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

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended March 31, 2003

[   ] 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
(State of Incorporation) |  | 33-0675808
(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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12 b-2 of the Exchange Act).
Yes [X]   No [   ]

COMMON SHARES OUTSTANDING ON MAY 10, 2003: 24,734,916





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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION  
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS                                 
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|CERTIFICATION                
|EXHIBIT 10.54                
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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CALIPER TECHNOLOGIES CORP.
TABLE OF CONTENTS

|               |  |         |    |                                                                                       |  |                                                                                                    |    |      |   | 
|-------------- |  | ------- | -- | ------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|               |  |         |    |                                                                                       |  |                                                                                                    |    | Page
|               |  |         |    |                                                                                       |  |                                                                                                    |    |     
|PART I         |  |         |    | FINANCIAL INFORMATION                                                                 |  |                                                                                                    |    |     
|               |  | Item 1. |    | Financial Statements (unaudited)                                                      |  |                                                                                                    | 2  |     
|               |  |         |    |                                                                                       |  | Condensed Consolidated Balance Sheets as of March 31, 2003
and December 31, 2002                   |    |      | 2 | 
|               |  |         |    |                                                                                       |  | Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 2003 and 2002 |    |      | 3 | 
|               |  |         |    |                                                                                       |  | Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2003 and 2002 |    |      | 4 | 
|               |  |         |    |                                                                                       |  | Notes to Unaudited Condensed Consolidated Financial Statements                                     |    |      | 5 | 
|               |  | Item 2. |    | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |                                                                                                    | 11 |     
|               |  | Item 3. |    | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                    | 22 |     
|               |  | Item 4. |    | Controls and Procedures                                                               |  |                                                                                                    | 23 |     
|PART II        |  |         |    | OTHER INFORMATION                                                                     |  |                                                                                                    |    |     
|               |  | Item 1. |    | Legal Proceedings                                                                     |  |                                                                                                    | 23 |     
|               |  | Item 2. |    | Changes in Securities and Use of Proceeds                                             |  |                                                                                                    | 24 |     
|               |  | Item 3. |    | Defaults upon Senior Securities                                                       |  |                                                                                                    | 24 |     
|               |  | Item 4. |    | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                    | 24 |     
|               |  | Item 5. |    | Other Information                                                                     |  |                                                                                                    | 24 |     
|               |  | Item 6. |    | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                    | 25 |     
|SIGNATURES     |  |         | 26 |                                                                                      
|CERTIFICATIONS |  |         | 27 |                                                                                      

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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




CALIPER TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                                  |                                                                                                                   |   |             |         |              |   |         |         |  
|------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | - | ----------- | ------- | ------------ | - | ------- | ------- | -
|                                                  |                                                                                                                   |   | March 31,   |         | December 31,
|                                                  |                                                                                                                   |   | 2003        |         | 2002        
|                                                  |                                                                                                                   |   |             |         |             
|                                                  |                                                                                                                   |   | (unaudited) |         | (Note 1)     |   |         |        
|Assets                                            |                                                                                                                   |   |             |         |              |   |         |        
|Current assets:                                   |                                                                                                                   |   |             |         |              |   |         |        
|                                                  | Cash and cash equivalents                                                                                         |   | $           | 6,872   |              |   | $       | 16,184  |  
|                                                  | Marketable securities                                                                                             |   |             | 137,126 |              |   |         | 138,139 |  
|                                                  | Accounts receivable, net of allowance for doubtful accounts of
$3 at March 31, 2003 and $119 at December 31, 2002 |   |             | 2,328   |              |   |         | 1,754   |  
|                                                  | Accounts receivable  related party, net of allowance of $91 at
March 31, 2003 and $0 at December 31, 2002        |   |             | 263     |              |   |         | 115     |  
|                                                  | Inventories                                                                                                       |   |             | 4,734   |              |   |         | 5,964   |  
|                                                  | Prepaid expenses and other current assets                                                                         |   |             | 2,384   |              |   |         | 1,508   |  
|                                                  |                                                                                                                   |   |             |         |              |   |         |        
|Total current assets                              |                                                                                                                   |   | 153,707     |         |              |   | 163,664 |        
|Security deposits                                 |                                                                                                                   |   | 2,718       |         |              |   | 3,000   |        
|Property and equipment, net                       |                                                                                                                   |   | 11,035      |         |              |   | 12,545  |        
|Notes receivable from officers                    |                                                                                                                   |   | 178         |         |              |   | 215     |        
|Other assets, net                                 |                                                                                                                   |   | 549         |         |              |   | 454     |        
|                                                  |                                                                                                                   |   |             |         |              |   |         |        
|Total assets                                      |                                                                                                                   | $ | 168,187     |         |              | $ | 179,878 |        
|                                                  |                                                                                                                   |   |             |         |              |   |         |        
|Liabilities and stockholders equity              |                                                                                                                   |   |             |         |              |   |         |        
|Current liabilities:                              |                                                                                                                   |   |             |         |              |   |         |        
|                                                  | Accounts payable                                                                                                  |   | $           | 860     |              |   | $       | 1,227   |  
|                                                  | Accrued compensation                                                                                              |   |             | 2,118   |              |   |         | 2,458   |  
|                                                  | Other accrued liabilities                                                                                         |   |             | 1,095   |              |   |         | 1,110   |  
|                                                  | Deferred revenue                                                                                                  |   |             | 473     |              |   |         | 874     |  
|                                                  | Current portion of sale-leaseback arrangements                                                                    |   |             | 2,310   |              |   |         | 2,412   |  
|                                                  |                                                                                                                   |   |             |         |              |   |         |        
|Total current liabilities                         |                                                                                                                   |   | 6,856       |         |              |   | 8,081   |        
|Noncurrent portion of sale-leaseback arrangements |                                                                                                                   |   | 1,408       |         |              |   | 1,986   |        
|Deferred revenue                                  |                                                                                                                   |   | 211         |         |              |   | 267     |        
|Other noncurrent liabilities                      |                                                                                                                   |   | 1,936       |         |              |   | 1,986   |        
|Commitments and contingencies                     |                                                                                                                   |   |             |         |              |   |         |        
|Stockholders equity:                             |                                                                                                                   |   |             |         |              |   |         |        
|                                                  | Common stock                                                                                                      |   |             | 25      |              |   |         | 25      |  
|                                                  | Additional paid-in capital                                                                                        |   |             | 252,242 |              |   |         | 252,219 |  
|                                                  | Deferred stock compensation                                                                                       |   |             | (449    | )            |   |         | (637    | )
|                                                  | Accumulated deficit                                                                                               |   |             | (95,534 | )            |   |         | (85,566 | )
|                                                  | Accumulated other comprehensive income                                                                            |   |             | 1,492   |              |   |         | 1,517   |  
|                                                  |                                                                                                                   |   |             |         |              |   |         |        
|Total stockholders equity                        |                                                                                                                   |   | 157,776     |         |              |   | 167,558 |        
|                                                  |                                                                                                                   |   |             |         |              |   |         |        
|Total liabilities and stockholders equity        |                                                                                                                   | $ | 168,187     |         |              | $ | 179,878 |        
|                                                  |                                                                                                                   |   |             |         |              |   |         |        

See accompanying notes.

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CALIPER TECHNOLOGIES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)

|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|------------------------------------------------------------------------------- | ---------------------------------------------------- | - | ------------------ | ----- | ---- | - | ------- | ------ | 
|                                                                                |                                                      |   | Three Months Ended
|                                                                                |                                                      |   | March 31,         
|                                                                                |                                                      |   |                   
|                                                                                |                                                      |   | 2003               |       | 2002
|                                                                                |                                                      |   |                    |       |     
|Revenues:                                                                       |                                                      |   |                    |       |      |   |         |       
|                                                                                | Product revenue                                      |   | $                  | 2,910 |      |   | $       | 3,196  | 
|                                                                                | Product revenue  related party                      |   |                    | 578   |      |   |         | 1,356  | 
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|                                                                                | Subtotal product revenue                             |   |                    | 3,488 |      |   |         | 4,552  | 
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|                                                                                | License fees and contract revenue                    |   |                    | 2,116 |      |   |         | 2,125  | 
|                                                                                | Contract revenue  related party                     |   |                    | 8     |      |   |         | 364    | 
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|                                                                                | Subtotal license fees and contract revenue           |   |                    | 2,124 |      |   |         | 2,489  | 
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Total revenue                                                                   |                                                      |   | 5,612              |       |      |   | 7,041   |       
|Costs and expenses:                                                             |                                                      |   |                    |       |      |   |         |       
|                                                                                | Cost of product revenue                              |   |                    | 2,220 |      |   |         | 2,093  | 
|                                                                                | Cost of product revenue  related party              |   |                    | 78    |      |   |         | 444    | 
|                                                                                | Research and development                             |   |                    | 9,411 |      |   |         | 11,052 | 
|                                                                                | Selling, general and administrative                  |   |                    | 4,569 |      |   |         | 4,657  | 
|                                                                                | Amortization of deferred stock compensation, net (1) |   |                    | 188   |      |   |         | 446    | 
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Total costs and expenses                                                        |                                                      |   | 16,466             |       |      |   | 18,692  |       
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Operating loss                                                                  |                                                      |   | (10,854            | )     |      |   | (11,651 | )     
|Interest income, net                                                            |                                                      |   | 921                |       |      |   | 2,431   |       
|Other expense/loss, net                                                         |                                                      |   | (35                | )     |      |   | (466    | )     
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Net loss                                                                        |                                                      | $ | (9,968             | )     |      | $ | (9,686  | )     
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Net loss per share, basic and diluted                                           |                                                      | $ | (0.40              | )     |      | $ | (0.40   | )     
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Shares used in computing net loss per share, basic and diluted                  |                                                      |   | 24,713             |       |      |   | 24,237  |       
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|(1) Amortization of deferred stock compensation, net, relates to the
following: |                                                      |   |                    |       |      |   |         |       
|Research and development                                                        |                                                      | $ | 48                 |       |      | $ | 156     |       
|Selling, general and administrative                                             |                                                      |   | 140                |       |      |   | 290     |       
|                                                                                |                                                      |   |                    |       |      |   |         |        | 
|Total                                                                           |                                                      | $ | 188                |       |      | $ | 446     |       
|                                                                                |                                                      |   |                    |       |      |   |         |        | 

See accompanying notes.

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CALIPER TECHNOLOGIES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

|                                                                                     |                                                  |                                                |         |                    |       |      |         |       |        |  
|------------------------------------------------------------------------------------ | ------------------------------------------------ | ---------------------------------------------- | ------- | ------------------ | ----- | ---- | ------- | ----- | ------ | -
|                                                                                     |                                                  |                                                |         | Three Months Ended
|                                                                                     |                                                  |                                                |         | March 31,         
|                                                                                     |                                                  |                                                |         |                   
|                                                                                     |                                                  |                                                |         | 2003               |       | 2002
|                                                                                     |                                                  |                                                |         |                    |       |     
|Operating activities                                                                 |                                                  |                                                |         |                    |       |      |         |      
|Net loss                                                                             |                                                  | $                                              | (9,968  | )                  |       | $    | (9,686  | )    
|Adjustments to reconcile net income (loss) to net cash used in
operating activities: |                                                  |                                                |         |                    |       |      |         |      
|                                                                                     | Depreciation and amortization                    |                                                |         | 1,630              |       |      |         | 1,249 |       
|                                                                                     | Amortization of deferred stock compensation, net |                                                |         | 188                |       |      |         | 446   |       
|                                                                                     | Stock options issued to non-employees            |                                                |         | (2                 | )     |      |         | (7    | )     
|                                                                                     | Changes in operating assets and liabilities:     |                                                |         |                    |       |      |         |       |       
|                                                                                     |                                                  | Accounts receivable and other receivable       |         |                    | (722  | )    |         |       | (697   | )
|                                                                                     |                                                  | Inventories                                    |         |                    | 1,230 |      |         |       | (1,705 | )
|                                                                                     |                                                  | Prepaid expenses and other current assets      |         |                    | (876  | )    |         |       | (325   | )
|                                                                                     |                                                  | Security deposits and other assets             |         |                    | 187   |      |         |       | 28     |  
|                                                                                     |                                                  | Notes receivable from
officers                 |         |                    | 37    |      |         |       | 100    |  
|                                                                                     |                                                  | Accounts payable and other accrued liabilities |         |                    | (381  | )    |         |       | 1,200  |  
|                                                                                     |                                                  | Accrued compensation                           |         |                    | (340  | )    |         |       | (541   | )
|                                                                                     |                                                  | Deferred revenue                               |         |                    | (457  | )    |         |       | (641   | )
|                                                                                     |                                                  | Other noncurrent liabilities                   |         |                    | (50   | )    |         |       | 151    |  
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Net cash used in operating activities                                                |                                                  |                                                | (9,524  | )                  |       |      | (10,428 | )    
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Investing activities                                                                 |                                                  |                                                |         |                    |       |      |         |      
|Purchases of marketable securities                                                   |                                                  |                                                | (18,759 | )                  |       |      | (43,823 | )    
|Proceeds from sale of marketable securities                                          |                                                  |                                                | 12,543  |                    |       |      | 33,149  |      
|Proceeds from maturities of marketable securities                                    |                                                  |                                                | 7,203   |                    |       |      | 36,256  |      
|Purchase of property and equipment                                                   |                                                  |                                                | (120    | )                  |       |      | (2,905  | )    
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Net cash provided by investing activities                                            |                                                  |                                                | 867     |                    |       |      | 22,677  |      
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Financing activities                                                                 |                                                  |                                                |         |                    |       |      |         |      
|Proceeds under sale-leaseback arrangements                                           |                                                  |                                                |        |                    |       |      | 335     |      
|Payments of obligations under sale-leaseback
arrangements                            |                                                  |                                                | (680    | )                  |       |      | (506    | )    
|Proceeds from issuance of common stock                                               |                                                  |                                                | 25      |                    |       |      | 293     |      
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Net cash (used in) provided by financing activities                                  |                                                  |                                                | (655    | )                  |       |      | 122     |      
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Net increase (decrease) in cash and cash equivalents                                 |                                                  |                                                | (9,312  | )                  |       |      | 12,371  |      
|Cash and cash equivalents at beginning of period                                     |                                                  |                                                | 16,184  |                    |       |      | 10,655  |      
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Cash and cash equivalents at end of
period                                           |                                                  | $                                              | 6,872   |                    |       | $    | 23,026  |      
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      
|Supplemental disclosure of cash flow information                                     |                                                  |                                                |         |                    |       |      |         |      
|Interest paid                                                                        |                                                  | $                                              | 126     |                    |       | $    | 171     |      
|                                                                                     |                                                  |                                                |         |                    |       |      |         |      

See accompanying notes.

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CALIPER TECHNOLOGIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC).
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring entries) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. The condensed
consolidated balance sheet at December 31, 2002 has been derived from
audited financial statements as of that date. For further information, refer
to the financial statements and notes thereto included in the Annual Report on
Form 10-K for the year ended December 31, 2002 filed by Caliper Technologies
Corp.

PRINCIPLES OF CONSOLIDATION

Calipers condensed consolidated financial statements as of March 31, 2003
include the accounts of Calipers wholly-owned subsidiary, Caliper Europe GmbH
formed on January 22, 2002. All significant intercompany balances and
transactions have been eliminated in consolidation.

Use of estimates and reclassifications

The preparation of financial statements requires management to make
estimates, assumptions and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, management evaluates
its estimates, including those related to investments; inventories; bad debts;
collaborative, royalty and license arrangements; restructuring; income taxes;
and litigation and other contingencies. Caliper bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from those
estimates under different assumptions or conditions.

Certain prior period amounts have been reclassified to conform to the
current period presentation.

REVENUE RECOGNITION

Revenue is earned from Calipers collaboration agreement with Agilent,
Automated Drug Discovery systems, chips and datapoints, Automated Microfluidics
Systems 90, Applications Developer Program, Technology Access Program
agreements, and licensing and royalty agreements.

Collaboration agreement

Revenue from development and support activities under Calipers
collaboration agreement with Agilent 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 has no continuing obligations at the time
these sales are made and Calipers collaboration partner has no return
privileges. Further, Calipers transfer of this title to the chips and
reagents are not contingent on the collaboration partners resale of these
items to third parties. Calipers share of gross margin on components of the
LabChip system sold by the collaboration partner is recognized as product
revenue upon shipment by the collaboration partner to the end user. The
instruments, chips and reagents as sold, are useable by Calipers collaboration
partner and their customers without additional support from Caliper.

Automated Drug Discovery System Products, Automated Microfluidics Systems 90
and Applications Developer Program

Product revenue is recognized upon the shipment and transfer of title to
customers and is recorded net of discounts and allowances. Revenues on
shipments subject to customer acceptance provisions are recognized only upon
customer acceptance, provided all other

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revenue recognition criteria are met. Service revenue is recognized
ratably over the contract service term. Customers are able to purchase
instruments, chips, support services and custom assay solutions directly from
Caliper. Customer purchases of instruments and chips are delivered under
standardized terms of FOB origin with the customer assuming the risks and
rewards of product ownership at the time of shipping from Calipers warehouse
with no return rights or privileges. Caliper offers discounts based on the
volume of products and services purchased. Caliper publishes a catalog of its
commercially available chips and drug discovery system products and the prices
for each product configuration.

In certain cases, customers will be charged on a datapoint pricing basis
for their usage of chips. A datapoint is generated each time a Caliper
instrument system introduces a sample into a chip through a sipper in order to
perform a particular LabChip assay. Datapoints are these test-results that
Calipers customers record when they use Calipers instruments. Caliper
records datapoint revenues in the period that Calipers customers attain these
datapoints and communicate such use to Caliper. Datapoint rates are
contractually negotiated between Caliper and its customers. Caliper has
contracted for minimum datapoint fees from Amphora, a related party, and two
additional customers in 2003. Under minimum datapoint fee arrangements,
datapoint revenues are recorded in the period the minimum applies. Caliper has
no performance obligations with respect to these minimum fees.

No sales made by Caliper include any return rights or privileges. Caliper
has made no provision for sales returns and other allowances. Although Caliper
has been commercially selling its instruments only since September 2001,
Caliper has been developing these instruments since 1999. Many of the buyers
of Calipers instruments are the same companies with whom Caliper was
collaborating to develop these instruments between 1999 and September 2001. As
such, these customers are very familiar with Calipers equipment, and returns
are therefore unlikely.

Technology access program agreements

Caliper had entered into multi-year Technology Access Program agreements
that included: (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 allocated the total arrangement fees to each
element based on fair value. Fair value was 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 had the ability to purchase unspecified quantities of a specific
prototype product.

Product revenue was recognized upon the shipment and transfer of title to
the customer. Subscription fees were recognized ratably over the subscription
period. When payment of the subscription fee was contingent upon reaching a
milestone, revenue was deferred until the milestone was met. Support and
development services revenue was recognized in the periods the costs were
incurred. In December 2001, the last of the agreements with Calipers
Technology Access Program customers was amended and converted into a commercial
agreement. There are no further technology access fees or subscription fees
recognized with products and services purchased by former Technology Access
Program customers after December 2001. Revenue is recognized for all former
Technology Access Program customers 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 Calipers 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 March 2003. As of
March 31, 2003, deferred revenue of $138,000 which existed as of December 31,
2002 was fully utilized by Calipers previous Technology Access Program
customers.

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.

As part of the comprehensive settlement agreement with Aclara Biosciences
entered into on January 7, 2001, Aclara is obligated to pay Caliper a minimum
annual royalty of $2.5 million on licensed product sales in both 2002 and 2003
offset by quarterly royalty payments due on Aclara licensed instrument or
LabCard product sales. For the three months ended March 31, 2003 and 2002,
Caliper recognized in both periods $625,000 in minimum royalties on Aclara
sales of licensed instruments and LabCards.

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Annual maintenance agreements

Caliper does not include with the initial product purchase any element of
a maintenance contract. No upgrades or operational support is included in such
purchases. All the customer is entitled to receive is service in accordance
with Calipers standard warranty, which is to provide replacement of defective
goods. Caliper, to date, has not focused on selling additional maintenance
contracts and in fact has only sold two such contracts regarding early
prototype instruments. This contract provided access to upgrades to Calipers
product, if and when available, and operational support. In the future,
Caliper expects to offer maintenance agreements to customer for access to
instrument system upgrades and overall instrument maintenance after the
expiration of the 1 year limited warranty period. Revenue with respect to
these maintenance contracts will be initially deferred and recognized ratably
over the term of the contract.

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated based on the
weighted-average number of common shares outstanding during the period. Diluted
net income (loss) 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 where they have an
antidilutive effect due to Calipers net loss.

STOCK-BASED COMPENSATION

Caliper recognizes employee stock-based compensation under the intrinsic
value method of accounting as prescribed by Accounting Principles Board Opinion
25, Accounting for Stock Issued to Employees and related interpretations.
Accordingly, no compensation expense is recognized in Calipers financial
statements for the stock options granted to employees, which had an exercise
price equal to the fair value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income and earnings
per share if Caliper had applied the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123 (in thousands, except per share amounts):

|                    |                                                                                                                                              |                   |   |                              |       |      |   |         |       |  
|------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | - | ---------------------------- | ----- | ---- | - | ------- | ----- | -
|                    |                                                                                                                                              |                   |   | Three
Months Ended
March 31,
|                    |                                                                                                                                              |                   |   |                             
|                    |                                                                                                                                              |                   |   | 2003                         |       | 2002
|                    |                                                                                                                                              |                   |   |                              |       |     
|Net loss:           |                                                                                                                                              |                   |   |                              |       |      |   |        
|                    | As reported                                                                                                                                  |                   | $ | (9,968                       | )     |      | $ | (9,686  | )    
|                    | Add: Stock-based employee
compensation expense included
in reported net loss, net of
related tax effects                                     |                   |   | 188                          |       |      |   | 446     |      
|                    | Deduct: Total stock-based
employee compensation
expense determined under
fair value based methods for
all awards, net of related
tax effects |                   |   | (6,256                       | )     |      |   | (5,799  | )    
|                    |                                                                                                                                              |                   |   |                              |       |      |   |        
|                    | Pro forma net loss                                                                                                                           |                   | $ | (16,036                      | )     |      | $ | (15,039 | )    
|                    |                                                                                                                                              |                   |   |                              |       |      |   |        
|Net loss per share: |                                                                                                                                              |                   |   |                              |       |      |   |        
|                    | As reported:                                                                                                                                 |                   |   |                              |       |      |   |         |      
|                    |                                                                                                                                              | Basic and diluted |   | $                            | (0.40 | )    |   | $       | (0.40 | )
|                    | Pro forma:                                                                                                                                   |                   |   |                              |       |      |   |         |      
|                    |                                                                                                                                              | Basic and diluted |   | $                            | (0.65 | )    |   | $       | (0.62 | )

Since options vest over several years and additional option grants are
expected to be made in future years, the pro forma impact on the results of
operations for the three months ended March 31, 2003 and 2002, respectively, is
not necessarily representative of the pro forma effects on the results of
operations for future periods.

NOTE 2  INVENTORIES

Inventories consist of the following (in thousands):

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|                |       |   |           |       |              |   |       |       | 
|--------------- | ----- | - | --------- | ----- | ------------ | - | ----- | ----- | 
|                |       |   | March 31, |       | December 31,
|                |       |   | 2003      |       | 2002        
|                |       |   |           |       |             
|Raw material    |       | $ | 3,208     |       |              | $ | 3,614 |      
|Work-in-process |       |   | 731       |       |              |   | 1,590 |      
|Finished goods  |       |   | 795       |       |              |   | 760   |      
|                |       |   |           |       |              |   |       |      
|                | Total |   | $         | 4,734 |              |   | $     | 5,964 | 
|                |       |   |           |       |              |   |       |      

NOTE 3  COMPREHENSIVE LOSS

The components of comprehensive loss for the three months ended March 31,
2003 and 2002 are as follows (in thousands):

|                                         |  |                    |        |      |  |   |         |  
|---------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------- | -
|                                         |  | Three Months Ended
|                                         |  | March 31,         
|                                         |  |                   
|                                         |  | 2003               |        | 2002
|                                         |  |                    |        |     
|Net loss                                 |  | $                  | (9,968 | )    |  | $ | (9,686  | )
|Unrealized loss on marketable securities |  |                    | (25    | )    |  |   | (1,621  | )
|                                         |  |                    |        |      |  |   |         |  
|Comprehensive loss                       |  | $                  | (9,993 | )    |  | $ | (11,307 | )
|                                         |  |                    |        |      |  |   |         |  

NOTE 4  RELATED PARTY

For the quarter ended March 31, 2003, Caliper recognized $586,000 in
related-party revenue consisting of sales of Caliper 250 Drug Discovery system
products, LabChips, and datapoints to Amphora Discovery Corp. Of the $586,000
in total revenue, $450,000 was in minimum datapoint revenues, $78,000 was for
LabChips and parts, with the remaining $58,000 related to revenue recognized on
the deferred gross profits on the sales of 21 Caliper 250 Drug Discovery
systems to Amphora through March 31, 2003. Caliper has deferred a total of
$697,000, or 28% of the gross profit, on the 21 drug discovery systems sold to
Amphora through December 31, 2002, which reflects Calipers retained ownership
interest in the products sold to Amphora. No sales of drug discovery systems
to Amphora were recorded in the quarter ended March 31, 2003. Caliper has
previously recognized $21,000 of this deferred gross profit in 2001 and
$177,000 in 2002. The remaining $441,000 in deferred gross profit as of March
31, 2003 will be recognized as revenue ratably through September 2005 as
Amphora records depreciation on its Caliper 250 Drug Discovery systems.

In December 2002, Amphora completed a second placement of equity
securities with third-party investors raising additional capital that reduced
Calipers original ownership from 28% to approximately 13%. Calipers gross
profit on sales of Calipers drug discovery systems after December 2002 will be
deferred at the new 13% ownership interest level with no change in Calipers
method of accounting for Amphora.

NOTE 5  WARRANTY EXPENSE

At the time revenue is recognized, Caliper establishes an accrual for
estimated warranty expenses associated with sales, recorded as a component of
cost of revenue. Caliper offers a one-year limited warranty on the automated
drug discovery systems and a 90-day warranty on chips, which is included in the
sales price of many of its products. These warranties are the only post-sale
obligation Caliper has to its customers. Provision is made for estimated
future warranty costs at the time of sale. As the majority of Calipers drug
discovery system parts are from original equipment manufacturers which provide
one-year warranties already on these parts, Caliper has a warranty provision of
$287,000 as of March 31, 2003 based on Calipers repair and warranty claims
history and on the limited service cost to travel to the customer and maintain
Calipers products under warranty. Caliper had no warranty provision as of
March 31, 2002. Caliper periodically assesses the adequacy of its recorded
warranty liabilities and adjusts amounts as necessary.

Changes in Calipers warranty obligation during the three months ended
March 31, 2003 are as follows:

|                                    |  |   |         |  
|----------------------------------- |  | - | ------- | -
|Balance, December 31, 2002          |  | $ | 265,000 |  
|Warranties issued during the period |  |   | 49,000  |  
|Settlements made during the period  |  |   | (27,000 | )
|                                    |  |   |         |  
|Balance, March 31, 2003             |  | $ | 287,000 |  
|                                    |  |   |         |  

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NOTE 6  SIGNIFICANT CONCENTRATIONS

In the first quarter of 2003, Agilent, Aclara and Amphora represented 46%,
11% and 10%, respectively, of total revenues. In the first quarter of 2002,
Agilent and Amphora represented 30% and 24%, respectively, and one of Calipers
previous Technology Access Program customers accounted for 13% of total
revenues.

Agilent, one of Calipers previous Technology Access Program customers,
and Amphora represented 22%, 12% and 10%, respectively, of Calipers
outstanding accounts receivable balance as of March 31, 2003. Amphora and
Agilent represented 42% and 32%, respectively, of Calipers outstanding
accounts receivable balance as of March 31, 2002.

NOTE 7  LITIGATION

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. The cases
have been consolidated under the caption In re Caliper Technologies Corp.
Initial Public Offering Securities Litigation, 01 Civ. 5072 (SAS) (GBD).
Similar complaints were filed in the same Court against hundreds of other
public companies that conducted IPOs of their common stock since the late 1990s
(the IPO Lawsuits). On August 8, 2001, the IPO Lawsuits were consolidated
for pretrial purposes before United States Judge Shira Scheindlin of the
Southern District of New York. Together, those cases are denominated In re
Initial Public Offering Securities Litigation, 21 MC 92(SAS). On April 19,
2002, a Consolidated Amended Complaint was filed alleging claims against
Caliper and the individual defendants under Sections 11 and 15 of the
Securities Act of 1933, and under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, as well as Rule 10b-5 promulgated thereunder. The
Consolidated Amended Complaint also names certain underwriters of Calipers
December 1999 initial public offering of common stock. The Complaint alleges
that these underwriters charged excessive, undisclosed commissions to investors
and entered into improper agreements with investors relating to aftermarket
transactions. The Complaint seeks an unspecified amount of money damages.
Caliper and the other issuers named as defendants in the IPO Lawsuits moved on
July 15, 2002 to dismiss all claims on multiple grounds. By Stipulation and
Order dated October 9, 2002, the claims against Messrs. Milligan, Kisner and
Knighton were dismissed without prejudice. On February 19, 2003, the Court
granted Calipers motion to dismiss all claims against it. Plaintiffs were not
given the right to replead the claims against Caliper; the time to appeal the
dismissal has not yet expired.

On April 16, 2002, Caliper filed a lawsuit against Molecular Devices
Corporation in the United States District Court for the Northern District of
California. In that case, Caliper Technologies Corp. v. Molecular Devices
Corporation, No. C-02-1837 (N.D. Cal.), Caliper asserts that Molecular Devices
Corp.s IMAP and Reagent Assay Kits willfully infringe one or more claims of
United States Patent No. 6,287,774, which Caliper owns. Calipers complaint
seeks both injunctive relief precluding further infringement of the patent and
damages. The answer to the Complaint was filed on May 8, 2002 and asserts a
counterclaim seeking a declaratory judgment that the patent is not infringed
and is invalid. Caliper believes the counterclaim to be without merit. In
late 2002, Caliper successfully moved the court to add a newly-issued patent,
U.S. Patent No. 6,472,141 to the lawsuit, alleging that the same accused
devices infringe one or more of the claims of that patent. The answer to
Calipers First Amended Complaint was filed on December 17, 2002, and asserts a
counterclaim seeking a declaratory judgment that both Caliper patents are
invalid, unenforceable and not infringed. Caliper believes the Amended
Counterclaim to be without merit. On January 28, 2003, Caliper filed a motion
for preliminary injunction, which was scheduled to be heard in May 2003, but
deferred by the court pending a patent claim construction hearing expected to
occur at the end of June 2003. Discovery is underway, and no trial date has
been set by the Court.

NOTE 8  RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148 (SFAS 148), Accounting
for Stock-Based Compensation, Transition and Disclosure. SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. SFAS 148 also
requires that disclosures of the pro forma effect of using the fair value
method of accounting for stock-based employee compensation be displayed more
prominently and in a tabular format. Additionally, SFAS 148 requires disclosure
of the pro forma effect in interim financial statements. The transition and
annual disclosure requirements of SFAS 148 are effective for fiscal years
ending after December 15, 2002. Caliper has included the required additional
disclosures in Note 1 to our condensed consolidated financial statements and
does not expect SFAS 148 to have an effect on its results of operations or
financial condition.

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In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Others. FIN 45 clarifies the guarantors requirements relating
to the guarantors accounting for, and disclosure of, the issuance of certain
types of guarantees and requires the guarantor to recognize at the inception of
a guarantee a liability for the fair value of the guarantee obligation. FIN 45
also requires additional disclosures by a guarantor in its interim and annual
financial statements about the obligation associated with guarantees issued.
The provisions for the initial recognition and measurement of guarantees are
effective on a prospective basis for guarantees that are issued or modified
after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. Caliper has adopted the disclosure requirements for its financial
statements included in this form 10-Q. The accounting profession and regulatory
agencies continue to discuss various provisions of this pronouncement with the
objective of providing additional guidance on its application. These
discussions and the issuance of any new interpretations, once finalized, could
lead to an unanticipated impact on Calipers future financial results.
Therefore, although Caliper currently does not believe these provisions will
have a material effect on its operating results or financial position, Caliper
will continue to evaluate the impact of FIN 45.

In January 2003, the FASB issued FASB Interpretation No. 46, or FIN 46,
Consolidation of Variable Interest Entities.FIN 46 clarifies the application
of Accounting Research Bulletin No. 51, Consolidated Financial Statements,to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the
first fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. FIN 46 applies to public enterprises as of
the beginning of the applicable interim or annual period. Caliper does not
believe there will be a material effect upon its financial condition or results
of operations from the adoption of the provisions of FIN 46.

In January 2003, the Emerging Issues Task Force published EITF Issue
00-21, Revenue Arrangements with Multiple Deliverables, which requires
companies to determine whether an arrangement involving multiple deliverables
contains more than one unit of accounting. In applying EITF Issue 00-21,
revenue arrangements with multiple deliverables should be divided into separate
units of accounting if the deliverables in the arrangement meet certain
criteria. Arrangement consideration should be allocated among the separate
units of accounting based on their relative fair values. This issue is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. Caliper is currently evaluating the impact the adoption of
this issue will have on its results of operations and/or financial position.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Managements Discussion and Analysis of Financial Condition and
Results of Operations as of March 31, 2003 and for the three month periods
ended March 31, 2003 and March 31, 2002 should be read in conjunction with our
financial statements included in this Quarterly Report on Form 10-Q and
Managements Discussion and Analysis of Financial Condition and Results of
Operations and our financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2002.

The discussion in this report contains forward-looking statements that
involve risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. 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 cautionary statements made in
this report should be read as applying to all related forward-looking
statements wherever they appear in this report.

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 laboratories full of equipment and people. We utilize two
distribution channels for our products. In some cases, we sell instruments and
chips directly to end users. In other instances we sell products to commercial
partners, who in turn sell these products to end users. 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. During this period our revenues
were principally from contract services and, to a lesser extent, from product
sales. With the introduction of the Caliper 250 Drug Discovery system in
September 2001, we transitioned to a commercial products business from a
technology access model.

Since our inception, we have incurred significant losses and, as of March
31, 2003, we had an accumulated deficit of $95.5 million. Our losses have
resulted principally from costs incurred in research and development,
manufacturing scale-up, and from sales, general and administrative costs
associated with our operations. We expect to continue to incur substantial
research and development, manufacturing scale-up and sales, general and
administrative costs. As a result, we will need to generate significantly
higher revenue to achieve profitability.

During the quarter ended March 31, 2003, total revenue decreased by 20%
largely due to a decline in revenue from Amphora as a result of no Caliper 250
system sales in the first quarter of 2003 and completion of most contracted
services to Amphora in 2002. In the first 13 months of its operation, from
September 2001 through September 2002, Amphora purchased 21 Caliper 250 drug
discovery systems from us in order to create and build their commercial
database. As a result, we do not expect them to buy more than one Caliper 250
in 2003. Rather, we expect the bulk of their purchases will be for chips,
parts, and contractual datapoint revenue of approximately $1.2 million for the
remaining three quarters of 2003. Revenues from sales of the Agilent 2100
Bioanalyzer products increased 65% over the same quarter last year as we
continue to experience growth in both Bioanalyzer instrument placements and
chip sales. In December 2002, Amphora raised additional capital in a financing
that reduced Calipers original ownership from 28% to approximately 13%.
Calipers gross profit on sales of Calipers drug discovery systems after
December 2002 will be deferred at the new 13% ownership interest level with no
change in Calipers method of accounting for Amphora. Prior to this financing,
Caliper deferred 28% of gross profits on sales of Calipers drug discovery
systems. The deferred amount is recognized as revenue as Amphora records
depreciation on its Caliper 250 Drug Discovery systems.

To date we have generated a substantial portion of our revenue from a
limited number of sources. During the quarter ended March 31, 2003, Agilent
alone accounted for 46% of our total revenue and 53% of our product revenue, our
previous Technology Access Program customers collectively accounted for 13% of
our revenue, and Amphora accounted for 10% of our total revenue and 17% of our
product revenue. During the quarter ended March 31, 2002, Amphora alone
accounted for 24% of our total revenue and 30% of our product revenue, and
Agilent alone accounted for 30% of our total revenue and 24% of our product
revenue. Although we are seeking to expand our customer base, we cannot assure
you that these efforts will be successful. Additionally, although Amphora is
scheduled to purchase the one remaining Caliper 250 drug discovery instrument
required under the Amended LabChip Solutions Agreement by December 31, 2003, we
have not as yet received a purchase order for this purchase. Amphora has no
further obligation to purchase instruments from us following this one remaining
instrument. In addition, there can be no assurance that our previous
Technology Access Program partners will continue to buy Caliper products or
services at historical levels, or at all, now that all purchase obligations by
these partners have been met as of March 31, 2003.

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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 and we recognize the related costs as
components of cost of sales. We recognize as revenue our share of gross margin
on components of the Agilent 2100 Bioanalyzer 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 products increased 65% in the first quarter of 2003 as
compared to the same period last year, 52% in 2002 as compared to 2001, and
158% in 2001 as compared to 2000 indicating, we believe, a continued growing
market acceptance of this technology. However, in the quarter ended March 31,
2003, research and development funding from Agilent declined 25% as compared to
the same period in 2002 as we have now completed the development programs
related to the Agilent 2100 Bioanalyzer product line. We anticipate research
and development funding from Agilent to decline further in 2003 as Agilent
continues to focus their product development programs.

In May 2002, we notified Agilent of our election to terminate the
agreement between the companies, effective as of May 8, 2003. Though the
relationship with Agilent is changing, there will be no impact to the margin
sharing between the two companies until the end of 2004. However, Agilent can
reduce product development funding at any time as they make independent
decisions on their product lines. If we do not enter into a new agreement, then
under the existing agreement the parties relationship would change, including
as follows:



| |  |  | we could cease to receive development funding for new products;                                                                                                                                                                                               
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we will grant Agilent a non-exclusive, royalty-bearing license to
use the lab-on-a-chip technologies that we have developed up to that
time in order to develop, make and sell products in substantially the
same field that applied during the collaboration;
|
| |  |  | upon request by Agilent, we will also transfer chip manufacturing know-how over a limited period of time; and                                                                                                                                                 
|
| |  |  | we will receive royalties on Agilents sales of systems that employ our patented technologies.                                                                                                                                                                

Beginning in November 2003, both Caliper and Agilent will have the right
to sell collaboration products, with reciprocal supply arrangements. Given the
success of the Agilent 2100 Bioanalyzer products and the changing relationship
between Caliper and Agilent, we are actively working to expand the number and
scope of our commercial partnerships.

On May 6, 2003, due to the continuing broad economic slowdown and reduced
research and development spending by biopharmaceutical companies, we conducted
a reduction in force that resulted in a further downsizing of our employee work
force by 26 people, or approximately 10%. We believed this was necessary to
better align Calipers organizational structure with these depressed market
conditions and customer demand. Previously, in September 2002, we had
conducted our first reduction in force that resulted in a downsizing of our
employee work force by 28 people with an expected annualized savings of $2.0
million. The reduction in both September 2002 and May 2003 were primarily in
our research and development staff where we continue to change the focus of our
product development and technology research to align more with the changing
needs of our customers. We expect to recognize a charge of approximately $286,000 in
the second quarter of 2003 for severance payments and related
benefits, all of
which we anticipate to pay by the end of June 2003. We expect to realize
approximately $2.6 million in annualized savings from this employee downsizing
action in May 2003. Going forward, on a combined basis, we expect these two
actions to generate approximately $4.6 million in annualized savings.

Results of Operations

Three Months Ended March 31, 2003 and 2002

Revenue. Total revenue was $5.6 million for the three months ended March
31, 2003, compared to $7.0 million for the three months ended March 31, 2002.
The decline in total revenue was primarily due to an anticipated $1.1 million
decrease in sales to Amphora and $1.1 million in lower sales of our drug
discovery products. Offsetting these declines were increases of $482,000 from
revenue under our commercial collaboration with Agilent and $347,000 from
increased contract services from our corporate partnerships.

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Product revenue was $3.5 million for the three months ended March 31,
2003, compared to $4.6 million in the same period in 2002. Product revenue
from unrelated customers declined by $286,000 to $2.9 million in the first
quarter of 2003 over the same period in 2002. The decrease in product revenue
was primarily due to lower unit sales of our drug discovery products, offset in
part by increased datapoint revenues and a 65% increase in product revenues
under our commercial collaboration with Agilent. Related-party product revenue
was $578,000 for the three months ended March 31, 2003, compared to $1.4
million in the same period in 2002. The decline was primarily due to no drug
discovery system sales to Amphora in the first quarter of 2003 as compared to
two system sales to Amphora in the same period in 2002. Datapoint revenue from
Amphora was $450,000 for the first quarter of 2003 as compared to $500,000 in
the same period last year. Datapoint revenues from all customers were
approximately 19% and 13% of total product revenues for the three months ending
March 31, 2003 and 2002, respectively.

It has been widely reported that the sluggish economic environment,
coupled with pharmaceutical industry-specific factors, continues to dampen
research spending for many companies. As such, continuing market acceptance of
our products will depend on our ability to demonstrate the advantages and
potential economic value of our drug discovery systems in the context of
decreased capital spending by our customers.

License fees and contract revenues decreased to $2.1 million for the three
months ended March 31, 2003, compared to $2.5 million for the same period in
2002 primarily due to a $356,000 decline in assay and application development
services to Amphora, as most contracted services were completed in 2002.
Contract fees to unrelated parties were essentially unchanged as the 25%
reduction in research and development services to Agilent were offset by
increases in research and development services funded by our other corporate
partnerships. We anticipate minimal contract revenues from Amphora during the
rest of 2003, with research and development funding from Agilent to also
decline significantly as they further focus their product development
programs. Licensing fees were $625,000 in the first quarter of 2003 and 2002, both
resulting from the licensing of the Ramsey family of patents to Aclara
Biosciences.

Cost of Product Revenues.Cost of product revenue represents
manufacturing costs incurred in the microfluidic instrument and chip production
process, including component materials, assembly labor and overhead, packaging
and delivery cost. Cost of products sold decreased to $2.3 million for the
three months ended March 31, 2003 as compared to $2.5 million for the same
period last year. The decline was driven primarily by lower costs resulting
from reduced product sales to Amphora and unrelated customers of our drug
discovery systems, offset in part by higher costs resulting from higher product
sales volume under our collaboration with Agilent. Cost of products sold was
$78,000 from related party sales to Amphora for the three months ended March
31, 2003, compared to $444,000 for the same period in 2002. In the first
quarter of 2003, we had no drug discovery system sales, as compared to two
system sales to Amphora in the same period of 2002. Datapoints, with their
minimal associated costs to us, were 78% of Amphora product revenues in the
first quarter of 2003 as compared to 37% in the same quarter last year. As a
result, the gross margins on total revenues from Amphora were 87% for the three
months ended March 31, 2003, as compared to 74% for the same period in 2002.
Cost of all other products sold was $2.2 million for the three months ended
March 31, 2003, compared to $2.1 million in the same period last year. The
increase was driven by higher costs associated with increased product volumes
of Agilent 2100 products offset in part by lower costs from reduced sales of
drug discovery systems. Warranty costs were $43,000 in the first quarter of
2003 with no corresponding cost in the same period last year. Also datapoints,
again with their minimal associated costs to us, were 7% of unrelated product
revenues in the first quarter of 2003 as compared to 3% in the same quarter
last year. As a result, gross margins on total revenues from unrelated
customers were 56% for the three months ended March 31, 2003, as compared to
61% in the same period of 2002. Gross margins were adversely impacted during
the three months ended March 31, 2003 by the ratio of increased collaboration
product sales volume, where the margins are shared with Agilent, as compared to
lower Caliper product volumes with their higher margins to us. Product mix
will continue to affect our future gross margins as we earn a higher return
from our 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, material costs
for prototype and test units, legal expenses resulting from intellectual
property prosecution, 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
decreased to $9.4 million during the three months ended March 31, 2003,
compared to $11.1 million in the same period of 2002. The decrease of $1.7
million was primarily attributable to lower salaries and related personnel
costs resulting from a 12% decline in research and development personnel as of
March 31, 2003 as compared to the same time period last year as well as reduced
technical services and supplies costs. Of the decreased costs, $1.3 million
was related to salaries and related benefit costs for research personnel,
$541,000 in lower laboratory supplies costs and $479,000 in reduced outside
technical services, offset by a $292,000 increase in fees for intellectual
property prosecution and $313,000 increase in depreciation costs.

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Our research and development focus has been on product development in the
areas of new applications, microfluidic instruments with expanded
capabilities and our genomic analysis systems. In the future, we intend
to focus our LabChip technology development efforts on a narrow range of
applications based on customer demand. We also will continue to make
investments intended to advance and refine our manufacturing processes in order
to improve the functionality and reliability of our chips and instruments. We
expect to continue our efforts in these areas of research and development even
though the outcomes of these projects are inherently uncertain. We will also
continue to revise our research and development focus and priorities to match
the economic climate and the research and development spending by
biopharmaceutical companies that we believe will affect the demand for our
microfluidic products. We expect research and development spending to decline
in 2003 as compared to 2002 as a result of our downsizing in September 2002 and
in May 2003 and reduced discretionary spending with our research and product
development efforts, only expanding in subsequent years based on customer
demand, market conditions, and our commercial growth.

Selling, General and Administrative Expenses.Selling, general and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, recruiting expenses,
marketing and product promotional costs, professional fees, and other corporate
expenses including business development and general legal activities. Selling,
general and administrative expenses decreased slightly to $4.6 million in the
three months ended March 31, 2003, compared to $4.7 million in the same period
of 2002. The decrease between the periods was due to lower consultant and
outside services costs of $343,000 and lower overall facilities expenses of
$275,000, offset by higher salaries and related employee expenses of $325,000,
product marketing expense of $108,000 and depreciation and amortization expense
$102,000. Selling, general and administrative personnel remained unchanged in
the first quarter of 2003 as compared to the same period last year. Although we
expect marketing and product promotion expenses to increase modestly over the
next several years to support the commercialization of our products, we
anticipate general administrative expenses to increase only as revenue grows
but at a lesser rate on a percentage basis.

Amortization of Deferred Stock Compensation.Deferred stock compensation
represents the difference, at the date of grant, between the deemed fair value
of our common stock for accounting purposes and the exercise price of options.
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 $188,000 for the three months ended
March 31, 2003, compared to $446,000 for the same period of 2002. We expect to
record amortization expense for deferred compensation as follows: $354,000 for
the remainder of 2003, and $94,500 during 2004. The amount of deferred
compensation expense to be recorded in future periods may further decrease if
unvested options for which deferred compensation has been recorded are
subsequently canceled.

Interest Income, Net.Interest income, net, consists of income from our
cash and investments offset by expenses related to our financing obligations.
Interest income, net, was $921,000 for the three months ended March 31, 2003,
compared to $2.4 million for the same period of 2002. The decrease primarily
resulted from declining interest rate yields and, to a lesser extent, the lower
cash, cash equivalents and marketable securities balances during the first
quarter of 2003 as compared to the same period in 2002. Until late last year,
we had a number of investments that were locked in at higher interest levels.
These have now matured, and we have had to reinvest the funds at more current
interest rates that are significantly lower.

Other Expense/loss, Net.Other loss of $35,000 for the three months ended
March 31, 2003 was our loss on disposal of surplus manufacturing equipment no
longer needed in our operations. Other expense of $466,000 for the three
months ended March 31, 2002 represents mark-to-market change in the fair value
of the 900,000 shares of Aclara common stock we held through October 2002 as
part of our litigation settlement with Aclara. This mark-to-market change in
the fair value was subsequently offset in October 2002 when we exchanged this
common stock for full payment from Aclara in accordance with the litigation
settlement.

LIQUIDITY AND CAPITAL RESOURCES

Our cash, cash equivalents and marketable securities were $144.0 million
at March 31, 2003 compared to $154.3 million at December 31, 2002. We used cash
of $9.5 million for operations for the three month period ended March 31, 2003
as compared to $10.4 million for the comparable period in 2002. Cash used in
operating activities in the three months ended March 31, 2003 consisted
primarily of the net loss of $10.0 million, plus aggregate current asset and
liability changes of $1.3 million, primarily increases in accounts receivable
and prepaid expenses, decreases in payables and other liabilities, offset in
part by depreciation and amortization expense of $1.6 million and decreases in
inventories of $1.2 million.

Net cash provided by investing activities was $867,000 for the three
months ended March 31, 2003 as compared to $22.7 million for the comparable
period in 2002. Net cash provided by investing consists primarily of purchases
of marketable securities as well as

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capital expenditures offset by proceeds from sales and maturities of
marketable securities. We used $120,000 and $2.9 million for the purchase of
property and equipment in the first three months of 2003 and 2002,
respectively.

Net cash used in financing activities was $655,000 for the three months
ended March 31, 2003 as compared to net cash provided by financing activities
of $122,000 for the comparable period in 2002. Net cash used in financing
activities for the three months ended March 31, 2003 consisted of $680,000 in
repayments of sale-leaseback arrangements, offset by $25,000 proceeds from
employee stock option exercises. Net proceeds from financing activities for
the same period ended March 31, 2002 consisted of $335,000 from sale-leaseback
arrangements and $293,000 from employee stock option exercises, offset by
repayments of sale-leaseback arrangements of $506,000.

The following are contractual commitments at March 31, 2003 associated with
debt and lease obligations (in thousands):

|                                                  |            |                                            |  |                |        |                |        |                   |       | 
|------------------------------------------------- | ---------- | ------------------------------------------ |  | -------------- | ------ | -------------- | ------ | ----------------- | ----- | 
|                                                  |            |                                            |  |                |        |                |        | Obligations Under
|                                                  |            |                                            |  | Operating      |        | Sale-Leaseback
|                                                  |            |                                            |  | Leases         |        | Arrangements  
|                                                  |            |                                            |  |                |        |               
|                                                  |            |                                            |  | (In thousands)
|12-month periods ending March 31:                 |            |                                            |  |                |        |                |        |                  
|                                                  | 2004       |                                            |  | 5,393          |        |                |        | 2,631             |      
|                                                  | 2005       |                                            |  | 5,536          |        |                |        | 1,380             |      
|                                                  | 2006       |                                            |  | 5,637          |        |                |        | 167               |      
|                                                  | 2007       |                                            |  | 5,790          |        |                |        |                  |      
|                                                  | Thereafter |                                            |  | 8,436          |        |                |        |                  |      
|                                                  |            |                                            |  |                |        |                |        |                  
|                                                  |            | Total minimum lease and principal payments |  | $              | 30,792 |                |        |                   | 4,178 | 
|                                                  |            |                                            |  |                |        |                |        |                  
|Amount representing interest                      |            |                                            |  |                |        |                | 460    |                  
|                                                  |            |                                            |  |                |        |                |        |                  
|Present value of future payments                  |            |                                            |  |                |        |                | 3,718  |                  
|Current portion of sale-leaseback arrangements    |            |                                            |  |                |        |                | (2,310 | )                
|                                                  |            |                                            |  |                |        |                |        |                  
|Noncurrent portion of sale-leaseback arrangements |            |                                            |  |                |        | $              | 1,408  |                  
|                                                  |            |                                            |  |                |        |                |        |                  

As of March 31, 2003, we have a non-cancelable purchase commitment in the
amount of approximately $450,000 with our foreign supplier for the purchase of
our proprietary glass stock used in the manufacture of certain types of our
chips. We also have minimum royalty obligations under separate license
agreements with UT-Battelle, LLC and the Trustees of the University of
Pennsylvania. Royalty obligations to UT-Battelle were $18,000 in the first
quarter of 2003 and are expected to exceed the required minimum royalty amount
of $53,000 for 2003 and through the remainder of the license. We anticipate
that during years 2004 through the remainder of the license with the Trustees
of the University of Pennsylvania that the minimum royalty obligation under
this license will exceed the earned royalty obligation. The minimum royalty
obligation under this license was $15,000 in the first quarter of 2003 and is
not expected to exceed the required minimum royalty for 2003 as well as is
never expected to exceed $200,000 per year thereafter.

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. Based on our long term strategic plan, we believe that our current
cash balances, together with the revenue to be derived from our commercial
partners and from the commercial sales of our microfluidic products and
services will be sufficient to fund our operations at least through the year
2004. Our future capital requirements will depend on many factors, including,
among others;



| |  |  | continued market acceptance of our microfluidic products;                                                     
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | continued scientific progress in our microfluidic research and product development programs;                  
|
| |  |  | the magnitude and scope of our research and product development programs;                                     
|
| |  |  | our ability to maintain existing, and establish additional, corporate partnerships and licensing arrangements;
|
| |  |  | the time and costs involved in expanding and maintaining our manufacturing facilities;                        
|
| |  |  | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims;     

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| |  |  | the potential need to develop, acquire or license new technologies and products; and
| | - |  | ------------------------------------------------------------------------------------
|
| |  |  | other factors not within our control.                                               

Actual capital expenditures could vary considerably, however, depending on
opportunities that arise over the course of the 2003 and 2004 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. The sale of additional equity or convertible debt
securities may result in additional dilution to our stockholders. Additional
financing may not be available on terms acceptable to us or at all. The
inability to obtain additional financing may force delays in research and
product development activities and, ultimately, cause us to cease operations.

FACTORS AFFECTING OPERATING RESULTS

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

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



| |  |  | our ability to demonstrate the advantages and potential economic
value of our drug discovery systems over alternative well-established
technologies and products;     
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | capital spending by our customers and potential customers, which has
decreased as a result of the current economic conditions and other
industry-specific factors; and
|
| |  |  | our ability to market our drug discovery systems.                                                                                                                     

Because the products comprising our drug discovery 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 first
customers do not approve of our initial drug discovery 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 drug discovery systems would suffer and further sales may be limited.
We cannot assure you that these customers efforts to put our high throughput
systems into use will continue or will be expeditious or effective. Potential
customers for our drug discovery systems may also wait for indications from our
initial drug discovery system customers that our drug discovery systems work
effectively and generate substantial benefits. Further, non-acceptance by the
market of our initial drug discovery systems could undermine not only those
systems but subsequent drug discovery systems as well.

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

We intend to continue developing lower cost drug discovery systems with
enhanced features that address existing or emerging customer needs such as
novel assay functionalities. If we are unable to do so, our drug discovery
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.

We must continue to develop applications for our drug discovery systems.

We currently have several assays in development including assays that
measure many important activities of cells and proteins. We are developing line
extensions that are particularly well suited for the evaluation of kinases, one
of the largest focus areas of drug discovery efforts today. We are creating new
tools to make it easier for our customers to develop their own custom assays in
a microfluidic format. Caliper is also developing kinase profiling and
selectivity screening kits. If we are not able to complete the development of
these applications and tools, or if we experience difficulties or delays, we
may lose our current customers and may not be able to obtain new customers.

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

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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 a current sluggish economic
climate, dampened research spending for many companies affecting our product
sales and expected continuing expenses for manufacturing capabilities, research
and product development costs and general and administrative costs. We may
never achieve profitability. As of March 31, 2003, we had an accumulated
deficit of approximately $95.5 million. Our losses have resulted principally
from costs incurred in research and development, product marketing and from
general and administrative costs associated with our operations. These costs
have exceeded our interest income and revenue which, to date, have been
generated principally from product sales, collaborative research and
development agreements, technology access fees, cash and investment balances
and, to a lesser extent, 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, the subsequent switching to a commercial products business from a
technology access model 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.

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. For the
three months ended March 31, 2003, Agilent alone represented 46% of total
revenues, three of Calipers previous Technology Access Program customers
combined accounted for 13% of total revenues, and Amphora accounted for 10% of
total revenues. In 2002, Agilent represented 39% of total revenues and Amphora
accounted for 24% of total revenues with three of Calipers previous Technology
Access Program customers combined representing 12% of total revenues. 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 a
few customers and on Agilent for the majority of our revenues.

We are still early in the process of converting some customers from Technology
Access Program agreements to purchasers of products and support services, and
our revenue could be adversely impacted by this conversion.

The final year of our Technology Access Program (TAP) agreements with
Eli Lilly and Amgen concluded in August 2002 and December 2002, respectively.
In addition, the third and final year of our Technology Access Program
agreement with Millennium which began on March 24, 2000 concluded in the first
quarter of 2003. It is too soon for us to know whether these former TAP
customers will continue to purchase our products and support services at
historic levels now that they have fully utilized their program conversion
credits, or whether we will be able to replace this revenue with revenue from
the sale of products to new customers. If our former TAP customers do not
continue purchasing products and support services at their historic levels, or
if we are not able to replace this revenue with sales to new customers, our
overall revenue will be adversely affected.

We rely on Agilent to manufacture, market and distribute the Agilent 2100
Bioanalyzer, and our agreement with Agilent to manufacture, market and
distribute the Agilent 2100 Bioanalyzer has terminated. Our revenue from the
Agilent 2100 Bioanalyzer and LabChip development funding is dependent on
Agilents success and continued investment in this product line.

Agilent manufactured, marketed and distributed the Agilent 2100
Bioanalyzer under an agreement we entered into in May 1998, which agreement
terminated in May 2003. Our revenues from the Agilent 2100
Bioanalyzer products will depend on Agilent continuing to develop, manufacture and
market these products successfully and also

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depends significantly on Agilents continued performance despite the
termination of this agreement. Although we believe that Agilent is financially
motivated to continue to sell the Agilent 2100 Bioanalyzer under the terms of
the agreement that govern following termination of the agreement, there can be
no assurance that they will continue to sell the Agilent 2100 Bioanalyzer.
Sales of 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 continue to increase
through the first quarter of 2003, 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, our future revenue from the Agilent 2100 Bioanalyzer may not be
material. We also anticipate research and development funding from Agilent to
continue to further decline from the levels we have already experienced in the
first quarter through the remainder of 2003. Agilent can reduce product
development funding at any time as they make independent decisions on their
product lines. If we do not negotiate a new agreement with Agilent, we could
cease to receive development funding from Agilent for new products.
Furthermore, the revenue we receive from Agilent for existing collaboration
products may grow more slowly or decline.

Amphora Discovery Corp., a related party and key customer, is a development
stage company and we have no assurance of its continued purchases of our
products and services.

Amphora, which is independently managed and funded, has a significant
on-going relationship with Caliper. After Amphoras December 2002 completion
of a second private placement of securities with third party investors, our
ownership in Amphora was reduced to approximately 13% from 28% on a fully
diluted basis. Over time we expect that our ownership in Amphora will be
further diluted, as we have no plans to make any future equity investments in
Amphora. Due to the reduction in our percentage ownership of Amphora, we now
have the right to appoint only one member to Amphoras board. Amphora is
currently Calipers largest automated drug discovery customer representing 10%
of our total revenue for the first quarter in 2003. As a development stage
company, there can be no assurances that Amphora will become commercially
successful or that in the near term its business strategy will not change. If
Amphora reduces its purchases of products and services or stops using Calipers
drug discovery systems, we could experience a significant decline in revenues.
In connection with the completion of Amphoras December 2002 financing, Caliper
and Amphora agreed to a renegotiation of Amphoras obligations under the
LabChip Solutions Agreement. Under the renegotiated agreement, the Companies
agreed to restructure the $4 million minimum datapoint payment for 2003 as
follows: Amphora agreed to purchase a minimum of $1.8 million of datapoints
during the second year of the agreement beginning in December 2002 and over
time to make up to $2.2 million of deferred payments to Caliper. These deferred
payments are contingent upon Amphoras future revenue generation, datapoint
production and other conditions and can be satisfied by Amphora under three
methods: i) quarterly payments to Caliper based on Amphoras revenues; ii)
commissions earned by Amphora as they provide certain marketing assistance to
Caliper for Calipers instruments; and iii) additional datapoint payments if
Amphora exceeds the certain minimum datapoint levels. We also agreed to defer
to December 31, 2003 Amphoras obligation to purchase the one remaining Caliper
250 instrument of the 11 originally scheduled to be purchased by Amphora before
December 31, 2002. In consideration for our agreement to this restructuring,
Amphora issued to Caliper 2.5 million shares of Amphora preferred stock. We
ascribed a nominal value of $25,000 to these shares as Amphora is a privately
held research and development company.

To the extent that Agilents sales of the Agilent 2100 Bioanalyzer and LabChip
products are reduced for any reason, including competition from us or any of
our future commercial partners, the future revenue we receive from Agilent
would be reduced.

We receive revenue from Agilent based on a formula for gross margin
sharing on sales by Agilent of instruments and chips developed under our
collaboration agreement. To the extent that Agilents sales of these products
now that our agreement has terminated is reduced for any reason, including
competition from us or any other commercial partner of ours, then the revenue
we would realized from Agilent would be reduced. Further, Agilent may decide
for reasons wholly independent of competition to reduce its sales efforts
and/or pricing for these products. If Agilent does so, our revenue may
decline.

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

Third parties may assert infringement or other intellectual property
claims against us. We may have to pay substantial damages, including treble
damages, for past infringement if it is ultimately determined that our products
infringe a third partys proprietary rights. Further, we may be prohibited from
selling our products before we obtain a license, which, if available at all,
may require us to pay substantial royalties. Even if these claims are without
merit, defending a lawsuit takes significant time, may be expensive and may
divert management attention from other business concerns. We are aware of
third-party patents that may relate to our technology or potential products. We
have also been notified that a third party has 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

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interference proceedings initiated or threatened against us could cause
our stock price to decline. In 2001, 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.

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 Molecular Devices Corporation as described under
Part II  Item 1. 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 price 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.

Agilent may compete with us now that our collaboration has terminated, which
could reduce the potential revenue from our independent product sales.

Under the terms of our agreement with Agilent, which we terminated
effective in May 2003, we granted to Agilent a non-exclusive, royalty-bearing
license to our LabChip technologies existing as of the termination date for Agilent to develop,
make and sell products in the field of the collaboration. Consequently, there
is the possibility that we may experience competition from Agilent in the
future, which would reduce our ability to sell products independently or
through other commercial partners.

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 drug discovery systems. We currently have limited
manufacturing capacity for our LabChip and automated drug discovery system
products and experience variability in manufacturing yields for chips and
automated drug discovery products. If we fail to deliver chips and automated
drug discovery 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 drug discovery applications, we will need to continue to
achieve consistently high yields in this process. We have experienced
difficulties in manufacturing both our chips and instruments. 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

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sales will decline. We are currently manufacturing drug discovery
instruments in-house and in limited volumes. If demand for our drug discovery
instruments increases significantly, we will either need to expand our in-house
manufacturing capabilities or outsource to other manufacturers. Our ability to
scale-up manufacturing may be compromised by uncertainty regarding the volume
of chips for the Agilent 2100 Bioanalyzer that we will need to supply to
Agilent in the future. When our exclusive collaboration with Agilent
terminates in May 2003 pursuant to the notice we have delivered to Agilent,
Agilent will have the option to manufacture chips itself rather than continue
to receive its supply of chips from Caliper. Accordingly, we will face
uncertainty regarding future demand for these chips from our manufacturing
operations.

We are dependent on a single-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 single-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.

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 despite the current economic climate. 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.

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 drug
discovery 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.

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 2004. 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 needed 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. 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.

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

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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; and                                                                                      
|
| |  |  | the assumption of unforeseen liabilities of the acquired company.                                                                                     

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

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 May 14, 2003, from a high of approximately $202.00 per
share on March 2, 2000 to a low of $2.71 per share both on January 28, 2003 and
February 6, 2003. 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 by our competitors of complementary or competing products and technologies;            
|
| |  |  | announcements of our financial results, particularly if they differ from investors expectations; and
|
| |  |  | general market volatility for technology stocks.                                                     

These factors and fluctuations, as well as general economic, political and
market conditions, may materially adversely affect the market price of our
common stock.

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 as described under Part II  Item 1.
Legal Proceedings. 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.

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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, 2002, our directors, entities affiliated with our
directors, our executive officers and principal stockholders beneficially own,
in the aggregate approximately 31% of our outstanding common stock. These
stockholders as a group are able to substantially influence the management and
affairs of Caliper and, if acting together, would be able to influence most
matters requiring the approval by our stockholders, including the election of
directors, any merger, consolidation or sale of all or substantially all of our
assets and any other significant corporate transaction. The concentration of
ownership may also delay or prevent a change of control of Caliper at a premium
price if these stockholders oppose it.

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

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




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity

Our exposure to market risk for changes in interest rates relates
primarily to our investment portfolio. Fixed rate securities may have their
fair market value adversely impacted due to fluctuations in interest rates,
while floating rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, our future investment
income may fall short of expectations due to changes in interest rates or we
may suffer losses in principal if forced to sell securities that have declined
in market value due to changes in interest rates.

Our equipment sale-leaseback financings, amounting to $3.7 million as of
March 31, 2003, are all at fixed rates and, therefore, have minimal exposure to
changes in interest rates. We have operated primarily in the United States and
substantially all sales to date have been made in U.S. dollars. Accordingly, we
have not had any material exposure to foreign currency rate fluctuations.

Our primary investment objective is to preserve principal while at the
same time maximizing yields without significantly increasing risk. Our
portfolio includes money markets funds, commercial paper, medium-term notes,
corporate notes, government securities, asset-backed securities, and corporate
bonds. The diversity of our portfolio helps us to achieve our investment
objective. As of March 31, 2003, approximately 47% of our investment portfolio
is composed of investments with original maturities of one year or less and
approximately 6% of our investment portfolio matures less than 90 days from the
date of purchase.

The following table presents the amounts of our cash equivalents and
investments that may be subject to interest rate risk and the average interest
rates as of March 31, 2003 by year of maturity (dollars in thousands):

|                                          |               |                       |        |        |      |      |        |        |      |            |        |        |      |   |        |        |      |   |         |         |      |  
|----------------------------------------- | ------------- | --------------------- | ------ | ------ | ---- | ---- | ------ | ------ | ---- | ---------- | ------ | ------ | ---- | - | ------ | ------ | ---- | - | ------- | ------- | ---- | -
|                                          |               |                       |        | 2003   |      | 2004 |        | 2005   |      | Thereafter |        | Total 
|                                          |               |                       |        |        |      |      |        |        |      |            |        |       
|Cash and money market funds:              |               |                       |        |        |      |      |        |        |      |            |        |        |      |   |        |        |      |   |         |        
|                                          | Fixed rate    |                       | $      | 6,872  |      |      |        |       |      |            |        |       |      |   |        |       |      |   | $       | 6,872   |     
|                                          |               | Average interest rate |        |        | 1.10 | %    |        |        |     |            |        |        |     |   |        |        |     |   |         |         | 1.10 | %
|Available for sale marketable securities: |               |                       |        |        |      |      |        |        |      |            |        |        |      |   |        |        |      |   |         |        
|                                          | Fixed rate    |                       | $      | 12,717 |      |      | $      | 47,036 |      |            | $      | 40,995 |      |   | $      | 20,570 |      |   | $       | 121,318 |     
|                                          |               | Average interest rate |        |        | 3.29 | %    |        |        | 4.63 | %          |        |        | 4.13 | % |        |        | 3.62 | % |         |         | 4.15 | %
|                                          | Variable rate |                       | $      | 3,306  |      |      | $      | 3,253  |      |            | $      | 7,757  |      |   |        |       |      |   | $       | 14,316  |     
|                                          |               | Average interest rate |        |        | 1.64 | %    |        |        | 1.59 | %          |        |        | 1.56 | % |        |        |     |   |         |         | 1.58 | %
|Total securities                          |               | $                     | 22,895 |        |      | $    | 50,289 |        |      | $          | 48,752 |        |      | $ | 20,570 |        |      | $ | 142,506 |        
|                                          |               | Average interest rate |        |        | 2.39 | %    |        |        | 4.43 | %          |        |        | 3.71 | % |        |        | 3.62 | % |         |         | 3.73 | %

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ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the date of the filing of this Quarterly Report on
Form 10-Q, we evaluated our disclosure controls and procedures and our
internal controls and procedures for financial reporting. This evaluation was
done under the supervision and with the participation of management, including
our chief executive officer and our chief financial officer.

(a)  Evaluation of disclosure controls and procedures.Disclosure
controls are procedures that are designed with the objective of ensuring that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934 (the Exchange Act), such as this Quarterly Report on
Form 10-Q, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions (SEC) rules and
forms. Disclosure controls are also designed with the objective of ensuring
that such information is accumulated and communicated to our management,
including the chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation, the chief executive officer and the chief
financial officer have concluded that our disclosure controls and procedures
are effective to ensure that information we are required to disclose in reports
that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.

(b)  Changes in internal controls.Internal Controls are procedures
which are designed with the objective of providing reasonable assurance that:
(1) our transactions are properly authorized; (2) our assets are safeguarded
against unauthorized or improper use; and (3) our transactions are properly
recorded and reported, all to permit the preparation of our financial
statements in conformity with accounting principles generally accepted in the
United States. Among other matters, we evaluated our internal controls to
determine whether there were any significant deficiencies or material
weaknesses, and sought to determine whether Caliper has identified any acts of
fraud involving personnel who have a significant role in Calipers internal
controls. In the professional auditing literature, significant deficiencies
are referred to as reportable conditions; these are control issues that could
have a significant adverse effect on the ability to record, process, summarize
and report financial data in the financial statements. A material weakness is
defined in the auditing literature as a particularly serious reportable
condition where the internal control does not reduce to a relatively low level
the risk that misstatements caused by error or fraud may occur in amounts that
would be material in relation to the financial statements and would not be
detected within a timely period by employees in the normal course of performing
their assigned functions.

In accordance with the requirements of the SEC, since the date of the
evaluation of our disclosure controls and our internal controls to the date of
this Annual Report, our chief executive officer and chief financial officer
concluded that there were no significant deficiencies or material weaknesses in
our internal controls. In addition, there were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Limitations on the Effectiveness of Controls.Our management,
including our chief executive and chief financial officer, does not expect that
our disclosure controls or our internal controls will prevent all error and all
fraud. A control system can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within Caliper have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or
more people or by management override of the control. The design of any system
of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time,
control systems may become inadequate because of changes in conditions, or the
degree of compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

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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. The cases
have been consolidated under the caption In re Caliper Technologies Corp.
Initial Public Offering Securities Litigation, 01 Civ. 5072 (SAS) (GBD).
Similar complaints were filed in the same Court against hundreds of other
public companies that conducted IPOs of their common stock since the late 1990s
(the IPO Lawsuits). On August 8, 2001, the IPO Lawsuits were consolidated
for pretrial purposes before United States Judge Shira Scheindlin of the
Southern District of New York. Together, those cases are denominated In re
Initial Public Offering Securities Litigation, 21 MC 92 (SAS). On April 19,
2002, a Consolidated Amended Complaint was filed alleging claims against
Caliper and the individual defendants under Sections 11 and 15 of the
Securities Act of 1933, and under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, as well as Rule 10b-5 promulgated thereunder. The
Consolidated Amended Complaint also names certain underwriters of Calipers
December 1999 initial public offering of common stock. The Complaint alleges
that these underwriters charged excessive, undisclosed commissions to investors
and entered into improper agreements with investors relating to aftermarket
transactions. The Complaint seeks an unspecified amount of money damages.
Caliper and the other issuers named as defendants in the IPO Lawsuits moved on
July 15, 2002, to dismiss all claims on multiple grounds. By Stipulation and
Order dated October 9, 2002, the claims against Messrs. Milligan, Kisner and
Knighton were dismissed without prejudice. On February 19, 2003, the Court
granted Calipers motion to dismiss all claims against it. Plaintiffs were not
given the right to replead the claims against Caliper; the time to appeal the
dismissal has not yet expired.

On April 16, 2002, Caliper filed a lawsuit against Molecular Devices
Corporation in the United States District Court for the Northern District of
California. In that case, Caliper Technologies Corp. v. Molecular Devices
Corporation, No. C-02-1837 (N.D. Cal.), Caliper asserts that Molecular Devices
Corp.s IMAP and Reagent Assay Kits willfully infringe one or more claims of
U.S. Patent No. 6,287,774, which Caliper owns. Calipers complaint seeks both
injunctive relief precluding further infringement of the patent and damages.
The answer to the complaint was filed on May 8, 2002 and asserts a counterclaim
seeking a declaratory judgment that the patent is not infringed and is invalid.
Caliper believes the counterclaim to be without merit. In late 2002, Caliper
successfully moved the court to add a newly-issued patent, U.S. Patent No.
6,472,141 to the lawsuit, alleging that the same accused devices infringe one
or more of the claims of that patent. The answer to Calipers first amended
complaint was filed on December 17, 2002, and asserts a counterclaim seeking a
declaratory judgment that both Caliper patents are invalid, unenforceable and
not infringed. Caliper believes the amended counterclaim to be without merit.
On January 28, 2003, Caliper filed a motion for preliminary injunction, which
was scheduled to be heard in May 2003, but deferred by the court pending a
patent claim construction hearing expected to occur at the end of June 2003.
Discovery is underway, and no trial date has been set by the Court.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




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

Not Applicable.




ITEM 5. OTHER INFORMATION

On May 6, 2003, we conducted a reduction in force that resulted in a
further downsizing of our employee work force by 26 people, or approximately
10%. Previously, in September 2002, we had conducted our first reduction in
force that resulted in a downsizing of our employee work force by 28 people.
The reduction in both September 2002 and May 2003 were primarily in our
research and development staff where we continue to change the focus of our
product development and technology research to align more with the changing
needs of our customers. We expect to recognize a charge of approximately $286,000
for severance payments and related benefits all of which we anticipate to pay
by the end of June 2003. We expect to realize approximately $2.6 million in
annualized savings from this employee downsizing action in May 2003.

Consistent with Section 10A(i)(2) of the Securities Exchange Act of 1934,
as added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible
for listing the non-audit services approved by our Audit Committee to be
performed by Ernst & Young LLP,

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our independent auditor. Non-audit services are defined as services other
than those provided in connection with an audit or a review of our financial
statements. The only non-audit services approved by our Audit Committee to be
performed by Ernst & Young LLP are the preparation of tax returns, and tax
advice in preparing for and in connection with such filings.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits



|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description of document                                                                                                                          
|        |  |                                                                                                                                                  
|3.1(1)  |  | Amended and Restated Certificate of Incorporation of Caliper.                                                                                    
|3.2(2)  |  | Certificate of Designation Of Series A Junior Participating Preferred Stock.                                                                     
|3.3(3)  |  | Bylaws of Caliper.                                                                                                                               
|3.4(4)  |  | Amendment No. 1 to Bylaws of Caliper.                                                                                                            
|4.1     |  | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.                                                                                             
|10.54   |  | Retention Agreement, dated February 26, 2003, between Caliper and Michael Merion                                                                 
|99.1(5) |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|99.2(5) |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



|(1) |  | Previously filed as Exhibit 3.3 to our Registration Statement on Form
S-1, Registration No. 333-88827, and incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Previously filed as Exhibit 99.1 to Current Report on Form 8-K filed
December 19, 2001, and incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) |  | Previously filed as Exhibit 3.4 to our Registration Statement on Form
S-1, Registration No. 333-88827, and incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) |  | Previously filed as Exhibit 3.4 to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, Commission No. 000-28229, and
incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(5) |  | This certification accompanies the Quarterly Report on Form 10-Q to
which it relates, pursuant to Section 906 of the Sarbanes Oxley Act of
2002, and is not deemed filed with the Securities and Exchange Commission
and is not to be incorporated by reference into any filing of Caliper
Technologies Corp. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (whether made before or after
the date of the Quarterly Report on Form 10-Q), irrespective of any
general incorporation language contained in such filing..
|   
|(b) |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | Caliper filed no reports on Form 8-K during the three month period ending
March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|               |  |  |                            |                                                                                                          |  |                           
|-------------- |  |  | -------------------------- | -------------------------------------------------------------------------------------------------------- |  | --------------------------
|               |  |  | CALIPER TECHNOLOGIES CORP.
|               |  |  |                            |                                                                                                          |  |                           
|March 15, 2003 |  |  |                            | By:                                                                                                      |  | /s/ JAMES L. KNIGHTON     
|               |  |  |                            |                                                                                                          |  |                           
|               |  |  |                            | James L. Knighton
President, Chief Operating Officer and Chief Financial Officer                        
|               |  |  |                            |                                                                                                          |  |                           
|               |  |  |                            | By:                                                                                                      |  | /s/ ANTHONY T. HENDRICKSON
|               |  |  |                            |                                                                                                          |  |                           
|               |  |  |                            | Anthony T. Hendrickson
Vice President, Finance and Corporate
Controller and Principal Accounting Officer

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Certification

I, Michael R. Knapp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Caliper Technologies
Corp.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ MICHAEL R. KNAPP
Michael R. Knapp, Chief Executive Officer
(Principal Executive Officer)

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Certification

I, James L. Knighton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Caliper Technologies
Corp.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ JAMES L. KNIGHTON
James L. Knighton, President, Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer)

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EXHIBIT INDEX

|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(1)  |  | Amended and Restated Certificate of Incorporation of Caliper.                                                                                    
|3.2(2)  |  | Certificate of Designation Of Series A Junior Participating Preferred Stock.                                                                     
|3.3(3)  |  | Bylaws of Caliper.                                                                                                                               
|3.4(4)  |  | Amendment No. 1 to Bylaws of Caliper.                                                                                                            
|4.1     |  | Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.                                                                                             
|10.54   |  | Retention Agreement, dated February 26, 2003, between Caliper and Michael Merion                                                                 
|99.1(5) |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|99.2(5) |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



|(1) |  | Previously filed as Exhibit 3.3 to our Registration Statement on Form
S-1, Registration No. 333-88827, and incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Previously filed as Exhibit 99.1 to Current Report on Form 8-K filed
December 19, 2001, and incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(3) |  | Previously filed as Exhibit 3.4 to our Registration Statement on Form
S-1, Registration No. 333-88827, and incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(4) |  | Previously filed as Exhibit 3.4 to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, Commission No. 000-28229, and
incorporated by reference herein.                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(5) |  | This certification accompanies the Quarterly Report on Form 10-Q to
which it relates, pursuant to Section 906 of the Sarbanes Oxley Act of
2002, and is not deemed filed with the Securities and Exchange Commission
and is not to be incorporated by reference into any filing of Caliper
Technologies Corp. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (whether made before or after
the date of the Quarterly Report on Form 10-Q), irrespective of any
general incorporation language contained in such filing.

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