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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K



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|           |  |                                                                                           
|---------- |  | ------------------------------------------------------------------------------------------
|(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,
	2001                                              
|          
|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 #000-28229

Caliper Technologies Corp.

(Exact name of registrant as specified in its
charter)


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

605 Fairchild Drive

Mountain View, CA 94043-2234


(Address and zip code of principal executive
offices)


Registrants telephone number, including
area code: (650) 623-0700

Securities registered pursuant to
Section 12(b) of the Act: None

Securities registered pursuant to
Section 12(g) of the Act:

Common Stock, $0.001 Par Value


(Title of Class)


Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

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

Based on the closing sale price of common stock
on the Nasdaq National Market on March 1, 2002 the
aggregate market value of the voting stock held by
non-affiliates of the registrant was $226,165,880. Excludes an
aggregate of 5,287,707 shares of common stock held by officers
and directors and by each person known by the registrant to own
5% or more of the outstanding common stock. Exclusion of shares
held by any of these persons should not be construed to indicate
that such person possesses the power, direct or indirect, to
direct or cause the direction of the management or policies of
the registrant, or that such person is controlled by or under
common control with the registrant.

The number of shares outstanding of
Registrants common stock, $0.001 par value was 24,229,573
at March 1, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in Part III of this Annual
Report on Form 10-K is incorporated by reference to the
Proxy Statement for the registrants 2002 Annual Meeting of
Stockholders to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this
Form 10-K.



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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1                       
|                              | Item 1. Business                                                                             
|                              | Item 2. Properties                                                                           
|                              | Item 3. Legal Proceedings                                                                    
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                      
|                              | Item 5. Market for Registrants Common Stock and Related Stockholder Matters                 
|                              | Item 6. Selected Financial Data                                                              
|                              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 8. Financial Statements and Supplementary Data                                          
|                              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|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                      
|                              | Item 13. Certain Relationships and Related Transactions                                      
|PART IV                      
|                              | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES                   
|INDEX TO FINANCIAL STATEMENTS
|EXHIBIT 10.40                
|EXHIBIT 10.41                
|EXHIBIT 10.42                
|EXHIBIT 10.43                
|EXHIBIT 10.44                
|EXHIBIT 23.1                 



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CALIPER TECHNOLOGIES CORP.

FORM 10-K

For the Fiscal Year Ended December 31,
2001


TABLE OF CONTENTS

|                     |  |                                                                                        |     |      |    | 
|-------------------- |  | -------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                     |  |                                                                                        |     | Page
|                     |  |                                                                                        |     |     
|PART I              
|Item 1.              |  | Business                                                                               |     |      | 2  | 
|Item 2.              |  | Properties                                                                             |     |      | 18 | 
|Item 3.              |  | Legal Proceedings                                                                      |     |      | 18 | 
|Item 4.              |  | Submission of Matters to a Vote of Security
	Holders                                   |     |      | 20 | 
|PART II             
|Item 5.              |  | Market for Registrants Common Equity and
	Related Stockholder Matters                 |     |      | 20 | 
|Item 6.              |  | Selected Financial Data                                                                |     |      | 21 | 
|Item 7.              |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |     |      | 23 | 
|Item 7A.             |  | Quantitative and Qualitative Disclosures about
	Market Risk                            |     |      | 40 | 
|Item 8.              |  | Financial Statements and Supplementary Data                                            |     |      | 41 | 
|Item 9.              |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |     |      | 41 | 
|PART III            
|Item 10.             |  | Directors and Executive Officers of the Registrant                                     |     |      | 41 | 
|Item 11.             |  | Executive Compensation                                                                 |     |      | 41 | 
|Item 12.             |  | Security Ownership of Certain Beneficial Owners
	and Management                        |     |      | 42 | 
|Item 13.             |  | Certain Relationships and Related Transactions                                         |     |      | 42 | 
|PART IV             
|Item 14.             |  | Exhibits, Financial Statement Schedules, and
	Reports on Form 8-K                      |     |      | 42 | 
|Signatures           |  |                                                                                        | 46  |     
|Financial Statements |  |                                                                                        | F-1 |     

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

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

LabChip, the LabChip logo, Caliper and the
Caliper logo are registered trademarks of Caliper. We have
applied for registration for the LibraryCard trademark.




PART 1




Item 1.     Business

Overview

We are a leader in lab-on-a-chip technologies. We
believe our LabChip systems can assemble the power and reduce
the size of entire laboratories full of equipment and people.
Our LabChip systems miniaturize, integrate and automate many
laboratory processes, and put them on a chip that can fit in the
palm of a childs hand. Each chip contains a network of
microscopic channels through which fluids and chemicals are
moved, using electricity or pressure, in order to perform
experiments. The chips are the key components of our LabChip
systems, which also include reagents as well as instruments and
software that together control and read the chips. We believe
our LabChip systems have the potential to revolutionize
experimentation in a wide range of industries by enabling
individuals and organizations to perform laboratory experiments
at a speed, cost and scale previously unattainable. Our initial
commercialization focus is the pharmaceutical industry, where
there is an urgent need to improve the efficiency and reduce the
cost of drug discovery and development. Future target industries
potentially include agriculture, clinical diagnostics, chemicals
and consumer products. We believe that we are the first company
to sell and deliver lab-on-a-chip products to customers.

During 1999 we introduced our first two LabChip
systems, a personal laboratory system and an initial version of
our high throughput system. In March 2000, we recognized revenue
from our first multi-capillary sipper chip system, and our joint
applications development program, which was formalized later
that year as our Applications Developer Program (ADP). In
September 2000, we introduced the Automated Microfluidics
System 90 (AMS 90) to perform automated high
throughput nucleic acid analysis. In September 2001, we launched
the LabChip-based high throughput screening system, which
represents a new, microfluidic chip-based approach to high
throughput drug screening. Also in September, Caliper formed a
new, independently funded and managed company, Amphora Discovery
Corp., to create and commercialize comprehensive chemical
genomics information detailing the interactions of small
molecules with a broad array of gene products.

We were incorporated in Delaware on July 26,
1995. Our principal offices and manufacturing facilities are
located at 605 Fairchild Drive, Mountain View, California
94043-2234, our telephone number is (650) 623-0700, and our
website is located on the worldwide web at
calipertech.com. Our website address is

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given solely for informational purposes; we do
not intend, by this reference, that our website should be deemed
to be part of this Annual Report on Form 10-K.


Our LabChip Systems

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



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



| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Miniaturization.Conventional laboratory equipment
	typically uses about a drop of fluid, or 50 to
	100 microliters, to perform each experiment. In some
	LabChip applications, this volume is reduced to
	1 nanoliter, or one billionth of a liter, an improvement of
	up to 100,000-fold over conventional systems.                           
|
| |  | Integration.Integration is the compression of
	multiple processes into a single process. Today most laboratory
	systems perform only one or two steps of an experimental
	protocol. Our LabChip systems can integrate complete experiments
	involving half a dozen or more steps into one continuous process
	performed on a single chip.      
|
| |  | Automation.Today
	most laboratory experiments are performed using multiple
	instruments in combination with multiple manual steps. With our
	LabChip systems, entire experiments can be automated and
	performed inside a chip using one instrument. The same
	instrument is used with different chips to perform other
	automated experiments.



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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | High Speed.We
	believe our LabChip systems can accelerate some experiments as
	much as 10-fold or more, depending on the application. For
	example, molecular separations such as electrophoresis normally
	take one hour or more using conventional equipment. On a chip,
	we can perform these separations in less than one minute.
	Another example is that chemical reactions are usually incubated
	for 30 minutes or more before the results are determined.
	Often, these long incubation periods are necessary only to
	provide enough time for manual steps to be performed on large
	numbers of samples. By integrating sample processing and
	detection, we can perform reactions in one minute or less and
	achieve comparable results. We believe our customers can take
	advantage of this acceleration to increase throughput or to
	complete experiments faster, depending on their needs.
|
| |  | Reduced Reagent and Labor Cost.Our LabChip systems use only a small
	fraction of the normal amount of expensive reagents used in
	experiments performed in test tubes, 96-well plates, or 384-well
	plates, sometimes as little as 1/100,000th, and also reduce
	labor involved in each experiment. We believe that saving on
	reagent cost and labor can enable pharmaceutical companies to
	expand the scale of experimentation in ways that would otherwise
	not be feasible.                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Expanded Individual Researcher Capability.Because our LabChip systems can
	collapse a multi-step, complex experiment into one step, we
	believe that individual researchers can perform experiments
	previously outside their areas of expertise. By comparison, with
	conventional, non-integrated equip-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | ment researchers need to acquire the equipment
	and master the complexities of performing each individual step.                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Improved Data Accuracy.We believe our LabChip systems
	generally produce more accurate and consistent data by reducing
	human error and the variability caused by the use of multiple
	instruments. With higher quality data, our customers can make
	better decisions. For example, biochemical determinations
	typically require accurate liquid measurements and precise
	incubation times. When these are manually performed significant
	variations can occur in liquid dispensing and in the duration of
	reaction times.
|
| |  | Improved Enterprise-Wide Productivity.We believe our LabChip systems can
	improve data quality to the point where researchers can rely on
	data generated outside their laboratory or organization. We
	believe this would improve enterprise-wide productivity by
	supporting data sharing and reducing the need to repeat
	experiments. When different research groups use different
	assortments of conventional equipment to perform experiments,
	they often produce data that is not strictly comparable.                

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

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

Products and Services

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

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| |                            
| | ---------------------------
| | Personal Laboratory Systems

|                              |  |                                                                                                |  |                    
|----------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------------
|Product                       |  | Description                                                                                    |  | Status             
|                              |  |                                                                                                |  |                    
|Agilent 2100 Bioanalyzer      |  | Desktop LabChip instrument and software                                                        |  | Marketed by Agilent
|DNA 12000 LabChip Kit         |  | Chips and reagents for analyzing large DNA
	fragments                                          |  | Marketed by Agilent
|DNA 7500 LabChip Kit          |  | Chips and reagents for analyzing medium DNA
	fragments                                         |  | Marketed by Agilent
|DNA 1000 LabChip Kit          |  | Chips and reagents for analyzing small DNA
	fragments                                          |  | Marketed by Agilent
|DNA 500 LabChip Kit           |  | Chips and reagents for analyzing very small DNA
	fragments                                     |  | Marketed by Agilent
|Protein 200 Plus LabChip Kit  |  | Chips and reagents for analyzing protein samples                                               |  | Marketed by Agilent
|RNA 6000 Nano LabChip Kit     |  | Chips and reagents for analyzing RNA samples                                                   |  | Marketed by Agilent
|Cell Fluorescence LabChip Kit |  | Chips and reagents for analyzing cells                                                         |  | Marketed by Agilent
|New LabChip Kits              |  | A series of kits containing chips and reagents
	for applications in molecular and cell biology |  | In development     

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

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



| |   |                                                        
| | - | -------------------------------------------------------
| |  | reduces analysis time from hours to minutes            
|
| |  | integrates several experimentation steps into one      
|
| |  | significantly reduces consumption of costly
	reagents  
|
| |  | produces higher quality data than conventional
	methods

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

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



| |                        
| | -----------------------
| | High Throughput Systems

Our high throughput systems are being designed to
perform thousands or tens of thousands of pharmaceutical
experiments per day on each chip. The hardware platforms on
which these systems run today include the Caliper AMS 90 SE
and the Caliper 250. We are also developing new instrument
platforms that

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have the potential to offer customers greater
functionality and flexibility for high throughput
experimentation. We believe the principal advantages of
Calipers high throughput systems are that they:




| |   |                                                       
| | - | ------------------------------------------------------
| |  | reduce costly reagent consumption up to
	100,000-fold 
|
| |  | integrate multiple experimental functions             
|
| |  | reduce the need for user intervention                 
|
| |  | produce higher data quality than conventional
	methods

Caliper 250 High Throughput Screening
(HTS) System.The
Caliper 250 HTS system performs screening experiments in a
serial, continuous flow fashion inside the microchannels of the
chip, constituting a closed, controlled environment. The chip
employs a proprietary capillary-like sample access system,
called a sipper, through which just nanoliters of
test compounds are drawn into the channels of the chip from
microwell plates. There they are mixed with equally tiny
quantities of the target biomolecule and other reagents for
screening. The Caliper 250 HTS system uses a 4-sipper chip
capable of performing tens of thousands of experiments per chip
per day, depending upon assay conditions, and offers walkaway
automation and minimal user intervention. The system currently
performs fluorogenic and electrophoretic mobility assays for
multiple target classes including kinases, proteases and
phosphatases. Caliper markets and distributes the 250 HTS
system directly through its own sales and marketing group.
Additional assays are in development as are 12 sipper chips to
increase throughput. Prior to the Caliper 250 HTS system,
the following instruments were available: the Caliper 100
System; the Caliper 110 Sipper System; and the
Caliper 220 Ultra High Throughput System. However, these
systems are no longer being marketed.

Automated Microfluidics System 90 SE System.The Automated Microfluidics
System 90 SE, or AMS 90 SE, is an automated
electrophoresis system designed to meet the needs of microarray
and cloning laboratories that analyze hundreds of samples per
day. The AMS 90 SE, introduced in January 2002, is an
improved version of the Caliper AMS 90. The AMS 90 was
originally introduced in the third quarter of 2000, with the
first units shipped to customers in the first quarter of 2001.
Introduced in January 2002, the AMS 90 SE uses
sipper-chip technology to perform DNA fragment sizing,
separation and quantitation analyses. The
AMS 90 SEs new features include: compatibility
with 96- and 384-well plates; two DNA analysis speeds
(30 seconds/ sample and 55 seconds/ sample); and a bar
code reader for plate tracking. Through a collaboration with
Structural GenomiX, we intend to develop a protein analysis
application for the AMS 90 SE. We are commercializing
the AMS 90 SE through our own sales and marketing
force.

Application Development System.The Applications Developer Program
enables customers to develop proficiency in fundamental
microfluidics and to develop novel chip-based microfluidic
applications using our proprietary LabChip technology. Customers
that participate in the Applications Developer Program purchase
the Caliper 42 instrument applications development
workstation, standard chips and Calipers training, support
and custom chip design services to develop new microfluidic
applications. We believe that this initiative will help to
create new applications and new markets for our LabChip
technology.

|                                    |  |                                                                                          |  |                       
|----------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ----------------------
|Product                             |  | Description                                                                              |  | Status                
|                                    |  |                                                                                          |  |                       
|Caliper 42 Instrument               |  | A workstation for investigating and developing
	new microfluidic applications            |  | Available from Caliper
|Microfluidic Developer  LabChip Kit |  | Six different chips and manuals for performing a
	variety of experiments                 |  | Available from Caliper
|Custom Chips                        |  | Design and fabrication service provided by
	Caliper to develop custom chips for customer |  | Ongoing               

We currently have five on-going collaborations
that span a broad array of market opportunities. These include
publicly disclosed relationships with Millennium,
GlaxoSmithKline and the National Aeronautics and Space
Administration (NASA). In addition, we have separate
collaborations underway with an agriculture and petrochemical
company.

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

During 2001, Caliper transitioned from a
fee-based technology access program model to a commercial
products business. Previously Caliper used its high throughput
systems internally to offer screening services to pharmaceutical
and biotechnology customers that preferred to outsource this
activity. Called the Value Added Screening Collaboration
program, it involved developing LabChip assays for targets
selected by a customer. Subsequently, we would screen the
targets against the customers compound library, our own
library, or both, and provide the data to the customer. As a
result of our transition away from a fee-based technology access
program model to a commercial product business, we no longer
offer these services.

For the year ending December 31, 2001,
personal laboratory system products alone accounted for 24% of
our revenue, high throughput system products alone accounted for
17% of our revenue and licensing and contract services accounted
for 58% of our revenue in this period. Personal laboratory
system products alone accounted for 9% of our revenue, high
throughput system products alone accounted for 8% of our revenue
and licensing and contract services accounted for 83% of our
revenue for the year ending December 31, 2000. For the year
ending December 31, 1999, personal laboratory system
products alone accounted for 2% of our revenue, high throughput
system products alone accounted for 8% of our revenue and
licensing and contract services accounted for 90% of our revenue
in this period.

Commercialization

We currently are selling our personal laboratory
system, the Agilent 2100 Bioanalyzer system, through our
collaboration with Agilent. We are directly selling our high
throughput systems, including the Caliper 250 HTS system
for drug screening and the AMS 90 SE for automated
electrophoresis. In addition, through our Applications Developer
Program, we directly sell instrumentation and custom chip design
services that enables customers to develop their own
applications.



| |                                 
| | --------------------------------
| | Strategic Alliance with
	Agilent

We have established a broad relationship with
Agilent to create a line of commercial research products based
on our LabChip technologies. This relationship provides us with
the scale and expertise of a leading analytical instrumentation
company to bring these novel products to market. When this
relationship was established in May 1998, Agilent and Caliper
publicly stated their intention to invest over $100 million
collectively to create and commercialize this line of products
over the ensuing five years. In September 1999, Agilent
introduced the Agilent 2100 Bioanalyzer with three different
LabChip kits, our first LabChip products under this agreement.
Subsequently, we have expanded the Agilent 2100 Bioanalyzer menu
with four additional LabChip kits.

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

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

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Our agreement with Agilent is mutually exclusive
in the field of lab-on-a-chip technologies for the research
products market. It requires our consent before Agilent may
offer products exceeding established sample throughput limits,
and it requires Agilents consent before we may offer these
products outside the collaboration in excess of established
volume limitations. Agilent has agreed that these volume
limitations will no longer apply to our high throughput
screening business.

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



| |                                                    
| | ---------------------------------------------------
| | Caliper 250 High Throughput Screening
	(HTS) System

In September 2001, we introduced our Caliper 250
HTS system, which includes instruments for assay development and
screening, a menu of chips that perform standard assays, as well
as Caliper-supplied support services and custom solutions.
Caliper is commercializing its 250 HTS system through its
own sales and marketing force. The company is also offering a
full range of customer and field support services, and a
specialized HTS solutions program that includes specific assay
development support, early access to beta products and
customized microfluidic solutions for customers individual
research challenges.

In December 2001, Caliper named Wako Pure
Chemical Industries, Ltd. (Wako) as its exclusive
distributor of the Caliper 250 HTS system and chips in
Japan. The agreement with Wako represents Calipers first
high throughput screening product marketing endeavor in Japan.
Wako is a major supplier of specialty chemicals, clinical
diagnostics and biological products for Japanese biotech
research.



| |                                           
| | ------------------------------------------
| | Relationship with Amphora Discovery
	Corp.

In September of 2001, Caliper completed the
formation of a new company, Amphora Discovery Corp.
(Amphora), to create and commercialize a
comprehensive database of chemical genomics information. Venture
capitalists invested $25 million in Amphora, and entered
into agreements to invest up to an additional $10 million
if requested by Amphora, causing Amphora to be a separate,
independent company from Caliper with its own management team
and board of directors. Calipers ownership in Amphora is
now approximately 28% but would be further reduced if part or
all of the additional $10 million were to be invested by
Amphoras venture capitalists. These venture capitalist
include ARCH Venture Partners and Venrock Associates. One of our
directors, Robert T. Nelsen, is a Managing Director of ARCH
Venture Partners, and another of our directors, Anthony B.
Evnin, is a General Partner of Venrock Associates. We received
the right to appoint two representatives to Amphoras six
member board of directors. Headquartered in Research Triangle
Park, North Carolina, Amphora also maintains research and
development offices in Mountain View, California.

Amphora intends to provide customers with
information and analysis tools designed to reduce dramatically
the time and expense of preclinical development and to enable
the selection of higher quality clinical candidates with a
greater chance of clinical success than current drug discovery
methods. Amphora intends to build and maintain its database
using Calipers LabChip high throughput screening systems
and directly purchase those systems from Caliper. The
miniaturized, integrated and automated LabChip platform is
designed to provide the capacity, throughput, cost-savings and
quality of data required for Amphoras scale of operations.

In recent years, technology has dramatically
increased the rate of genomics, functional genomics and high
throughput screening data generation. Genomics and functional
genomics efforts have significantly increased the number of
therapeutic targets. However, these efforts have not yet
improved the speed, or decreased the

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cost, of drug discovery. Amphora is creating a
chemical genomics database that catalogs the interactions
between chemical drug candidates and targets. Just as the
industrialization of DNA sequencing, combined with informatics
tools, delivered the knowledge of the genome, this effort is
intended to provide detailed knowledge about characteristics of
potential drugs. By so doing, Amphora anticipates making the
link between genomic data, chemical structures and information
that can lead to developing useful medicines.


Amphora intends to commercialize the database
initially through an early access program and subsequently
through subscriptions. Amphora plans to sell this database
information directly to pharmaceutical companies, biotechnology
firms and academic laboratories involved in preclinical and
clinical research in life sciences. It also plans to sell
analysis tools, reagents from the Amphora compound library, and
licenses to proprietary compounds and targets. Amphora
anticipates industrializing screening on a scale not approached
by any existing enterprise. Amphora is using Calipers
LabChip high throughput screening systems to create, build and
expand its chemical genomics database.

Since the completion of Amphoras financing
in September 2001 that reduced Calipers ownership in
Amphora to 28%, our investment in Amphora has been accounted for
under the equity method of accounting. As our investment in
Amphora has no basis for accounting purposes and, because
Caliper does not guarantee debt or have commitments to fund
losses, Caliper has not recorded its proportionate share of
Amphoras operating losses in its financial statements
since the completion of Amphoras financing. For the fiscal
year ended 2001, sales to Amphora of instruments, LabChips,
datapoints and assay development services were
$3.9 million, and we expect that Amphora will be one of our
major high throughput screening customers in 2002.

In September 2001, we entered into a LabChip
Solutions Agreement and an Intellectual Property Agreement with
Amphora. The LabChip Solutions Agreement provides for the
ongoing supply of our high throughput screening systems and
chips to Amphora, and for the provision of related services by
us to Amphora. Under this agreement, Amphora has agreed to
purchase a minimum of eleven Caliper instruments by
December 31, 2001 and at least eleven addition Caliper HTS
instruments by December 31, 2002. Amphora has also agreed
to purchase datapoints at a fixed amount of $2.0 million in
the first year and a minimum of $4.0 million to a maximum
based on volume of $6.0 million in the second year of the
agreement. The LabChip Solutions Agreement also contains certain
intellectual property licensing provisions pertaining to the
parties independent and collaborative efforts to develop
new high throughput screening systems based on our microfluidic
technologies. Under the Intellectual Property Agreement, we
granted Amphora certain exclusive rights to use our high
throughput screening products in a chemical genomics database
business.

In September 2001, Amphora entered into a
three-year Sublease Agreement with Caliper for the rent of
approximately 5,700 square feet in one of Calipers three
Mountain View, CA leased buildings for Amphoras research
and development use. Amphora is obligated for monthly rent based
on local market rates with a 3% per annum escalation and we, as
landlord, are obligated to provide certain facilities
maintenance services. In September 2001, we also entered into an
Administrative Services Agreement with Amphora for certain
financial accounting, purchasing and human resource services to
be provided by our personnel. We charge for these services
monthly at an hourly rate based on a cost plus mark-up basis
recording the corresponding payments from Amphora as part of our
overall employee costs. We anticipate that Amphora will
terminate this agreement at its option by mid 2002 when they are
fully staffed.



| |                          
| | -------------------------
| | Technology Access Program

Prior to transitioning to a commercial products
business model, we had Technology Access Program
(TAP) customers. In this program, focused on high
throughput systems for drug screening, we worked directly with
pharmaceutical company customers during the product development
process. In 2001, our existing TAP customers purchased Caliper
HTS 250 systems for their internal use. These customers
included: Millennium Pharmaceuticals, Eli Lilly and Amgen. We
also sold systems to non-TAP customers, including: Amphora,
Pfizer, Wyeth-Ayerst, Chiron and SUGEN, a Pharmacia company.

Beginning in August 2001, within the context of
our planned discontinuation of our Technology Access Program and
conversion to a commercial high throughput screening products
business structure, we initiated

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the renegotiation of our Technology Access
Program agreements with Amgen, Eli Lilly and Millennium
Pharmaceuticals. We proposed to each customer, and they agreed,
that the remaining technology access and subscription fees due
us under their agreement would be converted to credits toward
the purchase of products and services. The renegotiated
contracts with Amgen, Eli Lilly and Millennium include discounts
off our product list prices for their commitment and ongoing
participation as a customer of our high throughput screening
commercial business for the next 8 to 15 months.




| |                                             
| | --------------------------------------------
| | Value Added Screening Collaboration
	Program

Similarly, we also had a Value Added Screening
Collaboration (VASC) program in which we offered high throughput
screening services using our LabChip systems. When we decided to
transition our business to product-based revenues, this program
was eliminated. Of the two VASC collaborations, the contract
with Neurocrine Biosciences expired in December 2001, and the
other, with SUGEN, transitioned into a commercial products
customer.



| |                                       
| | --------------------------------------
| | Automated Microfluidics Systems 90
	SE

We introduced the AMS 90 SE in the
first quarter of 2002. Previously, the AMS 90, which began
shipping to customers in the first quarter of 2001, was
available. We sell proprietary reagents and chips required for
operation of the AMS 90 SE directly to customers as
well as support services. Assays for high-throughput DNA
analysis are currently available and we intend to introduce
additional assays.



| |                                
| | -------------------------------
| | Applications Developer
	Program

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

We have five ADP collaborations underway. These
include: Millennium Pharmaceuticals; GlaxoSmithKline; the
National Aeronautics and Space Administration (NASA); as well as
two collaborations in the area of petrochemical analysis and
agriculture. Our agreement with Millennium involves application
development in the areas of lead discovery, functional genomics
and proteomics. With GlaxoSmithKline, we are exploring
chemistry on a chip applications for chemical
synthesis. The NASA collaboration, with the Marshall Space
Flight Center, is focused on creating protein crystals on a chip
that would be compatible with a microgravity environment. In our
ADP collaborations we generally retain the rights to
microfluidics technologies and any products resulting from these
collaborations, subject in some circumstances to royalties or
other compensation to our collaborators.



| |                                                                             
| | ----------------------------------------------------------------------------
| | Entry into Clinical Diagnostics:
	Relationship with Bacterial BarCodes, Inc.

In December 2001, we formed an agreement with
Bacterial BarCodes, Inc. (BBCI) to co-distribute clinical
diagnostic systems based on our LabChip microfluidic technology
and BBCIs proprietary rep-PCR bacterial fingerprinting
technology. This agreement marked our entry into the diagnostics
marketplace. Under this agreement, we will sell the Caliper 1000
Analyzer, which will be used with BBCIs proprietary DNA
primers, to generate DNA fingerprints of bacteria for purposes
of identifying the organism and eventually predicting antibiotic
sensitivity. The addition of our technology is intended to
significantly diminish the number of steps, as well as the time
needed, to perform the identification. In the first half of
2002, BBCI

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intends to establish a small number of pilot
sites to evaluate the Caliper 1000 Analyzer, and we anticipate
introducing the product for epidemiology use in the first half
of 2002. A clinical product, requiring regulatory approval, is
also planned for which BBCI will manage the required submissions
to the Food and Drug Administration. We will receive revenue
only on our product sales of LabChips and instruments under our
agreement with BBCI. The Caliper 1000 Analyzer is in the final
stages of completion with commercial launch anticipated in first
half of 2002.


We believe that the combination of Caliper
LabChip microfluidic systems for DNA analysis and BBCIs
rep-PCR technology can offer the clinical diagnostic market a
practical method to quickly produce bacterial fingerprints in an
automated format. BBCI currently markets proprietary rep-PCR
products that enable labs to produce unique genetic fingerprints
of bacteria. The rep-PCR method produces a mixture of DNA
fragments of varying sizes that must be separated according to
size to form the actual unique fingerprint patterns. To date,
the rep-PCR method has relied upon DNA molecule separation using
traditional slab gel electrophoresis, a largely manual and
time-consuming process.

Under the agreement, Caliper and BBCI will create
a new diagnostic kit that combines our LabChip DNA analysis
reagents and chips with BBCIs rep-PCR reagents. We will
supply chips to BBCI who will sell the new kit and provide
customers with access to BBCIs software and database of
bacterial fingerprints. We will market and sell the Caliper 1000
Analyzer designed to run the chips.



| |          
| | ---------
| | Customers

To date, we have generated a substantial portion
of our revenue from a limited number of sources. Amphora, a
related party, initial licensing of the Ramsey family of patents
to Aclara, our Technology Access Program customers, Amgen, Eli
Lilly and Millennium, and our commercial partner, Agilent, each
accounted for in excess of 10% of our revenue in the year ended
December 31, 2001. Agilent alone accounted for 32% of our
revenue in this period, one Technology Access Program customer,
Millennium, accounted for 10% of our revenue, Amphora alone
accounted for 13% of our revenue, and initial licensing of the
Ramsey family of patents to Aclara accounted for 17% of our
revenue in the year ended December 31, 2001. Agilent alone
accounted for 45% of our revenue in the year ended
December 31, 2000 and our three Technology Access Program
customers Amgen, Eli Lilly and Millennium, each accounted for
14%, 18% and 13%, respectively, of our revenue in this period.
Agilent alone accounted for 50% of our revenue in the year ended
December 31, 1999, and our then two Technology Access
Program customers, Amgen and Eli Lilly, each accounted for 17%
and 21% of our revenue, respectively, in this period. Although
we are seeking to expand our customer base, we cannot assure you
that these efforts will be successful. The loss of any of these
customers would have a material adverse effect on our results of
operations.

During the course of 2001, 2000 and 1999, we did
not experience any material backlog in supplying products or
services to our customers. Our customers purchase our products
under standard terms and conditions for payment due in
30 days from the invoice date, as we do not offer extended
payment terms. We invoice our customers upon shipment of the
products or the completion of services under our agreements. We
offer our customers a one-year warranty on high throughput
system purchases and a 90-day warranty on chip purchases.

Approximately 98% of our total revenues were in
the United States as described in Note 2 to our financial
statements located at the end of this Annual Report.
Substantially all of our long-lived assets are located in the
United States.



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

Key components of our chips, instruments and
reagent-based products are obtained from a number of single
source or limited source suppliers. We rely on a privately-held
company for the supply of proprietary dyes used in many of our
LabChip products. Furthermore, we depend on a foreign single
source supplier for the manufacture of glass stock used in the
manufacture of certain types of our chips. The majority of our
key components for our chip and instrument products are readily
available from our suppliers within the normal production cycle
of our manufacturing process. The only component requiring any
significant lead time to

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acquire is our glass stock as our supplier
requires minimum quantity orders that necessitated us placing an
order of approximately $700,000 in 2001 for quantities that will
be sufficient for several years.


Although we have established licensing
arrangements and supply agreements with these suppliers, as well
as other single or limited-source suppliers, there can be no
assurances that these companies would not in some way be
adversely affected in the future and be unable to meet our
critical supply needs. In the event that the supply of
components from these suppliers and other single-source or
limited-source suppliers were interrupted, we may not be able to
manufacture, or manufacture in a timely fashion or in
significant quantities, our products, which would delay our
ability to manufacture and deliver products to our customers.



| |                     
| | --------------------
| | Commodity Price Risk

Some of the raw materials we use are subject to
price volatility caused by supply conditions, economic variables
and other unpredictable factors. Historically we have not
experienced significant supply or price constraints and we do
not expect our financial position, profitability and liquidity
to be affected materially by the supply level fluctuations.

Technology

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



| |                 
| | ----------------
| | Microfabrication

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

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

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

We currently make two basic chip
formats.In our planar chips, such as
those used in the Agilent 2100 Bioanalyzer, the user introduces
all of the chemical reagents into the reservoirs, including the
various samples to be tested, using pipettes. In our sipper chip
devices, such as those used in the Caliper 250
HTS system or the AMS 90 SE, a small tube, or
capillary, inserted into the chip draws a few nanoliters of each
sample into the channel network. In this way, minute quantities
of a large number of samples can be tested in a single chip. The
samples are introduced into the capillary one after the other,
spaced by buffer solution. They proceed through the channel
network in a continuous flow, assembly-line fashion to perform a
complete experiment. We have an issued U.S. patent claiming
this assay technique.

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| |              
| | -------------
| | Microfluidics

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

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

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

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



| |                                        
| | ---------------------------------------
| | Lab-on-a-Chip Applications
	Development

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

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

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Research and Development

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



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

Our technology research activities fall into
several classes.

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

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

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



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

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

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

LibraryCard System.We are developing a new format for
storing and accessing reagents, which we call the LibraryCard
reagent array. We have learned how to reconstitute very small
quantities of dried reagents stored at high density on a planar
surface. We can conveniently access reagents stored in this way
using our sipper chips. The LibraryCard reagent array could
produce a fundamental change in the way large libraries of
reagents are used. Today, these libraries are only accessible in
centralized reference-style laboratories that are set up to work
with automated warehouses of reagents. When libraries can be
reduced to the size of a postcard, high throughput
experimentation involving massive data acquisition can be
decentralized. We believe that this will increase the size of
the market for applications that run on this type of system. We
believe this type of system could significantly impact several
stages of the pharmaceutical development process, particularly

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primary screening and pharmacogenetic studies.
During 2001, we made steady progress advancing the development
of the Library Card System. This included validating the system
in small test screens, creating prototypes for use with 4-sipper
chips and using the prototypes in collaboration with development
partners.


SNP Genotyping.Genotyping is the determination of the
DNA sequence variation present at a particular site in an
individuals DNA. One type of these variations, called
single nucleotide polymorphisms, or SNPs, are
believed to be important determinants of disease and to be
predictive of variable individual responses to drug therapy.
Like all experimentation processes, these applications are a
combination of various fluid manipulations, biochemical
reactions, molecular separations and detection. We believe the
processes required for SNP analysis can be performed on the same
basic high throughput platform we have built for other
applications. We are developing an integrated SNP genotyping
application that is designed to perform the steps of reagent
assembly, amplification and genotyping in rapid, serial fashion
inside the channels of a microfluidic chip. We believe that our
SNP genotyping systems will offer the advantages of
nanoliter-scale processing of valuable reagents, automated
reagent assembly and computer-controlled heating and mixing for
high quality data production. This program had its origins in a
1999 project funded in part by the Advanced Technology Program
of the National Institute of Standards and Technology, to adapt
the platform and develop chips to run high throughput nucleic
acids analyses. During 2001, we achieved a number of product
development milestones. These included adding heating capability
to our high throughput system to denature DNA reproducibly and
amplifying DNA in multiple channels simultaneously on a single
chip.

Our research and development expenses for the
years ended 2001, 2000 and 1999 were approximately
$38.3 million, $33.5 million, and $17.5 million,
respectively. We expect research and development spending to
continue to increase over the next several years as we expand
our research and product development efforts although at a
lesser rate than our revenue growth rate. As of
December 31, 2001, we had 132 employees engaged in
research and development, including 78 with advanced degrees.

Manufacturing

We manufacture all of our chips, high throughput
instrument systems, and a variety of consumables in-house.
Caliper is ISO 9001 compliant for the development,
manufacture, and distribution of its chips and reagent systems.
ISO, the International Standards Organization, sets
international standards for quality in product manufacturing and
production. We rely upon Agilent to manufacture the Agilent 2100
Bioanalyzer and, on an OEM basis, the Caliper 1000 Analyzer,
which we anticipate introducing in 2002. We contract with third
parties to supply raw materials, components parts and
sub-assemblies used in our chip, reagent and instrument systems.
We intend to continue to invest in our infrastructure for the
manufacture and distribution of our chips and to continue to
work with third parties for outsourcing opportunities for
non-chip based products. For a discussion of the methods we use
to manufacture our chips see  Technology
and  Research and Development.

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

Competition

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



| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | companies providing conventional products based
	on established technologies, and incremental improvements to
	these products
|
| |  | companies developing their own microfluidics or
	lab-on-a-chip technologies                                                  
|
| |  | companies developing new non-chip technologies                                                                               

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In order to compete against vendors of
conventional products, we will need to demonstrate the
advantages of our LabChip products over alternative
well-established technologies and products. We will also need to
demonstrate the potential economic value of our LabChip products
relative to these conventional technologies and products. Some
of the companies that provide these products include the Applied
Biosystems division of Applera (formerly PE Corporation),
Agilent, Beckman-Coulter, Amersham Pharmacia Biotech, Bio-Rad
Laboratories, Molecular Devices and Tecan.

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

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

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

Intellectual Property

We seek patent protection on our lab-on-a-chip
technologies. As of March 1, 2002, we owned or held
licenses to 99 issued U.S. patents and 172 pending
U.S. patent applications, some of which derive from a
common parent application. The issued U.S. patents expire
between 2012 and 2019. Foreign counterparts of many of these
patents and applications have been filed and/or issued in one or
more other countries, resulting in a total of more than 573
issued patents and pending patent applications in the United
States and foreign countries. These patents and applications are
directed to various technological areas which we believe are
valuable to our business, including:



| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | control of movement of fluid and other material
	through interconnected microchannels
|
| |  | continuous flow high throughput screening assay
	methods and systems                 
|
| |  | analytical and control instrumentation                                               
|
| |  | analytical system architecture                                                       
|
| |  | chip-based assay chemistries and methods                                             
|
| |  | chip compatible sample accession                                                     
|
| |  | software for control of microfluidic based
	systems and data analysis                
|
| |  | chip manufacturing processes                                                         

We also rely upon copyright protection, trade
secrets, know-how, continuing technological innovation and
licensing opportunities to develop and maintain our competitive
position. Our success will depend in part on

16



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our ability to obtain patent protection for our
products and processes, to preserve our copyrights and trade
secrets, to operate without infringing the proprietary rights of
third parties and to acquire licenses related to enabling
technology or products used with our lab-on-a-chip technology.


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

Employees

As of December 31, 2001, we had a total of
250 employees, including 132 in research and development, 61 in
manufacturing, 17 in sales and marketing and 40 in
administration and finance. None of our employees is represented
by a collective bargaining agreement, nor have we experienced
any work stoppage. We consider our relations with our employees
to be good.

Executive Officers of the Registrant

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

Susan A. Evans, Ph.D.,has served as our Vice President of
Product Development since February 2002. From February 2000 to
January 2002, Dr. Evans served as Vice President of
Research and Development for LifeScan, Inc., a medical products
subsidiary of Johnson & Johnson. From December 1994 to
December 2000, Dr. Evans served as Senior Vice President of
Research and Development for Dade Behring, the succeeding
clinical diagnostic company from the Baxter Diagnostics, Inc
leveraged buyout. From 1981 to 1994, Dr. Evans held a
number of research and development positions at Baxter
Diagnostics, Inc., a diagnostic products manufacturing company.
Dr. Evans holds a B.A. in Chemistry from Emmanuel College
and a Ph.D. in Biochemistry from the University of Detroit.

James L. Knighton,has served as our Vice President and
Chief Financial Officer since September 1999 and was promoted to
Executive Vice President in April 2001. From October 1998 to
September 1999, Mr. Knighton served as Senior Vice
President and Chief Financial Officer of SUGEN, Inc., a
biotechnology company. From July 1997 to October 1998,
Mr. Knighton served as Vice President of Investor Relations
and Corporate Communications at Chiron Corporation, a
biotechnology company. From 1985 to 1994, Mr. Knighton
served in various operations, planning and R&D functions at
E. I. DuPont de Nemours Inc., a global,
diversified chemical and life science company. Mr. Knighton
holds a B.S. in Biology from the University of Notre Dame, an
M.S. in Genetics from the University of Pennsylvania and a
M.B.A. from the Wharton School at the University of Pennsylvania.

Michael R. Knapp, Ph.D.,co-founded Caliper and has served as
our Vice President of Science and Technology since September
1995. From November 1994 through August 1995, Dr. Knapp was
engaged in activities related to forming Caliper, including
securing our core technology license and procuring financing.
From October 1988 to October 1994, Dr. Knapp served as
President and Scientific Director at Molecular Tool, Inc., a
genetics technology company he co-founded in 1988. Previously,
Dr. Knapp was on the staff of the Center for Neurobiology
and Behavior at Columbia University and was a Scientific
Director of Genetica

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##### Table of Contents



SARL, an affiliate of Rhone Poulenc SA in Paris,
France. Dr. Knapp holds a B.S. in Biology from Trinity
College (Hartford) and a Ph.D. in Medical Microbiology from
Stanford University.


J. Wallace Parce, Ph.D.,co-founded Caliper and has served as
our Vice President of Research since October 1995. Prior to
joining Caliper, Dr. Parce spent 12 years with
Molecular Devices Corporation as a founder, consultant, Director
of Research and Vice President of Research. From 1980 until 1984
he was an Assistant Professor in the Department of Biochemistry
at Wake Forest University, from 1982 until 1987 an associate in
the Department of Microbiology and Immunology, and from 1984
until 1987, an Associate Professor of Biochemistry.
Dr. Parce holds a B.A. in Chemistry from Western Maryland
College in 1972 and a Ph.D. in Biochemistry from Wake Forest
University in 1976. From 1976 until 1980 Dr. Parce was a
Post Doctoral Fellow in Chemistry at Stanford University.

Michael Merion, Ph.D.,has served as our Vice President of
Sales and Marketing since August 2001. From November 1993 to
July 2001, Dr. Merion was Vice President of Marketing for
Dionex Corporation, a diagnostic instrument company, where he
was responsible for worldwide marketing of all of Dionex
products and new business development. From September 1984 to
October 1993, Dr. Merion held various positions in sales,
product management and program management for Waters
Corporation, a diagnostic instrument company. Dr. Merion
holds a B.A. in Biology from Rutgers University and a Ph.D. in
Biochemistry also from Rutgers University.

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

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




Item 2.     Properties

Our principal research and development,
manufacturing and administrative facilities are currently
located in three buildings totaling approximately 110,000 square
feet of leased space in Mountain View, California. The leases
for this space will expire in 2007 and 2008. We have no other
properties or facilities. We believe that our current
facilities, based on our long term strategic facilities plan,
are adequate for our needs through the fourth quarter of 2002,
and we are currently assessing the need for additional
facilities to meet our future needs. If we are unable to locate
additional facilities, we will be required to delay our planned
expansion. Any facilities that we are able to locate and lease
may be on terms that are expensive to us, especially since we
are located in the Silicon Valley in California where supply of
such facilities can fluctuate from year to year.




Item 3.     Legal
Proceedings

On March 22, 1999, Caliper filed a lawsuit
in California Superior Court for the County of Santa Clara
against Aclara and others alleging that all the defendants
misappropriated certain of Calipers trade secrets relating
to Caliper business plans, patents and intellectual property
strategy. On September 14, 2000, Caliper reached a
settlement agreement with the defendants other than Aclara. On
October 27, 2000, the jury returned a verdict in favor of
Caliper and against Aclara on Calipers claims for
misappropriation of trade secrets and conversion of property.
The jury awarded Caliper $52.6 million for damages to
Caliper and unjust enrichment to Aclara, which the court reduced
to $35.6 million.

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

On March 22, 2001, in connection with the
settlement agreement mentioned above, Caliper received 900,000
shares of Aclaras common stock with a then current fair
value of $4.3 million. The common stock is restricted from
sale for a period of 18 months from the date of the
settlement agreement. As a component of the settlement
agreement, Aclara has guaranteed the value of the Aclara common
stock to be $32.5 million at the time of Calipers
sale of the stock, provided that such sale occurs in the period
from 18 months to 24 months from the effective date of
the settlement agreement. Aclara entered into a fully-funded
$32.5 million standby letter of credit in favor of Caliper
to secure its performance under this potential obligation.
Accordingly, Caliper has recognized the entire
$32.5 million settlement in the quarter ended
March 31, 2001. Caliper has recognized $5.0 million of
license fee revenue and $27.5 million of litigation
settlement in the income statement pursuant to the terms
contained in the settlement agreement. Caliper will also receive
royalties on certain Aclara product sales commencing in 2002
through 2008 with a minimum annual royalty payment of
$2.5 million by December 31st in each of years 2002
and 2003. Caliper does not have any further obligations under
the agreement.

Caliper has accounted for this arrangement by
recording $4.3 million in Aclara stock at fair market
value, with a note receivable with a corresponding face value of
$28.2 million including other receivable for the fully
funded letter of credit which was reduced by the initial fair
value ($2.7 million) of an embedded derivative. The latter
two elements in combination represent the guarantee. The
receivable is being accreted to its face value of
$28.2 million over the life of the receivable using the
level-yield method. The embedded derivative is being accounted
for as discussed in Note 2 to our Financial Statements,
which are included in this Annual Report on Form 10-K
immediately following the signature page.

Commencing on June 7, 2001, Caliper and
three of its officers and directors (David V. Milligan,
Daniel L. Kisner and James L. Knighton) have been
named as defendants in three securities class action lawsuits
filed in the United States District Court for the Southern
District of New York. The first such suit is captioned
Colbert Birnet, L.P. v. Caliper Technologies Corp., et al.,No. 01-CV-5072. The other two suits are captioned
Kovel v. Caliper Technologies Corp., et al.,No. 01-CV-5964 and Leach v. Caliper Technologies
Corp., et al.,01-CV-6537. Caliper believes that the cases
will be consolidated and that a single consolidated complaint
will be filed after the court appoints a lead plaintiff. The
Koveland Leachcomplaints allege claims against
Caliper and certain individual officers or directors of Caliper
under Sections 11 and 15 of the Securities Act of 1933. The
Birnetand Kovel complaints allege claims against
Caliper and certain individual officers and directors of Caliper
under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as well as Rule 10b-5 of the Securities
Exchange Act. Each of the complaints also names as a defendant
one or more of the underwriters of Calipers December 1999
initial public offering of common stock. Each of the complaints
alleges that one or more of these underwriters charged
excessive, undisclosed commissions to investors and entered into
improper agreements with investors relating to aftermarket
transactions. The complaints seek rescission or rescissionary
damages on the Section 11 claims and an unspecified amount
of money damages on the Rule 10b-5 claims. Based on
information currently available to Caliper, Caliper believes
that the claims alleged against Caliper and its officers and
directors are without merit. Caliper intends to defend these
cases vigorously.

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

No matters were submitted to a vote of our
Security holders during the quarter ended December 31, 2001.




PART II




Item 5.     Market
for Registrants Common Stock and Related Stockholder
Matters

Market for Registrants Common
Equity

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

|             |                |      |   |        |  |  |   |       | 
|------------ | -------------- | ---- | - | ------ |  |  | - | ----- | 
|             |                | High |   | Low   
|             |                |      |   |       
|Fiscal 2001: |                |      |   |        |  |  |   |      
|             | First Quarter  |      | $ | 45.81  |  |  | $ | 13.00 | 
|             | Second Quarter |      | $ | 30.09  |  |  | $ | 13.25 | 
|             | Third Quarter  |      | $ | 20.63  |  |  | $ | 9.07  | 
|             | Fourth Quarter |      | $ | 15.98  |  |  | $ | 8.51  | 
|            
|Fiscal 2000: |                |      |   |        |  |  |   |      
|             | First Quarter  |      | $ | 202.00 |  |  | $ | 47.00 | 
|             | Second Quarter |      | $ | 76.69  |  |  | $ | 22.50 | 
|             | Third Quarter  |      | $ | 68.50  |  |  | $ | 40.00 | 
|             | Fourth Quarter |      | $ | 71.63  |  |  | $ | 38.50 | 

As of December 31, 2001, there were
approximately 208 holders of record of our common stock. We have
never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in
the operation and expansion of our business. Although we have no
restrictions, we do not anticipate paying any cash dividends in
the foreseeable future.

20



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##### Table of Contents






Item 6.     Selected
Financial Data

The statements of operations data for each of the
years ended December 31, 2001, 2000 and 1999, and the
balance sheet data as of December 31, 2001 and 2000, have
been derived from our audited financial statements included
elsewhere in this Annual Report on Form 10-K which have
been audited by Ernst & Young LLP, independent
auditors. The statements of operations data for the years ended
December 31, 1998 and 1997, and the balance sheet data as
of December 31, 1999, 1998 and 1997 have been derived from
our audited financial statements not included in this Annual
Report on Form 10-K. Our historical results are not
necessarily indicative of results to be expected for any future
period. The data presented below have been derived from
financial statements that have been prepared in accordance with
generally accepted accounting principles and should be read with
our financial statements, including the notes, and with
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this Annual Report on Form 10-K.

|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |       |       | 
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------- | ------- | ------ | ------ | ---- | ------- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ----- | 
|                                                                                                      |                                                |                                      
|                                                                                                      |                                                | Year Ended December 31,              
|                                                                                                      |                                                |                                      
|                                                                                                      |                                                | 2001                                  |         | 2000   |        | 1999 |         | 1998   |        | 1997
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |     
|                                                                                                      |                                                |                                      
|                                                                                                      |                                                | (In thousands, except per share data)
|Statements of Operations Data:                                                                        |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Revenue:                                                                                              |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|                                                                                                      | Product revenue                                |                                       | $       | 8,799  |        |      | $       | 3,201  |        |      | $       | 1,211  |        |   | $      |      |        |   | $      |      |      
|                                                                                                      | Product revenue-related party                  |                                       |         | 3,912  |        |      |         |       |        |      |         |       |        |   |        |      |        |   |        |      |      
|                                                                                                      | License fees and contract revenue              |                                       |         | 16,877 |        |      |         | 15,363 |        |      |         | 10,876 |        |   |        | 8,155 |        |   |        | 2,266 |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|                                                                                                      |                                                | Total revenue                         |         |        | 29,588 |      |         |        | 18,564 |      |         |        | 12,087 |   |        |       | 8,155  |   |        |       | 2,266 | 
|Costs and expenses:                                                                                   |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|                                                                                                      | Cost of product revenue                        |                                       |         | 4,784  |        |      |         | 2,519  |        |      |         | 921    |        |   |        |      |        |   |        |      |      
|                                                                                                      | Cost of product revenue-related party          |                                       |         | 2,103  |        |      |         |       |        |      |         |       |        |   |        |      |        |   |        |      |      
|                                                                                                      | Research and development                       |                                       |         | 38,263 |        |      |         | 33,478 |        |      |         | 17,494 |        |   |        | 9,584 |        |   |        | 7,200 |      
|                                                                                                      | General and administrative                     |                                       |         | 15,545 |        |      |         | 9,787  |        |      |         | 5,312  |        |   |        | 2,932 |        |   |        | 2,478 |      
|                                                                                                      | Amortization of deferred stock compensation(1) |                                       |         | 2,540  |        |      |         | 4,545  |        |      |         | 3,885  |        |   |        |      |        |   |        |      |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|                                                                                                      |                                                | Total costs and expenses              |         |        | 63,235 |      |         |        | 50,329 |      |         |        | 27,612 |   |        |       | 12,516 |   |        |       | 9,678 | 
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Operating loss                                                                                        |                                                |                                       | (33,647 | )      |        |      | (31,765 | )      |        |      | (15,525 | )      |        |   | (4,361 | )     |        |   | (7,412 | )    
|Interest income, net                                                                                  |                                                |                                       | 9,970   |        |        |      | 7,468   |        |        |      | 1,152   |        |        |   | 1,386  |       |        |   | 1,131  |      
|Litigation settlement and reimbursement                                                               |                                                |                                       | 27,500  |        |        |      | 13,274  |        |        |      |        |        |        |   |       |       |        |   |       |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Income (loss) before cumulative effect of
	change in accounting principle(3)                          |                                                |                                       | 3,823   |        |        |      | (11,023 | )      |        |      | (14,373 | )      |        |   | (2,975 | )     |        |   | (6,281 | )    
|Cumulative effect of a change in accounting
	principle                                                |                                                |                                       |        |        |        |      | (2,294  | )      |        |      |        |        |        |   |       |       |        |   |       |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss)                                                                                     |                                                |                                       | 3,823   |        |        |      | (13,317 | )      |        |      | (14,373 | )      |        |   | (2,975 | )     |        |   | (6,281 | )    
|Accretion on redeemable convertible preferred
	stock(2)                                               |                                                |                                       |        |        |        |      |        |        |        |      | (2,328  | )      |        |   | (2,174 | )     |        |   | (1,470 | )    
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) attributable to common
	stockholders                                                |                                                | $                                     | 3,823   |        |        | $    | (13,317 | )      |        | $    | (16,701 | )      |        | $ | (5,149 | )     |        | $ | (7,751 | )    
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) per common share, basic:                                                            |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) before cumulative effect
	of a change in accounting principle                       |                                                | $                                     | 0.16    |        |        | $    | (0.50   | )      |        | $    | (4.56   | )      |        | $ | (2.39  | )     |        | $ | (4.38  | )    
|Cumulative effect of a change in accounting
	principle                                                |                                                |                                       |        |        |        |      | (0.11   | )      |        |      |        |        |        |   |       |       |        |   |       |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) per share, basic                                                                    |                                                | $                                     | 0.16    |        |        | $    | (0.61   | )      |        | $    | (4.56   | )      |        | $ | (2.39  | )     |        | $ | (4.38  | )    
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Shares used in computing net income(loss) per
	common share, basic                                    |                                                |                                       | 23,997  |        |        |      | 21,853  |        |        |      | 3,663   |        |        |   | 2,157  |       |        |   | 1,768  |      
|Net income (loss) per common share, diluted:                                                          |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) before cumulative effect
	of a change in accounting principle                       |                                                | $                                     | 0.15    |        |        | $    | (0.50   | )      |        | $    | (4.56   | )      |        | $ | (2.39  | )     |        | $ | (4.38  | )    
|Cumulative effect of a change in accounting
	principle                                                |                                                |                                       |        |        |        |      | (0.11   | )      |        |      |        |        |        |   |       |       |        |   |       |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss) per share, diluted                                                                  |                                                | $                                     | 0.15    |        |        | $    | (0.61   | )      |        | $    | (4.56   | )      |        | $ | (2.39  | )     |        | $ | (4.38  | )    
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Shares used in computing net income
	(loss) per common share, diluted                                 |                                                |                                       | 25,634  |        |        |      | 21,853  |        |        |      | 3,663   |        |        |   | 2,157  |       |        |   | 1,768  |      
|Pro forma amounts assuming the change in
	accounting principle was applied retroactively (unaudited): |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Net income (loss)                                                                                     |                                                |                                       |         |        |        | $    | (11,023 | )      |        | $    | (14,267 | )      |        |   |        |       |        |   |        |      
|Net income (loss) per share, basic and
	diluted                                                       |                                                |                                       |         |        |        | $    | (0.50   | )      |        | $    | (0.92   | )      |        |   |        |       |        |   |        |      
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |      |         |        |        |   |        |       |        |   |        |      
|Shares used in computing pro forma net
	income(loss) per share, basic and diluted                     |                                                |                                       |         |        |        |      |         |        |        |      | 15,578  |        |        |   |        |       |        |   |        |      

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|                                                 |  |                |         |      |  |      |         |      |  |      |         |  |  |   |         |   |  |   |         |  
|------------------------------------------------ |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | - |  | - | ------- | -
|                                                 |  | 2001           |         | 2000 |  | 1999 |         | 1998 |  | 1997
|                                                 |  |                |         |      |  |      |         |      |  |     
|                                                 |  |               
|                                                 |  | (In thousands)
|Balance Sheet Data:                              |  |                |         |      |  |      |         |      |  |      |         |  |  |   |         |   |  |   |         |  
|Cash, cash equivalents and marketable securities |  | $              | 166,176 |      |  | $    | 191,699 |      |  | $    | 100,216 |  |  | $ | 31,052  |   |  | $ | 26,549  |  
|Working capital                                  |  |                | 195,310 |      |  |      | 187,475 |      |  |      | 95,234  |  |  |   | 21,604  |   |  |   | 24,679  |  
|Total assets                                     |  |                | 222,543 |      |  |      | 212,514 |      |  |      | 108,847 |  |  |   | 35,730  |   |  |   | 29,107  |  
|Long-term obligations, less current portion      |  |                | 3,749   |      |  |      | 3,534   |      |  |      | 3,906   |  |  |   | 2,008   |   |  |   | 1,430   |  
|Redeemable convertible preferred stock           |  |                |        |      |  |      |        |      |  |      |        |  |  |   | 48,716  |   |  |   | 38,283  |  
|Total stockholders equity (deficit)             |  |                | 206,564 |      |  |      | 196,457 |      |  |      | 97,863  |  |  |   | (17,654 | ) |  |   | (12,665 | )



---

|                                                                           |                            |              |   |       |       |      |   |       |       |  |   |       |       | 
|-------------------------------------------------------------------------- | -------------------------- | ------------ | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                                           |                            |             
|                                                                           |                            | Years Ended 
|                                                                           |                            | December 31,
|                                                                           |                            |             
|                                                                           |                            | 2001         |   | 2000  |       | 1999
|                                                                           |                            |              |   |       |       |     
|(1) Amortization of deferred stock
	compensation related to the following: |                            |              |   |       |       |      |   |       |       |  |   |      
|                                                                           | Research and development   |              | $ | 610   |       |      | $ | 1,601 |       |  | $ | 1,094 |      
|                                                                           | General and administrative |              |   | 1,930 |       |      |   | 2,944 |       |  |   | 2,791 |      
|                                                                           |                            |              |   |       |       |      |   |       |       |  |   |      
|                                                                           |                            | Total        |   | $     | 2,540 |      |   | $     | 4,545 |  |   | $     | 3,885 | 
|                                                                           |                            |              |   |       |       |      |   |       |       |  |   |      

|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Accretion on redeemable convertible preferred
	stock ceased upon conversion of all of the outstanding preferred
	stock to common stock at the close of our initial public
	offering in December 1999.
|   
|(3) | See Note 2 of notes to our financial statements
	for an explanation of the cumulative effect of a change in
	accounting principle related to revenue recognition.                                    

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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.

The following discussion and analysis is based
upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States.

Overview

We are a leader in lab-on-a-chip technologies
that miniaturize, integrate and automate many laboratory
processes. We develop, manufacture and sell our proprietary
LabChip systems to pharmaceutical and other companies. We
believe our LabChip systems have the potential to assemble the
power and reduce the scale of entire laboratories full of
equipment and people. From Calipers inception in July 1995
through September 2001, our operating activities were primarily
devoted to research, development and commercialization of
technologies involving the manipulation of very small amounts of
fluid, which are referred to as microfluidic
technologies, and first-generation products such as the
Agilent 2100 Bioanalyzer, LabChip kits and our high throughput
screening systems, recruiting personnel, business development,
raising capital and acquiring assets. During this period our
revenues were principally from contract services and, to a
lesser extent, from product sales. Subsequent to the
introduction of the Caliper 250 HTS system, we transitioned our
Technology Access Program participants to commercial customers.
In 1999, we recognized revenue from our first product sales when
we sold initial versions of our high throughput system for drug
screening to three of our Technology Access Program customers,
Amgen, Eli Lilly and Roche. In addition, in September 1999,
Agilent Technologies, Inc., our commercial partner, introduced
our first LabChip system for use by individual researchers. In
March 2000, we recognized revenue from our first multi-capillary
sipper chip system and Millennium Pharmaceuticals joined our
Technology Access Program, becoming our fourth Technology Access
Program customer, and also joined our joint applications
development program, which was formalized later in the year as
our Applications Developer Program. In May 2000, we introduced
the DNA500 LabChip kit for the automated analysis of small DNA
fragments to determine their size and concentration. In August
2000, we introduced the Protein 200 LabChip kit for the
automated sizing and analysis of protein samples. In September
2000, we introduced the Automated Microfluidics System 90 to
perform automated high throughput nucleic acid analysis. In
December 2000, GlaxoSmithKline became our second Applications
Developer Program customer, with the goal of developing new
applications in synthetic chemistry using our LabChip
technology. We shipped our first Automated Microfluidics System
90 and our first microfluidics development workstation, the
Caliper 42, in March 2001. In April 2001, we introduced the DNA
1000 LabChip kit for the automated analysis of DNA fragments to
determine their size and concentration. In July 2001, we
announced the establishment of an Applications Developer Program
collaboration with the National Aeronautics and Space
Administration (NASA) to use our LabChip technology to
perform protein crystallization in a microgravity environment.
In August 2001, we introduced the RNA Nano LabChip kit, an
enhanced application for the automated analysis of RNA fragments
to determine their size and concentration. In August 2001, we
also introduced new software to improve the efficiency of the
Agilent 2100 Bioanalyzer.

In September 2001, as anticipated, we initiated a
new commercial program for selling our high throughput screening
(HTS) products. This program is intended to replace our
fee-based Technology Access Program with direct sales of
instruments, chips, services and custom solutions to customers
based upon a product catalogue and established price list. We
also introduced a new instrument platform, the Caliper 250 HTS
system, which includes instruments for assay development and
screening, and a menu of chips that perform standard assays. The
Caliper 250 HTS system uses a 4-sipper chip capable of
performing tens of thousands of experiments per chip per day,
depending upon assay conditions, and offers walkaway automation

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and minimal user intervention. The Caliper 250
HTS system is being commercialized by our own sales and
marketing force. We are also offering a full range of customer
and field support services and a specialized HTS solutions
program that includes specific assay development support, early
access to beta products and customized microfluidic solutions
for customers individual research challenges. The first
sales of the Caliper 250 HTS System were made to Amphora
Discovery Corp., a related party, in September 2001 with
subsequent sales to our current high throughput screening
customers Amgen and Millennium and new pharmaceutical customers
including Pfizer, Wyeth-Ayerst and SUGEN, Inc., a Pharmacia
company.


In December 2001 we established a relationship
with Wako Pure Chemical Industries, Ltd. as the companys
high throughput system products distributor in Japan. As of the
end of 2001, our focus is now on the broad range of products we
have to offer that are based on our proprietary microfluidic
technology and now commercially available in the United States
and soon in Japan and Europe. We sold our first high throughput
system products in Japan in January 2002 and we anticipate sales
into Europe in the second half of 2002.

On January 7, 2001, we announced a
comprehensive settlement agreement with Aclara Biosciences on
all pending litigation between the two companies. As a result,
Aclara will pay us $37.5 million over the next three years
in a combination of stock, cash, and committed minimum royalties.

Entities upon which we can exercise significant
influence, but not control, are accounted for under the equity
method of accounting. Whether or not we exercise significant
influence with respect to a company depends on an evaluation of
several factors including, among others, representation on the
companys board of directors and ownership level, generally
20% - 50% interest in the voting securities of the company
including rights associated with our holding in common shares of
the company. In May 2001, we formed Amphora Discovery Corp.
later transferring certain intangibles to Amphora in September
of that year. Also in September 2001, Amphora completed a
private placement of securities with third-party investors
raising $25 million that reduced our ownership to
28 percent. Our investment in Amphora is accounted for
under the equity method of accounting. We received the right to
appoint two representative to Amphoras six member board of
directors. As Calipers investment in Amphora has no basis
for accounting purposes and, because Caliper does not guarantee
debt or have commitments to fund losses, Caliper has not
recorded its proportionate share of Amphoras operating
losses in its financial statements since the completion of
Amphoras financing. Future investments by Amphoras
third-party investors would further reduce our ownership
interest.

Amphora was created to develop and commercialize
a comprehensive database of chemical genomics information. The
Amphora database is being designed for use in preclinical drug
discovery and is intended to include a comprehensive collection
of information about important aspects of a library of small
molecules and their interactions with therapeutic targets.
Amphora plans to sell this database information directly to
pharmaceutical companies, biotechnology firms and academic
laboratories involved in preclinical and clinical research in
life sciences. It also plans to sell analysis tools, reagents
from the Amphora compound library, and licenses to proprietary
compounds and targets. Amphora intends to use our LabChip HTS
systems to create, build and expand its chemical genomics
database. Amphora has agreed to purchase a minimum number of
Caliper instruments and datapoints in its first few years of
operations and we expect that Amphora will be one of our major
high throughput screening customers.

After the completion of Amphoras
third-party financing, we sold to Amphora products and services
totaling $3.9 million in 2001 that included Caliper
250 HTS system products, LabChips, datapoints and assay
development services recording it as a related party sale on the
financial statements. Of the $3.9 million in total sales,
$3.0 million related to high throughput screening system
products and, under the equity method of accounting, we deferred
28% of the gross profit of these sales, or $363,000, that
reflects our retained ownership interest in the products sold to
Amphora. We recognized $21,000 of this deferred gross profit as
revenue in 2001 and expect to recognize the remaining $342,000
as revenue ratably over the next 36 months as Amphora
records depreciation on its Caliper 250 HTS systems.

Since our inception, we have incurred significant
losses and, as of December 31, 2001, we had an accumulated
deficit of $44.6 million. Our losses have resulted
principally from costs incurred in research and development,
manufacturing scale-up, and from general and administrative
costs associated with our

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operations. We expect to continue to incur
substantial research and development, manufacturing scale-up and
general and administrative costs. As a result, we will need to
generate significantly higher revenue to achieve profitability.


Historically, prior to September 2001, our
revenue has been derived principally from contract revenue
earned under our collaboration agreement with Agilent and from
our Technology Access Program customers and, to a lesser extent,
from the sale of products and government grants. Additionally,
in March 2001, we derived revenue of $5.0 million from our
initial licensing of the Ramsey family of patents to Aclara.
Commencing with the September 2001 launch of our Caliper
250 HTS system, we began the transition of our focus to a
commercial products business with our revenue derived thereafter
principally from the sale of products and the continuing
contract revenue earned under our collaboration agreement with
Agilent. Also, beginning in August 2001, the revenues from our
Technology Access Program customers were also transitioned to
being derived principally from product sales and to a lesser
extent contract revenues. In 2001, largely due to the sales of
high throughput screening systems to Amphora and our current and
new high throughput screening customers, a larger portion of our
revenue, about 43%, was derived from product sales, as compared
to only 17% in 2000. Although we are developing and plan to
introduce future products, we cannot provide assurance that we
will be successful in these efforts.

To date, we have generated a substantial portion
of our revenue from a limited number of sources. Amphora, a
related party, initial licensing of the Ramsey family of patents
to Aclara, our Technology Access Program customers, Amgen, Eli
Lilly and Millennium, and our commercial partner, Agilent, each
accounted for in excess of 10% of our revenue in the year ended
December 31, 2001. Agilent alone accounted for 32% of our
revenue in this period, the three Technology Access Program
customers collectively accounted for 21% of our revenue, Amphora
alone accounted for 13% of our revenue, and initial licensing of
the Ramsey family of patents to Aclara accounted for 17% of our
revenue in the year ended December 31, 2001. Agilent alone
accounted for 45% of our revenue in the year ended
December 31, 2000 and our three Technology Access Program
customers collectively accounted for 45% of our revenue in this
period. Agilent alone accounted for 50% of our revenue in the
year ended December 31, 1999, and our then two Technology
Access Program customers, Amgen and Eli Lilly, collectively
accounted for 38% of our revenue in that period. Although we are
seeking to expand our customer base, we cannot assure you that
these efforts will be successful.

Beginning in August 2001, within the context of
our planned discontinuation of our Technology Access Program and
conversion to a commercial HTS products business structure, we
initiated the renegotiation of our Technology Access Program
agreements with Amgen, Eli Lilly and Millennium Pharmaceuticals.
The renegotiated contracts with Amgen, Eli Lilly and Millennium
include a commitment for their ongoing participation as a
customer of Calipers high throughput screening commercial
business for 12 months. Historically, under our Technology
Access Program agreements, we recognized as revenue
non-refundable license fees over the contract period, product
sales upon the transfer of title to the customer, and
development and support fees in the period in which the costs
were incurred. Subscription fees and development and support
fees could be received annually or quarterly in advance
depending upon the terms of the agreement. We recorded payments
received in advance under all of these agreements as deferred
revenue until earned. Currently, with the new high throughput
screening commercial structure, customers will purchase
instruments, chips, support services and custom solutions
directly from Caliper, and they will be charged on a data point
pricing basis for their usage of chips. We will offer discounts
based on the volume of products and services purchased. Payments
received in advance under support service agreements or custom
solution agreements are recorded as deferred revenue until
earned as prescribed under SAB 101. After December 2001
when the last Technology Access Program agreement was amended,
there will be no further technology access fees or subscription
fees recognized with products and services purchased by former
Technology Access Program customers after December 2001
recognized upon shipment and transfer of title to the product to
the customer or when the assay development service has been
provided by Caliper. Under the amended agreements with our
Technology Access Program customers, Caliper agreed to convert
technology access and subscription fees still outstanding and
available towards the purchase of products and services that can
be utilized by the customer no later than December 2002. As of
December 31, 2001, a total of $3.3 million of

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revenue was deferred. We expect to recognize this
deferred revenue through the fourth quarter of 2002 as products
and services are purchased by our previous TAP customers.


Under our collaboration agreement, Agilent funds
our research and development expenditures related to the
collaboration, reimburses us for our costs of supplying chips
and reagents to Agilent and pays us a share of the gross margin
earned on all components of LabChip systems they sell. We record
revenue from development and support activities under our
collaboration agreement in the period in which the costs are
incurred. We report direct costs associated with this contract
as research and development expense. We recognize revenue
related to the reimbursement of costs for the supply of chips
and reagents to Agilent upon shipment. We recognize as revenue
our share of gross margin on components of the LabChip system
sold by Agilent upon shipment to the end user. Agilent began
marketing and sales efforts for the Agilent 2100 Bioanalyzer in
late 1999. Sales of new and innovative instrumentation such as
the Agilent 2100 Bioanalyzer involve a long sales cycle,
requiring customer training and demonstration periods. Sales of
the Agilent 2100 Bioanalyzer increased 158% during the course of
2001 as compared to 2000 indicating, we believe, a growing
market acceptance of this technology.

Significant Accounting Policies

Financial Reporting Release No. 60, which
was recently released by the Securities and Exchange Commission,
recommends all companies include a discussion of critical
accounting policies or methods used in the preparation of
financial statements. See Note 2 to our audited financial
statements included elsewhere in this document for a summary of
the significant accounting policies and methods used in the
preparation of the financial statements. The following is a
brief discussion of the more significant accounting policies and
methods used by Caliper.

Our financial statements are been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of our financial statements
requires management to make estimates and assumptions that
affect the reported amounts of revenue and expenses, and assets
and liabilities during the periods reported. Estimates are used
when accounting for certain items such as warranty expense,
sales and marketing programs, employee compensation programs,
depreciation and amortization periods, taxes, inventory values,
and valuations of investments and intangible assets. Other
significant accounting issues relate to accounts and
transactions with Amphora, a related party. We base our
estimates on historical experience, where applicable, and other
assumptions that we believe are reasonable under the
circumstances. Actual results may differ from our estimates due
to changing conditions or the validity of our assumptions. We
believe that the following critical accounting policies affect
our more significant judgments and estimates used in the
preparation of our financial statements.

We recognize instrument, LabChip, data point and
service support revenues net of credits and adjustments for
discounts. Regarding advance payments for customer service and
support, we concluded the approach described in SAB 101 is
preferable and have changed our method of accounting effective
January 2000 to recognize all customer support and service fees
over the term of the related agreement. We do not currently have
an allowance for doubtful accounts based on the aging of our
accounts receivable balances and our historical experience of no
write-offs. If the financial condition of our customers were to
deteriorate, we will implement and maintain allowances for
doubtful accounts for the estimated losses resulting from the
inability of our customers to make required payments. We value
inventories at the lower of standard cost (which approximates
actual cost) or market. We have made no provision for obsolete
or slow moving inventory as we have no history of returns and
warranties are not believed to be excessive. We may in future
periods, based on assumptions of customer demands and market
conditions, find it necessary to write down portions of our
inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and
estimated market value. When recording depreciation expense
associated with our production and microfluidic equipment, we
use estimated useful lives. As a result of changes in technology
and industry conditions, we periodically evaluate the useful
lives of our production and microfluidic equipment. These
evaluations could result in a change in useful lives in future
periods. We offer a one-year limited warranty on the HTS systems
and a 90-day warranty on chips, which is included in the sales
price of many of our products. We make provision for estimated
future warranty costs at the time of sale. As the

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majority of our HTS system parts are from
original equipment manufacturers which provide one-year
warranties already on these parts, we had a warranty provision
of $85,000 as of December 31, 2001 based on the limited service
cost to travel to the customer and maintain our products under
warranty. As our products have only been commercially available
since September 2001, our management will continue to analyze
evolving costs and customer trends when evaluating the adequacy
of the warranty expense provisions in future periods. We have
limited foreign currency risk as 98% of our revenues are in the
United States and we currently require foreign customers to pay
for products and services in U.S. dollars.


We have an ownership interest of approximately
28% in one entity, Amphora, for which we apply the equity or
cost method of accounting. Amphora is a major customer
representing approximately 13% of our total revenue in 2001. Our
investment in Amphora has no basis for accounting purposes and
we do not guarantee debt or have commitments to fund
Amphoras losses. Significant accounts and transactions
with Amphora are disclosed as related party transactions. In
2001, subsequent to Amphoras third-party financing,
Caliper sold a total of $3.9 million in Caliper 250 HTS
system products, LabChips, datapoints and assay development
services to Amphora recording the sales as related party revenue
in our financial statements. Under the equity accounting method,
Caliper recorded $3.0 million in related party product
sales and deferred 28% of the gross profit, or $363,000 that
reflects Calipers retained ownership interest in the
products sold to Amphora. Caliper recognized $21,000 of this
deferred gross profit in 2001 and we expect to recognize this
remaining $342,000 as revenue ratably over the next
36 months as Amphora records depreciation on its Caliper
250 HTS systems.

We have no guarantees of balance sheet debt of
third parties and we have no debt obligations that contain
provisions requiring accelerated payment in the event of
specified levels of declines in liquidity or profitability. We
do not have any special purpose entities in place.

In connection with the adoption of SFAS
No. 133, we recognize derivative financial instruments in
the financial statements at fair value regardless of the purpose
or intent for holding the instrument. We recognize changes in
the fair value of derivative financial instruments either
periodically in income or in stockholders equity as a component
of comprehensive income (loss) depending on whether the
derivative financial instrument qualifies for hedge accounting,
and if so, whether it is designated as a fair value hedge or
cash flow hedge. For derivative instruments that are designated
and qualify as fair value hedge (i.e., hedging the exposure to
changes in the fair value of an asset or a liability or an
identified portion thereof that is attributable to a particular
risk), we recognize the gain or loss on the derivative
instrument as well as the offsetting loss or gain on the hedged
item attributable to the hedged risk in current earnings during
the period of the change in fair values. We entered into a
settlement agreement with Aclara Biosciences in March 2001, the
terms of which provided that if we sell any of the 900,000
shares of Aclaras common stock received in the settlement
between 18 and 24 months from the effective date of the
settlement agreement, and the then fair value of Aclaras
stock is less than $36.11 per share, Aclara will pay us in cash
a dollar amount equal to the difference between the aggregate
fair value of the Aclara stock at the date the shares are
disposed and $32.5 million. If the then fair value of the
Aclara stock is greater than $36.11 per share, we will receive
no additional consideration from Aclara. We are restricted from
selling our shares of Aclara for 18 months following the
effective date of the settlement agreement. If we sell its
shares of Aclara stock at any time after 24 months from the
effective date of the settlement agreement, Aclara will have no
obligation to provide any additional consideration to us. Aclara
has executed a fully-funded $32.5 million standby letter of
credit in favor of Caliper to secure its performance under this
potential obligation. In effect, Aclara has guaranteed the
aggregate settlement amount of $32.5 million, so long as we
sell our Aclara stock within a specified period of time.

We have accounted for this arrangement by
initially recording $4.3 million in Aclara stock at fair
market value, with a note receivable with a corresponding face
value of $28.2 million for the fully funded letter of
credit which was reduced by the initial fair value
($2.7 million) of an embedded derivative. The embedded
derivative has been designated as a fair value hedge of the
Aclara stock. The mark-to-market change in the fair value of the
Aclara stock is recorded in earnings in the other income or
expense line on the statement of operations and is offset by the
gains or losses in the fair value of the derivative reported in
the same other income or expense line. The ineffective portion
of the embedded derivative is also recorded in the other

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income or expense line on the statement of
operations. As of December 31, 2001, the balances in Aclara
stock and the note receivable were $4.6 million and $26.9
million respectively.


We have deferred tax assets related to net
operating losses generated in the United States. Our accounting
policy is to record valuation allowances when it is more likely
than not that a tax benefit will not be realized. At
December 31, 2001, we had deferred tax assets related to
net operating losses of $15.9 million and a valuation
allowance of $15.9 million to equally offset those assets
as our lack of earnings history significantly limits our ability
to realize this tax asset.

Results of Operations



| |                                        
| | ---------------------------------------
| | Years Ended December 31, 2001 and
	2000

Revenue.Revenue
increased 59% to $29.6 million in 2001 from
$18.6 million in 2000. Of the $11.0 million increase,
$9.5 million was derived from increased product sales to
commercial customers, Amphora Discovery Corp., a related party,
and from our collaboration with Agilent.

Related party revenue was $3.9 million for
2001 resulting from sales of the Caliper 250 HTS system products
to Amphora subsequent to Amphoras third-party financing.
There were no related party revenues in 2000. Product revenue
from unrelated customers increased 175% to $8.8 million in
2001, compared to $3.2 million in 2000. This increase of
$5.6 million is from product volume growth under our
commercial collaboration with Agilent, and from sales of our
Caliper 250 HTS systems launched in September 2001 and the
Automated Microfluidics Systems 90 and Applications Developer
Program, both of which were introduced in March 2001. Product
revenue increased 111% in 2001 under our commercial
collaboration with Agilent driven by the Agilent 2100
Bioanalyzer unit sales increase of 158% over the same period in
2000. Product revenues from sales of our high throughput systems
increased 250% in 2001 driven by the commercial launch of the
Caliper 250 HTS systems, the Automated Microfluidics Systems 90
and the Applications Developer Program Caliper 42 System.
Additionally, we experienced this increase in part due to our
conversion from a fee-based technology access program model to a
commercial high throughput screening products business and the
associated change in revenue recognition methods.

License fees and contract revenues increased 10%
to $16.9 million in 2001 compared to $15.4 million in
2000. The increase of $1.5 million resulted mainly from the
$5.0 million licensing fee for the Ramsey family of patents
to Aclara in connection with our litigation settlement with
Aclara, and a $371,000 increase in product support services on
Calipers newly commercialized Automated Microfluidics
Systems 90 and Applications Developer Program products offset by
a $3.0 million decline in our Technology Access Program
contract revenue. We experienced this 39% decline in our
Technology Access Program revenue in 2001 as a result of our
conversion from a fee-based technology access program model to a
commercial high throughput screening products business. Also,
contract fee revenues under our collaboration with Agilent
declined 12% principally from a one time $735,000 research and
development reimbursement in 2000. Excluding this one time
reimbursement, contract fees in 2001 under the collaboration
with Agilent were essentially unchanged from 2000.

Cost of Product Revenue.Cost of product revenue represents
manufacturing costs incurred in the microfluidic instrument
production process, including component materials, assembly
labor and overhead, packaging and delivery cost. Cost of
products sold was $2.1 million for the related party sales
to Amphora Discovery Corp. for 2001. The profit margins on
product sales to Amphora vary due to the volume of products
purchased and the corresponding commercial volume discounts
earned. Cost of all other products sold were $4.8 million
for 2001 compared to $2.5 million in 2000. The improved
profit margins from product sales to unrelated customers in 2001
compared to last year was primarily due to the increased volume
of Agilent 2100 Bioanalyzer systems sold and sales of
Calipers own products. Product mix will affect future
profit margins as Caliper earns a higher return from its own
products sold as opposed to sharing gross margin revenues on
collaboration products with Agilent.

Research and Development Expenses.Research and development expenses
consist primarily of salaries and related personnel costs, fees
paid to consultants and outside service providers for chip
development,

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material costs for prototype and test units,
legal expenses resulting from intellectual property prosecution
and litigation, and other expenses related to the design,
development, testing, and enhancement of our products. We
expense our research and development costs as they are incurred.
Research and development expenses increased to
$38.3 million during 2001 from $33.5 million in 2000.
The increase of $4.8 million was primarily attributable to
continued growth of research and development activities,
including $7.7 million related to increased personnel and
services to support our expanded next generation high throughput
system and microfluidic chip development, partner collaboration
and initial product launches, $2.6 million for supplies
required to assemble, build and test prototype LabChip systems
and $3.0 million due to expansion in research facilities
and activities, offset by a reduction of $8.6 million for
costs related to intellectual property matters, primarily legal
fees due to the settlement with Aclara.


Our research and development focus has been on
product development in the areas of new applications,
microfluidic instruments with expanded capabilities, our
LibraryCard system and high throughput genomic systems. We
intend to continue LabChip systems development with increasingly
high throughput capabilities and develop a broader range of
applications for our LabChip technology. To advance our high
throughput systems and achieve the levels of throughput
necessary to meet customers demands, we need to continue
to develop and manufacture sipper chips with more than four
capillaries. Our current high throughput systems operate with
sipper chips with one and four capillaries, small glass tubes
used to draw compounds into the chip. In order to achieve the
levels of throughput that our customers desire, our research and
development efforts are focusing on a LabChip system that can
accommodate more than four capillaries. We expect to continue
our efforts in these areas of research and development even
though the risks of being successful are significant and we may
even not be able to develop the necessary technology to achieve
the advancements we currently envision. We expect research and
development spending to continue to increase over the next
several years as we expand our research and product development
efforts although at a lesser rate than our revenue growth rate.

General and Administrative Expenses.General and administrative expenses
consist primarily of salaries and related expenses for
executive, finance and other administrative personnel,
recruiting expenses, professional fees, and other corporate
expenses including business development and general legal
activities. General and administrative expenses increased to
$15.5 million during 2001 from $9.8 million in 2000.
The increase of $5.8 million was due primarily to
$3.0 million related to employment costs for marketing,
general and administrative personnel, $1.3 million for
general legal fees related to expanded commercial initiatives,
$947,000 for market research and services to support our initial
product launches and $558,000 for expanded operating facilities.
We expect general and administrative expenses to continue to
increase over the next several years to support our growing
business activities, and the commercialization of our products.

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

Interest Income (Expense), Net.Net interest income consists of income
from our cash and investments offset by expenses related to our
financing obligations. Net interest income increased to
$10.0 million in 2001 from net interest income of
$7.5 million in 2000.

This increase primarily resulted from interest on
proceeds of the $104.9 million raised in August 2000 from the
sale of 2,300,000 shares of common stock in a private placement
offset in part by generally declining interest rate yields in
2001.

Litigation settlement and reimbursement.In January 2001, we recognized
$27.5 million in a litigation settlement resulting from a
comprehensive settlement agreement with Aclara for the dismissal
of all suits and

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countersuits between the two companies. In 2000,
we received $13.3 million in a litigation settlement
resulting from a settlement agreement with a former patent
attorney and his former law firm. Of the $13.3 million
recognized in 2000, $12.0 million was a settlement with
Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP in a breach of fiduciary duty and
trade secret misappropriation case. The remainder relates to
reimbursement of litigation fees and expenses from one of our
collaborators.


Income Taxes.As of
December 31, 2001, we had federal and California net
operating loss carryforwards of approximately $27.6 million
and $2.5 million, respectively. We also had federal and
California research and other development tax credit
carryforwards of approximately $1.9 million and
$1.7 million, respectively. The net operating loss and
credit carryforwards will expire at various dates beginning on
2003 through 2021, if not utilized. Utilization of the net
operating losses and credits may be substantially limited due to
the change in ownership provisions of the Internal Revenue Code
of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits
before utilization.

As of December 31, 2001 and 2000 we had
deferred tax assets of approximately $15.9 million and
$16.7 million. The net deferred tax asset has been fully
offset by a valuation allowance. The net valuation allowance
decreased by $781,000 during the year ended December 31,
2001. The net valuation allowance increased by $6.2 million
during the year ended December 31, 2000. Deferred tax
assets relate primarily to net operating loss carryforwards,
research credit carryforwards, and capitalized research and
development costs.

Years Ended
December 31, 2000 and 1999

Revenue.Revenue
increased 54% to $18.6 million in 2000 from
$12.1 million in 1999. Of the $6.5 million increase,
$2 million was derived from product sales and $4.5 from
license fees and contract revenues. Product revenue from
unrelated customers was $3.2 million in 2000, compared to
$1.0 million in 1999. This increase of $2.2 million is
primarily from product volume growth under our commercial
collaboration with Agilent and, to a lesser extent, sales of
LabChips and microfluidic prototype instruments to our
Technology Access Program customers. With regard to our
collaboration with Agilent, the increase in revenue was
primarily attributed to product revenue resulting from increased
volume and product offerings as 2000 was the first full year
since commercial introduction of the Agilent 2100 Bioanalyzer in
November 1999.

License fees and contract revenues increased 41%
to $15.4 million in 2000 compared to $10.9 million in
1999. This increase of $4.5 million is comprised of a
$934,000 increase in contract services under our collaboration
with Agilent Technologies and a $3.6 million increase from
our Technology Access Program customers, primarily from the
addition of a new partner and the application of SAB 101,
which contributed $1.3 million to revenue.

Cost of Product Revenue.Cost of all other products sold were
$2.5 million for 2000 compared to $921,000 in 1999. The
improved profit margins from product sales to unrelated
customers in 2000 compared to last year was primarily due to the
increased volume of Agilent 2100 Bioanalyzer systems sold and
sales of Calipers own products.

Research and Development Expenses.Research and development expenses
increased to $33.5 million during 2000 from
$17.5 million in 1999. The increase of $16.0 million
was primarily attributable to continued growth of research and
development activities, including $7.1 million related to
increased personnel and services to support our Technology
Access Program, partner collaboration and initial product
launches, $6.3 million for costs related to intellectual
property matters, primarily legal fees, $1.1 million for
supplies required to assemble, build and test prototype LabChip
systems and the remainder due to expansion in operating
activities.

General and Administrative Expenses.General and administrative expenses
increased to $9.8 million during 2000 from
$5.3 million in 1999. The increase of $4.5 million was
due primarily to $2.9 million related to employment costs
for general and administrative personnel, $472,000 for general
legal fees as a result of being a public company and $405,000
for travel expenses to expand our business initiatives.

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

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from net interest income of $1.2 million in
1999. This increase primarily resulted from proceeds of
$104.9 million raised in August 2000 from the sale of
2,300,000 shares of common stock in a private placement.


Liquidity and Capital Resources

We have financed our operations from inception
primarily through equity sales, product and services, contract
and milestone payments to us under our collaboration and
Technology Access Program agreements, and equipment financing
arrangements. As of December 31, 2001, we had received net
proceeds of $228.2 million from issuances of common and
preferred stock which includes primarily $104.9 million
raised in August 2000 from the sale of 2,300,000 shares of
common stock in a private placement and $75.9 million
raised from our initial public offering in December 1999. In
addition, from inception through December 31, 2001 we had
received $72.8 million from collaborations, product and
services, Technology Access Program customers and government
grants and had financed equipment purchases and leasehold
improvements totaling approximately $11.4 million. We have
used leases and loans to finance capital expenditures. As of
December 31, 2001, we had $5.8 million in capitalized
lease obligations. These obligations are secured by the
equipment financed, bear interest at a weighted-average fixed
rate of approximately 11.1%, and are due in monthly installments
through December 2004. Under the terms of one equipment
financing agreement, the financed equipment may be purchased by
us at a fair value at the end of the financing term. Other
equipment financing agreements require a balloon payment at the
end of each loan term.

As of December 31, 2001, we had
$166.2 million in cash, cash equivalents and marketable
securities, as compared to $191.7 million as of
December 31, 2000. We used $22.6 million for
operations in 2001. This consisted of working capital changes of
$32.6 million offset by the net income for the period of
$3.8 million and by non-cash charges of $6.2 million
related to amortization of deferred stock compensation, stock
options issued to non-employees, and depreciation and
amortization expense.

Net cash used in investing activities was
$5.9 million for 2001, consisting primarily of
$7.2 million of capital expenditures and of
$188.5 million of purchases of available-for-sale
investments, offset in part by proceeds from sales and
maturities of available for sale investments. We received
$3.0 million from financing activities for 2001, which
consisted principally of $2.3 million raised in the
issuance of common stock and $2.5 million from equipment
financing, offset in part by repayments of equipment financing
arrangements of $2.0 million.

As of December 31, 2001, we had drawn down
$1.3 million of the $5.0 million equipment financing
credit line that existed as of December 31, 2000 at a
weighted-average interest rate of 11.5% and entered into a new
$3.0 million financing arrangement for the purchase of
property and equipment. As of December 31, 2001, we had
drawn down approximately $1.2 million under the new line
and had $1.8 million remaining available under this
arrangement. As of December 31, 2001, we had
$5.8 million in capitalized lease obligations

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outstanding compared to $5.2 million at
December 31, 2000. We had commitments under non-cancelable
operating leases of $34.6 million to be paid as it becomes
due through 2008. The following is a table of our commitments:


|                          |            |                                            |   |                 |        |  |   |       |       | 
|------------------------- | ---------- | ------------------------------------------ | - | --------------- | ------ |  | - | ----- | ----- | 
|                          |            |                                            |   | Capital Leases 
|                          |            | Operating                                  |   | And            
|                          |            | Leases                                     |   | Equipment Loans
|                          |            |                                            |   |                
|                          |            |                                           
|                          |            | (In thousands)                            
|Years ending December 31: |            |                                            |   |                 |        |  |   |      
|                          | 2002       |                                            | $ | 4,954           |        |  | $ | 2,027 |      
|                          | 2003       |                                            |   | 5,132           |        |  |   | 2,167 |      
|                          | 2004       |                                            |   | 5,290           |        |  |   | 1,355 |      
|                          | 2005       |                                            |   | 5,455           |        |  |   | 227   |      
|                          | Thereafter |                                            |   | 13,812          |        |  |   |      |      
|                          |            |                                            |   |                 |        |  |   |      
|                          |            | Total minimum lease and principal payments |   | $               | 34,643 |  |   | $     | 5,776 | 
|                          |            |                                            |   |                 |        |  |   |      

Our capital requirements depend on numerous
factors, including market acceptance of our products, the
resources we devote to developing and supporting our products,
and other factors. We expect to devote substantial capital
resources to continue our research and development efforts, to
expand our support and product development activities, and for
other general corporate activities. We also have commitments to
Amphora, a related party, to produce and deliver eleven high
throughput systems in 2002. Based on our long term strategic
plan, we believe that our current cash balances, together with
the revenue to be derived from our collaboration with Agilent
and the commercial sales of our microfluidic products and
services will be sufficient to fund our operations at least
through the year 2003. Actual capital expenditures could vary
considerably, however, depending on opportunities that arise
over the course of the 2002 and 2003 period. During or after
this period, if cash generated by operations is insufficient to
satisfy our liquidity requirements, we may need to reduce our
research and development efforts, or sell additional equity or
debt securities or obtain additional credit arrangements.
Additional financing may not be available on terms acceptable to
us or at all. The sale of additional equity or convertible debt
securities may result in additional dilution to our stockholders
or force delays in research and product development activities.

Impact of Inflation

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

Related Party Transactions

In May 2001, we formed Amphora Discovery Corp.,
later transferring certain intangibles in September of that
year. In September 2001, Amphora completed a private placement
of securities with third party investors raising
$25 million which reduced our ownership to 28 percent.
In connection with the financing we received the right to
appoint two representatives to Amphoras six member board
of directors. These two members were Michael R. Knapp, our
Vice President of Science and Technology, and James L.
Knighton, our Executive Vice President and Chief Financial
Officer. Mr. Knighton resigned from Amphoras board of
directors in February 2002 and we have not as yet designated a
replacement. Mr. Knighton also served as Amphoras
acting Chief Financial Officer from September 2001 until January
2002. As members of Amphoras board, Dr. Knapp and
Mr. Knighton were granted options to buy
900,000 shares and 450,000 shares, respectively of
Amphora common stock at a share value of $0.10 per share.

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In September 2001, we entered into a LabChip
Solutions Agreement and an Intellectual Property Agreement with
Amphora. The LabChip Solutions Agreement provided for the
ongoing supply of our high throughput screening systems and
chips to Amphora, and for the provision of related services by
us to Amphora. Under this agreement, Amphora has agreed to
purchase a minimum of eleven Caliper instruments by
December 31, 2001 and at least eleven additional HTS
instruments by December 31, 2002. Amphora has also agreed
to purchase datapoints at a fixed amount of $2.0 million in
the first year and a minimum of $4.0 million to a maximum
based on volume of $6.0 million in the second year of the
agreement. The LabChip Solutions Agreement also contains certain
intellectual property licensing provisions pertaining to the
parties independent and collaborative efforts to develop
new high throughput screening systems based on our microfluidic
technologies. Under the Intellectual Property Agreement, we
granted Amphora certain exclusive rights to use our high
throughput screening products in a chemical genomics database
business.

In 2001, subsequent to Amphoras third-party
financing, we sold a total of $3.9 million in
Caliper 250 HTS system products, chips, datapoints and
assay development services to Amphora recording the sale of
products and services as related party revenue in the
Companys financial statements.

In September 2001, Amphora entered into a
three-year Sublease Agreement with Caliper for the rent of
approximately 5,700 square feet in one of Calipers three
Mountain View, CA leased buildings for Amphoras research
and development use. Amphora is obligated for monthly rent based
on local market rates with a 3% per annum escalation and we, as
landlord, are obligated to provide certain facilities
maintenance services. In September 2001, we also entered into an
Administrative Services Agreement with Amphora for certain
financial accounting, purchasing and human resource services to
be provided by our personnel. We charge for these services
monthly at an hourly rate based on a cost plus mark-up basis
recording the corresponding payments from Amphora as part of our
overall employee costs. We anticipate that Amphora will
terminate this agreement at its option by mid 2002 when they are
fully staffed.

All of the agreements between us and Amphora were
entered into in arms-length negotiations, in which Amphora was
represented by separate legal counsel.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 141, Business
Combinations and No. 142, Goodwill and Other
Intangible Assets. The statements eliminated the
pooling-of-interests method of accounting for business
combinations and require that goodwill and certain intangible
assets not be amortized. Instead, these assets will be reviewed
for impairment annually with any related losses recognized in
earnings when incurred. The statements will be effective for
Caliper as of January 1, 2002 for any existing goodwill and
intangible assets and for business combinations initiated after
June 30, 2001. The adoption of these statements as of
January 1, 2002 is not expected to have a material impact
on Calipers financial position, results of operations or
cash flow.

In October 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This statement supersedes FASB
Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and replaces the provisions of APB Opinion
No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of
Segments of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the
disposal of segments of a business. SFAS No. 144 retains
the fundamental provisions of SFAS No. 121 for the
recognition and measurement of the impairment of long-lived
assets to be held and used and the measurement of long-lived
assets to be disposed of by sale. Impairment of goodwill is not
included in the scope of SFAS No. 144 and will be treated
in accordance with SFAS No. 142. Under SFAS No. 144,
long-lived assets are measured at the lower of carrying amount
or fair value less cost to sell. We are required to adopt this
statement no later than January 1, 2002. Based on our
current assessment, we do not expect the adoption of this
statement to have a significant impact on our financial
condition or results of operations.

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Factors Affecting Operating Results

Risks Related
To Our Business



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

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



| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to demonstrate the advantages and
	potential economic value of our LabChip systems over alternative
	well-established technologies and products
|
| |  | the extent of Agilents efforts to market
	the Agilent 2100 Bioanalyzer                                                                                    
|
| |  | our ability to market our high throughput systems                                                                                                          

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



| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not successfully introduce new
	products and expand the range of applications for our LabChip
	Systems, we may experience a decline in revenue or slow revenue
	growth and may not achieve or maintain profitability.

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

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

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

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applications. If we are unable to develop LabChip
kits for specific applications required by potential customers,
those customers may not purchase the Agilent 2100 Bioanalyzer.


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



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

Other than in 2001, we have experienced
significant operating losses each year since our inception and
expect to incur substantial additional operating losses for at
least the next two years, primarily as a result of expected
increases in expenses for manufacturing capabilities, research
and product development costs and general and administrative
costs. We may not achieve profitability in future years. For
example, we experienced net losses of approximately
$3.0 million in 1998, $14.4 million in 1999 and
$13.3 million in 2000 with only a profit of
$3.8 million earned in 2001. Without our litigation
settlement and reimbursement of $27.5 million in 2001, we
would have also had a net loss in 2001. As of December 31,
2001, we had an accumulated deficit of approximately
$44.6 million. Our losses have resulted principally from
costs incurred in research and development and from general and
administrative costs associated with our operations. These costs
have exceeded our litigation settlement and reimbursement,
interest income and revenue which, to date, have been generated
principally from collaborative research and development
agreements, technology access fees, cash and investment balances
and, to a lesser extent, product sales and government grants.



| |                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our operating results fluctuate significantly
	and any failure to meet financial expectations may disappoint
	securities analysts or investors and result in a decline in our
	stock price.

Our quarterly operating results have fluctuated
significantly in the past and we expect they will fluctuate in
the future as a result of many factors, some of which are
outside of our control. For example, our revenues have varied
dramatically as a result of new customers joining our Technology
Access Program and product shipments. It is possible that in
some future quarter or quarters, our operating results will be
below the expectations of securities analysts or investors. In
this event, the market price of our common stock may fall
abruptly and significantly. Because our revenue and operating
results are difficult to predict, we believe that
period-to-period comparisons of our results of operations are
not a good indication of our future performance.

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



| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Agilent determines that we may be violating
	a third-party patent, it may terminate sales of the
	Agilent 2100 Bioanalyzer, which will decrease our
	revenue.

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



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

Third parties may assert infringement or other
intellectual property claims against us, such as the Aclara
litigation that was settled and is described under
Part I  Item 3. Legal
Proceedings. We may have to pay substantial damages,
including treble damages, for past infringement if it is
ultimately determined that our products infringe a third
partys proprietary rights. Further, we may be prohibited
from selling our products before we obtain a license, which, if
available at all, may require us to pay substantial royalties.
Even if these

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claims are without merit, defending a lawsuit
takes significant time, may be expensive and may divert
management attention from other business concerns. We are aware
of third-party patents that may relate to our technology or
potential products. We have also been notified that third
parties have attempted to provoke an interference with one
issued U.S. patent that we have exclusively licensed to
determine the priority of inventions. Any public announcements
related to litigation or interference proceedings initiated or
threatened against us could cause our stock price to decline. We
settled intellectual property litigation with Aclara concerning
one family of Aclara patents. However, Aclara could assert other
patent infringement claims against us in the future in
alternative dispute resolution proceedings established under our
settlement agreement. If we are found to be infringing any valid
patent claims asserted by Aclara in alternative dispute
resolution proceedings, we may be prohibited from selling our
products before we obtain a license, which, if available at all,
may require us to pay substantial royalties.




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

We rely on patents to protect a large part of our
intellectual property and our competitive position. In order to
protect or enforce our patent rights, we may initiate patent
litigation against third parties, such as the patent
infringement suit against Aclara that was settled and is
described under Part I  Item 3. Legal
Proceedings. These lawsuits could be expensive, take
significant time, and could divert managements attention
from other business concerns. They would put our patents at risk
of being invalidated or interpreted narrowly and our patent
applications at risk of not issuing. We may also provoke these
third parties to assert claims against us. Patent law relating
to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in
our industry are generally uncertain. We cannot assure you that
we will prevail in any of these suits or that the damages or
other remedies awarded, if any, will be commercially valuable.
During the course of these suits, there may be public
announcements of the results of hearings, motions and other
interim proceedings or developments in the litigation. If
securities analysts or investors perceive any of these results
to be negative, it could cause our stock to decline.



| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The rights we rely upon to protect our
	intellectual property underlying our products may not be
	adequate, which could enable third parties to use our technology
	and would reduce our ability to compete in the market.

In addition to patents, we rely on a combination
of trade secrets, copyright and trademark laws, nondisclosure
agreements and other contractual provisions and technical
measures to protect our intellectual property rights.
Nevertheless, these measures may not be adequate to safeguard
the technology underlying our products. If they do not protect
our rights, third parties could use our technology, and our
ability to compete in the market would be reduced. In addition,
employees, consultants and others who participate in the
development of our products may breach their agreements with us
regarding our intellectual property, and we may not have
adequate remedies for the breach. We also may not be able to
effectively protect our intellectual property rights in some
foreign countries. For a variety of reasons, we may decide not
to file for patent, copyright or trademark protection outside of
the United States. We also realize that our trade secrets may
become known through other means not currently foreseen by us.
Notwithstanding our efforts to protect our intellectual
property, our competitors may independently develop similar or
alternative technologies or products that are equal or superior
to our technology and products without infringing on any of our
intellectual property rights or design around our proprietary
technologies. For further information on our intellectual
property and the difficulties in protecting it, see
Part I  Item 1. Business 
Intellectual Property.

36



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We rely heavily on Agilent to manufacture,
	market and distribute the Agilent 2100 Bioanalyzer. If
	Agilent fails to perform under our agreement or successfully
	commercialize our collaborative products, our revenue from the
	Agilent 2100 Bioanalyzer may not be material and we may
	lose the development funding we currently receive from
	Agilent.

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



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Agilent may compete with us if our
	collaboration terminates after May 2003, which could reduce the
	potential revenue from our independent product sales.

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



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

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

37



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

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



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Our business operations may be adversely
	affected by the California energy crisis.

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



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If a natural disaster strikes our
	manufacturing facility we would be unable to manufacture our
	products for a substantial amount of time and we would
	experience lost revenue.

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



| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because a small number of customers and
	Agilent have accounted for, and are likely to continue to
	account for, a substantial portion of our revenue, our revenue
	could decline due to the loss of one of these customers or the
	termination of our agreement with Agilent.

Historically we have had very few customers and
one commercial partner, Agilent, from which we have derived the
majority of our revenue and, if we were to lose any one of
these, our revenue would decrease substantially. Agilent, our
Technology Access Program customers, Amphora and our initial
licensing of the Ramsey family of patents to Aclara in
connection with our litigation settlement with them, accounted
for 93% of our total revenue for the year ended
December 31, 2001. Agilent and three customers accounted
for 90% of total revenue for the year ended December 31,
2000. Agilent and four customers accounted for 88% of total
revenue in 1999. We and Agilent introduced the Agilent 2100
Bioanalyzer system in September 1999 and have received only
modest revenue from the sale of this product on a commercial
scale. Although we anticipate that future sales of the
Agilent 2100 Bioanalyzer system will further expand our
revenue base, we expect that we will continue to rely on our
large customers and on Agilent for the majority of our revenue



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | We have reached the final contract year for
	some of our Technology Access Program agreements.

The third and final year of our Technology Access
Program agreement with Amgen began on January 1, 2001 and
was amended for a fourth year in December 2001. In addition, the
third and final year of our Technology Access Program agreement
with Eli Lilly began on August 12, 2001. Although we
believe that these customers will continue to use LabChip
products and services, we may not derive significant revenue
from them in the future.

38



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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.

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

We currently have no credit facility or committed
sources of capital other than an equipment lease line with
$1.8 million unused and available as of December 31,
2001. To the extent operating and capital resources are
insufficient to meet future requirements, we will have to raise
additional funds to continue the development and
commercialization of our technologies. These funds may not be
available on favorable terms, or at all. If adequate funds are
not available on attractive terms, we may be required to curtail
operations significantly or to obtain funds by entering into
financing, supply or collaboration agreements on unattractive
terms.



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

We are highly dependent on the principal members
of our management and scientific staff. The loss of services of
any of these persons could seriously harm our product
development and commercialization efforts. In addition,
research, product development and commercialization will require
additional skilled personnel in areas such as chemistry and
biology, software engineering and electronic engineering. Our
business is located in Silicon Valley, California, where demand
for personnel with these skills is extremely high and is likely
to remain high. As a result, competition for and retention of
personnel, particularly for employees with technical expertise,
is intense and the turnover rate for these people is high. If we
are unable to hire, train and retain a sufficient number of
qualified employees, our ability to conduct and expand our
business could be seriously reduced. The inability to retain and
hire qualified personnel could also hinder the planned expansion
of our business.



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

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



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties in integration of the operations,
	technologies, and products of the acquired companies                                                   
|
| |  | the risk of diverting managements attention
	from normal daily operations of the business                                                             
|
| |  | accounting consequences, including charges for
	in-process research and development expenses, resulting in
	variability in our quarterly earnings      
|
| |  | potential difficulties in completing projects
	associated with purchased in-process research and development                                           
|
| |  | risks of entering markets in which we have no or
	limited direct prior experience and where competitors in such
	markets have stronger market positions
|
| |  | the potential loss of key employees of the
	acquired company                                                                                           
|
| |  | the assumption of unforeseen liabilities of the
	acquired company                                                                                      

39



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



| |                                          
| | -----------------------------------------
| | Risks Related to Owning Our Common
	Stock



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

Our stock has been trading on the Nasdaq National
Market only since mid-December 1999. We initially offered our
common stock to the public at $16.00 per share. Since then our
stock price has been extremely volatile and has ranged, through
March 20, 2002, from a high of approximately $202.00 per
share on March 2, 2000 to a low of $8.40 per share on
September 21, 2001. Our stock price may drop substantially
following an investment in our common stock. We expect that our
stock price will remain volatile as a result of a number of
factors, including:



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



| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Concentration of ownership among our existing
	executive officers, directors and principal stockholders may
	prevent new investors from influencing significant corporate
	decisions.

As of December 31, 2001, our directors,
entities affiliated with our directors, our executive officers
and principal stockholders beneficially own, in the aggregate
approximately 24% of our outstanding common stock. These
stockholders as a group are able to substantially influence the
management and affairs of Caliper and, if acting together, would
be able to influence most matters requiring the approval by our
stockholders, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets
and any other significant corporate transaction. The
concentration of ownership may also delay or prevent a change of
control of Caliper at a premium price if these stockholders
oppose it.



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

In the Spring and Summer of 2001, class action
lawsuits were filed against certain leading investment banks and
over 300 companies that did public offerings during the prior
several years, including lawsuits against Caliper and certain of
its officers and directors. See Part I 
Item 3. Legal Proceedings for a description of these
lawsuits. This and other securities litigation could result in
potential liability, cause us to incur litigation costs and
divert managements attention and resources, any of which
could harm our business. In addition, announcements of future
lawsuits of this or some other nature, and announcements of
events occurring during the course of the current and any future
lawsuits, could cause our stock price to drop.



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of our charter documents and
	Delaware law may inhibit a takeover, which could limit the price
	investors might be willing to pay in the future for our common
	stock.

Provisions in our certificate of incorporation
and bylaws may have the effect of delaying or preventing an
acquisition, merger in which we are not the surviving company or
changes in our management. In addition, because we are
incorporated in Delaware, we are governed by the provisions of
Section 203 of the Delaware General Corporation Law. These
provisions may prohibit large stockholders, in particular those
owning 15% or more of the outstanding voting stock, from
consummating a merger or combination including us. These
provisions could limit the price that investors might be willing
to pay in the future for our common stock.

7A.     Quantitative
and Qualitative Disclosures About Market Risk

The primary objective of our investment
activities is to preserve principal while at the same time
maximizing the income we receive from our investments without
significantly increasing risk. Some of the

40



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##### Table of Contents



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


The table below presents our investment portfolio
by expected maturity and related weighted average interest rates
at December 31, 2001:

|                                         |  |      |        |      |  |      |        |       |  |       |        |   |  |   |         |   |  |   |         | 
|---------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ----- |  | ----- | ------ | - |  | - | ------- | - |  | - | ------- | 
|                                         |  |      |        |      |  |      |        |       |  | Fair 
|                                         |  | 2002 |        | 2003 |  | 2004 |        | Total |  | Value
|                                         |  |      |        |      |  |      |        |       |  |      
|Cash and money market funds              |  | $    | 10,655 |      |  |      |       |       |  |       |       |   |  | $ | 10,655  |   |  | $ | 10,655  | 
|Average interest rate                    |  |      | 2.10   | %    |  |      |       |       |  |       |       |   |  |   | 2.10    | % |  |   |         | 
|Available for sale marketable securities |  | $    | 75,642 |      |  | $    | 44,678 |       |  | $     | 33,124 |   |  | $ | 153,444 |   |  | $ | 155,521 | 
|Average interest rate                    |  |      | 4.72   | %    |  |      | 6.18   | %     |  |       | 5.18   | % |  |   | 5.24    | % |  |   |         | 
|Total securities                         |  | $    | 86,297 |      |  | $    | 44,678 |       |  | $     | 33,124 |   |  | $ | 164,099 |   |  | $ | 166,176 | 
|Average interest rate                    |  |      | 4.45   | %    |  |      | 6.18   | %     |  |       | 5.18   | % |  |   | 4.96    | % |  |   |         | 

Our equipment financings, amounting to
$5.8 million as of December 31, 2001, are all at fixed
rates and therefore, have minimal exposure to changes in
interest rates.

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




Item 8.     Financial
Statements and Supplementary Data

The Report of Independent Auditors, Financial
Statements and Notes to Financial Statements begin on
page F-1 immediately following the signature page and are
incorporated here by reference, including the unaudited
quarterly information for the last two years in Note 13.




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

Not Applicable.




PART III




Item 10.     Directors
and Executive Officers of the Registrant

Information concerning our directors is
incorporated by reference to the section entitled
Proposal 1  Election of Directors
contained in our definitive Proxy Statement with respect to our
Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission not later than April 30, 2002 (the
Proxy Statement). Information concerning our
Executive Officers is set forth under Executive Officers
of the Registrant in Part I of this Annual Report on
Form 10-K and is incorporated herein by reference.
Information concerning compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated by reference to
the section entitled Section 16(a) Beneficial
Ownership Reporting Compliance contained in our Proxy
Statement.




Item 11.     Executive
Compensation

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

41



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##### Table of Contents






Item 12.     Security
Ownership of Certain Beneficial Owners and
Management

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




Item 13.     Certain
Relationships and Related Transactions

Information concerning certain relationships is
incorporated by reference to the section entitled Certain
Relationships and Related Transactions contained in our
Proxy Statement.




PART IV




Item 14.     Exhibits,
Financial Statement Schedules and Reports on
Form 8-K

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



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

|                                                                                                                             |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                             |  | Page
|                                                                                                                             |  |     
|Report of Ernst & Young LLP, Independent
	Auditors                                                                           |  |      | F-2 | 
|Balance Sheets at December 31, 2001 and 2000                                                                                 |  |      | F-3 | 
|Statements of Operations  For the
	Years ended December 31, 2001, 2000 and 1999                                             |  |      | F-4 | 
|Statements of Redeemable Convertible Stock and
	Stockholders Equity  For the Years ended
	December 31, 2001, 2000 and 1999 |  |      | F-5 | 
|Statements of Cash flows  For the
	Years ended December 31, 2001, 2000 and 1999                                             |  |      | F-6 | 
|Notes to Financial Statements                                                                                                |  |      | F-7 | 



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | (2) Financial Statement Schedules:                                                                                                            
|
| | All schedules are omitted because they are not
	applicable or the required information is shown in the financial
	statements or notes thereto.
|
| | (3) Exhibits:                                                                                                                                 

|        |       |                         |  |                                                                                                                          
|------- | ----- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 3.1(  | 1)                      |  | Amended and Restated Certificate of Incorporation
	of Caliper.                                                           
|        | 3.2(  | 12)                     |  | Certificate of Designation Of Series A
	Junior Participating Preferred Stock.                                            
|        | 3.2(  | 2)                      |  | Bylaws of Caliper.                                                                                                       
|        | 4.1   |                         |  | Reference is made to Exhibits 3.1 and 3.2.                                                                               
|        | 4.2(  | 3)                      |  | Specimen Stock Certificate.                                                                                              
|        | 4.3(  | 12)                     |  | Rights Agreement, dated as of December 18,
	2001, between Caliper and Wells Fargo Bank Minnesota, N.A., as
	Rights Agent.
|        | 10.1( | 3)                      |  | Lease Agreement, dated December 1, 1998,
	between Caliper and 605 East Fairchild Associates, L.P.                        
|        | 10.2( | 3)(4)                   |  | 1996 Equity Incentive Plan.                                                                                              
|        | 10.3( | 3)(4)                   |  | 1999 Equity Incentive Plan.                                                                                              
|        | 10.4( | 3)(4)                   |  | 1999 Employee Stock Purchase Plan.                                                                                       
|        | 10.5( | 3)(4)                   |  | 1999 Non-Employee Directors Stock Option
	Plan.                                                                         
|        | 10.6( | 3)(4)                   |  | Employment Agreement, dated January 18,
	1999, between Caliper and Daniel L. Kisner, M.D.                                
|        | 10.7( | 3)(4)                   |  | Promissory Note, dated July 29, 1999,
	between Caliper and Daniel L. Kisner, M.D.                                        

42



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|        |       |                         |  |                                                                                                                                                                      
|------- | ----- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10.8( | 3)                      |  | Amended and Restated Investor Rights Agreement,
	dated May 7, 1998, among Caliper and certain stockholders
	of Caliper.                                              
|        | 10.9( | 3)(4)                   |  | Form of Indemnification Agreement entered into
	between Caliper and its directors and executive officers.                                                            
|        | 10.10 | (3)(5)                  |  | Collaboration Agreement, dated May 2, 1998,
	between Caliper and Hewlett-Packard Company.                                                                            
|        | 10.12 | (3)(5)                  |  | Technology Access Agreement, dated
	December 21, 1998, between Caliper and Amgen, Inc.                                                                               
|        | 10.13 | (3)(5)                  |  | Technology Access Agreement, dated
	August 12, 1999, between Caliper and Eli Lilly and Company.                                                                      
|        | 10.15 | (3)(5)                  |  | Sole Commercial Patent License Agreement,
	effective September 1, 1995, between Lockheed Martin Energy
	Research Corporation and Caliper, as amended (domestic).     
|        | 10.16 | (3)(5)                  |  | Sole Commercial Patent License Agreement,
	effective September 1, 1995, between Lockheed Martin Energy
	Research Corporation and Caliper, as amended (international).
|        | 10.17 | (3)(4)                  |  | Consulting Agreement, dated April 30, 1997,
	between Caliper and Dr. David V. Milligan.                                                                              
|        | 10.18 | (3)(4)                  |  | Employment Agreement, dated September 23,
	1999, between Caliper and James L. Knighton.                                                                              
|        | 10.19 | (3)(4)                  |  | Consulting Agreement, dated May 1, 1997,
	between Caliper and Regis McKenna.                                                                                         
|        | 10.20 | (3)(4)                  |  | Promissory Note, dated March 25, 1997,
	between Caliper and Michael R. Knapp, Ph.D.                                                                                  
|        | 10.21 | (3)(4)                  |  | Option Agreement, dated August 9, 1995,
	between Caliper and Michael R. Knapp, Ph.D.                                                                                 
|        | 10.22 | (3)(4)                  |  | Amendment to Option Agreement, dated
	August 25, 1995, between Caliper, Michael R. Knapp,
	Ph.D., J. Michael Ramsey, Ph.D. and Avalon Medical Partners.              
|        | 10.23 | (3)(4)                  |  | The Corporate Plan for Retirement Select Plan
	Adoption Agreement and related Basic Plan Document.                                                                   
|        | 10.24 | (6)                     |  | Warrant for the purchase of shares of Common
	Stock issued to Michael R. Knapp, dated October 11,
	1996.                                                             
|        | 10.25 | (6)                     |  | Warrant for the purchase of shares of Common
	Stock issued to Michael R. Knapp, dated February 2,
	2000.                                                             
|        | 10.26 | (5)(7)                  |  | Technology Access and Applications Development
	Agreement, dated March 24, 2000, between Caliper and
	Millennium Pharmaceuticals, Inc.                               
|        | 10.27 | (8)                     |  | Lease Agreement, dated June 23, 2000 and
	effective July 5, 2000, between Caliper and Martin CBP
	Associates, L.P.                                                   
|        | 10.28 | (8)                     |  | Promissory Note, dated July 17, 2000,
	between Caliper and Daniel L. Kisner, M.D.                                                                                    
|        | 10.29 | (4)(9)                  |  | Change of Control Sr. Mgmt Severance/ Equity
	Acceleration Plan.                                                                                                     
|        | 10.30 | (5)(10)                 |  | Cross-License Agreement, dated March 12,
	2001 by and among Aclara Biosciences, Inc. and Caliper.                                                                    
|        | 10.31 | (10)                    |  | Common Stock Issuance Agreement, dated
	March 22, 2001.                                                                                                              
|        | 10.32 | (5)(10)                 |  | Settlement Agreement and Mutual General Release,
	dated March 12, 2001 by and among Aclara Biosciences, Inc.
	and Caliper.                                           
|        | 10.33 | (11)(14)                |  | LabChip Solutions Agreement, dated as of
	September 21, 2001, by and between Amphora Discovery Corp.
	and Caliper.                                                   
|        | 10.34 | (4)(11)                 |  | Consulting Agreement, entered into as of the 8th
	day of October 2001 by and between Amphora Discovery Corp., and
	Michael R. Knapp.                                 
|        | 10.35 | (4)(11)                 |  | Restricted Stock Purchase Agreement, entered into
	as of October 8, 2001, by and between Amphora Discovery
	Corp. and Michael R. Knapp.                              

43



---



##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                               
|------- | ----- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10.36 | (4)(11)                 |  | Consulting Agreement, entered into as of the 14th
	day of October 2001 by and between Amphora Discovery Corp., and
	James L. Knighton.                                                                                                                        
|        | 10.37 | (4)(11)                 |  | Restricted Stock Purchase Agreement, entered into
	as of October 14, 2001, by and between Amphora Discovery
	Corp. and James L. Knighton.                                                                                                                     
|        | 10.38 | (11)(14)                |  | Technology Access Agreement Amendment, dated
	August 20, 2001, by and between Caliper and Eli Lilly and
	Company, amending Technology Access Agreement dated
	August 12, 1999 (the Agreement).                                                              
|        | 10.39 | (13)                    |  | 2001 Non-Statutory Stock Option Plan.                                                                                                                                                                                                                         
|        | 10.40 |                         |  | Separation Agreement, dated August 9, 2001,
	between Caliper and Calvin Y.H. Chow.                                                                                                                                                                            
|        | 10.41 | (14)                    |  | Technology Access Agreement Amendment, dated
	December 14, 2001, by and between Caliper and Amgen, Inc.,
	amending Technology Access Agreement dated December 21,
	1998.                                                                                      
|        | 10.42 |                         |  | Amendment No. 2 to Technology Access
	Agreement, dated December 18, 2001, by and between Caliper
	and Amgen, Inc., amending Technology Access Agreement dated
	December 21, 1998.                                                                             
|        | 10.43 | (14)                    |  | Technology Access and Applications Development
	Agreement Amendment, dated December 19, 2001, by and
	between Caliper and Millennium Pharmaceuticals, Inc., amending
	Technology Access and Applications Development Agreement dated
	March 24, 2000.         
|        | 10.44 |                         |  | Amendment No. 2 to Technology Access and
	Applications Development Agreement, dated February 28,
	2002, by and between Caliper and Millennium Pharmaceuticals,
	Inc., amending Technology Access and Applications Development
	Agreement dated March 24, 2000.
|        | 23.1  |                         |  | Consent of Ernst & Young LLP, independent
	auditors.                                                                                                                                                                                                          
|        | 24.1  |                         |  | Power of Attorney (reference is made to the
	signature page of this report).                                                                                                                                                                                  



---



|    |                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed as Exhibit 3.3 to our
	Registration Statement on Form S-1, as amended, File
	No. 333-88827, filed on October 12, 1999 and
	incorporated by reference herein.                 
|   
|(2) | Previously filed as Exhibit 3.4 to our
	Registration Statement on Form S-1, as amended, File
	No. 333-88827, filed on October 12, 1999 and
	incorporated by reference herein.                 
|   
|(3) | Previously filed as the like-numbered Exhibit to
	our Registration Statement on Form S-1, as amended, File
	No. 333-88827, filed on October 12, 1999 and
	incorporated by reference herein.   
|   
|(4) | Management contract or compensatory plan or
	arrangement.                                                                                                                                     
|   
|(5) | Confidential treatment has been granted for a
	portion of this exhibit.                                                                                                                       
|   
|(6) | Filed as the like-numbered exhibit to Annual
	Report of Form 10-K for the year ended December 31,
	1999 and incorporated by reference herein.                                                 
|   
|(7) | Previously filed as Exhibit 10.26 to
	Form 10-Q for the quarterly period ended March 31,
	2000 and incorporated by reference herein.                                                          
|   
|(8) | Previously filed as the like-numbered Exhibit to
	our Registration Statement on Form S-1, as amended, File
	No. 333-45942, filed on September 15, 2000, and
	incorporated by reference herein.
|   
|(9) | Previously filed as the like-numbered Exhibit to
	Form 10-K/A for the year ended December 31, 2000 and
	incorporated by reference herein.                                                     



|     |                                                                                                                                                     
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Previously filed as the like-numbered Exhibit to
	Form 10-Q for the quarterly period ended March 31,
	2001 and incorporated by reference herein.    
|    
|(11) | Previously filed as the like-numbered Exhibit to
	Form 10-Q for the quarterly period ended September 30,
	2001 and incorporated by reference herein.
|    
|(12) | Previously filed as Exhibit 99.1 to Current
	Report on Form 8-K filed December 19, 2001 and
	incorporated by reference herein.                      

44



---



##### Table of Contents





|     |                                                                                                                                                                
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(13) | 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.
|    
|(14) | Confidential treatment has been requested for a
	portion of this exhibit.                                                                                      

(b) Reports on Form 8-K

On December 19, 2001, we filed a Current
Report reporting under Item 5 regarding our adoption of a
shareholder rights plan.

45



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 28, 2002.



| |                           
| | --------------------------
| | CALIPER TECHNOLOGIES CORP.



| |     |                     
| | --- | --------------------
| | By: | /s/ DANIEL L. KISNER

| |                                       
| | --------------------------------------
| |                                       
| | Daniel L. Kisner, M.D.                
| | President and Chief Executive
	Officer

POWER OF ATTORNEY

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

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

|                                              |  |                                                                                |  |               
|--------------------------------------------- |  | ------------------------------------------------------------------------------ |  | --------------
|Signatures                                    |  | Title                                                                          |  | Date          
|                                              |  |                                                                                |  |               
|                                             
|/s/ DANIEL L. KISNERDaniel L. Kisner, M.D.    |  | President, Chief Executive Officer and Director
	(principal executive officer) |  | March 28, 2002
|                                             
|/s/ JAMES L. KNIGHTONJames L. Knighton        |  | Chief Financial Officer (principal financial
	officer)                         |  | March 28, 2002
|                                             
|/s/ ANTHONY HENDRICKSONAnthony Hendrickson    |  | Corporate Controller (principal accounting
	officer)                           |  | March 28, 2002
|                                             
|/s/ DAVID V. MILLIGANDavid V. Milligan, Ph.D. |  | Chairman of the Board of Directors                                             |  | March 28, 2002
|                                             
|/s/ ANTHONY B. EVNINAnthony B. Evnin, Ph.D.   |  | Director                                                                       |  | March 28, 2002
|                                             
|/s/ REGIS P. MCKENNARegis P. McKenna          |  | Director                                                                       |  | March 28, 2002
|                                             
|/s/ ROBERT T. NELSENRobert T. Nelsen          |  | Director                                                                       |  | March 28, 2002

46



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.






INDEX TO FINANCIAL STATEMENTS


|                                                                              |  |      |     | 
|----------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                              |  | Page
|                                                                              |  |     
|Report of Ernst & Young LLP, Independent
	Auditors                            |  |      | F-2 | 
|Balance Sheets                                                                |  |      | F-3 | 
|Statements of Operations                                                      |  |      | F-4 | 
|Statement of Redeemable Convertible Preferred
	Stock and Stockholders Equity |  |      | F-5 | 
|Statements of Cash Flows                                                      |  |      | F-6 | 
|Notes to Financial Statements                                                 |  |      | F-7 | 

F-1



---



##### Table of Contents



REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS

The Board of Directors and Stockholders

Caliper Technologies Corp.


We have audited the accompanying balance sheets
of Caliper Technologies Corp. as of December 31, 2001 and
2000, and the related statements of operations, redeemable
convertible preferred stock and stockholders equity, and
cash flows for each of the three years in the period ended
December 31, 2001. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Caliper Technologies Corp. at December 31, 2001
and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles
generally accepted in the United States.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

Palo Alto, California

January  25, 2002


F-2



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.

BALANCE SHEETS

|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |         |         | 
|----------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                          |                                                                                                                                                                         |                           
|                                          |                                                                                                                                                                         | December 31,              
|                                          |                                                                                                                                                                         |                           
|                                          |                                                                                                                                                                         | 2001                       |         | 2000   
|                                          |                                                                                                                                                                         |                            |         |        
|                                          |                                                                                                                                                                         |                           
|                                          |                                                                                                                                                                         | (In thousands, except     
|                                          |                                                                                                                                                                         | share and per share data) 
|ASSETS                                   
|Current assets:                           |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          | Cash and cash equivalents                                                                                                                                               |                            | $       | 10,655  |         |   | $       | 36,294  |        
|                                          | Marketable securities                                                                                                                                                   |                            |         | 155,521 |         |   |         | 155,405 |        
|                                          | Accounts receivable                                                                                                                                                     |                            |         | 1,130   |         |   |         | 2,991   |        
|                                          | Accounts receivable-related party                                                                                                                                       |                            |         | 1,179   |         |   |         |        |        
|                                          | Inventories                                                                                                                                                             |                            |         | 3,411   |         |   |         | 2,206   |        
|                                          | Prepaid expenses and other current assets                                                                                                                               |                            |         | 2,311   |         |   |         | 1,237   |        
|                                          | Investment in Aclara common stock                                                                                                                                       |                            |         | 4,563   |         |   |         |        |        
|                                          | Other receivable                                                                                                                                                        |                            |         | 26,949  |         |   |         | 1,033   |        
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          |                                                                                                                                                                         | Total current assets       |         |         | 205,719 |   |         |         | 199,166 | 
|Security deposits                         |                                                                                                                                                                         |                            | 3,200   |         |         |   | 3,000   |        
|Property and equipment, net               |                                                                                                                                                                         |                            | 12,581  |         |         |   | 9,101   |        
|Notes receivable from officers            |                                                                                                                                                                         |                            | 475     |         |         |   | 615     |        
|Other assets, net                         |                                                                                                                                                                         |                            | 568     |         |         |   | 632     |        
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          |                                                                                                                                                                         | Total assets               |         | $       | 222,543 |   |         | $       | 212,514 | 
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                         
|LIABILITIES AND STOCKHOLDERS
	EQUITY    
|Current liabilities:                      |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          | Accounts payable                                                                                                                                                        |                            | $       | 1,808   |         |   | $       | 2,960   |        
|                                          | Accrued compensation                                                                                                                                                    |                            |         | 3,135   |         |   |         | 1,946   |        
|                                          | Other accrued liabilities                                                                                                                                               |                            |         | 357     |         |   |         | 1,351   |        
|                                          | Deferred revenue                                                                                                                                                        |                            |         | 3,082   |         |   |         | 3,763   |        
|                                          | Current portion of equipment financing                                                                                                                                  |                            |         | 2,027   |         |   |         | 1,671   |        
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          |                                                                                                                                                                         | Total current liabilities  |         |         | 10,409  |   |         |         | 11,691  | 
|Noncurrent portion of equipment financing |                                                                                                                                                                         |                            | 3,749   |         |         |   | 3,534   |        
|Deferred revenue                          |                                                                                                                                                                         |                            | 221     |         |         |   | 194     |        
|Other noncurrent liabilities              |                                                                                                                                                                         |                            | 1,600   |         |         |   | 638     |        
|Commitments and contingencies             |                                                                                                                                                                         |                            |         |         |         |   |         |        
|Stockholders equity:                     |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          | Preferred stock, $0.001 par value; 5,000,000
	shares authorized in 2001 and 2000; no shares issued and
	outstanding in 2001 and 2000                                    |                            |         |        |         |   |         |        |        
|                                          | Common stock, $0.001 par value; 70,000,000 shares
	authorized in 2001 and 2000; 24,200,097 and 23,688,455 shares
	issued and outstanding in 2001 and 2000, respectively |                            |         | 24      |         |   |         | 23      |        
|                                          | Additional paid-in capital                                                                                                                                              |                            |         | 251,357 |         |   |         | 249,004 |        
|                                          | Deferred stock compensation                                                                                                                                             |                            |         | (2,232  | )       |   |         | (4,772  | )      
|                                          | Accumulated deficit                                                                                                                                                     |                            |         | (44,602 | )       |   |         | (48,426 | )      
|                                          | Accumulated other comprehensive income                                                                                                                                  |                            |         | 2,017   |         |   |         | 628     |        
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          |                                                                                                                                                                         | Total stockholders equity |         |         | 206,564 |   |         |         | 196,457 | 
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        
|                                          |                                                                                                                                                                         | $                          | 222,543 |         |         | $ | 212,514 |        
|                                          |                                                                                                                                                                         |                            |         |         |         |   |         |        

See accompanying notes.

F-3



---



##### Table of Contents



CALIPER TECHNOLOGIES CORP.

STATEMENTS OF OPERATIONS

|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |        |        | 
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------- | ------- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                                      |                                                |                                      
|                                                                                                      |                                                | Years Ended December 31,             
|                                                                                                      |                                                |                                      
|                                                                                                      |                                                | 2001                                  |         | 2000   |        | 1999
|                                                                                                      |                                                |                                       |         |        |        |     
|                                                                                                      |                                                |                                      
|                                                                                                      |                                                | (In thousands, except per share data)
|Revenue:                                                                                              |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|                                                                                                      | Product revenue                                |                                       | $       | 8,799  |        |      | $       | 3,201  |        |   | $       | 1,211  |       
|                                                                                                      | Product revenue  related party                |                                       |         | 3,912  |        |      |         |       |        |   |         |       |       
|                                                                                                      | License fees and contract revenue              |                                       |         | 16,877 |        |      |         | 15,363 |        |   |         | 10,876 |       
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|                                                                                                      |                                                | Total revenue                         |         |        | 29,588 |      |         |        | 18,564 |   |         |        | 12,087 | 
|Costs and expenses:                                                                                   |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|                                                                                                      | Cost of product revenue                        |                                       |         | 4,784  |        |      |         | 2,519  |        |   |         | 921    |       
|                                                                                                      | Cost of product revenue  related party        |                                       |         | 2,103  |        |      |         |       |        |   |         |       |       
|                                                                                                      | Research and development                       |                                       |         | 38,263 |        |      |         | 33,478 |        |   |         | 17,494 |       
|                                                                                                      | General and administrative                     |                                       |         | 15,545 |        |      |         | 9,787  |        |   |         | 5,312  |       
|                                                                                                      | Amortization of deferred stock compensation(1) |                                       |         | 2,540  |        |      |         | 4,545  |        |   |         | 3,885  |       
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|                                                                                                      |                                                | Total costs and expenses              |         |        | 63,235 |      |         |        | 50,329 |   |         |        | 27,612 | 
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Operating loss                                                                                        |                                                |                                       | (33,647 | )      |        |      | (31,765 | )      |        |   | (15,525 | )     
|                                                                                                      | Interest income                                |                                       |         | 12,335 |        |      |         | 8,088  |        |   |         | 1,564  |       
|                                                                                                      | Interest expense                               |                                       |         | (2,365 | )      |      |         | (620   | )      |   |         | (412   | )     
|                                                                                                      | Litigation settlement and reimbursement        |                                       |         | 27,500 |        |      |         | 13,274 |        |   |         |       |       
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Income (loss) before cumulative effect of a
	change in accounting principle                           |                                                |                                       | 3,823   |        |        |      | (11,023 | )      |        |   | (14,373 | )     
|Cumulative effect of a change in accounting
	principle                                                |                                                |                                       |        |        |        |      | (2,294  | )      |        |   |        |       
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Net income (loss)                                                                                     |                                                |                                       | 3,823   |        |        |      | (13,317 | )      |        |   | (14,373 | )     
|Accretion on redeemable convertible preferred
	stock                                                  |                                                |                                       |        |        |        |      |        |        |        |   | (2,328  | )     
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Net income (loss) attributable to common
	stockholders                                                |                                                | $                                     | 3,823   |        |        | $    | (13,317 | )      |        | $ | (16,701 | )     
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Net income (loss) per share, basic:                                                                   |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Income (loss) before cumulative effect of a
	change in accounting principle                           |                                                | $                                     | 0.16    |        |        | $    | (0.50   | )      |        | $ | (4.56   | )     
|Cumulative effect of a change in accounting
	principle                                                |                                                |                                       |        |        |        |      | (0.11   | )      |        |   |        |       
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Net income (loss) per share, basic                                                                    |                                                | $                                     | 0.16    |        |        | $    | (0.61   | )      |        | $ | (4.56   | )     
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Shares used in computing net income
	(loss) per common share, basic                                   |                                                |                                       | 23,997  |        |        |      | 21,853  |        |        |   | 3,663   |       
|Net income (loss) per share, diluted:                                                                 |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Income (loss) before cumulative effect of a
	change in accounting principle                           |                                                | $                                     | 0.15    |        |        | $    | (0.50   | )      |        | $ | (4.56   | )     
|Cumulative effect of a change in accounting
	principle                                                |                                                |                                       |        |        |        |      | (0.11   | )      |        |   |        |       
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Net income (loss) per share, diluted                                                                  |                                                | $                                     | 0.15    |        |        | $    | (0.61   | )      |        | $ | (4.56   | )     
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Shares used in computing net income
	(loss) per share, diluted                                        |                                                |                                       | 25,634  |        |        |      | 21,853  |        |        |   | 3,663   |       
|Pro forma amounts assuming the change in
	accounting principle was applied retroactively (unaudited): |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Net income (loss)                                                                                     |                                                |                                       |         |        |        | $    | (11,023 | )      |        | $ | (14,267 | )     
|Net income (loss) per share, basic and
	diluted                                                       |                                                |                                       |         |        |        | $    | (0.50   | )      |        | $ | (0.92   | )     
|                                                                                                      |                                                |                                       |         |        |        |      |         |        |        |   |         |       
|Shares used in computing pro forma net income
	(loss) per share, basic and diluted                    |                                                |                                       |         |        |        |      |         |        |        |   | 15,578  |       



---



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

|                           |       |   |       |       |  |   |       |       |  |   |       |       | 
|-------------------------- | ----- | - | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|Research and development   |       | $ | 610   |       |  | $ | 1,601 |       |  | $ | 1,094 |      
|General and administrative |       |   | 1,930 |       |  |   | 2,944 |       |  |   | 2,791 |      
|                           |       |   |       |       |  |   |       |       |  |   |       |      
|                           | Total |   | $     | 2,540 |  |   | $     | 4,545 |  |   | $     | 3,885 | 
|                           |       |   |       |       |  |   |       |       |  |   |       |      

See accompanying notes.

F-4



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.

STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS EQUITY

|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------- | ----------- | --------------- |  | ------------------- | ------- | ---------- |  | ----------- | -------- | ----------- |  | ------------- | -- | ------------- |  | ------- | ---------- | ------------- |  | ------ | -- |  |  | - | ------- |  |  | - | ------- | - |  | - | ------- | - |  | - | ----- | - |  | - | ------- | -
|                                                                                                                         |  |                               |             |                 |  |                    
|                                                                                                                         |  |                               |             |                 |  | Stockholders Equity
|                                                                                                                         |  |                               |             |                 |  |                    
|                                                                                                                         |  |                               |             |                
|                                                                                                                         |  | Redeemable                    |             |                 |  |                    
|                                                                                                                         |  | Convertible                   |             | Convertible     |  |                     |         |            |  | Accumulated |          |            
|                                                                                                                         |  | Preferred Stock               |             | Preferred Stock |  | Common Stock        |         | Additional |  | Deferred    |          |             |  | Other         |    | Total        
|                                                                                                                         |  |                               |             |                 |  |                     |         | Paid-in    |  | Stock       |          | Accumulated |  | Comprehensive |    | Stockholders
|                                                                                                                         |  | Shares                        |             | Amount          |  | Shares              |         | Amount     |  | Shares      |          | Amount      |  | Capital       |    | Compensation  |  | Deficit |            | Income/(Loss) |  | Equity
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |       
|                                                                                                                         |  |                              
|                                                                                                                         |  | (In thousands, except shares)
|Balances at December 31, 1998                                                                                            |  |                               | 11,703,692  |                 |  | $                   | 48,716  |            |  |             | 829,142  |             |  | $             | 1  |               |  |         | 2,772,343  |               |  | $      | 3  |  |  | $ | 1,250   |  |  | $ | (500    | ) |  | $ | (18,408 | ) |  | $ |      |   |  | $ | (17,654 | )
|Net loss                                                                                                                 |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   | (14,373 | ) |  |   |      |   |  |   | (14,373 | )
|Accretion on redeemable convertible preferred
	stock                                                                     |  |                               |            |                 |  |                     | 2,328   |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   | (2,328  | ) |  |   |      |   |  |   | (2,328  | )
|Change in unrealized loss on available- for-sale
	securities                                                             |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   | (133  | ) |  |   | (133    | )
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Comprehensive loss                                                                                                       |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | (16,834 | )
|Issuance of shares of common stock in the initial
	public offering, net of offering costs of $6,896.                     |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 5,175,000  |               |  |        | 5  |  |  |   | 75,899  |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 75,904  |  
|Conversion of redeemable convertible preferred
	stock into common stock, in connection with the initial public
	offering |  |                               | (11,703,692 | )               |  |                     | (51,044 | )          |  |             |         |             |  |               |   |               |  |         | 11,703,692 |               |  |        | 12 |  |  |   | 51,032  |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 51,044  |  
|Conversion of convertible preferred stock into
	common stock, in connection with the initial public offering             |  |                               |            |                 |  |                     |        |            |  |             | (829,142 | )           |  |               | (1 | )             |  |         | 829,142    |               |  |        | 1  |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   |        |  
|Issuance of common stock upon exercise of stock
	options                                                                 |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 512,624    |               |  |        |   |  |  |   | 274     |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 274     |  
|Issuance of common stock for services                                                                                    |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 9,294      |               |  |        |   |  |  |   | 83      |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 83      |  
|Deferred stock compensation                                                                                              |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   | 12,702  |  |  |   | (12,702 | ) |  |   |        |   |  |   |      |   |  |   |        |  
|Amortization of deferred stock compensation                                                                              |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   | 3,885   |   |  |   |        |   |  |   |      |   |  |   | 3,885   |  
|Warrants issuable in connection with milestone
	Achievement                                                              |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   | 568     |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 568     |  
|Stock options issued to non-employees                                                                                    |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |   |  |  |   | 593     |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 593     |  
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Balances at December 31, 1999                                                                                            |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 21,002,095 |               |  |        | 21 |  |  |   | 142,401 |  |  |   | (9,317  | ) |  |   | (35,109 | ) |  |   | (133  | ) |  |   | 97,863  |  
|Net loss                                                                                                                 |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   | (13,317 | ) |  |   |      |   |  |   | (13,317 | )
|Change in unrealized gain on available- for-sale
	securities                                                             |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   | 761   |   |  |   | 761     |  
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Comprehensive loss                                                                                                       |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | (12,556 | )
|Issuance of shares of common stock in a private
	placement offering, net of offering costs of $200                       |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 2,300,000  |               |  |        | 2  |  |  |   | 104,679 |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 104,681 |  
|Issuance of common stock upon exercise of stock
	options and in connection with the employee stock purchase plan         |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 306,154    |               |  |        |   |  |  |   | 1,463   |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 1,463   |  
|Issuance of common stock upon exercise of warrants                                                                       |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 72,514     |               |  |        |   |  |  |   |         |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   |        |  
|Issuance of common stock for services                                                                                    |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 7,692      |               |  |        |   |  |  |   | 207     |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 207     |  
|Amortization of deferred stock compensation                                                                              |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   | 4,545   |   |  |   |        |   |  |   |      |   |  |   | 4,545   |  
|Stock options issued to non-employees                                                                                    |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   | 254     |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 254     |  
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Balances at December 31, 2000                                                                                            |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 23,688,455 |               |  |        | 23 |  |  |   | 249,004 |  |  |   | (4,772  | ) |  |   | (48,426 | ) |  |   | 628   |   |  |   | 196,457 |  
|Net income (loss)                                                                                                        |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   | 3,823   |   |  |   |      |   |  |   | 3,823   |  
|Change in unrealized gain on available- for-sale
	securities                                                             |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   | 1,389 |   |  |   | 1,389   |  
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Comprehensive income                                                                                                     |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 5,212   |  
|Issuance of common stock upon exercise of stock
	options and in connection with the employee stock purchase plan         |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         | 511,642    |               |  |        | 1  |  |  |   | 2,273   |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 2,272   |  
|Amortization of deferred stock compensation                                                                              |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   |        |  |  |   | 2,540   |   |  |   |        |   |  |   |      |   |  |   | 2,540   |  
|Stock options issued to non-employees                                                                                    |  |                               |            |                 |  |                     |        |            |  |             |         |             |  |               |   |               |  |         |           |               |  |        |   |  |  |   | 80      |  |  |   |        |   |  |   |        |   |  |   |      |   |  |   | 80      |  
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Balances at December 31, 2001                                                                                            |  |                               |            |                 |  | $                   |        |            |  |             |         |             |  | $             |   |               |  |         | 24,200,097 |               |  | $      | 24 |  |  | $ | 251,357 |  |  | $ | (2,232  | ) |  | $ | (44,602 | ) |  | $ | 2,017 |   |  | $ | 206,564 |  
|                                                                                                                         |  |                               |             |                 |  |                     |         |            |  |             |          |             |  |               |    |               |  |         |            |               |  |        |    |  |  |   |         |  |  |   |         |   |  |   |         |   |  |   |       |   |  |   |         |  

See accompanying notes.

F-5



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.

STATEMENTS OF CASH FLOWS

|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |       |       |         |  
|------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------- | ------ | ------- | -------- | ----- | ------ | -------- | ------- | ----- | ----- | ------- | -
|                                                                                      |                                                                |                                               
|                                                                                      |                                                                | Years Ended December 31,                      
|                                                                                      |                                                                |                                               
|                                                                                      |                                                                | 2001                                           |                                           | 2000    |        | 1999   
|                                                                                      |                                                                |                                                |                                           |         |        |        
|                                                                                      |                                                                |                                               
|                                                                                      |                                                                | (In thousands)                                
|Operating activities                                                                  |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Net income (loss)                                                                     |                                                                | $                                              | 3,823                                     |         |        | $       | (13,317  | )     |        | $        | (14,373 | )    
|Adjustments to reconcile net income
	(loss) to net cash used in operating activities: |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|                                                                                      | Gain on settlement of litigation and non cash
	license revenue |                                                |                                           | (32,500 | )      |         |          |      |        |          |         |      |      
|                                                                                      | Cumulative effect of a change in accounting
	principle         |                                                |                                           |        |        |         |          | 2,294 |        |          |         |      |      
|                                                                                      | Depreciation and amortization                                  |                                                |                                           | 3,693   |        |         |          | 2,155 |        |          |         | 1,325 |      
|                                                                                      | Amortization of deferred stock compensation                    |                                                |                                           | 2,540   |        |         |          | 4,545 |        |          |         | 3,885 |      
|                                                                                      | Issuance of common and preferred stock for
	services           |                                                |                                           |        |        |         |          | 207   |        |          |         | 83    |      
|                                                                                      | Stock options issued to non-employees                          |                                                |                                           | 80      |        |         |          | 254   |        |          |         | 593   |      
|                                                                                      | Changes in operating assets and liabilities:                   |                                                |                                           |         |        |         |          |       |        |          |         |       |      
|                                                                                      |                                                                | Accounts receivable and other receivable       |                                           |         | 1,715  |         |          |       | (2,969 | )        |         |       | 27    |        
|                                                                                      |                                                                | Inventories                                    |                                           |         | (1,205 | )       |          |       | (1,919 | )        |         |       | (287  | )      
|                                                                                      |                                                                | Prepaid expenses and other current assets      |                                           |         | (86    | )       |          |       | (483   | )        |         |       | (154  | )      
|                                                                                      |                                                                | Security deposits and other assets             |                                           |         | (134   | )       |          |       | (3,182 | )        |         |       |      |        
|                                                                                      |                                                                | Notes receivable from officers                 |                                           |         | 140    |         |          |       | 10     |          |         |       | (425  | )      
|                                                                                      |                                                                | Accounts payable and other accrued liabilities |                                           |         | (2,146 | )       |          |       | 1,979  |          |         |       | 1,611 |        
|                                                                                      |                                                                | Accrued compensation                           |                                           |         | 1,189  |         |          |       | 864    |          |         |       | 650   |        
|                                                                                      |                                                                | Deferred revenue                               |                                           |         | (654   | )       |          |       | (547   | )        |         |       | 1,584 |        
|                                                                                      |                                                                | Other noncurrent liabilities                   |                                           |         | 962    |         |          |       | 403    |          |         |       | 235   |        
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|                                                                                      |                                                                |                                                | Net cash used in operating activities     |         |        | (22,583 | )        |       |        | (9,706   | )       |       |       | (5,246  | )
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Investing activities                                                                  |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Purchases of marketable securities                                                    |                                                                |                                                | (188,539                                  | )       |        |         | (184,078 | )     |        |          | (52,380 | )    
|Proceeds from sales of marketable securities                                          |                                                                |                                                | 104,829                                   |         |        |         | 32,910   |       |        |          | 9,199   |      
|Proceeds from maturities of marketable securities                                     |                                                                |                                                | 84,983                                    |         |        |         | 51,968   |       |        |          | 13,498  |      
|Purchases of property and equipment                                                   |                                                                |                                                | (7,173                                    | )       |        |         | (5,794   | )     |        |          | (3,871  | )    
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|                                                                                      |                                                                |                                                | Net cash used in investing activities     |         |        | (5,900  | )        |       |        | (104,994 | )       |       |       | (33,554 | )
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Financing activities                                                                  |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Proceeds from equipment financing                                                     |                                                                |                                                | 2,531                                     |         |        |         | 1,745    |       |        |          | 3,419   |      
|Payments of obligations under equipment financing                                     |                                                                |                                                | (1,960                                    | )       |        |         | (1,665   | )     |        |          | (1,183  | )    
|Proceeds from issuance of common and preferred
	stock                                 |                                                                |                                                | 2,273                                     |         |        |         | 106,142  |       |        |          | 76,178  |      
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|                                                                                      |                                                                |                                                | Net cash provided by financing activities |         |        | 2,844   |          |       |        | 106,222  |         |       |       | 78,414  |  
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Net increase (decrease) in cash and cash
	equivalents                                 |                                                                |                                                | (25,639                                   | )       |        |         | (8,478   | )     |        |          | 39,614  |      
|Cash and cash equivalents at beginning of year                                        |                                                                |                                                | 36,294                                    |         |        |         | 44,772   |       |        |          | 5,158   |      
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Cash and cash equivalents at end of year                                              |                                                                | $                                              | 10,655                                    |         |        | $       | 36,294   |       |        | $        | 44,772  |      
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Supplemental disclosure of cash flow
	information                                     |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Interest paid                                                                         |                                                                | $                                              | 629                                       |         |        | $       | 620      |       |        | $        | 412     |      
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Schedule of noncash transactions                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Issuance of warrants                                                                  |                                                                | $                                              |                                          |         |        | $       |         |       |        | $        | 568     |      
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Deferred stock compensation                                                           |                                                                | $                                              |                                          |         |        | $       |         |       |        | $        | 12,702  |      
|                                                                                      |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Supplemental disclosure of significant noncash
	investing activities                  |                                                                |                                                |                                           |         |        |         |          |       |        |          |         |      
|Other receivable                                                                      |                                                                |                                                | 26,949                                    |         |        |         |         |       |        |          |        |      
|Investment in Aclara common stock                                                     |                                                                |                                                | 4,563                                     |         |        |         |         |       |        |          |        |      
|Other assets                                                                          |                                                                |                                                | 988                                       |         |        |         |         |       |        |          |        |      

See accompanying notes.

F-6



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS

1.     Organization
and Basis of Presentation

Caliper Technologies Corp. (Caliper)
was incorporated in the state of Delaware on July 26, 1995.
Caliper develops lab-on-a-chip technologies and manufactures
LabChip and high throughput systems. These systems perform
laboratory experiments for use in the pharmaceutical industry
and other industries.

Initial
Public Offering

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

Stock
Split

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

Financial
Statement Presentation

The financial statements of Caliper include all
the accounts of the company, as Caliper does not have any other
majority or minority-owned subsidiaries that are controlled by
Caliper. Affiliates that are 20 percent to 50 percent
owned are generally accounted for using the equity method with
all accounts and transactions disclosed as related party
transactions. Intercompany accounts and transactions have been
eliminated in consolidation. The financial statements of Caliper
for the years ended December 31, 2001, 2000 and 1999,
reflect all adjustments that are, in the opinion of management,
necessary for a fair presentation of the financial position,
results of operations and cash flows. Such adjustments include
those of a normal, recurring nature and those related to the
transition of Calipers Technology Access Program to
commercially available products and services as described below.

2.     Summary of
Significant Accounting Policies

Use of
Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.

Cash
Equivalents and Marketable Securities

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

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

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

Caliper does not generally invest in the common
stock of corporations, partnerships or special purpose entities.
As of December 31, 2001, however, Caliper had investments
in common stock totaling $4.6 million from investments in
Aclara Biosciences Inc. and Amphora Discovery Corp. As a result
of a settlement agreement between the Aclara Biosciences Inc and
Caliper entered into in January 2001, Caliper has an investment
of 900,000 shares in Aclara Bioscience Inc. common stock.
The common stock is restricted from being sold for a period of
18 months that will expire in August 2002. Caliper
anticipates selling the 900,000 shares of Aclaras
common stock beginning in August 2002 in accordance with the
terms of the settlement agreement. Also, in September of 2001,
Caliper completed the spin out of a new company, Amphora
Discovery Corp., through the private placement of securities
with third party investors that reduced Calipers ownership
interest to 28 percent. See Note 10 to the financial
statements for further discussions.

Customer and
Accounts Receivable

Customer and accounts receivable are stated at
amounts owed to the company. No collateral is required on these
receivables. Caliper has historically not experienced
significant credit losses in connection with its customer
receivables. Accounts receivable at December 31, 2001 was
$2.3 million all of which were current and due in less than
35 days. Of this $2.3 million, Amphora, a related
party, had a customer account balance of $1.2 million
related to the purchase of Caliper 250 High Throughput Systems
in December 2001. Caliper has only one international customer
and requires all their purchases to be denominated and paid in
U.S. dollars. Caliper has made no provision for the
uncollectability of its accounts receivable as it only began to
commercially sell its products in September 2001. Caliper will
continue to analyze accounts receivable, historical bad debts,
customer concentrations, customer credit-worthiness, current
economic trends and changes in its customer payment terms when
evaluating the necessity and or adequacy in future periods for
an allowance for doubtful accounts.

Inventories

Inventory consists primarily of glass, quartz and
reagents used in the manufacture Calipers chips as well as
electronic components, devices and accessories from original
equipment manufacturers used in the manufacture of
Calipers microfluidic instruments. Inventories are stated
at the lower of standard cost (which approximates actual cost)
or market. Caliper has made no provision for obsolete or slow
moving inventory as Calipers products have only begun to
be commercially sold. Caliper may in future periods, based on
assumptions of customer demands and market conditions, find it
necessary to record reserves for excess and obsolete inventory.

|                |       |              |       |              |  |   |       |       | 
|--------------- | ----- | ------------ | ----- | ------------ |  | - | ----- | ----- | 
|                |       | December 31, |       | December 31,
|                |       | 2001         |       | 2000        
|                |       |              |       |             
|Raw material    |       | $            | 1,952 |              |  | $ | 2,018 |      
|Work-in-process |       |              | 657   |              |  |   | 151   |      
|Finished goods  |       |              | 802   |              |  |   | 37    |      
|                |       |              |       |              |  |   |       |      
|                | Total |              | $     | 3,411        |  |   | $     | 2,206 | 
|                |       |              |       |              |  |   |       |      

Property and
Equipment

Additions to property and equipment are recorded
at cost. Major replacements and improvements are capitalized
while general repairs and maintenance are expensed as incurred.
Depreciation commences once the assets have been placed in
service and is computed using the straight-line method over the
shorter of the

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

financing period or the estimated useful lives of
the assets, which primarily range from four to seven years.
Furniture and equipment acquired under equipment financing is
amortized over the shorter of the useful lives or the financing
period, generally four years. Leasehold improvements are
amortized over the shorter of the estimated useful life of the
assets or lease term, generally four to seven years.

Long-lived
Assets

Caliper will periodically evaluate the carrying
value of its long-lived assets. Caliper records impairment
losses on long-lived assets used in operations when events and
circumstances indicate that assets may be impaired. As of
December 31, 2001 and 2000, there has been no indication of
any such impairment.

Revenue
Recognition

Revenue is earned from Calipers
collaboration agreement, Technology Access Program agreements,
LabChip High Throughput Screening System, Automated
Microfluidics Systems 90, Applications Developer Program,
chips, licensing and royalty agreements and government grants.



| |                        
| | -----------------------
| | Collaboration Agreement

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



| |                                     
| | ------------------------------------
| | Technology Access Program Agreements

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

Prior to January 1, 2000, Caliper recognized
non-refundable license fees under its Technology Access Programs
as revenues upon transfer of the license to third parties and
when no further performance obligations existed. Effective
January 1, 2000, Caliper changed its method of accounting
for non-refundable license fees to recognize such fees ratably
over the term of the committed related Technology Access Program
agreement. Caliper believes the change in accounting principle
is preferable based on guidance provided in SEC Staff Accounting
Bulletin No. 101  Revenue Recognition in
Financial Statements. Caliper further believes that the change
is preferable as it is possible that Technology Access Program
participants would not pay the non-refundable license fees
without Calipers continuing involvement in the
subscription period, in providing support services, and in
making prototype products available for purchase during the
subscription period. The $2.3 million cumulative effect of
the change in accounting principle was reported as a charge in
the period ended March 31, 2000. The cumulative effect was
initially recorded as deferred revenue and is being recognized
as revenue over the remaining contractual terms of the
Technology Access Program agreements. During the year ended
December 31, 2001, Caliper recorded $800,000 ($0.03 per
share) of the related deferred revenue as revenue. During the
year ended December 31, 2000, the impact of the change in
accounting was to increase net loss by $1.250 million, or
$(0.06) per share, comprised of the $2.3 million cumulative
effect of the change as described above ($0.11 per share), less
$1.3 million of the related deferred

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

revenue which was recognized as revenue during
the year ended December 31, 2000 ($0.06 per share) and
$250,000 ($0.01 per share) recorded as deferred revenue as of
December 31, 2000 that would have been recognized as
revenue had SAB 101 not been adopted. The remaining
$194,000 of the related deferred revenue will be recognized as
revenue in 2002.

Product revenue is recognized upon transfer of
title to the customer. Subscription fees are recognized ratably
over the subscription period. When payment of the subscription
fee is contingent upon reaching a milestone, revenue is deferred
until the milestone is met. Support and development services
revenue is recognized in the periods the costs are incurred.
After December 2001 when the last Technology Access Program
agreement was amended, there will be no further technology
access fees or subscription fees recognized with products and
services purchased by former Technology Access Program customers
after December 2001 recognized upon shipment and transfer of
title to the product to the customer or when the assay
development service has been provided by Caliper. Under the
amended agreements with our Technology Access Program customers,
Caliper agreed to convert technology access and subscription
fees still outstanding and available towards the purchase of
products and services that can be utilized by the customer no
later than December 2002.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | LabChip High Throughput Screening System,
	Automated Microfluidics Systems 90 and Applications Developer
	Program

Product revenue is recognized upon the transfer
of title to customers and is recorded net of discounts, rebates
and allowances. Service revenue is recognized ratably over the
service term. Customers are able to purchase instruments, chips,
support services and custom solutions directly from Caliper, and
they will be charged on a data point pricing basis for their
usage of chips. We will offer discounts based on the volume of
products and services purchased. Caliper publishes a catalog of
our commercially available chips and high throughput system
products and the prices for each product configuration. Caliper
provides a one-year limited warranty on the HTS systems and a
90-day warranty on chips for customers. After the warranty
period has expired, customers may purchase annual maintenance
contracts from Caliper that entitles them to continued system
upgrades and operational support. Caliper also provides custom
chip design services to develop new microfluidic applications or
expand existing applications. Caliper has made no provision for
sales returns and other allowances as it only began to
commercially sell its products in September 2001. Management
will continue to analyze historical returns, current economic
trends, and changes in customer demand and acceptance of
Calipers products when evaluating the necessity and or
adequacy in future periods for a sales returns and other sales
allowance.



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

Revenue from Calipers up-front license fees
is recognized when the earnings process is complete and no
further obligations exist. If further obligations exist, the
up-front license fee is recognized ratably over the obligation
period. Royalties from licenses are based on third-party sales
and recorded as earned in accordance with contract terms, when
third-party results are reliably measured and collectibility is
assured.



| |                  
| | -----------------
| | Government Grants

Calipers grant from the National Institute
of Standards and Technology provides for the reimbursement of
qualified expenses for research and development as defined under
the terms of the grant agreement. Revenue under grant agreements
is recognized when the related research expenses are incurred.
The grant from the National Institute of Standards and
Technology was completed in December 2001, and no revenues will
be recognized after 2001.

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

Segment
Reporting

Caliper operates solely in one segment,
principally sourced in the United States. Caliper has only one
international customer who represented 2% of its total revenues
in 2001 with no sales international sales in prior years. As of
December 31, 2001 and 2000, substantially all
Calipers assets are located in the United States.

Research and
Development

Caliper expenses research and development costs
as incurred. Research and development costs consist primarily of
salaries and related personnel costs, fees paid to consultants
and outside service providers for chip development, material
cost of prototypes and test units, legal expenses resulting from
intellectual property prosecution and litigation, and other
expenses related to the design, development, testing and
enhancement of our products.

Warranty
Expense

Caliper offers a one-year limited warranty on the
HTS systems and a 90-day warranty on chips, which is included in
the sales price of many of its products. Provision is made for
estimated future warranty costs at the time of sale. As the
majority of Calipers HTS system parts are from original
equipment manufacturers which provide one-year warranties
already on these parts, Caliper has a warranty provision of
$85,000 as of December 31, 2001 based on the limited
service cost to travel to the customer and maintain
Calipers products under warranty. As Calipers
products have only been commercially available since September
2001, management will analyze evolving costs and customer trends
when evaluating the adequacy of the warranty expense provisions
in future periods. No warranty expense was incurred in previous
years.

Advertising
Expense

Caliper expenses costs of advertising as
incurred. Advertising costs were $631,000 for the year ending
December 31, 2001 as compared to $133,000 in 2000 and no
advertising expense in 1999.

Risk
Management

Caliper has purchased commercial insurance to
cover its estimated future legal costs and settlements related
to workers compensation, product, general, auto and
operations liability claims. Calipers management decides
the amount of insurance coverage to purchase from unaffiliated
companies and the appropriate amount of risk coverage based on
the cost and availability of insurance and the likelihood of a
loss. Management believes that the levels of risk that Caliper
has provided insurance coverage for are consistent with those of
other companies in its industry. There can be no assurance that
Caliper will not incur losses beyond the limits, or outside the
coverage, of its insurance.

Credit and
Other Risks

The Company invests excess cash in securities
that the Company believes bear minimal risk. These investments
are of a short-term nature and include investments in auction
rate preferred securities, commercial paper and government and
corporate debt securities. The Company has not experienced any
losses due to institutional failure or bankruptcy.

The Companys products include certain
equipment that are currently single-sourced. The Company
believes that other vendors would be able to provide similar
equipment, however, the qualification of such vendors may
require start-up time. In order to mitigate any adverse impacts
from a disruption of supply, the Company attempts to maintain an
adequate supply of critical single-sourced equipment.

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

Derivative
and Hedging Activities Accounting Policy for Derivative
Instruments

Effective January 1, 2001, Caliper adopted
Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended. In connection with the
adoption of SFAS No. 133, Caliper recognizes derivative
financial instruments in the financial statements at fair value
regardless of the purpose or intent for holding the instrument.
Changes in the fair value of derivative financial instruments
are either recognized periodically in income or in stockholders
equity as a component of comprehensive income
(loss) depending on whether the derivative financial
instrument qualifies for hedge accounting, and if so, whether it
is designated as a fair value hedge or cash flow hedge. For
derivative instruments that are designated and qualify as fair
value hedge (i.e., hedging the exposure to changes in the fair
value of an asset or a liability or an identified portion
thereof that is attributable to a particular risk), the gain or
loss on the derivative instrument as well as the offsetting loss
or gain on the hedged item attributable to the hedged risk are
recognized in current earnings during the period of the change
in fair values. For derivative instruments that are designated
and qualify as a cash flow hedge (i.e., hedging the exposure to
variability in expected future cash flows that is attributable
to a particular risk), the effective portion of the gain or loss
on the derivative instrument is reported as a component of other
comprehensive income and is reclassified into earnings in the
same period or periods during which the hedged transaction
affects earnings. The remaining gain or loss on the derivative
instrument in excess of the cumulative change in the present
value of future cash flows of the hedged item, if any, is
recognized in current earnings during the period of change.
Hedge effectiveness is assessed on a quarterly basis.

As discussed in Note 12, Caliper has entered into
a settlement agreement with Aclara Biosciences. The terms of the
agreement provide that if Caliper sells any of the 900,000
shares of Aclaras common stock received in the settlement
between 18 and 24 months from the effective date of the
settlement agreement, and the then fair value of Aclaras
stock is less than $36.11 per share, Aclara will pay Caliper in
cash a dollar amount equal to the difference between the
aggregate fair value of the Aclara stock at the date the shares
are disposed and $32.5 million. If the then fair value of
the Aclara stock is greater than $36.11 per share, Caliper will
receive no additional consideration from Aclara. Caliper is
restricted from selling its shares of Aclara for 18 months
following the effective date of the settlement agreement. If
Caliper sells its shares of Aclara stock at any time after
24 months from the effective date of the settlement
agreement, Aclara will have no obligation to provide any
additional consideration to Caliper. As discussed in
Note 12, Aclara has executed a fully-funded
$32.5 million standby letter of credit in favor of Caliper
to secure its performance under this obligation. In effect,
Aclara has guaranteed the aggregate settlement amount of
$32.5 million, so long as Caliper sells its Aclara stock
within a specified period of time.

Caliper has accounted for this arrangement by
initially recording $4.3 million in Aclara stock at fair
market value, with a note receivable with a corresponding face
value of $28.2 million including other receivable for the
fully funded letter of credit which was reduced by the initial
fair value ($2.7 million) of an embedded derivative. The
embedded derivative has been designated as a fair value hedge of
the Aclara stock.

The mark-to-market change in the fair value of
the Aclara stock is recorded in earnings in the other income or
expense line on the statement of operations and is offset by the
gains or losses in the fair value of the derivative reported in
the same other income or expense line. The ineffective portion
of the embedded derivative is also recorded in the other income
or expense line on the statement of operations. As of
December 31, 2001, the balances in Aclara stock and the
note receivable were $4.6 million and $26.9 million
respectively.

Comprehensive
Income (Loss)

Caliper has adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive
Income. The only component of comprehensive income
(loss) is unrealized gains and losses on available-for-

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

sale securities. Comprehensive income
(loss) has been disclosed in the Statement of Redeemable
Convertible Preferred Stock and Stockholders Equity.

Stock-Based
Compensation

Caliper accounts for its stock options and equity
awards in accordance with the provisions of Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and has elected to follow the
disclosure only alternative prescribed by Financial
Accounting Standards Boards Statement of Financial
Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123). Caliper
accounts for stock options issued to non-employees in accordance
with the provisions of SFAS No. 123 and Emerging Issues
Task Force 96-18. For the year ended December 31, 2001,
compensation expense related to stock options issued to
non-employees was $80,000 as compared to $254,000 for the year
ended December 31, 2000 and $593,000 for the year ended
December 31, 1999.

Net Income
(Loss) Per Share

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

Proforma net loss per share has been computed to
give effect to the adoption of the SEC Staff Accounting Bulletin
No. 101  Revenue Recognition in Financial
Statements  as a cumulative change in accounting
principle effective January 1, 2000.

F-13



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

A reconciliation of shares used in the
calculations is as follows (in thousands except per share data):

|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |        |  
|---------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------------------------ | ------ | ----- |  | ---- | ------- | ------ | - | - | ------- | ------ | -
|                                                                                                           |                                                              |                         
|                                                                                                           |                                                              | Years Ended December 31,
|                                                                                                           |                                                              |                         
|                                                                                                           |                                                              | 2001                     |        | 2000  |  | 1999
|                                                                                                           |                                                              |                          |        |       |  |     
|Net Income (loss):                                                                                         |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Net income (loss) before cumulative effect
	of change in accounting principle and extraordinary items      |                                                              | $                        | 3,823  |       |  | $    | (11,023 | )      |   | $ | (14,373 | )     
|                                                                                                           | Cumulative effect of a change in accounting
	principle       |                          |        |      |  |      |         | (2,294 | ) |   |         |       |  
|                                                                                                           | Accretion on redeemable convertible preferred
	stock         |                          |        |      |  |      |         |       |   |   |         | (2,328 | )
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Net income (loss) attributable to common
	stockholders for basic and dilutive computations                 |                                                              | $                        | 3,823  |       |  | $    | (13,317 | )      |   | $ | (16,701 | )     
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Weighted-average shares of common stock
	outstanding                                                       |                                                              |                          | 24,009 |       |  |      | 21,939  |        |   |   | 3,909   |       
|Less: weighted-average shares subject to
	repurchase                                                       |                                                              |                          | (12    | )     |  |      | (86     | )      |   |   | (246    | )     
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Weighted-average shares used in basic
	computations of net income (loss) per share                         |                                                              |                          | 23,997 |       |  |      | 21,853  |        |   |   | 3,663   |       
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Weighted-average shares used in basic
	computations of net income (loss) per share                         |                                                              |                          | 23,997 |       |  |      | 21,853  |        |   |   | 3,663   |       
|                                                                                                           | Dilutive stock options  based on the
	treasury stock method |                          |        | 1,601 |  |      |         |       |   |   |         |       |  
|                                                                                                           | Dilutive warrants  based on the
	treasury stock method      |                          |        | 36    |  |      |         |       |   |   |         |       |  
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Weighted-average shares used in dilutive
	computations of net income (loss) per share                      |                                                              |                          | 25,634 |       |  |      | 21,853  |        |   |   | 3,663   |       
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Net Income (loss) per share:                                                                               |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Basic:                                                                                                     |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|From net income (loss) before cumulative
	effect of change in accounting principle and extraordinary items |                                                              | $                        | 0.16   |       |  | $    | (0.50   | )      |   | $ | (0.92   | )     
|                                                                                                           | Cumulative effect of a change in accounting
	principle       |                          |        |      |  |      |         | (0.11  | ) |   |         |       |  
|                                                                                                           | Accretion on redeemable convertible preferred
	stock         |                          |        |      |  |      |         |       |   |   |         |       |  
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Net income (loss) per share  basic                                                                        |                                                              | $                        | 0.16   |       |  | $    | (0.61   | )      |   | $ | (0.92   | )     
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Diluted:                                                                                                   |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|From net income (loss) before cumulative
	effect of change in accounting principle and extraordinary items |                                                              | $                        | 0.15   |       |  | $    | (0.50   | )      |   | $ | (0.92   | )     
|                                                                                                           | Cumulative effect of a change in accounting
	principle       |                          |        |      |  |      |         | (0.11  | ) |   |         |       |  
|                                                                                                           | Accretion on redeemable convertible preferred
	stock         |                          |        |      |  |      |         |       |   |   |         |       |  
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       
|Net income (loss) per share 
	diluted                                                                     |                                                              | $                        | 0.15   |       |  | $    | (0.61   | )      |   | $ | (0.92   | )     
|                                                                                                           |                                                              |                          |        |       |  |      |         |        |   |   |         |       

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

|                     |  |                          |       |      |  |      |       |  |  |  |       | 
|-------------------- |  | ------------------------ | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                     |  |                         
|                     |  | Years Ended December 31,
|                     |  |                         
|                     |  | 2001                     |       | 2000 |  | 1999
|                     |  |                          |       |      |  |     
|Options and warrants |  |                          | 2,403 |      |  |      | 3,082 |  |  |  | 2,497 | 

Significant Concentrations

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

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

In 1999, Agilent Technologies represented 50% of
total revenues and two of Calipers Technology Access
Program customers accounted for 21% and 17% of total revenues.
In 2000, Agilent Technologies represented 45% of total revenues
and three of Calipers Technology Access Program customers
accounted for 18%, 14% and 13% of total revenues. In 2001,
Agilent Technologies represented 32% of total revenues and three
of Calipers Technology Access Program customers accounted
for 6%, 6% and 10% of total revenues. Also in 2001, Amphora
Discovery Corp., a related party, accounted for 13% of total
revenues.

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

Recent
Accounting Pronouncements

In July 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 141, Business
Combinations and No. 142, Goodwill and Other
Intangible Assets. The statements eliminate the
pooling-of-interests method of accounting for business
combinations and require that goodwill and certain intangible
assets not be amortized. Instead, these assets will be reviewed
for impairment annually with any related losses recognized in
earnings when incurred. The statements will be effective for
Caliper as of January 1, 2002 for any existing goodwill and
intangible assets and for business combinations initiated after
June 30, 2001. The adoption of these statements as of
January 1, 2002 is not expected to have a material impact
on Calipers financial position, results of operations or
cash flow.

In October 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. This statement
supersedes FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and replaces the provisions of APB Opinion
No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of
Segments of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the
disposal of segments of a business. SFAS No. 144 retains
the fundamental provisions of SFAS No. 121 for the
recognition and measurement of the impairment of long-lived
assets to be held and used and the measurement of long-lived
assets to be disposed of by sale. Impairment of goodwill is not
included in the scope of SFAS No. 144 and will be treated
in accordance with SFAS No. 142. Under SFAS No. 144,
long-lived assets are measured at the lower of carrying amount
or fair value less cost to sell. We are required to adopt this
statement no later than January 1, 2002. Based on our
current assessment, we do not expect the adoption of this
statement to have a significant impact on our financial
condition or results of operations.

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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

3.     Cash
Equivalents and Marketable Securities

The following is a summary of available-for-sale
securities as of December 31, 2001:

|                                              |                                  |                |         |            |  |            |      |            |   |   |       |       |  |   |         |         | 
|--------------------------------------------- | -------------------------------- | -------------- | ------- | ---------- |  | ---------- | ---- | ---------- | - | - | ----- | ----- |  | - | ------- | ------- | 
|                                              |                                  |                |         | Gross      |  | Gross      |      |           
|                                              |                                  | Amortized      |         | Unrealized |  | Unrealized |      | Estimated 
|                                              |                                  | Cost           |         | Losses     |  | Gains      |      | Fair Value
|                                              |                                  |                |         |            |  |            |      |           
|                                              |                                  |               
|                                              |                                  | (In thousands)
|Cash and money market funds                   |                                  | $              | 10,655  |            |  | $          |     |            |   | $ |      |       |  | $ | 10,655  |        
|Bonds of the U.S. Government and its agencies |                                  |                | 28,446  |            |  |            | (37  | )          |   |   | 333   |       |  |   | 28,742  |        
|Commercial paper                              |                                  |                | 125,058 |            |  |            | (85  | )          |   |   | 1,806 |       |  |   | 126,779 |        
|                                              |                                  |                |         |            |  |            |      |            |   |   |       |       |  |   |         |        
|                                              |                                  | $              | 164,159 |            |  | $          | (122 | )          |   | $ | 2,139 |       |  | $ | 166,176 |        
|                                              |                                  |                |         |            |  |            |      |            |   |   |       |       |  |   |         |        
|Reported as:                                  |                                  |                |         |            |  |            |      |            |   |   |       |       |  |   |         |        
|                                              | Cash equivalents                 |                | $       | 10,655     |  |            | $    |           |   |   | $     |      |  |   | $       | 10,655  | 
|                                              | Short-term marketable securities |                |         | 153,504    |  |            |      | (122       | ) |   |       | 2,139 |  |   |         | 155,521 | 
|                                              |                                  |                |         |            |  |            |      |            |   |   |       |       |  |   |         |        
|                                              |                                  | $              | 164,159 |            |  | $          | (122 | )          |   | $ | 2,139 |       |  | $ | 166,176 |        
|                                              |                                  |                |         |            |  |            |      |            |   |   |       |       |  |   |         |        

The following is a summary of the cost and
estimated fair value of available-for-sale securities at
December 31, 2001, by contractual maturity:

|                                          |       |                |        |            |  |   |        |         | 
|----------------------------------------- | ----- | -------------- | ------ | ---------- |  | - | ------ | ------- | 
|                                          |       | Amortized      |        | Estimated 
|                                          |       | Cost           |        | Fair Value
|                                          |       |                |        |           
|                                          |       |               
|                                          |       | (In thousands)
|Mature in one year or less                |       | $              | 86,297 |            |  | $ | 86,879 |        
|Mature after one year through three years |       |                | 77,862 |            |  |   | 79,297 |        
|                                          |       |                |        |            |  |   |        |        
|                                          | Total |                | $      | 164,159    |  |   | $      | 166,176 | 
|                                          |       |                |        |            |  |   |        |        

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

|                                              |                                  |                |         |            |  |            |     |            |   |   |     |     |  |   |         |         | 
|--------------------------------------------- | -------------------------------- | -------------- | ------- | ---------- |  | ---------- | --- | ---------- | - | - | --- | --- |  | - | ------- | ------- | 
|                                              |                                  |                |         | Gross      |  | Gross      |     |           
|                                              |                                  | Amortized      |         | Unrealized |  | Unrealized |     | Estimated 
|                                              |                                  | Cost           |         | Losses     |  | Gains      |     | Fair Value
|                                              |                                  |                |         |            |  |            |     |           
|                                              |                                  |               
|                                              |                                  | (In thousands)
|Cash and money market funds                   |                                  | $              | 28,769  |            |  | $          |    |            |   | $ |    |     |  | $ | 28,769  |        
|Bonds of the U.S. Government and its agencies |                                  |                | 26,486  |            |  |            |    |            |   |   | 90  |     |  |   | 26,576  |        
|Commercial paper                              |                                  |                | 135,816 |            |  |            | (17 | )          |   |   | 555 |     |  |   | 136,354 |        
|                                              |                                  |                |         |            |  |            |     |            |   |   |     |     |  |   |         |        
|                                              |                                  | $              | 191,071 |            |  | $          | (17 | )          |   | $ | 645 |     |  | $ | 191,699 |        
|                                              |                                  |                |         |            |  |            |     |            |   |   |     |     |  |   |         |        
|Reported as:                                  |                                  |                |         |            |  |            |     |            |   |   |     |     |  |   |         |        
|                                              | Cash equivalents                 |                | $       | 36,294     |  |            | $   |           |   |   | $   |    |  |   | $       | 36,294  | 
|                                              | Short-term marketable securities |                |         | 154,777    |  |            |     | (17        | ) |   |     | 645 |  |   |         | 155,405 | 
|                                              |                                  |                |         |            |  |            |     |            |   |   |     |     |  |   |         |        
|                                              |                                  | $              | 191,071 |            |  | $          | (17 | )          |   | $ | 645 |     |  | $ | 191,699 |        
|                                              |                                  |                |         |            |  |            |     |            |   |   |     |     |  |   |         |        

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

4.     Notes
Receivable

As of December 31, 2001, Caliper held an
aggregate of $475,000 in notes receivable from two officers of
Caliper. The first note, with an initial principal of $200,000,
bears annual interest at 6.61% commencing in January 2002, is
collateralized by certain personal assets of the officer, and
requires contractual periodic

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

payments ending in 2006. As of December 31,
2001, $160,000 is outstanding under this note. The second note,
with an initial principal amount of $500,000 bears annual
interest at 5.96% and is repayable upon the earlier of; i)
July 29, 2005, or ii) the voluntary termination of the
officers employment with Caliper. This second note is
subject to forgiveness by Caliper of principal and interest
amounts based on performance reviews of the officer. As of
December 31, 2001, $315,000 is outstanding under this note.

5.     Property and
Equipment

Property and equipment consists of the following:

|                                          |  |                |        |      |  |   |        |  
|----------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                          |  |               
|                                          |  | December 31,  
|                                          |  |               
|                                          |  | 2001           |        | 2000
|                                          |  |                |        |     
|                                          |  |               
|                                          |  | (In thousands)
|Machinery, equipment, and furniture       |  | $              | 17,101 |      |  | $ | 11,099 |  
|Leasehold improvements                    |  |                | 3,498  |      |  |   | 2,327  |  
|                                          |  |                |        |      |  |   |        |  
|                                          |  |                | 20,599 |      |  |   | 13,426 |  
|Accumulated depreciation and amortization |  |                | (8,018 | )    |  |   | (4,325 | )
|                                          |  |                |        |      |  |   |        |  
|Property and equipment, net               |  | $              | 12,581 |      |  | $ | 9,101  |  
|                                          |  |                |        |      |  |   |        |  

As of December 31, 2001 and 2000 property
and equipment includes assets acquired under capital leases of
approximately $9.0 million and $8.2 million
respectively. Accumulated depreciation related to leased assets
was approximately $4.7 million and $4.0 million at
December 31, 2001 and 2000.

6.     Equipment
Financing and Lease Commitments

As of December 31, 2001, Caliper had
$9.0 million of property and equipment financed through
capital lease obligations and approximately $1.8 million
unused and available under an equipment financing credit line.
The obligations under the equipment financings are secured by
the equipment financed, bear interest at a weighted-average
fixed rate of approximately 12.2%, and are due in monthly
installments through December 2004. Under the terms of one
equipment financing agreement, ownership of the financed
equipment may be purchased by Caliper at fair value at the end
of the financing term. Other equipment financing agreements
require a balloon payment at the end of each loan term.

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

As of December 31, 2001, future minimum
lease payments under operating and capital leases and principal
payments on equipment loans are as follows:

|                                          |            |                                            |   |                 |        |   |        |       |       | 
|----------------------------------------- | ---------- | ------------------------------------------ | - | --------------- | ------ | - | ------ | ----- | ----- | 
|                                          |            |                                            |   | Capital Leases 
|                                          |            | Operating                                  |   | and            
|                                          |            | Leases                                     |   | Equipment Loans
|                                          |            |                                            |   |                
|                                          |            |                                           
|                                          |            | (In thousands)                            
|Years ending December 31:                 |            |                                            |   |                 |        |   |        |      
|                                          | 2002       |                                            | $ | 4,954           |        |   | $      | 2,027 |      
|                                          | 2003       |                                            |   | 5,132           |        |   |        | 2,167 |      
|                                          | 2004       |                                            |   | 5,290           |        |   |        | 1,355 |      
|                                          | 2005       |                                            |   | 5,455           |        |   |        | 227   |      
|                                          | Thereafter |                                            |   | 13,812          |        |   |        |      |      
|                                          |            |                                            |   |                 |        |   |        |      
|                                          |            | Total minimum lease and principal payments |   | $               | 34,643 |   |        |       | 5,776 | 
|                                          |            |                                            |   |                 |        |   |        |      
|Amount representing interest              |            |                                            |   |                 |        |   |       |      
|                                          |            |                                            |   |                 |        |   |        |      
|Present value of future payments          |            |                                            |   |                 |        |   | 5,776  |      
|Current portion of equipment financing    |            |                                            |   |                 |        |   | (2,027 | )    
|                                          |            |                                            |   |                 |        |   |        |      
|Noncurrent portion of equipment financing |            |                                            |   |                 |        | $ | 3,749  |      
|                                          |            |                                            |   |                 |        |   |        |      

Through December 31, 2001, Caliper drew down
$1.3 million of the $5.0 million equipment financing
credit line which existed as of December 31, 2000 at a
weighted-average interest rate of 11.5%. In July 2001, Caliper
also entered into a $3.0 million financing agreement with a
financial institution for the purchase of property and equipment
which bears interest commensurate to the U.S. Treasury yield to
maturity for a note with a forty-eight month maturity plus a
loan margin. The drawdown period under the equipment financing
credit line expires on June 30, 2002. As of
December 31, 2001, Caliper drew down approximately
$1.2 million under the new line at a weighted average
interest rate of 11.6% and had $1.8 million remaining
available under this arrangement.

Rent expense relating to operating leases was
approximately $3.9 million in 2001, $2.5 million in
2000, and $1.8 million in 1999.

In December 1998, Caliper entered into a 10-year
facility operating lease agreement. Caliper also entered into a
sublease agreement pursuant to which it received a monthly
amount of $18,000 from December 1998 through November 1999 and a
monthly amount of $24,000 in December 1999 and January 2000. In
June 2000, Caliper entered into an 8-year facility operating
lease agreement and also entered into a sublease agreement with
a third party for a monthly amount of $42,000 from September
2000 through June 2001. In June 2001, Caliper entered into an
7-year facility operating lease agreement and also entered into
a sublease agreement with Amphora, a related party, for a
monthly amount of $18,500 from September 2001 through August
2004 subject also to a 3% per annum increase. The annual
increase is 4% for the first operating lease agreement and is 3%
for the second and third agreement. In connection with these
three facility leases, Caliper has a $3.2 million standby
letter-of-credit arrangement with a bank expiring in year 2008.
Caliper has pledged a certificate of deposit of
$3.2 million as collateral on outstanding letters of credit
related to Calipers operating lease agreements and is
classified as security deposits on the balance sheet.

7.     Redeemable
Convertible Preferred Stock and Stockholders
Equity

Private
Placement

In August 2000, Caliper completed a private
placement of 2,300,000 shares of its common stock to selected
institutional investors, at a per share price of $48.00. Caliper
received aggregate gross proceeds from

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

the offering of approximately $110.4 million
before payment of placement agent fees and other expenses of
approximately $5.5 million.

Preferred
Share Purchase Rights Plan

In December 2001, the board of directors and
stockholders of Caliper adopted a Preferred Share Purchase
Rights Plan (Rights Plan) under which Caliper issued
as a dividend certain rights to all holders of its common stock
to acquire additional shares of common stock at a discount price
under certain circumstances. The dividend of the Rights was made
to holders of record of Calipers common stock as of
January 8, 2002 and shares of common stock that are newly
issued after this date will also carry Rights. The Rights Plan
is to provide protection to stockholders from various
unsolicited and abusive takeover tactics, including attempts to
acquire control of Caliper at an inadequate price or treat all
stockholders equally. Under the Rights Plan, each stockholder
received one Right for each share of Calipers outstanding
common stock held by the stockholder. Each Right will entitle
the holder to purchase one one-hundredth of a share of newly
designated Series A Junior Participating Preferred Stock of
Caliper at an initial exercise price of $100. Initially, the
Rights are not detachable from Calipers common stock and
are not exercisable. Subject to certain exceptions, they become
immediately exercisable after any person or group (an
Acquiring Person) acquires beneficial ownership of
15% or more of Calipers common stock or 10 business days
(or such date as the board of directors may determine) after any
person or entity announces a tender or exchange offer that would
result in a 15% or greater beneficial ownership level. At no
time will the Rights have any voting power. If the Rights become
exercisable and a buyer becomes an Acquiring Person, all Rights
holders, except the Acquiring Person, will be entitled to
purchase, for each Right held, $200 worth of Calipers
common stock for $100. Calipers board of directors may
amend or terminate the Rights Plan at any time or redeem the
rights prior to the time a person acquires more than 15% of
Calipers common stock. Issuance of the Rights will not
affect the financial position of Caliper or interfere with its
business plans. Issuance of the Rights will not affect reported
earnings per share and will not be taxable to Caliper or
Calipers stockholder except under certain circumstance if
the Rights become exercisable.

Convertible
Preferred Stock

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

Warrants

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

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

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

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

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

In August 1995, Caliper executed an agreement
which called for the issue of two warrants, upon achievement of
a certain patent milestone, to purchase a total of 38,460 shares
of common stock at an exercise price of $1.22 per share. This
patent milestone was met in December 1999, and the two warrants
were issued in February 2000. These warrants will expire in
January 2006. The fair value of the warrants was capitalized in
1999 and is being amortized over 5 years. One of these warrants
is exercisable through January 17, 2006. In July 2000, one
of these warrants was exercised under a net exercise provision
and 18,729 shares of common stock were issued. There were no
exercises in 2001.

Common Stock
Subject to Repurchase

Common stock issued to founders of Caliper vest
generally over five years at 20% one year from the date of grant
and on a monthly, pro rata basis thereafter. At
December 31, 2001, 4,273 shares are unvested and remain
subject to repurchase at the original issuance price in the
event of termination of employment or services to Caliper.
Caliper has not repurchased any shares in accordance with these
rights.

Stock Option
Plans

In December 2001, Calipers board of
directors adopted the 2001 Non-Statutory Stock Option Plan
(2001 Non-Statutory Plan). A total of 500,000 shares
of common stock has been reserved for issuance under this plan.
Caliper issued 230,400 shares under the 2001 Non-Statutory Plan
in the year 2001 at a weighted average price of $12.24. Options
under the 2001 Non-Statutory Plan cannot be issued to
Calipers current officers and directors.

In October 1999, Calipers board of
directors and stockholders adopted the 1999 Equity Incentive
Plan (1999 Equity Plan). The 1999 Equity Plan
amended and restated the 1996 Stock Incentive Plan and increased
the shares reserved for issuance to 4 million. In addition,
the 1999 Equity Plan provides for an automatic increase in the
shares reserved for issuance by the greater of 5% of outstanding
shares on a fully-diluted basis or the number of shares that
have been made subject to awards granted under the 1999 Equity
Plan during the prior 12-month period. The automatic share
reserve increase may not exceed 12,820,000 shares in aggregate
over the 10-year period. In June 2001 and 2000, an additional
1,350,058 shares and 1,439,198 shares of common stock,
respectively, became issuable under this plan.

In October 1999, Calipers board of
directors and stockholders adopted the 1999 Non-Employee
Directors Stock Option Plan (1999 Directors
Plan) which provides for the automatic grant of options to
non-employee directors. A total of 200,000 shares of common
stock has been reserved for issuance under this plan. The number
of shares reserved for issuance will automatically increase by
the greater of 0.3% of outstanding shares on a fully-diluted
basis or the number of shares subject to options granted under
the 1999 Directors Plan during the prior 12-month period.
In June 2001 and 2000, an additional 77,017 shares and 69,496
shares of common stock, respectively, became issuable under this
plan.

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

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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

A summary of activity under the plans is as
follows:

|                             |            |           |           |                     |   |                |           |           |   |  |                  |                  |  |     |       |       | 
|---------------------------- | ---------- | --------- | --------- | ------------------- | - | -------------- | --------- | --------- | - |  | ---------------- | ---------------- |  | --- | ----- | ----- | 
|                             |            |           |           |                     |   |               
|                             |            |           |           | Options Outstanding |   | Weighted-     
|                             |            |           |           |                     |   | Average       
|                             |            | Options   |           | Number of           |   |                |           | Exercise 
|                             |            | Available |           | Options             |   | Exercise Price |           | Price    
|                             |            |           |           |                     |   |                |           |          
|Balance at December 31, 1998 |            |           | 1,505,048 |                     |   |                | 1,066,007 |           |   |  | $ 0.06 - $  0.9  |                  |  | 7 $ | 0.59  |      
|                             | Authorized |           |           | 1,474,109           |   |                |           |          |   |  |                  |                 |  |     |       |      | 
|                             | Granted    |           |           | (1,728,454          | ) |                |           | 1,728,454 |   |  |                  | $ 0.97 - $ 14.0  |  |     | 0 $   | 2.88  | 
|                             | Exercised  |           |           |                    |   |                |           | (389,638  | ) |  |                  | $ 0.06 - $  0.9  |  |     | 7 $   | 0.59  | 
|                             | Canceled   |           |           | 20,839              |   |                |           | (20,839   | ) |  |                  | $ 0.62 - $  0.9  |  |     | 7 $   | 0.70  | 
|                             |            |           |           |                     |   |                |           |           |   |  |                  |                  |  |     |       |      
|Balance at December 31, 1999 |            |           | 1,271,542 |                     |   |                | 2,383,984 |           |   |  | $ 0.06 - $ 14.0  |                  |  | 0 $ | 2.25  |      
|                             | Authorized |           |           | 1,508,694           |   |                |           |          |   |  |                  |                 |  |     |       |      | 
|                             | Awards     |           |           | (6,250              | ) |                |           |          |   |  |                  |                 |  |     |       |      | 
|                             | Granted    |           |           | (916,681            | ) |                |           | 916,681   |   |  |                  | $24.13 - $162.00 |  |     | $     | 59.67 | 
|                             | Exercised  |           |           |                    |   |                |           | (230,703  | ) |  |                  | $ 0.06 - $ 14.0  |  |     | 0 $   | 1.05  | 
|                             | Canceled   |           |           | 23,513              |   |                |           | (27,060   | ) |  |                  | $ 0.06 - $ 77.0  |  |     | 0 $   | 3.26  | 
|                             |            |           |           |                     |   |                |           |           |   |  |                  |                  |  |     |       |      
|Balance at December 31, 2000 |            |           | 1,880,818 |                     |   |                | 3,042,902 |           |   |  | $ 0.06 - $162.00 |                  |  | $   | 19.63 |      
|                             | Authorized |           |           | 1,927,075           |   |                |           |          |   |  |                  |                 |  |     |       |      | 
|                             | Awards     |           |           |                    |   |                |           |          |   |  |                  |                 |  |     |       |      | 
|                             | Granted    |           |           | (2,625,293          | ) |                |           | 2,625,293 |   |  |                  | $ 9.25 - $ 47.0  |  |     | 0 $   | 21.51 | 
|                             | Exercised  |           |           |                    |   |                |           | (398,761  | ) |  |                  | $ 0.06 - $ 14.0  |  |     | 0 $   | 2.08  | 
|                             | Canceled   |           |           | 381,395             |   |                |           | (381,395  | ) |  |                  | $ 0.47 - $106.00 |  |     | $     | 33.70 | 
|                             |            |           |           |                     |   |                |           |           |   |  |                  |                  |  |     |       |      
|Balance at December 31, 2001 |            |           | 1,563,995 |                     |   |                | 4,888,039 |           |   |  | $ 0.06 - $162.00 |                  |  | $   | 20.95 |      
|                             |            |           |           |                     |   |                |           |           |   |  |                  |                  |  |     |       |      

Caliper granted nonqualified options of
1,402,344, 391,841 and 303,845 for the years ended
December 31, 2001, 2000, and 1999, respectively.

The weighted-average fair value of options
granted during 2001, 2000, and 1999 was $21.01, $47.60, and
$0.73, respectively.

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

The following table summarizes information with
respect to stock options outstanding at December 31, 2001:

|                        |  |                     |           |                     |  |                |     |        |  |                  |        |  |  |  |           |  |  |   |        | 
|----------------------- |  | ------------------- | --------- | ------------------- |  | -------------- | --- | ------ |  | ---------------- | ------ |  |  |  | --------- |  |  | - | ------ | 
|                        |  |                     |           |                     |  |               
|                        |  | Options Exercisable |           |                    
|                        |  |                     |           | Options Outstanding
|                        |  |                     |           | Weighted            |  |                |     |       
|                        |  |                     |           | Average             |  | Weighted       |     | Number |  | Weighted        
|                        |  | Number              |           | Remaining           |  | Average        |     | of     |  | Average Exercise
|Range of Exercise Price |  | of Shares           |           | Contractual Life    |  | Exercise Price |     | Shares |  | Price           
|                        |  |                     |           |                     |  |                |     |        |  |                 
|$  0.06 - $  0.06       |  |                     | 22,120    |                     |  |                | 4.3 |        |  | $                | 0.06   |  |  |  | 22,120    |  |  | $ | 0.06   | 
|$  0.11 - $  0.11       |  |                     | 1,923     |                     |  |                | 0.2 |        |  | $                | 0.11   |  |  |  | 1,923     |  |  | $ | 0.11   | 
|$  0.47 - $  0.62       |  |                     | 177,877   |                     |  |                | 5.5 |        |  | $                | 0.56   |  |  |  | 128,064   |  |  | $ | 0.54   | 
|$  0.97 - $  0.97       |  |                     | 888,875   |                     |  |                | 7.1 |        |  | $                | 0.97   |  |  |  | 399,264   |  |  | $ | 0.97   | 
|$  3.12 - $  3.12       |  |                     | 477,893   |                     |  |                | 7.7 |        |  | $                | 3.12   |  |  |  | 178,522   |  |  | $ | 3.12   | 
|$  9.25 - $ 13.71       |  |                     | 715,366   |                     |  |                | 9.8 |        |  | $                | 11.63  |  |  |  | 9,286     |  |  | $ | 12.99  | 
|$ 14.00 - $ 20.62       |  |                     | 965,353   |                     |  |                | 9.5 |        |  | $                | 15.33  |  |  |  | 66,462    |  |  | $ | 14.68  | 
|$ 21.05 - $ 31.13       |  |                     | 325,488   |                     |  |                | 9.0 |        |  | $                | 26.53  |  |  |  | 48,972    |  |  | $ | 28.57  | 
|$ 32.19 - $ 47.00       |  |                     | 775,844   |                     |  |                | 9.0 |        |  | $                | 36.21  |  |  |  | 40,944    |  |  | $ | 41.06  | 
|$ 49.63 - $ 65.63       |  |                     | 238,750   |                     |  |                | 8.5 |        |  | $                | 57.02  |  |  |  | 102,647   |  |  | $ | 57.50  | 
|$ 77.00 - $102.00       |  |                     | 284,600   |                     |  |                | 8.0 |        |  | $                | 78.20  |  |  |  | 127,235   |  |  | $ | 78.18  | 
|$130.00 - $162.00       |  |                     | 13,950    |                     |  |                | 8.1 |        |  | $                | 154.77 |  |  |  | 6,393     |  |  | $ | 154.78 | 
|                        |  |                     |           |                     |  |                |     |        |  |                  |        |  |  |  |           |  |  |   |        | 
|$  0.06 - $162.00       |  |                     | 4,888,039 |                     |  |                | 8.5 |        |  | $                | 20.53  |  |  |  | 1,131,832 |  |  | $ | 19.46  | 
|                        |  |                     |           |                     |  |                |     |        |  |                  |        |  |  |  |           |  |  |   |        | 

Employee
Stock Purchase Plan

In October 1999, the board of directors and
stockholders adopted the 1999 Employee Stock Purchase Plan
(1999 Purchase Plan). A total of 300,000 shares of
common stock has been reserved for issuance under the 1999
Purchase Plan. The number of shares reserved automatically
increases by the greater of 0.5% of outstanding shares on a
fully-diluted basis or the number of shares issued under the
1999 Purchase Plan during the prior 12 -month period. The
automatic share reserve increase may not exceed 3 million
shares in aggregate over the 10 -year period. The 1999
Purchase Plan permits eligible employees to acquire shares of
Calipers common stock through payroll deductions of up to
10% of their gross earnings. No employee may participate in the
1999 Purchase Plan if immediately after the grant the employee
has voting power over 5% or more of the outstanding capital
stock. Under the 1999 Purchase Plan, the board may specify
offerings of up to 27 months. Unless the board determines
otherwise, common stock may be purchased at the lower of 85% of
the fair market value of Calipers common stock on the
first day of the offering or 85% of the fair market value of
Calipers common stock on the purchase date. The initial
offering period began on the effective date of the initial
public offering. Caliper issued 69,201 shares under the
1999 Purchase Plan in the year 2000 at a weighted average price
of $14.27. Caliper issued 112,881 shares under the 1999 Purchase
Plan in the year 2001 at a weighted average price of $12.51. In
June 2001 and 2000, an additional 128,361 shares and
115,827 shares, respectively, of common stock became
issuable under the 1999 Purchase Plan. As of December 31,
2001, 362,106 shares remain available for future issuance.

Stock Based
Compensation

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

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

6.28%, an expected life of four years, and no
dividends. The assumptions used for 2001 were: volatility of
112%, risk-free interest rate of 4.33%, an expected life of four
years, and no dividends. The following assumptions were used for
the 1999 Purchase Plan: volatility of 112%, risk-free interest
rate of 4.50%, an expected life of seven months, and no
dividends.

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

|                                                        |              |                                       |   |         |       |      |   |         |       |   |   |         |       |  
|------------------------------------------------------- | ------------ | ------------------------------------- | - | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | -
|                                                        |              |                                      
|                                                        |              | Years Ended December 31,             
|                                                        |              |                                      
|                                                        |              | 2001                                  |   | 2000    |       | 1999
|                                                        |              |                                       |   |         |       |     
|                                                        |              |                                      
|                                                        |              | (In thousands, except per share data)
|Net income (loss) attributable to common
	stockholders: |              |                                       |   |         |       |      |   |         |       |   |   |        
|                                                        | As reported  |                                       | $ | 3,823   |       |      | $ | (13,317 | )     |   | $ | (16,701 | )    
|                                                        | Pro forma    |                                       | $ | (12,501 | )     |      | $ | (21,991 | )     |   | $ | (17,319 | )    
|Net income (loss) per share:                            |              |                                       |   |         |       |      |   |         |       |   |   |        
|                                                        | As reported: |                                       |   |         |       |      |   |         |       |   |   |         |      
|                                                        |              | Basic                                 |   | $       | 0.16  |      |   | $       | (0.61 | ) |   | $       | (4.56 | )
|                                                        |              | Diluted                               |   | $       | 0.15  |      |   | $       | (0.61 | ) |   | $       | (4.56 | )
|                                                        | Pro forma:   |                                       |   |         |       |      |   |         |       |   |   |         |      
|                                                        |              | Basic                                 |   | $       | (0.52 | )    |   | $       | (1.01 | ) |   | $       | (4.73 | )
|                                                        |              | Diluted                               |   | $       | (0.52 | )    |   | $       | (1.01 | ) |   | $       | (4.73 | )

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

Caliper has recorded deferred stock compensation
of approximately $12.7 million for the year ended
December 31, 1999, representing the difference between the
exercise price of the options granted and the deemed fair value
of the common stock. These amounts are being amortized by
charges to operations over the vesting periods of the individual
stock options using the graded vesting method. Such amortization
expense amounted to approximately $2.5 million,
$4.5 million and $3.9 million for the years ended
December 31, 2001, December 31, 2000 and
December 31, 1999, respectively.

Reserved
Stock

As of December 31, 2001, Caliper had
reserved shares of common stock for future issuance as follows:

|                                  |  |  |           | 
|--------------------------------- |  |  | --------- | 
|Stock options                     |  |  | 6,105,516 | 
|Warrants                          |  |  | 38,460    | 
|1999 Employee Stock Purchase Plan |  |  | 362,106   | 
|1999 Directors Plan              |  |  | 346,513   | 
|                                  |  |  |           | 
|                                  |  |  | 6,852,595 | 
|                                  |  |  |           | 

8.     Income
Taxes

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

As of December 31, 2001, Caliper had federal
and California net operating loss carryforwards of approximately
$27.6 million and $2.5 million. Caliper also had
federal and state research and development tax credit
carryforwards of approximately $1.9 million and
$1.7 million, respectively. The federal net operating

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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

loss and credit carryforwards will expire at
various dates beginning in the year 2009 through 2021, if not
utilized. The state of California net operating losses will
begin to expire in year 2003, if not utilized.

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

|                                           |                                       |                |        |      |  |   |        |       | 
|------------------------------------------ | ------------------------------------- | -------------- | ------ | ---- |  | - | ------ | ----- | 
|                                           |                                       |               
|                                           |                                       | Year Ended    
|                                           |                                       | December 31,  
|                                           |                                       |               
|                                           |                                       | 2001           |        | 2000
|                                           |                                       |                |        |     
|                                           |                                       |               
|                                           |                                       | (In thousands)
|U.S. federal taxes (benefit):              |                                       |                |        |      |  |   |        |      
|At statutory rate                          |                                       | $              | 1,300  |      |  | $ | (4,528 | )    
|Federal alternative minimum taxes          |                                       |                |       |      |  |   |       |      
|State                                      |                                       |                |       |      |  |   |       |      
|Foreign                                    |                                       |                |       |      |  |   |       |      
|Permanent differences;                     |                                       |                |        |      |  |   |        |      
|                                           | Amortization of Deferred Compensation |                |        | 864  |  |   |        | 1,545 | 
|                                           | Other                                 |                |        | 106  |  |   |        | 13    | 
|Unutilized (utilized) net operating losses |                                       |                | (2,270 | )    |  |   | 2,970  |      
|                                           |                                       |                |        |      |  |   |        |      
|Total                                      |                                       | $              |       |      |  | $ |       |      
|                                           |                                       |                |        |      |  |   |        |      

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

|                                     |       |                |         |      |  |   |         |   | 
|------------------------------------ | ----- | -------------- | ------- | ---- |  | - | ------- | - | 
|                                     |       |               
|                                     |       | December 31,  
|                                     |       |               
|                                     |       | 2001           |         | 2000
|                                     |       |                |         |     
|                                     |       |               
|                                     |       | (In thousands)
|Net operating loss carryforwards     |       | $              | 9,500   |      |  | $ | 10,900  |  
|Research credit carryforwards        |       |                | 3,040   |      |  |   | 1,350   |  
|Capitalized research and development |       |                | 1,477   |      |  |   | 1,658   |  
|Other, net                           |       |                | 1,810   |      |  |   | 2,790   |  
|                                     |       |                |         |      |  |   |         |  
|Net deferred tax assets              |       |                | 15,827  |      |  |   | 16,698  |  
|Valuation allowance                  |       |                | (15,827 | )    |  |   | (16,698 | )
|                                     |       |                |         |      |  |   |         |  
|                                     | Total |                | $       |     |  |   | $       |  | 
|                                     |       |                |         |      |  |   |         |  

Because of Calipers lack of earnings
history, the deferred tax assets have been fully offset by a
valuation allowance. The valuation allowance decreased by
$871,000 and increased $6.2 million and $4.2 million
during the years ended December 31, 2001, 2000 and 1999,
respectively.

9.     Contracts and
Grants



| |                                 
| | --------------------------------
| | Strategic Alliance with
	Agilent

In May 1998, Caliper executed a collaboration
agreement with Hewlett-Packard Company
(Hewlett-Packard) to create a line of commercial
research products based on LabChip technologies. In November
1999, Hewlett-Packard transferred this collaboration to its
subsidiary, Agilent Technologies, Inc. (Agilent). In
this collaboration, Caliper primarily focuses on developing core
technology and LabChip applications.

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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

Caliper also manufactures the chips and supplies
the chips and reagents to Agilent. If Caliper elects, however,
not to manufacture chips for a LabChip application or is unable
to meet minimum mutually agreed supply commitments, Agilent
would have the right to manufacture those chips. Agilent
primarily focuses on developing instruments and software,
manufacturing instruments, and marketing, selling and supporting
complete systems.

Agilent funds Calipers product development
efforts under the collaboration, reimburses Calipers costs
of supplying chips and reagents, and pays Caliper a share of the
gross margin on all components of LabChip systems. The gross
margin share varies depending on the type of collaboration
product, whether Caliper or Agilent manufacture the
collaboration product, and whether such collaboration product is
sold during the collaboration or after the collaboration has
terminated. Under this agreement, Hewlett-Packard purchased
534,188 shares of Calipers redeemable convertible
preferred stock Series E with an aggregate cost of
$5.0 million.

The term of the Agilent agreement is eight years,
beginning in May 1998. After three years, Agilent could have
elected not to meet certain annual funding requirements, in
which case either party could have terminated the agreement.
Agilent elected to continue the annual funding requirements in
May 2001. Either party may also terminate the agreement after
five years.



| |                          
| | -------------------------
| | Technology Access Program

In prior years and through the majority of 2001,
Caliper maintained a Technology Access Program which provided
customers with early access to new products, and offered
technical training, support and customization services.
Technology Access Program customers had non-exclusive access to
all of the high throughput screening products Caliper offered
during the term of the agreement. These agreements generally
provided for customers to pay an up-front license fee and annual
subscription fees, and to reimburse Caliper for its costs of
providing development and support services. Instruments and
chips were generally sold separately on a product-by-product
basis, although some agreements establish prices for initial
instruments or estimates of per data point charges for sipper
chips. In August 2001, Caliper began to amend these agreements
with continuing Technology Access Program customers to
transition them to a products and services based customer for
commercially available high throughput products. We proposed to
each customer, and they agreed, that the remaining technology
access and subscription fees due Caliper under their agreement
would be converted to credits toward the purchase of products
and services. These credits must be utilized in the next eight
to fifteen months.

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

Eli Lilly.Caliper
signed a technology access agreement with Eli Lilly in August
1999. The term was three years. In August 2001, the agreement
was amended to include terms for commercially available products
and continuing assay development services through August 2002.
There will be no further technology access fees or subscription
fees with products and services purchased by Eli Lilly after
August 2001 recognized upon shipment and transfer of title to
product to Eli Lilly or when the assay development service has
been provided by Caliper.

Millennium.Caliper
signed a broad technology access and application development
collaboration with Millennium in March 2000. The term is two
years with an option to renew in the third year. In December
2001, the agreement was amended to include terms for
commercially available products and continuing assay development
services and through March 2003. There will be no further
technology access fees or subscription fees with products and
services purchased by Millennium after December 2001 recognized
upon shipment and transfer of title to product to Millennium or
when the assay development service has been provided by Caliper.

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

Amgen.Caliper
entered into a three year technology access agreement with Amgen
in December 1998. In December 2001, the agreement was amended to
include terms for commercially available products and continuing
assay development services and extended through to December
2002. Under the amended agreement Caliper agreed to convert
technology access fees still available towards the purchase of
products and services that Amgen utilized in December 2001.
There will be no further technology access fees or subscription
fees with products and services purchased by Amgen after
December 2001 recognized upon shipment and transfer of title to
product to Amgen or when the assay development service has been
provided by Caliper.

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



| |                                             
| | --------------------------------------------
| | Value Added Screening Collaboration
	Program

Calipers Value Added Screening
Collaboration program offered high throughput screening services
using Calipers LabChip systems. Calipers first Value
Added Screening Collaboration agreement was established with
Neurocrine Biosciences in December 1998. Caliper received
screening fees on a per data point basis, preclinical milestones
and royalties on Neurocrine products emerging from the
collaboration. This agreement had a three-year term, but could
have been terminated by either party under certain circumstances
after the first year. In 2001, when Caliper decided to
transition its business to product-based revenues, this program
was eliminated. Of the two Value Added Screening Collaboration
collaborations, the contract with Neurocrine Biosciences and
SUGEN expired in December 2001. SUGEN became a commercial
products customer in December 2001.

Revenue from the alliance and programs discussed
above were approximately $16.0 million, $17.8 million,
$11.2 million and $7.9 million in 2001, 2000, 1999 and
1998 respectively. Revenue earned from reimbursement of
development and support activities approximated actual costs
incurred.

In September 1998, Caliper received a grant from
the Advanced Technology Program of the National Institute of
Standards and Technology (NIST) to develop a
Reference Laboratory DNA Diagnostics System based on
Calipers lab-on-a-chip technology of
approximately $2 million over three years. The grant period
began in January 1999 and concluded in December 2001, and no
revenues will be recognized after 2001.

10.     Related
Party

In September of 2001, Caliper completed the spin
out of a new company, Amphora Discovery Corp., to create and
commercialize a comprehensive database of chemical genomics
information. Venture capitalists invested $25 million in
Amphora, and entered into agreements to invest up to an
additional $10 million if requested by Amphora, causing
Amphora to be a separate, independent company from Caliper with
its own management team and board of directors. Calipers
ownership interest in Amphora is approximately 28% but would be
further reduced if part or all of the additional
$10 million were to be invested by Amphoras venture
capitalists. These venture capitalist include ARCH Venture
Partners and Venrock Associates. One of Calipers
directors, Robert T. Nelsen, is a Managing Director of ARCH
Venture Partners, and another of Calipers directors,
Anthony B. Evnin, is a General Partner of Venrock
Associates. Calipers investment in Amphora is accounted
for under the equity method of accounting. As Calipers
investment in Amphora has no

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CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

basis for accounting purposes and, because
Caliper does not guarantee debt or have commitments to fund
losses of Amphora, Caliper has not recorded its proportionate
share of Amphoras operating losses in its financial
statements since the completion of Amphoras financing.

Caliper has two representatives on Amphoras
six member board of directors. Michael R. Knapp,
Calipers Vice President of Science and Technology, and
James L. Knighton, Calipers Executive Vice President
and Chief Financial Officer, have served on Amphoras board
of directors since September 2001. Mr. Knighton resigned
from Amporas board of directors in February 2002 and
Caliper has not as yet designated a replacement.
Mr. Knighton also served as Amphoras acting Chief
Financial Officer from September 2001 until January 2002. As
members of Amphoras board, Dr. Knapp and
Mr. Knighton were granted options to buy 900,000 shares and
450,000 shares, respectively of Amphora common stock at a share
value of $0.10 per share.

In September 2001, Caliper and Amphora entered
into a LabChip Solutions Agreement and an Intellectual Property
Agreement. The LabChip Solutions Agreement provided for the
ongoing supply of Caliper high throughput screening systems and
chips to Amphora, and for the provision of related services by
Caliper to Amphora. Under this agreement, Amphora has agreed to
purchase a minimum of eleven Caliper instruments by
December 31, 2001 and at least eleven additional Caliper
HTS instruments by December 31, 2002. Amphora has also
agreed to purchase datapoints at a fixed amount of
$2 million in the first year and a minimum of
$4 million to a maximum based on volume of $6 million
in the second year of the agreement. The LabChip Solutions
Agreement also contains certain intellectual property licensing
provisions pertaining to the parties independent and
collaborative efforts to develop new high throughput screening
systems based on Calipers microfluidic technologies. Under
the Intellectual Property Agreement, Caliper has granted Amphora
certain exclusive rights to use Calipers High Throughput
Screening products in a chemical genomics database business.

In 2001, Caliper sold, subsequent to
Amphoras third-part financing, a total of
$3.9 million in Caliper 250 High Throughput Screening
System products, LabChips, datapoints and assay development
services to Amphora recording it as a related party sale on the
financial statements. Of the $3.9 million in total sales,
$3.0 million related to high throughput screening system
products and, under the equity method of accounting, we deferred
28% of the gross profit, or $363,000 that reflects
Calipers ownership interest in the products sold to
Amphora. Caliper recognized $21,000 of this deferred gross
profit in 2001 and expects to recognize this remaining $342,000
as revenue ratably over the next 36 months as Amphora
records depreciation on its Caliper 250 High Throughput
Screening Systems.

In September 2001, Amphora entered into a
three-year Sublease Agreement with Caliper for the rent of
approximately 5,700 square feet in one of Calipers
Mountain View, CA leased buildings for Amphoras research
and development use. Amphora is obligated for monthly rent based
on local market rates with a 3% per annum escalation and
Caliper, as landlord, is obligated to provide certain facilities
maintenance services. Caliper records both the subtenant rental
income and maintenance service costs as part of its overall
facilities costs.

In September 2001, Amphora entered into an
Administrative Services Agreement with Caliper for certain
financial accounting, purchasing and human resource services to
be provided by Calipers personnel. Caliper charges for
these services monthly at an hourly rate based on a cost plus
mark-up basis recording the corresponding payments from Amphora
as part of its overall employee costs.

11.     401(k)
Plan

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

F-27



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

12.     Litigation

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

On January 7, 2001, Caliper announced a
comprehensive settlement agreement with Aclara BioSciences, Inc.
of all pending litigation between the two companies. Under the
terms of the settlement both companies agreed to dismiss all
suits and countersuits in the federal and state court actions
and to cross-license selected patents. The settlement provides
Caliper with freedom to operate under Aclaras 022
family of patents, which includes the 015 and other
patents, for its glass chips and related instruments through a
fully paid, royalty-free license. Under the terms of the
agreement, Aclara agreed to pay Caliper $37.5 million due
in 2002 over a three-year period in a combination of stock,
cash, and committed minimum royalties. Caliper also agreed to
license to Aclara the Ramsey family of patents for
use with Aclaras polymer chips and related instruments in
exchange for license fees and royalties. The two companies have
also agreed to an alternative dispute resolution procedure for
handling potential future patent disagreements out of court.

On March 22, 2001, in connection with the
settlement agreement mentioned above, Caliper received 900,000
shares of Aclaras common stock with a then current fair
value of $4.3 million. The common stock is restricted from
sale for a period of 18 months from the date of the
settlement agreement. As a component of the settlement
agreement, Aclara has guaranteed the value of the Aclara common
stock to be $32.5 million at the time of Calipers
sale of the stock, provided that such sale occurs in the period
from 18 months to 24 months from the effective date of
the settlement agreement. Aclara entered into a fully-funded
$32.5 million standby letter of credit in favor of Caliper
to secure its performance under this potential obligation.
Accordingly, Caliper recognized the entire $32.5 million
settlement in the quarter ended March 31, 2001. Caliper
recognized $5.0 million of license fee revenue and
$27.5 million of litigation settlement in the income
statement pursuant to the terms contained in the settlement
agreement. Caliper will also receive royalties on certain Aclara
product sales commencing in 2002 through 2008 with a minimum
annual royalty payment of $2.5 million by
December 31st in each of years 2002 and 2003. Caliper does
not have any further obligations under the agreement.

Caliper has accounted for this arrangement by
initially recording $4.3 million in Aclara stock at fair
market value, with a note receivable with a corresponding face
value of $28.2 million including other receivable for the
fully funded letter of credit which was reduced by the initial
fair value ($2.7 million) of an embedded derivative. The
latter two elements in combination represent the guarantee. The
receivable will be accreted to its face value of
$28.2 million over the life of the receivable using the
level-yield method. The embedded derivative will be accounted
for as discussed in Note 2.

Commencing on June 7, 2001, Caliper and
three of its officers and directors (David V. Milligan,
Daniel L. Kisner and James L. Knighton) were named as
defendants in three securities class action lawsuits filed in
the United States District Court for the Southern District of
New York: Colbert Birnet, L.P v. Caliper Technologies
Corp., et al.,No. 01-CV-5072, Kovel v. Caliper
Technologies Corp., et al.,No. 01-CV-5964 and
Leach v. Caliper Technologies Corp., et al.,01-CV-6537. The cases have been consolidated under the
Birnet

F-28



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##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

caption. A motion for the appointment of a lead
plaintiff has been filed by another individual but has not yet
been ruled upon by the Court. The Koveland Leachcomplaints allege claims against Caliper and certain
individual officers or directors of Caliper under
Sections 11 and 15 of the Securities Act of 1933. The
Birnetand Kovelcomplaints allege claims against
Caliper and certain individual officers and directors of Caliper
under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as well as Rule 10b-5 of the Securities
Exchange Act. Each of the complaints also names as a defendant
one or more of the underwriters of Calipers December 1999
initial public offering of common stock. Each of the complaints
alleges that one or more of these underwriters charged
excessive, undisclosed commissions to investors and entered into
improper agreements with investors relating to aftermarket
transactions. The complaints seek rescission or rescissionary
damages on the Section 11 claims and an unspecified amount
of money damages on the Rule 10b-5 claims. Based on
information currently available to Caliper, Caliper believes
that the claims alleged against Caliper and its officers and
directors are without merit. Caliper intends to defend these
cases vigorously.

F-29



---



##### Table of Contents



CALIPER TECHNOLOGIES CORP.


NOTES TO FINANCIAL STATEMENTS 
(Continued)

13.     Quarterly
Financial Data (Unaudited)

|                                                                               |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |       |  
|------------------------------------------------------------------------------ | --------------------------------------------------------------------------- | ------------------------------------- | ------ | ------- | - | ------- | ------ | ------- | - | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                               |                                                                             | First                                 |        | Second  |   | Third   |        | Fourth 
|                                                                               |                                                                             | Quarter                               |        | Quarter |   | Quarter |        | Quarter
|                                                                               |                                                                             |                                       |        |         |   |         |        |        
|                                                                               |                                                                             |                                      
|                                                                               |                                                                             | (In thousands, except per share data)
|2001                                                                           |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|Total revenue                                                                  |                                                                             | $                                     | 9,793  |         |   | $       | 5,287  |         |   | $ | 6,641   |       |   | $ | 7,867   |      
|Operating loss                                                                 |                                                                             |                                       | (3,996 | )       |   |         | (9,066 | )       |   |   | (10,533 | )     |   |   | (10,052 | )    
|Income (loss) before cumulative effect of a
	change in accounting principle(1) |                                                                             |                                       | 26,404 |         |   |         | (6,195 | )       |   |   | (8,368  | )     |   |   | (8,018  | )    
|Cumulative effecting of a change in accounting
	principle                      |                                                                             |                                       |       |         |   |         |       |         |   |   |        |       |   |   |        |      
|Net income (loss)                                                              |                                                                             |                                       | 26,404 |         |   |         | (6,195 | )       |   |   | (8,368  | )     |   |   | (8,018  | )    
|Basic income (loss) per share                                                  |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|                                                                               | Income (loss) before cumulative effect of a
	change in accounting principle |                                       | $      | 1.11    |   |         | $      | (0.27   | ) |   | $       | (0.35 | ) |   | $       | (0.33 | )
|Diluted and pro forma diluted income
	(loss) per share                         |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|                                                                               | Income (loss) before cumulative effect of a
	change in accounting principle |                                       | $      | 1.10    |   |         | $      | (0.27   | ) |   | $       | (0.35 | ) |   | $       | (0.33 | )
|                                                                              
|2000                                                                           |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|Total revenue                                                                  |                                                                             | $                                     | 3,912  |         |   | $       | 4,158  |         |   | $ | 5,507   |       |   | $ | 4,987   |      
|Operating loss                                                                 |                                                                             |                                       | (7,339 | )       |   |         | (6,568 | )       |   |   | (7,803  | )     |   |   | (10,056 | )    
|Income (loss) before cumulative effect of a
	change in accounting principle    |                                                                             |                                       | (6,000 | )       |   |         | (5,248 | )       |   |   | 6,067   |       |   |   | (5,842  | )    
|Cumulative effecting of a change in accounting
	principle                      |                                                                             |                                       | (2,294 | )       |   |         |       |         |   |   |        |       |   |   |        |      
|Net income (loss)                                                              |                                                                             |                                       | (8,294 | )       |   |         | (5,248 | )       |   |   | 6,067   |       |   |   | (5,842  | )    
|Basic and pro forma basic income (loss) per
	share                             |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|                                                                               | Income (loss) before cumulative effect of a
	change in accounting principle |                                       | $      | (0.29   | ) |         | $      | (0.24   | ) |   | $       | 0.28  |   |   | $       | (0.25 | )
|                                                                               | Cumulative effect of a change in accounting
	principle                      |                                       |        | (0.11   | ) |         |        |        |   |   |         |      |   |   |         |      |  
|                                                                               |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|                                                                               | Net income (loss)                                                           |                                       | $      | (0.40   | ) |         | $      | (0.24   | ) |   | $       | 0.28  |   |   | $       | (0.25 | )
|                                                                               |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|Diluted and pro forma diluted income
	(loss) per share                         |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|                                                                               | Income (loss) before cumulative effect of a
	change in accounting principle |                                       | $      | (0.29   | ) |         | $      | (0.24   | ) |   | $       | 0.27  |   |   | $       | (0.25 | )
|                                                                               | Cumulative effect of accounting change                                      |                                       |        | (0.11   | ) |         |        |        |   |   |         |      |   |   |         |      |  
|                                                                               |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      
|                                                                               | Net income (loss)                                                           |                                       | $      | (0.40   | ) |         | $      | (0.24   | ) |   | $       | 0.27  |   |   | $       | (0.25 | )
|                                                                               |                                                                             |                                       |        |         |   |         |        |         |   |   |         |       |   |   |         |      



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | Includes litigation settlement of
	$27.5 million from Aclara recorded in March 2001.

F-30



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##### Table of Contents



EXHIBIT INDEX

|        |       |                         |  |                                                                                                                                                                      
|------- | ----- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 3.1(  | 1)                      |  | Amended and Restated Certificate of Incorporation
	of Caliper.                                                                                                       
|        | 3.2(  | 12)                     |  | Certificate of Designation Of Series A
	Junior Participating Preferred Stock.                                                                                        
|        | 3.2(  | 2)                      |  | Bylaws of Caliper.                                                                                                                                                   
|        | 4.1   |                         |  | Reference is made to Exhibits 3.1 and 3.2.                                                                                                                           
|        | 4.2(  | 3)                      |  | Specimen Stock Certificate.                                                                                                                                          
|        | 4.3(  | 12)                     |  | Rights Agreement, dated as of December 18,
	2001, between Caliper and Wells Fargo Bank Minnesota, N.A., as
	Rights Agent.                                            
|        | 10.1( | 3)                      |  | Lease Agreement, dated December 1, 1998,
	between Caliper and 605 East Fairchild Associates, L.P.                                                                    
|        | 10.2( | 3)(4)                   |  | 1996 Equity Incentive Plan.                                                                                                                                          
|        | 10.3( | 3)(4)                   |  | 1999 Equity Incentive Plan.                                                                                                                                          
|        | 10.4( | 3)(4)                   |  | 1999 Employee Stock Purchase Plan.                                                                                                                                   
|        | 10.5( | 3)(4)                   |  | 1999 Non-Employee Directors Stock Option
	Plan.                                                                                                                     
|        | 10.6( | 3)(4)                   |  | Employment Agreement, dated January 18,
	1999, between Caliper and Daniel L. Kisner, M.D.                                                                            
|        | 10.7( | 3)(4)                   |  | Promissory Note, dated July 29, 1999,
	between Caliper and Daniel L. Kisner, M.D.                                                                                    
|        | 10.8( | 3)                      |  | Amended and Restated Investor Rights Agreement,
	dated May 7, 1998, among Caliper and certain stockholders
	of Caliper.                                              
|        | 10.9( | 3)(4)                   |  | Form of Indemnification Agreement entered into
	between Caliper and its directors and executive officers.                                                            
|        | 10.10 | (3)(5)                  |  | Collaboration Agreement, dated May 2, 1998,
	between Caliper and Hewlett-Packard Company.                                                                            
|        | 10.12 | (3)(5)                  |  | Technology Access Agreement, dated
	December 21, 1998, between Caliper and Amgen, Inc.                                                                               
|        | 10.13 | (3)(5)                  |  | Technology Access Agreement, dated
	August 12, 1999, between Caliper and Eli Lilly and Company.                                                                      
|        | 10.15 | (3)(5)                  |  | Sole Commercial Patent License Agreement,
	effective September 1, 1995, between Lockheed Martin Energy
	Research Corporation and Caliper, as amended (domestic).     
|        | 10.16 | (3)(5)                  |  | Sole Commercial Patent License Agreement,
	effective September 1, 1995, between Lockheed Martin Energy
	Research Corporation and Caliper, as amended (international).
|        | 10.17 | (3)(4)                  |  | Consulting Agreement, dated April 30, 1997,
	between Caliper and Dr. David V. Milligan.                                                                              
|        | 10.18 | (3)(4)                  |  | Employment Agreement, dated September 23,
	1999, between Caliper and James L. Knighton.                                                                              
|        | 10.19 | (3)(4)                  |  | Consulting Agreement, dated May 1, 1997,
	between Caliper and Regis McKenna.                                                                                         
|        | 10.20 | (3)(4)                  |  | Promissory Note, dated March 25, 1997,
	between Caliper and Michael R. Knapp, Ph.D.                                                                                  
|        | 10.21 | (3)(4)                  |  | Option Agreement, dated August 9, 1995,
	between Caliper and Michael R. Knapp, Ph.D.                                                                                 
|        | 10.22 | (3)(4)                  |  | Amendment to Option Agreement, dated
	August 25, 1995, between Caliper, Michael R. Knapp,
	Ph.D., J. Michael Ramsey, Ph.D. and Avalon Medical Partners.              
|        | 10.23 | (3)(4)                  |  | The Corporate Plan for Retirement Select Plan
	Adoption Agreement and related Basic Plan Document.                                                                   
|        | 10.24 | (6)                     |  | Warrant for the purchase of shares of Common
	Stock issued to Michael R. Knapp, dated October 11,
	1996.                                                             
|        | 10.25 | (6)                     |  | Warrant for the purchase of shares of Common
	Stock issued to Michael R. Knapp, dated February 2,
	2000.                                                             



---



##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                               
|------- | ----- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10.26 | (5)(7)                  |  | Technology Access and Applications Development
	Agreement, dated March 24, 2000, between Caliper and
	Millennium Pharmaceuticals, Inc.                                                                                                                        
|        | 10.27 | (8)                     |  | Lease Agreement, dated June 23, 2000 and
	effective July 5, 2000, between Caliper and Martin CBP
	Associates, L.P.                                                                                                                                            
|        | 10.28 | (8)                     |  | Promissory Note, dated July 17, 2000,
	between Caliper and Daniel L. Kisner, M.D.                                                                                                                                                                             
|        | 10.29 | (4)(9)                  |  | Change of Control Sr. Mgmt Severance/ Equity
	Acceleration Plan.                                                                                                                                                                                              
|        | 10.30 | (5)(10)                 |  | Cross-License Agreement, dated March 12,
	2001 by and among Aclara Biosciences, Inc. and Caliper.                                                                                                                                                             
|        | 10.31 | (10)                    |  | Common Stock Issuance Agreement, dated
	March 22, 2001.                                                                                                                                                                                                       
|        | 10.32 | (5)(10)                 |  | Settlement Agreement and Mutual General Release,
	dated March 12, 2001 by and among Aclara Biosciences, Inc.
	and Caliper.                                                                                                                                    
|        | 10.33 | (11)(14)                |  | LabChip Solutions Agreement, dated as of
	September 21, 2001, by and between Amphora Discovery Corp.
	and Caliper.                                                                                                                                            
|        | 10.34 | (4)(11)                 |  | Consulting Agreement, entered into as of the 8th
	day of October 2001 by and between Amphora Discovery Corp., and
	Michael R. Knapp.                                                                                                                          
|        | 10.35 | (4)(11)                 |  | Restricted Stock Purchase Agreement, entered into
	as of October 8, 2001, by and between Amphora Discovery
	Corp. and Michael R. Knapp.                                                                                                                       
|        | 10.36 | (4)(11)                 |  | Consulting Agreement, entered into as of the 14th
	day of October 2001 by and between Amphora Discovery Corp., and
	James L. Knighton.                                                                                                                        
|        | 10.37 | (4)(11)                 |  | Restricted Stock Purchase Agreement, entered into
	as of October 14, 2001, by and between Amphora Discovery
	Corp. and James L. Knighton.                                                                                                                     
|        | 10.38 | (11)(14)                |  | Technology Access Agreement Amendment, dated
	August 20, 2001, by and between Caliper and Eli Lilly and
	Company, amending Technology Access Agreement dated
	August 12, 1999 (the Agreement).                                                              
|        | 10.39 | (13)                    |  | 2001 Non-Statutory Stock Option Plan.                                                                                                                                                                                                                         
|        | 10.40 |                         |  | Separation Agreement, dated August 9, 2001,
	between Caliper and Calvin Y.H. Chow.                                                                                                                                                                            
|        | 10.41 | (14)                    |  | Technology Access Agreement Amendment, dated
	December 14, 2001, by and between Caliper and Amgen, Inc.,
	amending Technology Access Agreement dated December 21,
	1998.                                                                                      
|        | 10.42 |                         |  | Amendment No. 2 to Technology Access Agreement,
	dated December 18, 2001, by and between Caliper and Amgen, Inc.,
	amending Technology Access Agreement dated December 21,
	1998.                                                                             
|        | 10.43 | (14)                    |  | Technology Access and Applications Development
	Agreement Amendment, dated December 19, 2001, by and
	between Caliper and Millennium Pharmaceuticals, Inc., amending
	Technology Access and Applications Development Agreement dated
	March 24, 2000.         
|        | 10.44 |                         |  | Amendment No. 2 to Technology Access and
	Applications Development Agreement, dated February 28,
	2002, by and between Caliper and Millennium Pharmaceuticals,
	Inc., amending Technology Access and Applications Development
	Agreement dated March 24, 2000.
|        | 23.1  |                         |  | Consent of Ernst & Young LLP, independent
	auditors.                                                                                                                                                                                                          
|        | 24.1  |                         |  | Power of Attorney (reference is made to the
	signature page of this report).                                                                                                                                                                                  



---



|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed as Exhibit 3.3 to our
	Registration Statement on Form S-1, as amended, File
	No. 333-88827, filed on October 12, 1999 and
	incorporated by reference herein.              
|   
|(2) | Previously filed as Exhibit 3.4 to our
	Registration Statement on Form S-1, as amended, File
	No. 333-88827, filed on October 12, 1999 and
	incorporated by reference herein.              
|   
|(3) | Previously filed as the like-numbered Exhibit to
	our Registration Statement on Form S-1, as amended, File
	No. 333-88827, filed on October 12, 1999 and
	incorporated by reference herein.



---



##### Table of Contents





|    |                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Management contract or compensatory plan or
	arrangement.                                                                                                                                     
|   
|(5) | Confidential treatment has been granted for a
	portion of this exhibit.                                                                                                                       
|   
|(6) | Filed as the like-numbered exhibit to Annual
	Report of Form 10-K for the year ended December 31,
	1999 and incorporated by reference herein.                                                 
|   
|(7) | Previously filed as Exhibit 10.26 to
	Form 10-Q for the quarterly period ended March 31,
	2000 and incorporated by reference herein.                                                          
|   
|(8) | Previously filed as the like-numbered Exhibit to
	our Registration Statement on Form S-1, as amended, File
	No. 333-45942, filed on September 15, 2000, and
	incorporated by reference herein.
|   
|(9) | Previously filed as the liked-numbered an Exhibit
	to Form 10-K/A for the year ended December 31, 2000
	and incorporated by reference herein.                                                 



|     |                                                                                                                                                                
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Previously filed as the like-numbered Exhibit to
	Form 10-Q for the quarterly period ended March 31,
	2001 and incorporated by reference herein.               
|    
|(11) | Previously filed as the like-numbered Exhibit to
	Form 10-Q for the quarterly period ended September 30,
	2001 and incorporated by reference herein.           
|    
|(12) | Previously filed as Exhibit 99.1 to Current
	Report on Form 8-K filed December 19, 2001 and
	incorporated by reference herein.                                 
|    
|(13) | 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.
|    
|(14) | Confidential treatment has been requested for a
	portion of this exhibit.