |            |          |            |             |    |         |  |   |              | 540    |       |               |        |       |               |   |          |        |   |   |       |       |   |   |         | 540     |  
|                              | Compensation expense and deferred compensation related to stock
    options issued to non-employees                 |                               |            |          |            |             |    |         |  |   |              | 58     |       |               |        | (16    | )             |   |          |        |   |   |       |       |   |   |         | 42      |  
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  
|Balances at December 31, 2004 |                                                                                                                     |                               | 30,360,288 |           |            | $           | 30 |          |  | $ | 280,709      |        |       | $             | (2,666 | )      |               | $ | (166,649 | )       |   | $ | 155   |        |   |   | 111,579 |        
|                              |                                                                                                                     |                               |            |           |            |             |    |          |  |   |              |        |       |               |        |        |               |   |          |         |  



F-5



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |       |        |         |  
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ---------------------------------------------- | ---------------------------------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | -------- | ----- | ------ | ------- | -
|                                                                             |                                                                                | Years Ended December 31,                       |                                   
|                                                                             |                                                                                |                                                |                                   
|                                                                             |                                                                                | 2004                                           |                                    |        | 2003   |         |         | 2002   |       
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|                                                                             |                                                                                | (In thousands)                                 |                                   
|Operating activities                                                         |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |      
|Net loss                                                                     |                                                                                | $                                              | (31,556                            | )      |        | $       | (49,527 | )      |        | $       | (40,964  | )    
|Adjustments to reconcile net loss to net cash from operating
    activities: |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |      
|                                                                             | Depreciation and amortization                                                  |                                                |                                    | 10,020 |        |         |         | 10,169 |        |         |          | 5,795 |       
|                                                                             | Employee stock compensation, net                                               |                                                |                                    | 2,770  |        |         |         | 1,000  |        |         |          | 378   |       
|                                                                             | Stock options issued to non-employees                                          |                                                |                                    | 42     |        |         |         | 434    |        |         |          | 452   |       
|                                                                             | Non-cash restructuring charge                                                  |                                                |                                    | 5,774  |        |         |         | 10,623 |        |         |          |      |       
|                                                                             | Loss from disposal of fixed assets                                             |                                                |                                    | 4      |        |         |         | 313    |        |         |          |      |       
|                                                                             | Changes in operating assets and liabilities, net of acquisition
    of Zymark: |                                                |                                    |        |        |         |         |        |        |         |          |       |       
|                                                                             |                                                                                | Accounts receivable and other receivables      |                                    |        | (7,150 | )       |         |        | (1,296 | )       |          |       | 27,389 |        
|                                                                             |                                                                                | Inventories                                    |                                    |        | 1,410  |         |         |        | 4,343  |         |          |       | (2,553 | )      
|                                                                             |                                                                                | Prepaid expenses and other current assets      |                                    |        | 2,184  |         |         |        | (577   | )       |          |       | 803    |        
|                                                                             |                                                                                | Other assets                                   |                                    |        | 40     |         |         |        | (568   | )       |          |       | 35     |        
|                                                                             |                                                                                | Notes receivable from officers                 |                                    |        | 32     |         |         |        | 37     |         |          |       | 260    |        
|                                                                             |                                                                                | Accounts payable and other accrued liabilities |                                    |        | 1,369  |         |         |        | (463   | )       |          |       | 172    |        
|                                                                             |                                                                                | Accrued compensation                           |                                    |        | 1,617  |         |         |        | (2,874 | )       |          |       | (363   | )      
|                                                                             |                                                                                | Deferred revenue                               |                                    |        | 566    |         |         |        | (1,299 | )       |          |       | (2,162 | )      
|                                                                             |                                                                                | Other non-current liabilities                  |                                    |        | (298   | )       |         |        | (401   | )       |          |       | 386    |        
|                                                                             |                                                                                | Payments of accrued restructuring obligations  |                                    |        | (4,438 | )       |         |        | (1,338 | )       |          |       | (314   | )      
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|                                                                             |                                                                                |                                                | Net cash from operating activities |        |        | (17,614 | )       |        |        | (31,424 | )        |       |        | (10,686 | )
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|Investing activities                                                         |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |      
|Purchases of marketable securities                                           |                                                                                |                                                | (51,410                            | )      |        |         | (44,257 | )      |        |         | (168,689 | )    
|Proceeds from sales of marketable securities                                 |                                                                                |                                                | 61,058                             |        |        |         | 115,164 |        |        |         | 114,116  |      
|Proceeds from maturities of marketable securities                            |                                                                                |                                                | 7,831                              |        |        |         | 8,232   |        |        |         | 76,018   |      
|Restricted cash, net                                                         |                                                                                |                                                | 48                                 |        |        |         | 279     |        |        |         | 279      |      
|Purchases of property and equipment                                          |                                                                                |                                                | (3,593                             | )      |        |         | (1,533  | )      |        |         | (5,759   | )    
|Acquisition of Zymark, net of cash acquired                                  |                                                                                |                                                |                                   |        |        |         | (52,436 | )      |        |         |         |      
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|                                                                             |                                                                                |                                                | Net cash from investing activities |        |        | 13,934  |         |        |        | 25,449  |          |       |        | 15,965  |  
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|Financing activities                                                         |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |      
|Proceeds under sale-leaseback arrangements                                   |                                                                                |                                                |                                   |        |        |         |        |        |        |         | 822      |      
|Payments of obligations under sale-leaseback arrangements                    |                                                                                |                                                | (1,443                             | )      |        |         | (2,884  | )      |        |         | (2,200   | )    
|Payments of long-term obligations                                            |                                                                                |                                                | (362                               | )      |        |         |        |        |        |         |         |      
|Proceeds from issuance of common stock                                       |                                                                                |                                                | 6,392                              |        |        |         | 1,419   |        |        |         | 1,628    |      
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|                                                                             |                                                                                |                                                | Net cash from financing activities |        |        | 4,587   |         |        |        | (1,465  | )        |       |        | 250     |  
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|Effect of exchange rates on changes in cash and cash equivalents             |                                                                                |                                                | 328                                |        |        |         | 145     |        |        |         |         |      
|Net increase (decrease) in cash and cash equivalents                         |                                                                                |                                                | 1,235                              |        |        |         | (7,295  | )      |        |         | 5,529    |      
|Cash and cash equivalents at beginning of year                               |                                                                                |                                                | 9,168                              |        |        |         | 16,463  |        |        |         | 10,934   |      
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|Cash and cash equivalents at end of year                                     |                                                                                | $                                              | 10,403                             |        |        | $       | 9,168   |        |        | $       | 16,463   |      
|                                                                             |                                                                                |                                                |                                    |        |        |         |         |        |       
|Supplemental disclosure of cash flow information                             |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |      
|Interest paid                                                                |                                                                                | $                                              | 409                                |        |        | $       | 412     |        |        | $       | 642      |      
|Income taxes paid                                                            |                                                                                | $                                              | 103                                |        |        | $       | 171     |        |        | $       |         |      
|Supplemental disclosure of significant non-cash investing
    activities     |                                                                                |                                                |                                    |        |        |         |         |        |        |         |          |      
|Non-cash consideration exchanged for acquired research and
    development   |                                                                                | $                                              | 810                                |        |        | $       |        |        |        | $       |         |      
|Stock issued for acquisition of Zymark                                       |                                                                                | $                                              |                                   |        |        | $       | 14,591  |        |        | $       |         |      
|Purchase price adjustment for Zymark acquisition                             |                                                                                | $                                              | (47                                | )      |        | $       |        |        |        | $       |         |      



F-6



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                       
|-- | --------------------------------------
|1. | Organization and Basis of Presentation





| |                                 
| | --------------------------------
| | Financial Statement Presentation





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                 
| | ----------------
| | Use of Estimates





| |                                           
| | ------------------------------------------
| | Cash Equivalents and Marketable Securities







| |                             
| | ----------------------------
| | Customer Accounts Receivable





| |            
| | -----------
| | Inventories



F-7



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                
| | ---------------
| | Restricted Cash





| |                       
| | ----------------------
| | Property and Equipment





| |                                
| | -------------------------------
| | Impairment of Long-lived Assets





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





F-8



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                    
| | -------------------
| | Revenue Recognition



| |               
| | --------------
| | General Policy







| |                
| | ---------------
| | Product Revenue







| |                     
| | --------------------
| | Agilent Supply Terms



F-9



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                          
| | -----------------------------------------
| | Service and Annual Maintenance Agreements





| |                      
| | ---------------------
| | Licensing and Royalty





| |                 
| | ----------------
| | Contract Revenue





| |         
| | --------
| | Software





| |                  
| | -----------------
| | Segment Reporting



F-10



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |         
| | --------
| | Goodwill





| |                             
| | ----------------------------
| | Foreign Currency Translation







| |                         
| | ------------------------
| | Research and Development







| |                     
| | --------------------
| | Warranty Obligations



F-11



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                     |  |   |        |  
|---------------------------------------------------- |  | - | ------ | -
|Balance, December 31, 2002                           |  | $ | 265    |  
|Zymark warranty obligations assumed on July 14, 2003 |  |   | 850    |  
|Warranties issued during the period                  |  |   | 1,002  |  
|Settlements and adjustments made during the period   |  |   | (1,009 | )
|                                                     |  |   |       
|Balance, December 31, 2003                           |  |   | 1,108  |  
|Warranties issued during the period                  |  |   | 1,751  |  
|Settlements and adjustments made during the period   |  |   | (1,423 | )
|                                                     |  |   |       
|Balance, December 31, 2004                           |  | $ | 1,436  |  
|                                                     |  |   |       



| |                       
| | ----------------------
| | Other Income (Expense)



|                                            |  |                          |     |   |      |   |       |      |  |   |       |  
|------------------------------------------- |  | ------------------------ | --- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                            |  | Years Ended December 31, |    
|                                            |  |                          |    
|                                            |  | 2004                     |     |   | 2003 |   |       | 2002 | 
|                                            |  |                          |     |   |      |   |       |      | 
|                                            |  | (In thousands)           |    
|Realized gain on marketable securities, net |  | $                        | 124 |   |      | $ | 924   |      |  | $ | 1,371 |  
|Foreign exchange transaction gain           |  |                          | 338 |   |      |   | 783   |      |  |   |      |  
|Loss on sale of equipment                   |  |                          | (4  | ) |      |   | (313  | )    |  |   | (51   | )
|Other income (expense), net                 |  |                          | 59  |   |      |   | (115  | )    |  |   |      |  
|                                            |  |                          |     |   |      |   |       |      | 
|                                            |  | $                        | 517 |   |      | $ | 1,279 |      |  | $ | 1,320 |  
|                                            |  |                          |     |   |      |   |       |      | 



| |                                
| | -------------------------------
| | Guarantees and Indemnifications





F-12



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                     
| | ------------------------------------
| | Shipping and Handling Fees and Costs





| |                    
| | -------------------
| | Advertising Expense





| |                
| | ---------------
| | Risk Management





| |                                                   
| | --------------------------------------------------
| | Significant Concentrations, Credit and Other Risks









| |                            
| | ---------------------------
| | Comprehensive Income (Loss)



F-13



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                         
| | ------------------------
| | Stock-Based Compensation





|                    |                                                                                                                      |                                       |   |         |       |   |   |         |       |   |   |         |       |  
|------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | - | ------- | ----- | - | - | ------- | ----- | - | - | ------- | ----- | -
|                    |                                                                                                                      | Years Ended December 31,              |  
|                    |                                                                                                                      |                                       |  
|                    |                                                                                                                      | 2004                                  |   |         | 2003  |   |   | 2002    |      
|                    |                                                                                                                      |                                       |   |         |       |   |   |         |      
|                    |                                                                                                                      | (In thousands, except per share data) |  
|Net loss:           |                                                                                                                      |                                       |   |         |       |   |   |         |       |   |   |        
|                    | As reported                                                                                                          |                                       | $ | (31,556 | )     |   | $ | (49,527 | )     |   | $ | (40,964 | )    
|                    | Add: Stock-based employee compensation expense included in
    reported net loss (see Note 13)                       |                                       |   | 2,770   |       |   |   | 1,841   |       |   |   | 378     |      
|                    | Deduct: Total stock-based employee compensation expense
    determined under fair value based methods for all awards |                                       |   | (12,827 | )     |   |   | (20,142 | )     |   |   | (25,221 | )    
|                    |                                                                                                                      |                                       |   |         |       |   |   |         |      
|                    | Pro forma net loss                                                                                                   |                                       | $ | (41,613 | )     |   | $ | (67,828 | )     |   | $ | (65,807 | )    
|                    |                                                                                                                      |                                       |   |         |       |   |   |         |      
|Net loss per share: |                                                                                                                      |                                       |   |         |       |   |   |         |       |   |   |        
|                    | As reported:                                                                                                         |                                       |   |         |       |   |   |         |       |   |   |         |      
|                    |                                                                                                                      | Basic and diluted                     |   | $       | (1.08 | ) |   | $       | (1.88 | ) |   | $       | (1.68 | )
|                    | Pro forma:                                                                                                           |                                       |   |         |       |   |   |         |       |   |   |         |      
|                    |                                                                                                                      | Basic and diluted                     |   | $       | (1.42 | ) |   | $       | (2.57 | ) |   | $       | (2.70 | )





| |                            
| | ---------------------------
| | Net Income (Loss) Per Share



F-14



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                  
| | -----------------
| | Reclassifications





| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements

requires






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A modified prospective method in which compensation
    cost is recognized beginning with the effective date
    (a) based on the requirements of Statement 123(R) for
    all share-based payments granted after the effective date and
    (b) based on the requirements of Statement 123 for all
    awards granted to employees prior to the effective date of
    Statement 123(R) that remain unvested on the effective date.
|
| |  | A modified retrospective method which includes the
    requirements of the modified prospective method described above,
    but also permits entities to restate based on the amounts
    previously recognized under Statement 123 for purposes of
    pro forma disclosures either (a) all prior periods
    presented or (b) prior interim periods of the year of
    adoption.                                                 






F-15



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                  
|-- | ---------------------------------
|3. | Acquisition of Zymark Corporation







|                               |  |   |         |  
|------------------------------ |  | - | ------- | -
|Cash and cash equivalents      |  | $ | 5,803   |  
|Other current assets           |  |   | 17,472  |  
|Other assets                   |  |   | 2,838   |  
|Liabilities assumed            |  |   | (19,663 | )
|Identifiable intangible assets |  |   | 19,165  |  
|Goodwill                       |  |   | 47,215  |  
|                               |  |   |        
|                               |  | $ | 72,830  |  
|                               |  |   |        





|   |                                  
|-- | ---------------------------------
|4. | Acquired Research and Development



F-16



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                                 
|-- | ------------------------------------------------
|5. | Cash, Cash Equivalents and Marketable Securities



|                                              |                           |                |        |        |            |   |       |            |   |   |            |    |  |   |        |        | 
|--------------------------------------------- | ------------------------- | -------------- | ------ | ------ | ---------- | - | ----- | ---------- | - | - | ---------- | -- |  | - | ------ | ------ | 
|                                              |                           |                |        | Gross  |            |   | Gross |            |   |  
|                                              |                           | Amortized      |        |        | Unrealized |   |       | Unrealized |   |   | Estimated  |   
|                                              |                           | Cost           |        |        | Losses     |   |       | Gains      |   |   | Fair Value |   
|                                              |                           |                |        |        |            |   |       |            |   |   |            |   
|                                              |                           | (In thousands) |       
|Cash and money market funds                   |                           | $              | 10,403 |        |            | $ |      |            |   | $ |           |    |  | $ | 10,403 |       
|Bonds of the U.S. Government and its agencies |                           |                | 24,575 |        |            |   | (161  | )          |   |   |           |    |  |   | 24,414 |       
|Corporate debt securities                     |                           |                | 15,434 |        |            |   | (84   | )          |   |   | 70         |    |  |   | 15,420 |       
|                                              |                           |                |        |        |            |   |       |            |   |   |            |   
|                                              |                           | $              | 50,412 |        |            | $ | (245  | )          |   | $ | 70         |    |  | $ | 50,237 |       
|                                              |                           |                |        |        |            |   |       |            |   |   |            |   
|Reported as:                                  |                           |                |        |        |            |   |       |            |   |   |            |    |  |   |        |       
|                                              | Cash and cash equivalents |                | $      | 10,403 |            |   | $     |           |   |   | $          |   |  |   | $      | 10,403 | 
|                                              | Marketable securities     |                |        | 40,009 |            |   |       | (245       | ) |   |            | 70 |  |   |        | 39,834 | 
|                                              |                           |                |        |        |            |   |       |            |   |   |            |   
|                                              |                           | $              | 50,412 |        |            | $ | (245  | )          |   | $ | 70         |    |  | $ | 50,237 |       
|                                              |                           |                |        |        |            |   |       |            |   |   |            |   



|                                          |       |                |        |        |            |   |        |        | 
|----------------------------------------- | ----- | -------------- | ------ | ------ | ---------- | - | ------ | ------ | 
|                                          |       | Amortized      |        |        | Estimated  |  
|                                          |       | Cost           |        |        | Fair Value |  
|                                          |       |                |        |        |            |  
|                                          |       | (In thousands) |       
|Mature within one year                    |       | $              | 27,409 |        |            | $ | 27,285 |       
|Mature after one year through three years |       |                | 23,003 |        |            |   | 22,952 |       
|                                          |       |                |        |        |            |  
|                                          | Total |                | $      | 50,412 |            |   | $      | 50,237 | 
|                                          |       |                |        |        |            |  

F-17



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                              |                           |                |        |        |            |   |       |            |   |           |       |     |  |   |        |        | 
|--------------------------------------------- | ------------------------- | -------------- | ------ | ------ | ---------- | - | ----- | ---------- | - | --------- | ----- | --- |  | - | ------ | ------ | 
|                                              |                           |                |        | Gross  |            |   | Gross |            |   | Estimated |      
|                                              |                           | Amortized      |        |        | Unrealized |   |       | Unrealized |   |           | Fair  |    
|                                              |                           | Cost           |        |        | Losses     |   |       | Gains      |   |           | Value |    
|                                              |                           |                |        |        |            |   |       |            |   |           |       |    
|                                              |                           | (In thousands) |       
|Cash and money market funds                   |                           | $              | 9,168  |        |            | $ |      |            |   | $         |      |     |  | $ | 9,168  |       
|Bonds of the U.S. Government and its agencies |                           |                | 20,140 |        |            |   | (2    | )          |   |           | 119   |     |  |   | 20,257 |       
|Corporate debt securities                     |                           |                | 37,348 |        |            |   | (2    | )          |   |           | 225   |     |  |   | 37,571 |       
|                                              |                           |                |        |        |            |   |       |            |   |           |       |    
|                                              |                           | $              | 66,656 |        |            | $ | (4    | )          |   | $         | 344   |     |  | $ | 66,996 |       
|                                              |                           |                |        |        |            |   |       |            |   |           |       |    
|Reported as:                                  |                           |                |        |        |            |   |       |            |   |           |       |     |  |   |        |       
|                                              | Cash and cash equivalents |                | $      | 9,168  |            |   | $     |           |   |           | $     |    |  |   | $      | 9,168  | 
|                                              | Marketable securities     |                |        | 57,488 |            |   |       | (4         | ) |           |       | 344 |  |   |        | 57,828 | 
|                                              |                           |                |        |        |            |   |       |            |   |           |       |    
|                                              |                           | $              | 66,656 |        |            | $ | (4    | )          |   | $         | 344   |     |  | $ | 66,996 |       
|                                              |                           |                |        |        |            |   |       |            |   |           |       |    



|                                          |       |                |        |        |            |   |        |        | 
|----------------------------------------- | ----- | -------------- | ------ | ------ | ---------- | - | ------ | ------ | 
|                                          |       | Amortized      |        |        | Estimated  |  
|                                          |       | Cost           |        |        | Fair Value |  
|                                          |       |                |        |        |            |  
|                                          |       | (In thousands) |       
|Mature within one year                    |       | $              | 24,808 |        |            | $ | 24,869 |       
|Mature after one year through three years |       |                | 41,848 |        |            |   | 42,127 |       
|                                          |       |                |        |        |            |  
|                                          | Total |                | $      | 66,656 |            |   | $      | 66,996 | 
|                                          |       |                |        |        |            |  







|   |                 
|-- | ----------------
|6. | Notes Receivable



F-18



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |            
|-- | -----------
|7. | Inventories



|                |             |                |       |       |      |   |       |        | 
|--------------- | ----------- | -------------- | ----- | ----- | ---- | - | ----- | ------ | 
|                |             | December 31,   |      
|                |             |                |      
|                |             | 2004           |       |       | 2003 |  
|                |             |                |       |       |      |  
|                |             | (In thousands) |      
|Raw material    |             | $              | 4,780 |       |      | $ | 5,929 |       
|Work-in-process |             |                | 852   |       |      |   | 1,087 |       
|Finished goods  |             |                | 4,196 |       |      |   | 4,564 |       
|                |             |                |       |       |      |  
|                | Inventories |                | $     | 9,828 |      |   | $     | 11,580 | 
|                |             |                |       |       |      |  





|   |                       
|-- | ----------------------
|8. | Property and Equipment



|                                          |  |                                                   |           |                |       |   |         |      |       |   |         |  
|----------------------------------------- |  | ------------------------------------------------- | --------- | -------------- | ----- | - | ------- | ---- | ----- | - | ------- | -
|                                          |  |                                                   |           | December 31,   |      
|                                          |  |                                                   |           |                |      
|Asset Classification                      |  | Estimated Useful Life                             |           |                | 2004  |   |         | 2003 |      
|                                          |  |                                                   |           |                |       |   |         |      |      
|                                          |  |                                                   |           | (In thousands) |      
|Machinery and equipment                   |  |                                                   | 2-5 years |                |       | $ | 15,122  |      |       | $ | 14,439  |  
|Computers and information systems         |  |                                                   | 3-5 years |                |       |   | 5,782   |      |       |   | 3,501   |  
|Office equipment, furniture and fixtures  |  |                                                   | 5 years   |                |       |   | 2,019   |      |       |   | 1,858   |  
|Leasehold improvements                    |  | Shorter of estimated useful life or life of lease |           |                | 4,715 |   |         |      | 5,001 |  
|                                          |  |                                                   |           |                |       |   |         |      |      
|                                          |  |                                                   |           |                |       |   | 27,638  |      |       |   | 24,799  |  
|Accumulated depreciation and amortization |  |                                                   |           |                |       |   | (21,452 | )    |       |   | (15,693 | )
|                                          |  |                                                   |           |                |       |   |         |      |      
|Property and equipment, net               |  |                                                   |           |                |       | $ | 6,186   |      |       | $ | 9,106   |  
|                                          |  |                                                   |           |                |       |   |         |      |      



F-19



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                          |  |                |        |   |      |   |        |  
|----------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                          |  | December 31,   |       
|                                          |  |                |       
|Asset Classification                      |  | 2004           |        |   | 2003 |  
|                                          |  |                |        |   |      |  
|                                          |  | (In thousands) |       
|Machinery and equipment                   |  | $              | 1,218  |   |      | $ | 3,441  |  
|Computers and information systems         |  |                | 135    |   |      |   | 1,179  |  
|Office equipment, furniture and fixtures  |  |                | 54     |   |      |   | 202    |  
|Leasehold improvements                    |  |                | 17     |   |      |   | 1,132  |  
|                                          |  |                |        |   |      |  
|                                          |  |                | 1,424  |   |      |   | 5,954  |  
|Accumulated depreciation and amortization |  |                | (1,303 | ) |      |   | (4,835 | )
|                                          |  |                |        |   |      |  
|Leased property and equipment, net        |  | $              | 121    |   |      | $ | 1,119  |  
|                                          |  |                |        |   |      |  



|   |                         
|-- | ------------------------
|9. | Goodwill and Intangibles



|                 |                                |                |        |        |      |   |        |        | 
|---------------- | ------------------------------ | -------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                 |                                | December 31,   |       
|                 |                                |                |       
|                 |                                | 2004           |        |        | 2003 |  
|                 |                                |                |        |        |      |  
|                 |                                | (In thousands) |       
|Intangibles, net |                                | $              | 12,745 |        |      | $ | 16,628 |       
|Goodwill         |                                |                | 47,215 |        |      |   | 47,262 |       
|                 |                                |                |        |        |      |  
|                 | Total goodwill and intangibles |                | $      | 59,960 |      |   | $      | 63,890 | 
|                 |                                |                |        |        |      |  



| |         
| | --------
| | Goodwill





| |            
| | -----------
| | Intangibles



|                     |                            |                |           |  |      |   |             |              |  |   |        |        |   |   |        |        | 
|-------------------- | -------------------------- | -------------- | --------- |  | ---- | - | ----------- | ------------ |  | - | ------ | ------ | - | - | ------ | ------ | 
|                     |                            | Amortization   |           |  |      |   | Accumulated |              |  |  
|Asset Classification |                            | Period         |           |  | Cost |   |             | Amortization |  |   | Net    |       
|                     |                            |                |           |  |      |   |             |              |  |   |        |       
|                     |                            | (In thousands) |          
|Developed technology |                            |                | 5 years   |  |      | $ | 14,314      |              |  | $ | (4,175 | )      |   | $ | 10,139 |       
|Customer list        |                            |                | 5 years   |  |      |   | 3,640       |              |  |   | (1,062 | )      |   |   | 2,578  |       
|Backlog              |                            |                | 0.5 years |  |      |   | 1,211       |              |  |   | (1,211 | )      |   |   |       |       
|                     |                            |                |           |  |      |   |             |              |  |   |        |       
|                     | Total acquired intangibles |                |           |  |      |   |             | 19,165       |  |   |        | (6,448 | ) |   |        | 12,717 | 
|Other intangibles    |                            |                | 5 years   |  |      |   | 910         |              |  |   | (882   | )      |   |   | 28     |       
|                     |                            |                |           |  |      |   |             |              |  |   |        |       
|                     |                            |                |           |  |      | $ | 20,075      |              |  | $ | (7,330 | )      |   | $ | 12,745 |       
|                     |                            |                |           |  |      |   |             |              |  |   |        |       

F-20



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |  |   |        | 
|---- |  | - | ------ | 
|2005 |  | $ | 3,619  | 
|2006 |  |   | 3,591  | 
|2007 |  |   | 3,591  | 
|2008 |  |   | 1,944  | 
|     |  |   |       
|     |  | $ | 12,745 | 
|     |  |   |       



|    |                                          
|--- | -----------------------------------------
|10. | Other Current and Non-current Liabilities



|                                 |                                    |                |       |       |      |   |       |       | 
|-------------------------------- | ---------------------------------- | -------------- | ----- | ----- | ---- | - | ----- | ----- | 
|                                 |                                    | December 31,   |      
|                                 |                                    |                |      
|                                 |                                    | 2004           |       |       | 2003 |  
|                                 |                                    |                |       |       |      |  
|                                 |                                    | (In thousands) |      
|Accrued bonus                    |                                    | $              | 4,364 |       |      | $ | 2,272 |      
|Accrued other                    |                                    |                | 1,984 |       |      |   | 1,876 |      
|                                 |                                    |                |       |       |      |  
|                                 | Total accrued compensation         |                | $     | 6,348 |      |   | $     | 4,148 | 
|                                 |                                    |                |       |       |      |  
|Accrued warranty                 |                                    | $              | 1,436 |       |      | $ | 1,108 |      
|Accrued VAT and other taxes      |                                    |                | 1,571 |       |      |   | 1,306 |      
|Accrued accounting and legal     |                                    |                | 1,031 |       |      |   | 587   |      
|Accrued other                    |                                    |                | 1,803 |       |      |   | 1,758 |      
|                                 |                                    |                |       |       |      |  
|                                 | Total other accrued liabilities    |                | $     | 5,841 |      |   | $     | 4,759 | 
|                                 |                                    |                |       |       |      |  
|Deferred rent                    |                                    | $              | 611   |       |      | $ | 1,088 |      
|Deferred compensation obligation |                                    |                | 202   |       |      |   | 497   |      
|Other                            |                                    |                | 118   |       |      |   | 395   |      
|                                 |                                    |                |       |       |      |  
|                                 | Total other noncurrent liabilities |                | $     | 931   |      |   | $     | 1,980 | 
|                                 |                                    |                |       |       |      |  

F-21



---



##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |            
|--- | -----------
|11. | Commitments



| |                
| | ---------------
| | Debt and Leases



|                                     |            |                                            |   |       |                |       |     |             |     |   |     |     |     | 
|------------------------------------ | ---------- | ------------------------------------------ | - | ----- | -------------- | ----- | --- | ----------- | --- | - | --- | --- | --- | 
|                                     |            |                                            |   |       |                | Other |    
|                                     |            | Operating                                  |   |       | Sale-Leaseback |       |     | Long-term   |    
|                                     |            | Leases                                     |   |       | Obligations    |       |     | Obligations |    
|                                     |            |                                            |   |       |                |       |     |             |    
|Years ending December 31:            |            |                                            |   |       |                |       |     |             |     |   |     |    
|                                     | 2005       |                                            | $ | 4,174 |                |       | $   | 312         |     |   | $   | 409 |    
|                                     | 2006       |                                            |   | 2,776 |                |       |     |            |     |   |     |    |    
|                                     | 2007       |                                            |   | 2,442 |                |       |     |            |     |   |     |    |    
|                                     | 2008       |                                            |   | 2,227 |                |       |     |            |     |   |     |    |    
|                                     | 2009       |                                            |   | 283   |                |       |     |            |     |   |     |    |    
|                                     | Thereafter |                                            |   | 490   |                |       |     |            |     |   |     |    |    
|                                     |            |                                            |   |       |                |       |     |             |    
|                                     |            | Total minimum lease and principal payments |   | $     | 12,392         |       |     |             | 312 |   |     |     | 409 | 
|                                     |            |                                            |   |       |                |       |     |             |    
|Less: Amount representing interest   |            |                                            |   |       |                |       | 11  |             |     |   |    |    
|                                     |            |                                            |   |       |                |       |     |             |    
|Present value of future payments     |            |                                            |   |       |                |       | 301 |             |     |   | 409 |    
|Less: Current portion of obligations |            |                                            |   |       |                |       | 301 |             |     |   | 409 |    
|                                     |            |                                            |   |       |                |       |     |             |    
|Noncurrent portion of obligations    |            |                                            |   |       |                | $     |    |             |     | $ |    |    
|                                     |            |                                            |   |       |                |       |     |             |    





| |                
| | ---------------
| | Facility Leases











F-22



---



##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                           
| | --------------------------
| | Sale-Leaseback Obligations





| |                 
| | ----------------
| | Other Obligation





| |                  
| | -----------------
| | Letters-of-Credit





| |                    
| | -------------------
| | Inventory Purchases





| |          
| | ---------
| | Royalties





|    |                         
|--- | ------------------------
|12. | Restructuring Activities



F-23



---



##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                     
| | --------------------
| | Workforce Reductions



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In September 2002, Caliper reduced its workforce by 28
    employees, or approximately 10%, in response to depressed market
    conditions. Of the employees affected by the reduction, 75% were
    in research and development, with the remaining divided equally
    between manufacturing and administrative functions. Caliper
    recorded a charge of $314,000 for severance and related
    benefits, and all of the separations and payments were completed
    by December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | In May 2003, Caliper reduced its workforce by 26 employees, or
    approximately 10%, in response to a continuing broad economic
    slowdown and reduced research and development spending by
    biopharmaceutical companies. The reduction primarily affected
    employees in research and development and was due to a change in
    focus in product development and technology research to better
    align with the changing needs of Calipers customers.
    Caliper recorded a charge of $322,000 for severance payments and
    related benefits, and all of the separations and payments were
    completed by June 30, 2003.                                                                                                                                                                                                                                                                                                                         
|
| |  | In August 2003, Caliper reduced its workforce by 37 positions,
    or approximately 7% of the total headcount of Caliper and the
    newly acquired Zymark. The reduction was the first of two phases
    of reductions designed to eliminate redundancies and increase
    organizational efficiencies within the newly combined company,
    and primarily affected manufacturing, sales and administration.
    Of the 37 terminations, 33% occurred in August 2003 and the
    remainder of the terminations occurred by March 31, 2004.
    Caliper recorded a charge of $774,000 in the third quarter of
    2003 and a related charge of $1.5 million during the fourth
    quarter of 2003 for severance payments and related benefits. All
    separations and related payments were completed by June 2004. Of
    the amount included in accrued restructuring expenses at
    December 31, 2003, $1.5 million was related to the
    August downsizing.
|
| |  | In December 2003, Caliper reduced its workforce by 37 positions,
    or approximately 8% of total headcount as the second phase of
    consolidating operations following the Zymark acquisition. This
    reduction primarily affected research and development staff as a
    result of certain strategy and priority decisions finalized
    during the fourth quarter of 2003. Caliper recorded a charge of
    $1.2 million in the fourth quarter of 2003 for severance
    payments and related benefits for the December downsizing. All
    separations and related payments were completed during 2004. Of
    the amount included in accrued restructuring expenses at
    December 31, 2003, $569,000 was related to the December
    downsizing.                                                                                                                                                                                                       
|
| |  | In June 2004, Caliper reduced its workforce by 14 positions, or
    approximately 3% of total headcount. The intent of the reduction
    was to finalize the implementation of identified cost
    efficiencies achieved as a result of the Zymark acquisition,
    aimed to reduce LabChip manufacturing costs. Caliper recorded a
    charge of $180,000 for severance and related benefits, and all
    separations and related payments were completed by
    September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| |                  
| | -----------------
| | Facility Closures



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In November 2003, Caliper closed one of its three facilities in
    Mountain View, CA that was used primarily for instrument
    manufacturing and research and development activities, and
    recognized a $7.7 million charge related to costs estimated
    over the remainder of the lease (June 2008), including leasehold
    improvements having a carrying value of $319,000 that had no
    further use.
|
| |  | In June 2004, as a result of efficiencies achieved following
    Calipers strategic prioritization of research and
    development programs, Caliper vacated and shut down
    approximately one half of a second                                                                                                                                                                                                

F-24



---



##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | Mountain View facility that was primarily used for research and
    development activities, and recognized an additional
    $2.2 million charge related to costs estimated over the
    remainder of the lease (June 2008), including leasehold
    improvements having a carrying value of $67,000 that had no
    further use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | In December 2004, Caliper was successful in achieving additional
    efficiencies that enabled it to complete the full closure of the
    second facility above. In connection with the latest action
    taken in December Caliper also reassessed its previous estimates
    supporting the earlier charges taken and determined, on the
    basis of recent market information indicating a low probability
    of obtaining sublease income from these idled facilities, that a
    $3.6 million charge was necessary to both account for the
    latest closure and reflect the fair value of its remaining lease
    payments for both idled facilities as of December 31, 2004.
    Of the total charge, $1.7 million was related to Caliper
    revised estimate of the sublease income potential and $246,000
    was related to leasehold improvements that had no further use.





|                                            |  |                |        |   |          |   |        |            |  |   |       |   |  |   |        |  
|------------------------------------------- |  | -------------- | ------ | - | -------- | - | ------ | ---------- |  | - | ----- | - |  | - | ------ | -
|                                            |  | Severance      |        |   |          |   |        |            | 
|                                            |  | and            |        |   |          |   |        |            | 
|                                            |  | Related        |        |   | Facility |   |        | Leaseholds |  |   | Total |  
|                                            |  |                |        |   |          |   |        |            |  |   |       |  
|                                            |  | (In thousands) |       
|Balance, December 31, 2002                  |  | $              |       |   |          | $ |       |            |  | $ |      |   |  | $ |       |  
|Restructuring charges                       |  |                | 3,822  |   |          |   | 7,394  |            |  |   | 319   |   |  |   | 11,535 |  
|Non-cash restructuring charges              |  |                | (401   | ) |          |   |       |            |  |   | (319  | ) |  |   | (720   | )
|Reclassification of deferred rent liability |  |                |       |   |          |   | 425    |            |  |   |      |   |  |   | 425    |  
|Payments                                    |  |                | (1,338 | ) |          |   |       |            |  |   |      |   |  |   | (1,338 | )
|                                            |  |                |        |   |          |   |        |            |  |   |       |  
|Balance, December 31, 2003                  |  |                | 2,083  |   |          |   | 7,819  |            |  |   |      |   |  |   | 9,902  |  
|                                            |  |                |        |   |          |   |        |            |  |   |       |  
|Restructuring charges                       |  |                | 180    |   |          |   | 5,415  |            |  |   | 313   |   |  |   | 5,908  |  
|Non-cash restructuring charges              |  |                |       |   |          |   |       |            |  |   | (313  | ) |  |   | (313   | )
|Restructuring credits                       |  |                | (134   | ) |          |   |       |            |  |   |      |   |  |   | (134   | )
|Reclassification of deferred rent liability |  |                |       |   |          |   | 436    |            |  |   |      |   |  |   | 436    |  
|Accretion of facility lease accrual         |  |                |       |   |          |   | 244    |            |  |   |      |   |  |   | 244    |  
|Payments                                    |  |                | (2,129 | ) |          |   | (2,309 | )          |  |   |      |   |  |   | (4,438 | )
|                                            |  |                |        |   |          |   |        |            |  |   |       |  
|Balance, December 31, 2004                  |  | $              |       |   |          | $ | 11,605 |            |  | $ |      |   |  | $ | 11,605 |  
|                                            |  |                |        |   |          |   |        |            |  |   |       |  



F-25



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                     |      |                                            |        |       |        | 
|------------------------------------ | ---- | ------------------------------------------ | ------ | ----- | ------ | 
|Years ending December 31:            |      |                                            |        |      
|                                     | 2005 |                                            | $      | 3,535 |       
|                                     | 2006 |                                            |        | 3,657 |       
|                                     | 2007 |                                            |        | 3,784 |       
|                                     | 2008 |                                            |        | 1,922 |       
|                                     |      |                                            |       
|                                     |      | Total minimum lease and principal payments |        |       | 12,898 | 
|Less: Amount representing interest   |      |                                            | 1,293  |      
|                                     |      |                                            |       
|Present value of future payments     |      |                                            | 11,605 |      
|Less: Current portion of obligations |      |                                            | 3,177  |      
|                                     |      |                                            |       
|Noncurrent portion of obligations    |      | $                                          | 8,428  |      
|                                     |      |                                            |       





|    |                     
|--- | --------------------
|13. | Stockholders Equity



| |                                     
| | ------------------------------------
| | Preferred Share Purchase Rights Plan





| |         
| | --------
| | Warrants



F-26



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |            
| | -----------
| | Stock Plans



|                                     |  |             |            |  |             |  |           |              |  |  |                     |  |  |  |            | 
|------------------------------------ |  | ----------- | ---------- |  | ----------- |  | --------- | ------------ |  |  | ------------------- |  |  |  | ---------- | 
|                                     |  |             |            |  |             |  |           | Common Stock | 
|                                     |  | Plan Shares |            |  | Plan Shares |  |           | Awards       |  |  | Reserved for Future | 
|Plan                                 |  | Authorized  |            |  | Available   |  |           | Outstanding  |  |  | Issuance            | 
|                                     |  |             |            |  |             |  |           |              |  |  |                     | 
|Option Plans:                        |  |             |            |  |             |  |           |              |  |  |                     |  |  |  |            | 
|1999 Equity Plan                     |  |             | 12,820,000 |  |             |  | 3,699,719 |              |  |  | 6,042,871           |  |  |  | 9,742,590  | 
|1999 Directors Plan                 |  |             | 556,023    |  |             |  | 410,823   |              |  |  | 138,200             |  |  |  | 549,023    | 
|2001 Non-Statutory Stock Option Plan |  |             | 500,000    |  |             |  | 108,437   |              |  |  | 391,563             |  |  |  | 500,000    | 
|Acquisition Plan                     |  |             | 900,000    |  |             |  | 25,000    |              |  |  | 838,750             |  |  |  | 863,750    | 
|1996 Stock Plan                      |  |             | 89,797     |  |             |  |          |              |  |  | 1,410               |  |  |  | 1,410      | 
|                                     |  |             |            |  |             |  |           |              |  |  |                     | 
|                                     |  |             | 14,865,820 |  |             |  | 4,243,979 |              |  |  | 7,412,794           |  |  |  | 11,656,773 | 
|                                     |  |             |            |  |             |  |           |              |  |  |                     | 
|1999 Purchase Plan                   |  |             | 1,484,892  |  |             |  | 242,261   |              |  |  |                    |  |  |  | 242,261    | 
|                                     |  |             |            |  |             |  |           |              |  |  |                     | 













F-27



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                 |                       |           |           |             |        |  |           |                |          |   |              |              |  |   |       |       | 
|-------------------------------- | --------------------- | --------- | --------- | ----------- | ------ |  | --------- | -------------- | -------- | - | ------------ | ------------ |  | - | ----- | ----- | 
|                                 |                       |           |           | Outstanding |        |  | Weighted- |               
|                                 |                       |           |           |             |        |  | Average   |               
|                                 |                       |           |           | Number of   |        |  |           |                | Exercise |  
|                                 |                       | Available |           |             | Shares |  |           | Exercise Price |          |   | Price        |             
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Balance at December 31, 2001     |                       |           | 1,563,995 |             |        |  | 4,888,039 |                |          | $ | 0.06$162.00 |              |  | $ | 20.95 |      
|                                 | Authorized            |           |           | 2,492,997   |        |  |           |               |          |   |              |             |  |   |       |      | 
|                                 | Granted               |           |           | (2,682,387  | )      |  |           | 2,682,387      |          |   | $            | 3.52$ 17.66 |  |   | $     | 9.46  | 
|                                 | Exercised             |           |           |            |        |  |           | (157,866       | )        |   | $            | 0.06$  3.12 |  |   | $     | 1.07  | 
|                                 | Canceled              |           |           | 3,030,253   |        |  |           | (3,030,253     | )        |   | $            | 0.47$102.00 |  |   | $     | 26.60 | 
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Balance at December 31, 2002     |                       |           | 4,404,858 |             |        |  | 4,382,307 |                |          | $ | 0.06$162.00 |              |  | $ | 10.15 |      
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|                                 | Authorized            |           |           | 4,543,275   |        |  |           |               |          |   |              |             |  |   |       |      | 
|                                 | Granted               |           |           | (5,670,660  | )      |  |           | 5,670,660      |          |   | $            | 0.00$6.45   |  |   | $     | 4.12  | 
|                                 | Exercised             |           |           |            |        |  |           | (177,666       | )        |   | $            | 0.06$ 3.63  |  |   | $     | 1.89  | 
|                                 | Vested                |           |           |            |        |  |           | (15,152        | )        |   | $            | 0.00         |  |   | $     | 0.00  | 
|                                 | Canceled              |           |           | 923,799     |        |  |           | (923,799       | )        |   | $            | 0.97$77.00  |  |   | $     | 9.89  | 
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Balance at December 31, 2003     |                       |           | 4,201,272 |             |        |  | 8,936,350 |                |          | $ | 0.06$162.00 |              |  | $ | 6.54  |      
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|                                 | Authorized            |           |           | 103,980     |        |  |           |               |          |   |              |             |  |   |       |      | 
|                                 | Granted               |           |           | (1,055,470  | )      |  |           | 1,055,470      |          |   | $            | 0.00$ 9.32  |  |   | $     | 3.71  | 
|                                 | Exercised             |           |           |            |        |  |           | (1,374,938     | )        |   | $            | 0.06$6.37   |  |   | $     | 3.69  | 
|                                 | Vested                |           |           |            |        |  |           | (188,746       | )        |   | $            | 0.00         |  |   | $     | 0.00  | 
|                                 | Un-vested repurchases |           |           |            |        |  |           | (21,145        | )        |   | $            | 0.00         |  |   | $     | 0.00  | 
|                                 | Canceled              |           |           | 994,197     |        |  |           | (994,197       | )        |   | $            | 0.97$162.00 |  |   | $     | 11.15 | 
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Balance at December 31, 2004     |                       |           | 4,243,979 |             |        |  | 7,412,794 |                |          | $ | 0.00$162.00 |              |  | $ | 6.24  |      
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Exercisable at December 31, 2004 |                       |           |           |             |        |  | 4,047,952 |                |          |   |              |              |  |   |       |      
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Exercisable at December 31, 2003 |                       |           |           |             |        |  | 3,695,624 |                |          |   |              |              |  |   |       |      
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             
|Exercisable at December 31, 2002 |                       |           |           |             |        |  | 1,546,056 |                |          |   |              |              |  |   |       |      
|                                 |                       |           |           |             |        |  |           |                |          |   |              |             



F-28



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                        |  |             |           |          |                  |  |          |                |  |   |           |          |  |                  |           |  |  |   |        | 
|----------------------- |  | ----------- | --------- | -------- | ---------------- |  | -------- | -------------- |  | - | --------- | -------- |  | ---------------- | --------- |  |  | - | ------ | 
|                        |  | Outstanding |           |          |                 
|                        |  |             |           |          | Exercisable      | 
|                        |  |             |           | Weighted |                  |  |          |                |  |  
|                        |  |             |           | Average  |                  |  | Weighted |                |  |   |           | Weighted | 
|                        |  | Number of   |           |          | Remaining        |  |          | Average        |  |   | Number of |          |  | Average Exercise |          
|Range of Exercise Price |  | Shares      |           |          | Contractual Life |  |          | Exercise Price |  |   | Shares    |          |  | Price            |          
|                        |  |             |           |          |                  |  |          |                |  |   |           |          |  |                  |          
|$  0.00                 |  |             | 639,020   |          |                  |  | 3.5      |                |  | $ | 0.00      |          |  |                  |          |  |  |   |       | 
|$  0.06                 |  |             | 1,410     |          |                  |  | 1.2      |                |  | $ | 0.06      |          |  |                  | 1,410     |  |  | $ | 0.06   | 
|$  0.47$  0.62         |  |             | 35,796    |          |                  |  | 2.6      |                |  | $ | 0.58      |          |  |                  | 35,796    |  |  | $ | 0.58   | 
|$  0.97                 |  |             | 563,664   |          |                  |  | 4.1      |                |  | $ | 0.97      |          |  |                  | 563,664   |  |  | $ | 0.97   | 
|$  3.12$  4.64         |  |             | 1,893,223 |          |                  |  | 7.1      |                |  | $ | 3.61      |          |  |                  | 1,318,428 |  |  | $ | 3.57   | 
|$  4.71$  7.06         |  |             | 3,111,736 |          |                  |  | 8.4      |                |  | $ | 5.60      |          |  |                  | 1,171,005 |  |  | $ | 5.60   | 
|$  7.39$  9.96         |  |             | 343,530   |          |                  |  | 6.9      |                |  | $ | 8.75      |          |  |                  | 234,507   |  |  | $ | 8.87   | 
|$ 11.80$ 17.34         |  |             | 587,744   |          |                  |  | 5.9      |                |  | $ | 14.20     |          |  |                  | 490,326   |  |  | $ | 14.27  | 
|$ 20.62$ 22.40         |  |             | 6,721     |          |                  |  | 4.7      |                |  | $ | 21.23     |          |  |                  | 5,633     |  |  | $ | 21.23  | 
|$ 31.13$ 44.44         |  |             | 187,300   |          |                  |  | 4.4      |                |  | $ | 33.08     |          |  |                  | 184,533   |  |  | $ | 33.07  | 
|$ 58.44$ 77.00         |  |             | 34,100    |          |                  |  | 5.3      |                |  | $ | 70.98     |          |  |                  | 34,100    |  |  | $ | 70.98  | 
|$130.00$162.00         |  |             | 8,550     |          |                  |  | 5.1      |                |  | $ | 150.21    |          |  |                  | 8,550     |  |  | $ | 150.21 | 
|                        |  |             |           |          |                  |  |          |                |  |   |           |          |  |                  |          
|                        |  |             | 7,412,794 |          |                  |  | 6.9      |                |  | $ | 6.24      |          |  |                  | 4,047,952 |  |  | $ | 7.63   | 
|                        |  |             |           |          |                  |  |          |                |  |   |           |          |  |                  |          



| |                        
| | -----------------------
| | Option Exchange Program





| |                         
| | ------------------------
| | Stock Based Compensation



F-29



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                           |  |      |      |  |      |  |      |      |  |  |      | 
|-------------------------- |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|                           |  | 2004 |      |  | 2003 |  |      | 2002 | 
|                           |  |      |      |  |      |  |      |      | 
|Volatility(%)              |  |      | 78   |  |      |  | 81   |      |  |  | 112  | 
|Risk-free interest rate(%) |  |      | 3.11 |  |      |  | 2.26 |      |  |  | 3.70 | 
|Expected life (years)      |  |      | 4.0  |  |      |  | 4.0  |      |  |  | 4.0  | 
|Expected dividend yield(%) |  |      | 0    |  |      |  | 0    |      |  |  | 0    | 



|                                                                                                                        |  |                          |       |   |      |   |       |      |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                                                                        |  | Years Ended December 31, |      
|                                                                                                                        |  |                          |      
|                                                                                                                        |  | 2004                     |       |   | 2003 |   |       | 2002 | 
|                                                                                                                        |  |                          |       |   |      |   |       |      | 
|Grants related to Calipers initial public offering in 1999                                                             |  | $                        | 95    |   |      | $ | 542   |      |  | $ | 1,388  |  
|Restricted stock issuances                                                                                              |  |                          | 1,599 |   |      |   | 475   |      |  |   |       |  
|Option accelerating and other stock-based expenses incurred in
    connection with employment and separation agreements |  |                          | 1,123 |   |      |   |      |      |  |   |       |  
|Reversal of stock compensation due to forfeited options and
    restricted stock                                        |  |                          | (47   | ) |      |   | (17   | )    |  |   | (1,010 | )
|                                                                                                                        |  |                          |       |   |      |   |       |      | 
|                                                                                                                        |  | $                        | 2,770 |   |      | $ | 1,000 |      |  | $ | 378    |  
|                                                                                                                        |  |                          |       |   |      |   |       |      | 









F-30



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |  |   |       | 
|---- |  | - | ----- | 
|2005 |  | $ | 1,263 | 
|2006 |  |   | 747   | 
|2007 |  |   | 494   | 
|2008 |  |   | 162   | 
|     |  |   |      
|     |  | $ | 2,666 | 
|     |  |   |      



|    |             
|--- | ------------
|14. | Income Taxes





|                                |                    |                         |         |      |      |   |         |      |  |   |         |     | 
|------------------------------- | ------------------ | ----------------------- | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | --- | 
|                                |                    | Year Ended December 31, |        
|                                |                    |                         |        
|                                |                    | 2004                    |         |      | 2003 |   |         | 2002 | 
|                                |                    |                         |         |      |      |   |         |      | 
|                                |                    | (In thousands)          |        
|U.S. federal taxes (benefit):   |                    |                         |         |      |      |   |         |      |  |   |         |    
|At statutory rate               |                    | $                       | (10,601 | )    |      | $ | (16,775 | )    |  | $ | (14,197 | )  
|State                           |                    |                         |        |      |      |   |        |      |  |   |        |    
|Foreign                         |                    |                         | 377     |      |      |   | 190     |      |  |   |        |    
|Permanent differences:          |                    |                         |         |      |      |   |         |      |  |   |         |    
|                                | Stock Compensation |                         |         | (685 | )    |   |         | 340  |  |   |         | 542 | 
|                                | Other              |                         |         | 95   |      |   |         | 151  |  |   |         | 169 | 
|Unutilized net operating losses |                    |                         | 11,191  |      |      |   | 16,284  |      |  |   | 13,486  |    
|                                |                    |                         |         |      |      |   |         |      | 
|Total                           |                    | $                       | 377     |      |      | $ | 190     |      |  | $ |        |    
|                                |                    |                         |         |      |      |   |         |      | 



|                                     |       |                |         |   |      |   |         |      |  |   |         |   | 
|------------------------------------ | ----- | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - | 
|                                     |       | December 31,   |        
|                                     |       |                |        
|                                     |       | 2004           |         |   | 2003 |   |         | 2002 | 
|                                     |       |                |         |   |      |   |         |      | 
|                                     |       | (In thousands) |        
|Net operating loss carryforwards     |       | $              | 47,859  |   |      | $ | 36,099  |      |  | $ | 22,400  |  
|Research credit carryforwards        |       |                | 7,093   |   |      |   | 6,230   |      |  |   | 4,350   |  
|Capitalized research and development |       |                | 2,567   |   |      |   | 3,026   |      |  |   | 3,420   |  
|Restructuring accrual                |       |                | 4,473   |   |      |   | 3,917   |      |  |   |        |  
|Intangible assets                    |       |                | (5,041  | ) |      |   | (6,564  | )    |  |   |        |  
|Other, net                           |       |                | 5,736   |   |      |   | 4,349   |      |  |   | 3,050   |  
|                                     |       |                |         |   |      |   |         |      | 
|Net deferred tax assets              |       |                | 62,687  |   |      |   | 47,057  |      |  |   | 33,220  |  
|Valuation allowance                  |       |                | (62,687 | ) |      |   | (47,057 | )    |  |   | (33,220 | )
|                                     |       |                |         |   |      |   |         |      | 
|                                     | Total |                | $       |  |      |   | $       |     |  |   | $       |  | 
|                                     |       |                |         |   |      |   |         |      | 

F-31



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                          
|--- | -------------------------
|15. | Relationship with Amphora







F-32



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |            
|--- | -----------
|16. | 401(k) Plan





|    |           
|--- | ----------
|17. | Litigation





In re Caliper Technologies
Corp. Initial Public Offering Securities Litigation, In re Initial Public Offering
Securities


F-33



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Litigation,




|    |                
|--- | ---------------
|18. | Geographic Data



|         |               |                |        |        |      |   |        |        |  |   |        |        | 
|-------- | ------------- | -------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|         |               | 2004           |        |        | 2003 |   |        | 2002   | 
|         |               |                |        |        |      |   |        |        | 
|         |               | (In thousands) |       
|Revenue: |               |                |        |        |      |   |        |        |  |   |        |       
|         | United States |                | $      | 50,154 |      |   | $      | 34,668 |  |   | $      | 23,838 | 
|         | Europe        |                |        | 20,029 |      |   |        | 10,291 |  |   |        | 307    | 
|         | Asia          |                |        | 8,233  |      |   |        | 3,986  |  |   |        | 1,688  | 
|         | Other         |                |        | 1,711  |      |   |        | 466    |  |   |        |       | 
|         |               |                |        |        |      |   |        |        | 
|         |               | $              | 80,127 |        |      | $ | 49,411 |        |  | $ | 25,833 |       
|         |               |                |        |        |      |   |        |        | 

F-34



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                             |               |                |         |         |      |   |         |         |   |   |         |         |  
|---------------------------- | ------------- | -------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                             |               | 2004           |         |         | 2003 |   |         | 2002    |  
|                             |               |                |         |         |      |   |         |         |  
|                             |               | (In thousands) |        
|Net income (loss):           |               |                |         |         |      |   |         |         |   |   |         |        
|                             | United States |                | $       | (34,199 | )    |   | $       | (49,105 | ) |   | $       | (41,226 | )
|                             | Europe        |                |         | 1,211   |      |   |         | (516    | ) |   |         | (133    | )
|                             | Asia          |                |         | 1,095   |      |   |         | 132     |   |   |         | 395     |  
|                             | Other         |                |         | 337     |      |   |         | (38     | ) |   |         |        |  
|                             |               |                |         |         |      |   |         |         |  
|                             |               | $              | (31,556 | )       |      | $ | (49,527 | )       |   | $ | (40,964 | )      
|                             |               |                |         |         |      |   |         |         |  
|Property and equipment, net: |               |                |         |         |      |   |         |         |   |   |         |        
|                             | United States |                | $       | 5,946   |      |   | $       | 8,843   |   |   | $       | 12,522  |  
|                             | Europe        |                |         | 227     |      |   |         | 244     |   |   |         | 23      |  
|                             | Asia          |                |         | 13      |      |   |         | 19      |   |   |         |        |  
|                             |               |                |         |         |      |   |         |         |  
|                             |               | $              | 6,186   |         |      | $ | 9,106   |         |   | $ | 12,545  |        
|                             |               |                |         |         |      |   |         |         |  
|Net Assets:                  |               |                |         |         |      |   |         |         |   |   |         |        
|                             | United States |                | $       | 107,292 |      |   | $       | 136,089 |   |   | $       | 167,928 |  
|                             | Europe        |                |         | 4,392   |      |   |         | (1,221  | ) |   |         | (370    | )
|                             | Asia          |                |         | (631    | )    |   |         | (259    | ) |   |         |        |  
|                             | Other         |                |         | 526     |      |   |         | 188     |   |   |         |        |  
|                             |               |                |         |         |      |   |         |         |  
|                             |               | $              | 111,579 |         |      | $ | 134,797 |         |   | $ | 167,558 |        
|                             |               |                |         |         |      |   |         |         |  



F-35



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##### Table of Contents



CALIPER LIFE SCIENCES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                     
|--- | ------------------------------------
|19. | Quarterly Financial Data (Unaudited)



|                                 |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|-------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                 |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                 |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                 |  |                                       |         |   |         |   |         |         |  |   |         |  
|                                 |  | (In thousands, except per share data) |        
|Year ended December 31, 2004     |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|Total revenue                    |  | $                                     | 16,933  |   |         | $ | 18,922  |         |  | $ | 20,181  |   |  | $ | 24,091  |  
|Gross profit(1)                  |  |                                       | 4,808   |   |         |   | 6,432   |         |  |   | 7,196   |   |  |   | 7,797   |  
|Operating loss                   |  |                                       | (10,103 | ) |         |   | (9,637  | )       |  |   | (5,159  | ) |  |   | (7,399  | )
|Net loss                         |  |                                       | (10,036 | ) |         |   | (9,473  | )       |  |   | (5,129  | ) |  |   | (6,918  | )
|Basic and diluted loss per share |  | $                                     | (0.35   | ) |         | $ | (0.33   | )       |  | $ | (0.17   | ) |  | $ | (0.23   | )
|Year ended December 31, 2003     |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|Total revenue                    |  | $                                     | 5,612   |   |         | $ | 5,878   |         |  | $ | 16,523  |   |  | $ | 21,398  |  
|Gross profit(1)                  |  |                                       | 1,190   |   |         |   | 979     |         |  |   | 5,321   |   |  |   | 2,325   |  
|Operating loss                   |  |                                       | (10,854 | ) |         |   | (10,620 | )       |  |   | (10,961 | ) |  |   | (20,408 | )
|Net loss                         |  |                                       | (9,968  | ) |         |   | (9,542  | )       |  |   | (10,148 | ) |  |   | (19,869 | )
|Basic and diluted loss per share |  | $                                     | (0.40   | ) |         | $ | (0.39   | )       |  | $ | (0.37   | ) |  | $ | (0.70   | )






|    |                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross profit refers to total product and service revenue, less
    costs associated with those revenues. Costs related to contract
    revenues are included within research and development expenses
    in the accompanying statements of operations.

F-36



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##### Table of Contents



Caliper Life Sciences, Inc.


Schedule II  VALUATION AND QUALIFYING
ACCOUNTS


|                                            |  |                |        |  |            |   |        |            |  |            |        |  |  |   |        | 
|------------------------------------------- |  | -------------- | ------ |  | ---------- | - | ------ | ---------- |  | ---------- | ------ |  |  | - | ------ | 
|                                            |  | Balance        |        |  | Additions  |   |        |            |  |           
|                                            |  | at             |        |  | Charged to |   |        |            |  | Balance at |       
|                                            |  | Beginning      |        |  | Costs and  |   |        |            |  | End of     |       
|                                            |  | Period         |        |  | Expenses   |   |        | Deductions |  |            | Period | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 
|                                            |  | (In thousands) |       
|Year ended December 31, 2004:               |  |                |        |  |            |   |        |            |  |            |        |  |  |   |        | 
|Allowance for doubtful accounts             |  | $              | 252    |  |            | $ | 244    |            |  | $          | 21     |  |  | $ | 475    | 
|Valuation allowance for deferred tax assets |  |                | 47,057 |  |            |   | 15,630 | (1)        |  |            |       |  |  |   | 62,687 | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 
|                                            |  | $              | 47,309 |  |            | $ | 15,874 |            |  | $          | 21     |  |  | $ | 63,162 | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 
|Year ended December 31, 2003:               |  |                |        |  |            |   |        |            |  |            |        |  |  |   |        | 
|Allowance for doubtful accounts             |  | $              | 119    |  |            | $ | 263    |            |  | $          | 130    |  |  | $ | 252    | 
|Valuation allowance for deferred tax assets |  |                | 33,220 |  |            |   | 13,837 | (1)        |  |            |       |  |  |   | 47,057 | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 
|                                            |  | $              | 33,339 |  |            | $ | 14,100 |            |  | $          | 130    |  |  | $ | 47,309 | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 
|Year ended December 31, 2002:               |  |                |        |  |            |   |        |            |  |            |        |  |  |   |        | 
|Allowance for doubtful accounts             |  | $              |       |  |            | $ | 119    |            |  | $          |       |  |  | $ | 119    | 
|Valuation allowance for deferred tax assets |  |                | 15,827 |  |            |   | 17,393 | (1)        |  |            |       |  |  |   | 33,220 | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 
|                                            |  | $              | 15,827 |  |            | $ | 17,512 |            |  | $          |       |  |  | $ | 33,339 | 
|                                            |  |                |        |  |            |   |        |            |  |            |        | 






|    |                                
|--- | -------------------------------
|(1) | Charged to deferred tax expense

F-37



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##### Table of Contents



EXHIBIT INDEX


|        |    |            |                         |                                                                                                                                                     
|------- | -- | ---------- | ----------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            |                        
|Number  |    |            | Description of Document
|        |    |            |                        
|        | 2  | .1(17)     |                         | Stock Purchase Agreement, by and among Caliper, Berwind
    Corporation and The Berwind Company LLC, dated June 9, 2003.                            
|        | 2  | .2(17)     |                         | Amendment No. 1 to the Stock Purchase Agreement, by and
    among Caliper, Berwind Corporation and The Berwind Company LLC,
    dated July 10, 2003.
|        | 2  | .3(20)     |                         | Amendment No. 2 to the Stock Purchase Agreement, by and
    among Caliper, Berwind Corporation and The Berwind Company LLC,
    dated April 1, 2004.
|        | 3  | .1(20)     |                         | Amended and Restated Certificate of Incorporation of Caliper.                                                                                       
|        | 3  | .2(9)      |                         | Certificate of Designation Of Series A Junior Participating
    Preferred Stock.                                                                    
|        | 3  | .3(1)      |                         | Restated Bylaws of Caliper.                                                                                                                         
|        | 3  | .4(18)     |                         | Amendment No. 1 to Bylaws of Caliper.                                                                                                               
|        | 4  | .1         |                         | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.                                                                                                
|        | 4  | .2         |                         | Specimen Stock Certificate.                                                                                                                         
|        | 4  | .3(9)      |                         | Rights Agreement, dated as of December 18, 2001, between
    Caliper and Wells Fargo Bank Minnesota, N.A., as Rights Agent.                         
|        | 10 | .1(2)      |                         | Lease Agreement, dated December 1, 1998, between Caliper
    and 605 East Fairchild Associates, L.P.                                                
|        | 10 | .2(2)(3)   |                         | 1996 Equity Incentive Plan.                                                                                                                         
|        | 10 | .3(2)(3)   |                         | 1999 Equity Incentive Plan.                                                                                                                         
|        | 10 | .4(2)(3)   |                         | 1999 Employee Stock Purchase Plan.                                                                                                                  
|        | 10 | .5(2)(3)   |                         | 1999 Non-Employee Directors Stock Option Plan.                                                                                                     
|        | 10 | .6(3)      |                         | Form of Grant Agreement for 1999 Equity Incentive
    Plan  Option Awards.                                                                         
|        | 10 | .7(3)      |                         | Form of Grant Agreement for 1999 Equity Incentive
    Plan  Restricted Stock Unit Awards.                                                          
|        | 10 | .8(3)      |                         | Form of Grant Agreement for 1999 Non-Employee Directors
    Stock Option Plan.                                                                     
|        | 10 | .9(2)(3)   |                         | Form of Indemnification Agreement entered into between Caliper
    and its directors and executive officers.                                        
|        | 10 | .10(2)(4)  |                         | Collaboration Agreement, dated May 2, 1998, between Caliper
    and Hewlett-Packard Company (now Agilent Technologies, Inc.).                       
|        | 10 | .11(3)     |                         | Form of Stock Option Grant Agreement for Acquisition Equity
    Incentive Plan.                                                                     
|        | 10 | .12(3)     |                         | Form of Stock Award Agreement for Acquisition Equity Incentive
    Plan (pro rata vesting).                                                         
|        | 10 | .13(3)     |                         | Form of Stock Award Agreement for Acquisition Equity Incentive
    Plan (5 year cliff vesting).                                                     
|        | 10 | .17(3)     |                         | Non-Employee Directors Cash Compensation Plan.                                                                                                     
|        | 10 | .18(3)(12) |                         | Caliper Performance Bonus Plan.                                                                                                                     
|        | 10 | .19(3)     |                         | Employment Offer Letter dated November 30, 2004 between
    Caliper and Mr. Thomas T. Higgins.                                                      
|        | 10 | .20(3)(12) |                         | Summary Cash Compensation Sheet.                                                                                                                    
|        | 10 | .23(2)(3)  |                         | The Corporate Plan for Retirement Select Plan Adoption Agreement
    and related Basic Plan Document.                                               
|        | 10 | .27(6)     |                         | Lease Agreement, dated June 23, 2000 and effective
    July 5, 2000, between Caliper and Martin CBP Associates,
    L.P.                            
|        | 10 | .28(3)(6)  |                         | Amended Promissory Note, dated July 17, 2000, between
    Caliper and Dr. Daniel L. Kisner.                                                         
|        | 10 | .29(3)     |                         | Key Employee Change of Control and Severance Benefit Plan.                                                                                          
|        | 10 | .30(5)(9)  |                         | Cross-License Agreement, dated March 12, 2001 between
    Aclara Biosciences, Inc. and Caliper.                                                     
|        | 10 | .32(4)(7)  |                         | Settlement Agreement and Mutual General Release, dated
    March 12, 2001 between Aclara Biosciences, Inc. and Caliper.                             



---



##### Table of Contents



|        |    |            |                         |                                                                                                                                                                                                                        
|------- | -- | ---------- | ----------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            |                        
|Number  |    |            | Description of Document
|        |    |            |                        
|        | 10 | .33(4)(8)  |                         | LabChip Solutions Agreement, dated September 21, 2001,
    between Amphora Discovery Corp. and Caliper.                                                                                                                
|        | 10 | .39(3)(10) |                         | 2001 Non-Statutory Stock Option Plan.                                                                                                                                                                                  
|        | 10 | .46(3)     |                         | Form of Grant Agreement for 2001 Non-Statutory Stock Option Plan.                                                                                                                                                      
|        | 10 | .48(3)(11) |                         | Key Employee Agreement, dated July 1, 2002, between Caliper
    and Dr. Daniel Kisner.                                                                                                                                 
|        | 10 | .52(4)(18) |                         | Sole Commercial Patent License Agreement, effective
    September 1, 1995, between UT-Battelle, LLC, the successor
    to Lockheed Martin Energy Research Corporation, and Caliper, as
    amended on November 1, 2002.
|        | 10 | .53(4)(18) |                         | Modification of LabChip Solutions Agreement, dated
    December 12, 2002, between Amphora Discovery Corp. and
    Caliper.                                                                                             
|        | 10 | .55(4)(14) |                         | Collaboration Agreement, dated June 4, 2003, between
    Caliper and Bio-Rad Laboratories, Inc.                                                                                                                        
|        | 10 | .56(3)(15) |                         | Key Employee Agreement, dated July 14, 2003, between
    Caliper and E. Kevin Hrusovsky.                                                                                                                               
|        | 10 | .61(15)    |                         | Letter Agreement, dated September 17, 2003, between Caliper
    and Berwind Company LLC regarding the appointment of a Berwind
    nominee to the Caliper Board of Directors.                                          
|        | 10 | .62(3)(16) |                         | Acquisition Equity Incentive Plan.                                                                                                                                                                                     
|        | 10 | .63(3)(19) |                         | Key Employee Agreement Amendment, dated December 24, 2003,
    between Caliper and Dr. Daniel L. Kisner.                                                                                                               
|        | 10 | .64(3)(19) |                         | Consulting Agreement, dated January 1, 2004, between
    Caliper and Dr. David V. Milligan.                                                                                                                            
|        | 10 | .66(4)(19) |                         | Collaboration and Supply Agreement, dated January 9, 2004,
    among Caliper, Zymark Corporation and Affymetrix, Inc.                                                                                                  
|        | 10 | .69(4)(19) |                         | Letter Amendment to Modification Agreement, dated
    December 22, 2003, between Caliper and Amphora Discovery
    Corp.                                                                                               
|        | 11 | .1         |                         | Subsidiaries of the Registrant.                                                                                                                                                                                        
|        | 23 | .1         |                         | Consent of Ernst & Young LLP, independent registered
    public accounting firm.                                                                                                                                       
|        | 24 | .1         |                         | Power of Attorney (reference is made to the signature page of
    this report).                                                                                                                                        
|        | 31 | .1         |                         | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|        | 31 | .2         |                         | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|        | 32 | .1         |                         | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                        
|        | 32 | .2         |                         | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                        






|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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.                 
|   
|(2) | 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.   
|   
|(3) | Management contract or compensatory plan or arrangement.                                                                                                                                               
|   
|(4) | Confidential treatment has been granted for a portion of this
    exhibit.                                                                                                                             
|   
|(5) | 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.                                                    
|   
|(6) | 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, 2000, and
    incorporated by reference herein.
|   
|(7) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended March 31, 2001 and
    incorporated by reference herein.                                                 
|   
|(8) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended September 30, 2001 and
    incorporated by reference herein.                                             



---



##### Table of Contents





|    |                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|(9) | Previously filed as Exhibit 99.1 to Current Report on
    Form 8-K filed December 19, 2001 and incorporated by
    reference herein.



|     |                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Previously filed as Exhibit 99.1 to our Registration
    Statement on Form S-8, File No. 333-76636, filed
    January 11, 2002 and incorporated by reference herein.
|    
|(11) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended September 30, 2002 and
    incorporated by reference herein.          
|    
|(12) | Previously filed as the like-numbered Exhibit to Current Report
    on Form 8-K filed March 16, 2005 and incorporated by
    reference herein.                      
|    
|(13) | Confidential treatment has been requested for a portion of this
    exhibit.                                                                                        
|    
|(14) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended June 30, 2003 and
    incorporated by reference herein.               
|    
|(15) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended September 30, 2003 and
    incorporated by reference herein.          
|    
|(16) | Previously filed as Exhibit 99.1 to our Registration
    Statement on Form S-8, File No. 333-106946, filed
    June 10, 2003 and incorporated by reference herein.  
|    
|(17) | Previously filed as the like-numbered Exhibit to Form 8-K
    filed July 25, 2003 and incorporated by reference herein.                                             
|    
|(18) | Previously filed as the like-numbered Exhibit to Form 10-K
    for the year ended December 31, 2002 and incorporated by
    reference herein.                       
|    
|(19) | Previously filed as the like-numbered Exhibit to Form 10-K
    for the year ended December 31, 2003 and incorporated by
    reference herein.                       
|    
|(20) | Previously filed as the like-numbered Exhibit to Form 10-Q
    for the quarterly period ended March 31, 2004 and
    incorporated by reference herein.