##### Table of Contents



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 September 30, 2003


OR

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

for the transition period from
________________ to _________________.


Commission file # 000-28229

CALIPER TECHNOLOGIES CORP.

(Exact name of registrant as specified in its charter)


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

68 ELM STREET
HOPKINTON, MA 01748

(Address and zip code of principal executive offices)

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

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 12b-2 of the Exchange Act). Yes [X] No [  ]

COMMON SHARES OUTSTANDING ON NOVEMBER 10, 2003: 28,181,628





---

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                   
|EXHIBIT INDEX                
|EXHIBIT 10.57                
|EXHIBIT 10.58                
|EXHIBIT 10.59                
|EXHIBIT 10.60                
|EXHIBIT 10.61                
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 
|EXHIBIT 32.2                 



---



##### Table of Contents



CALIPER TECHNOLOGIES CORP.
TABLE OF CONTENTS

|              |  |  |  |                       |  |                                                                                                                 |  |  |    |      |  | 
|------------- |  |  |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------- |  |  | -- | ---- |  | 
|              |  |  |  |                       |  |                                                                                                                 |  |  |    | Page
|              |  |  |  |                       |  |                                                                                                                 |  |  |    |     
|PART I        |  |  |  | FINANCIAL INFORMATION |  |                                                                                                                 |  | 
|              |  |  |  | Item 1.               |  | Financial Statements (unaudited)                                                                                |  |  |    |     
|              |  |  |  |                       |  | Condensed Consolidated Balance Sheets as of September
30, 2003 and December 31, 2002                            |  |  | 2  |     
|              |  |  |  |                       |  | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002 |  |  | 3  |     
|              |  |  |  |                       |  | Condensed Consolidated Statements of Cash Flows for the Nine months Ended September 30, 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                           |  |  | 14 |     
|              |  |  |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                      |  |  | 28 |     
|              |  |  |  | Item 4.               |  | Controls and Procedures                                                                                         |  |  | 29 |     
|PART II       |  |  |  | OTHER INFORMATION     |  |                                                                                                                 |  | 
|              |  |  |  | Item 1.               |  | Legal Proceedings                                                                                               |  |  | 30 |     
|              |  |  |  | Item 2.               |  | Changes in Securities and Use of Proceeds                                                                       |  |  | 31 |     
|              |  |  |  | Item 3.               |  | Defaults upon Senior Securities                                                                                 |  |  | 31 |     
|              |  |  |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                             |  |  | 31 |     
|              |  |  |  | Item 5.               |  | Other Information                                                                                               |  |  | 31 |     
|              |  |  |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                                |  |  | 32 |     
|SIGNATURES    |  |  |  |                       |  |                                                                                                                 |  |  | 33 |     
|EXHIBIT INDEX |  |  |  |                       |  |                                                                                                                 |  |  | 34 |     

1



---



##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




CALIPER TECHNOLOGIES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | - | ------------- | -------- | ------------ | - | ------- | ------- | -
|                                            |                                                                                                                        |   | September 30, |          | December 31,
|                                            |                                                                                                                        |   | 2003          |          | 2002        
|                                            |                                                                                                                        |   |               |          |             
|                                            |                                                                                                                        |   | (unaudited)   |          | (Note 1)    
|Assets                                      |                                                                                                                        |   |               |          |              |   |         |        
|Current assets:                             |                                                                                                                        |   |               |          |              |   |         |        
|                                            | Cash and cash equivalents                                                                                              |   | $             | 5,076    |              |   | $       | 16,184  |  
|                                            | Marketable securities                                                                                                  |   |               | 67,094   |              |   |         | 138,139 |  
|                                            | Accounts receivable, net of allowance for
doubtful accounts of $16 at September 30,
2003 and $119 at December 31, 2002 |   |               | 8,685    |              |   |         | 1,754   |  
|                                            | Accounts receivable - related party                                                                                    |   |               | 169      |              |   |         | 115     |  
|                                            | Royalties receivable from Aclara                                                                                       |   |               | 1,875    |              |   |         |        |  
|                                            | Inventories                                                                                                            |   |               | 14,547   |              |   |         | 5,964   |  
|                                            | Prepaid expenses and other current assets                                                                              |   |               | 2,936    |              |   |         | 1,508   |  
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|Total current assets                        |                                                                                                                        |   | 100,382       |          |              |   | 163,664 |        
|Security deposits                           |                                                                                                                        |   | 3,381         |          |              |   | 3,000   |        
|Property and equipment, net                 |                                                                                                                        |   | 10,972        |          |              |   | 12,545  |        
|Notes receivable from officers              |                                                                                                                        |   | 178           |          |              |   | 215     |        
|Goodwill                                    |                                                                                                                        |   | 44,296        |          |              |   |        |        
|Intangible
assets, net                      |                                                                                                                        |   | 21,208        |          |              |   |        |        
|Other assets, net                           |                                                                                                                        |   | 523           |          |              |   | 454     |        
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|Total assets                                |                                                                                                                        | $ | 180,940       |          |              | $ | 179,878 |        
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|Liabilities and stockholders equity        |                                                                                                                        |   |               |          |              |   |         |        
|Current liabilities:                        |                                                                                                                        |   |               |          |              |   |         |        
|                                            | Accounts payable                                                                                                       |   | $             | 3,013    |              |   | $       | 1,227   |  
|                                            | Accrued compensation                                                                                                   |   |               | 4,112    |              |   |         | 2,458   |  
|                                            | Other accrued liabilities                                                                                              |   |               | 6,342    |              |   |         | 1,110   |  
|                                            | Deferred revenue and customer deposits                                                                                 |   |               | 8,954    |              |   |         | 874     |  
|                                            | Current portion of long-term obligations                                                                               |   |               | 2,161    |              |   |         | 2,412   |  
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|Total current liabilities                   |                                                                                                                        |   | 24,582        |          |              |   | 8,081   |        
|Noncurrent portion of long-term obligations |                                                                                                                        |   | 964           |          |              |   | 1,986   |        
|Deferred revenue                            |                                                                                                                        |   | 168           |          |              |   | 267     |        
|Other noncurrent
liabilities                |                                                                                                                        |   | 2,088         |          |              |   | 1,986   |        
|Commitments and contingencies               |                                                                                                                        |   |               |          |              |   |         |        
|Stockholders equity:                       |                                                                                                                        |   |               |          |              |   |         |        
|                                            | Common
stock                                                                                                           |   |               | 28       |              |   |         | 25      |  
|                                            | Additional paid-in capital                                                                                             |   |               | 267,766  |              |   |         | 252,219 |  
|                                            | Deferred stock compensation                                                                                            |   |               | (180     | )            |   |         | (637    | )
|                                            | Accumulated deficit                                                                                                    |   |               | (115,224 | )            |   |         | (85,566 | )
|                                            | Accumulated other comprehensive income                                                                                 |   |               | 748      |              |   |         | 1,517   |  
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|Total stockholders equity                  |                                                                                                                        |   | 153,138       |          |              |   | 167,558 |        
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  
|Total liabilities and stockholders equity  |                                                                                                                        | $ | 180,940       |          |              | $ | 179,878 |        
|                                            |                                                                                                                        |   |               |          |              |   |         |         |  

See accompanying notes.

2



---



##### Table of Contents






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

|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|------------------------------------------------------------------------------- | ---------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                |                                                      |   | Three Months Ended |        | Nine Months Ended
|                                                                                |                                                      |   | September 30,      |        | September 30,    
|                                                                                |                                                      |   |                    |        |                  
|                                                                                |                                                      |   | 2003               |        | 2002              |   | 2003    |        | 2002
|                                                                                |                                                      |   |                    |        |                   |   |         |        |     
|Revenue:                                                                        |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |       
|                                                                                | Product revenue                                      |   | $                  | 10,855 |                   |   | $       | 2,253  |      |   | $       | 16,658 |  |   | $       | 7,879  | 
|                                                                                | Service revenue                                      |   |                    | 2,566  |                   |   |         | 3      |      |   |         | 2,635  |  |   |         | 37     | 
|                                                                                | Related party revenue                                |   |                    | 680    |                   |   |         | 1,929  |      |   |         | 1,817  |  |   |         | 6,076  | 
|                                                                                | License fees and contract revenue                    |   |                    | 2,422  |                   |   |         | 2,438  |      |   |         | 6,903  |  |   |         | 6,908  | 
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Total revenue                                                                   |                                                      |   | 16,523             |        |                   |   | 6,623   |        |      |   | 28,013  |        |  |   | 20,900  |       
|Costs and expenses:                                                             |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |       
|                                                                                | Cost of product revenue                              |   |                    | 7,573  |                   |   |         | 1,792  |      |   |         | 12,195 |  |   |         | 5,808  | 
|                                                                                | Cost of service revenue                              |   |                    | 1,020  |                   |   |         |       |      |   |         | 1,020  |  |   |         |       | 
|                                                                                | Cost of related party revenue                        |   |                    | 62     |                   |   |         | 985    |      |   |         | 200    |  |   |         | 2,832  | 
|                                                                                | Research and development                             |   |                    | 9,113  |                   |   |         | 10,915 |      |   |         | 27,346 |  |   |         | 33,430 | 
|                                                                                | Selling, general and administrative                  |   |                    | 7,429  |                   |   |         | 4,108  |      |   |         | 16,738 |  |   |         | 13,582 | 
|                                                                                | Amortization of deferred stock compensation, net (1) |   |                    | 117    |                   |   |         | (681   | )    |   |         | 457    |  |   |         | 151    | 
|                                                                                | Amortization of intangible assets                    |   |                    | 1,396  |                   |   |         |       |      |   |         | 1,396  |  |   |         |       | 
|                                                                                | Restructuring charges                                |   |                    | 774    |                   |   |         | 261    |      |   |         | 1,096  |  |   |         | 261    | 
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Total costs and expenses                                                        |                                                      |   | 27,484             |        |                   |   | 17,380  |        |      |   | 60,448  |        |  |   | 56,064  |       
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Operating loss                                                                  |                                                      |   | (10,961            | )      |                   |   | (10,757 | )      |      |   | (32,435 | )      |  |   | (35,164 | )     
|Interest income, net                                                            |                                                      |   | 655                |        |                   |   | 1,729   |        |      |   | 2,653   |        |  |   | 6,006   |       
|Other
income (expense), net                                                     |                                                      |   | 189                |        |                   |   | (347    | )      |      |   | 155     |        |  |   | (1,271  | )     
|Provision for income taxes                                                      |                                                      |   | (31                | )      |                   |   |        |        |      |   | (31     | )      |  |   |        |       
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Net loss                                                                        |                                                      | $ | (10,148            | )      |                   | $ | (9,375  | )      |      | $ | (29,658 | )      |  | $ | (30,429 | )     
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Net loss per share, basic and diluted                                           |                                                      | $ | (0.37              | )      |                   | $ | (0.38   | )      |      | $ | (1.15   | )      |  | $ | (1.25   | )     
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Shares used in computing net loss per share, basic and diluted                  |                                                      |   | 27,721             |        |                   |   | 24,482  |        |      |   | 25,769  |        |  |   | 24,350  |       
|                                                                               
|(1) Amortization of deferred stock compensation, net, relates
to the following: |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |       
|Research and
development                                                        |                                                      | $ | 31                 |        |                   | $ | (664    | )      |      | $ | 119     |        |  | $ | (373    | )     
|Selling, general and
administrative                                             |                                                      |   | 86                 |        |                   |   | (17     | )      |      |   | 338     |        |  |   | 524     |       
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|Total                                                                           |                                                      | $ | 117                |        |                   | $ | (681    | )      |      | $ | 457     |        |  | $ | 151     |       
|                                                                                |                                                      |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 

See accompanying notes.

3



---



##### Table of Contents






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

|                                                                            |                                                  |                                                |         |                  |        |      |          |       |        |  
|--------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------------- | ------- | ---------------- | ------ | ---- | -------- | ----- | ------ | -
|                                                                            |                                                  |                                                |         | Nine Month Ended
|                                                                            |                                                  |                                                |         | September 30,   
|                                                                            |                                                  |                                                |         |                 
|                                                                            |                                                  |                                                |         | 2003             |        | 2002
|                                                                            |                                                  |                                                |         |                  |        |     
|Operating activities                                                        |                                                  |                                                |         |                  |        |      |          |      
|Net loss                                                                    |                                                  | $                                              | (29,658 | )                |        | $    | (30,429  | )    
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                                  |                                                |         |                  |        |      |          |      
|                                                                            | Depreciation and amortization                    |                                                |         | 6,642            |        |      |          | 4,199 |       
|                                                                            | Amortization of deferred stock compensation, net |                                                |         | 457              |        |      |          | 151   |       
|                                                                            | Stock options issued to non-employees            |                                                |         | 49               |        |      |          | 453   |       
|                                                                            | Non-cash restructuring charge                    |                                                |         | 150              |        |      |          |      |       
|                                                                            | Changes in operating assets and liabilities:     |                                                |         |                  |        |      |          |       |       
|                                                                            |                                                  | Accounts receivable and other receivable       |         |                  | (2,389 | )    |          |       | (2,715 | )
|                                                                            |                                                  | Inventories                                    |         |                  | 2,390  |      |          |       | (3,590 | )
|                                                                            |                                                  | Prepaid expenses and other current assets      |         |                  | (62    | )    |          |       | (1,920 | )
|                                                                            |                                                  | Security deposits and other assets             |         |                  | (366   | )    |          |       | 194    |  
|                                                                            |                                                  | Notes receivable from
officers                 |         |                  | 37     |      |          |       | 260    |  
|                                                                            |                                                  | Accounts payable and other accrued liabilities |         |                  | 732    |      |          |       | 78     |  
|                                                                            |                                                  | Accrued compensation                           |         |                  | (4,417 | )    |          |       | 274    |  
|                                                                            |                                                  | Deferred revenue and customer deposits         |         |                  | 535    |      |          |       | (1,313 | )
|                                                                            |                                                  | Other noncurrent liabilities                   |         |                  | 102    |      |          |       | 279    |  
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Net cash used in operating activities                                       |                                                  |                                                | (25,798 | )                |        |      | (34,079  | )    
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Investing Activities                                                        |                                                  |                                                |         |                  |        |      |          |      
|Purchases of marketable securities                                          |                                                  |                                                | (28,152 | )                |        |      | (126,520 | )    
|Proceeds from sale of marketable securities                                 |                                                  |                                                | 91,159  |                  |        |      | 89,153   |      
|Proceeds from maturities of marketable securities                           |                                                  |                                                | 7,203   |                  |        |      | 70,984   |      
|Purchases of property and equipment                                         |                                                  |                                                | (1,142  | )                |        |      | (5,243   | )    
|Acquisition
of Zymark, net of cash acquired                                 |                                                  |                                                | (52,955 | )                |        |      |         |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Net cash provided by investing activities                                   |                                                  |                                                | 16,113  |                  |        |      | 28,374   |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Financing activities                                                        |                                                  |                                                |         |                  |        |      |          |      
|Proceeds under sale-leaseback arrangements                                  |                                                  |                                                |        |                  |        |      | 822      |      
|Payments of debt
obligations                                                |                                                  |                                                | (2,275  | )                |        |      | (1,620   | )    
|Proceeds from issuance of common stock                                      |                                                  |                                                | 763     |                  |        |      | 1,035    |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Net cash (used in) provided by financing activities                         |                                                  |                                                | (1,512  | )                |        |      | 237      |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Effect
of exchange rates on changes in cash and cash equivalents            |                                                  |                                                | 89      |                  |        |      |         |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Net decrease in cash and cash equivalents                                   |                                                  |                                                | (11,108 | )                |        |      | (5,468   | )    
|Cash and cash equivalents at beginning of period                            |                                                  |                                                | 16,184  |                  |        |      | 10,655   |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Cash and cash equivalents at end of period                                  |                                                  | $                                              | 5,076   |                  |        | $    | 5,187    |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Supplemental disclosure of cash flow information                            |                                                  |                                                |         |                  |        |      |          |      
|Interest paid                                                               |                                                  | $                                              | 316     |                  |        | $    | 515      |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Income taxes paid                                                           |                                                  | $                                              | 48      |                  |        | $    |         |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      
|Stock
issued for acquisition of Zymark                                      |                                                  | $                                              | 14,591  |                  |        | $    |         |      
|                                                                            |                                                  |                                                |         |                  |        |      |          |      

See accompanying notes.

4



---



##### Table of Contents






CALIPER TECHNOLOGIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 and nine
months ended September 30, 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, and Form 8- K/A dated September 29,
2003 filed by Caliper Technologies Corp.

ACQUISITION

On July 14, 2003, Caliper completed the acquisition of ZYAC Holding
Corporation (ZYAC) from The Berwind Company LLC (Berwind) for consideration
of approximately $73.3 million in the form of $55.7 million in cash, 3.15
million shares of Calipers common stock valued at
$14.6 million, and estimated acquisition costs
of $3.0 million. In the event that Zymark meets specified sales
targets, Caliper
will issue an additional 1.575 million shares of its common
stock to Berwind as part of the sales
price. ZYAC is a holding corporation, with no separate operations of its own,
that holds all of the outstanding stock of Zymark Corporation (Zymark) and,
as a result of the transaction, Caliper also acquired Zymark. Hereinafter
throughout these notes, ZYAC and Zymark are collectively referred to as Zymark.

Zymark is a global developer, manufacturer and marketer of life science
instruments and related consumables and services for use in drug discovery and
other life sciences research and development. Zymark generated revenue of
approximately $65 million for its fiscal year ended December 31, 2002.
Zymarks operations, assumed as of the date of the acquisition, are included in
the results of operations of Caliper beginning on July 14, 2003
and, as a result, are
not reflected in the results of operations for the three and nine months ended
September 30, 2002. The acquisition was accounted for as a purchase in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 141, Accounting
for Business Combinations, and Caliper accordingly allocated the estimated purchase price of Zymark based upon
the fair value of net assets acquired and liabilities assumed.
Caliper is in the process of finalizing certain estimates including
those for intangible assets and certain liabilities and, as a result,
the initial allocation of the purchase price is subject to further
adjustments. The
components and allocation of the estimated purchase price, which is expected to
be finalized within one year of the acquisition date, consisted of the
following:

|                               |       |   |         |        | 
|------------------------------ | ----- | - | ------- | ------ | 
|Cash and cash
equivalents      |       | $ | 5,803   |       
|Other current assets           |       |   | 18,586  |       
|Other assets                   |       |   | 2,838   |       
|Liabilities assumed            |       |   | (20,779 | )     
|Identifiable intangible assets |       |   | 22,604  |       
|Goodwill                       |       |   | 44,296  |       
|                               |       |   |         |       
|                               | Total |   | $       | 73,348 | 
|                               |       |   |         |       

5



---



##### Table of Contents



Acquired intangible assets consisted of the following (in thousands):

Useful Life
    
    Fair ValueDeveloped Technology
    
    5 years
    
    $
    14,314Tradenames
    
    5 years
    
    
    3,439Customer List
    
    5 years
    
    
    3,640Backlog
    
    0.5 years
    
    
    1,211$
    22,604


Fair value was determined by an independent appraisal and was based upon
expected future discounted cash flows taking into account risks related to the
characteristics and application of the technology, existing and future markets
and assessments of life cycle stage of the technology. Amortization expense
was $1.4 million during the three months ended
September 30, 2003 and will be $1.6 million in the fourth
quarter of 2003. The
amortization expense related to the intangible assets in future periods are as
follows ( in thousands):

12-Month Periods Ending
December 31:
    
    Amortization2003
    
    $
    3,0712004
    
    
    4,3802005
    
    
    4,2792006
    
    
    4,2792007
    
    
    4,2792008
    
    
    2,316$
    22,604


Unaudited pro forma operating results from continuing
operations for Caliper for the three and nine months ended September 30, 2003 and 2002,
assuming the acquisition was completed as of January 1, 2002, would be as
follows (in thousands, except per share amounts):

|                                 |  |                                  |        |                                 |  |      |        |      |  |   |         |   |  |   |         |  
|-------------------------------- |  | -------------------------------- | ------ | ------------------------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                 |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                 |  |                                  |        |                                
|                                 |  | 2003                             |        | 2002                            |  | 2003 |        | 2002
|                                 |  |                                  |        |                                 |  |      |        |     
|Revenue                          |  | $                                | 20,212 |                                 |  | $    | 23,550 |      |  | $ | 55,161  |   |  | $ | 65,463  |  
|Operating loss                   |  |                                  | (9,888 | )                               |  |      | (9,992 | )    |  |   | (39,996 | ) |  |   | (37,562 | )
|Net loss                         |  |                                  | (9,363 | )                               |  |      | (9,385 | )    |  |   | (38,268 | ) |  |   | (34,737 | )
|Basic and diluted
loss per share |  |                                  | (0.33  | )                               |  |      | (0.34  | )    |  |   | (1.37   | ) |  |   | (1.26   | )

The unaudited pro forma financial information is presented for
informational purposes only, and is not necessarily indicative of Calipers
operating results had the acquisition been completed on the date for which the
pro forma results give effect. The pro forma financial results reflect certain
adjustments to exclude non-recurring effects
associated with the acquisition of Zymark. Deferred revenues of Zymark
included in purchase price above were recorded at fair value in accordance with
the provisions of SFAS No. 141 and EITF No. 01-03. This
adjustment resulted in a $3.7 million decrease to the value reflected on Zymarks
stand-alone books in accordance with
generally accepted accounting principles. Of this amount, revenues of $3.0 million which
would have been reported in the third quarter of 2003 by Zymark on a continuing GAAP basis of accounting
have been added back to arrive at pro forma 2003 revenues shown above. In
addition, cost of product revenue charges of $493,000 related to the valuation of
inventories at fair value as of the date of acquisition have been
excluded from the pro forma operating results shown above.

GOODWILL

Caliper recorded $44.3 million of goodwill upon the acquisition of Zymark
on July 14, 2003. In accordance with SFAS No. 141, Business Combinations,
goodwill is not amortized. In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets, Caliper will review the carrying amount of goodwill
at least annually to determine whether indicators of impairment exist.

INTANGIBLE ASSETS

Caliper recorded $22.6 million of intangible assets upon the acquisition
of Zymark on July 14, 2003 consisting of developed technology, tradename, and
customer list with lives of 5 years except for backlog which has a life of six
months. In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long Lived Assets, intangible assets are reviewed for impairment
whenever indicators of impairment are present.

SEGMENT REPORTING

Caliper currently operates in one business segment, the development and
commercialization of life science instruments and related consumables and
services for use in drug discovery and other life sciences research and
development. The acquisition of Zymark offers Caliper access to new product
technologies that are complementary to its existing microfluidic technology and
an expanded commercial base that will continue to be managed and operated as
one business. The entire business is comprehensively managed by a single
management team that reports to the Chief Executive Officer. Caliper does not
operate separate lines of business or separate business entities with respect
to its products or product candidates. Accordingly, Caliper does not
accumulate discrete financial information with respect to separate product
areas and does not have separately reportable segments as defined by
SFAS No. 131, Disclosure about Segments
of an Enterprise and Related Information.

PRINCIPLES OF CONSOLIDATION

Calipers condensed consolidated financial statements as of September 30,
2003 include the accounts of its wholly owned subsidiaries including Caliper
GmbH, ZYAC Holding Corporation (US), Zymark Corporation (US), Zymark Limited (UK), Zymark Ltd. (Canada),
Zymark Europe (Belgium), Zymark GmbH (Germany), Zymark SA (France), Zymark AG
(Switzerland) and Zymark Japan Ltd. The operating results of the
Zymark entities have been included beginning July 14, 2003. 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.

6



---



##### Table of Contents



FOREIGN CURRENCY TRANSLATION

The
financial statements of Calipers foreign subsidiaries are
translated in accordance with SFAS No. 52, Foreign Currency Translation. In
translating the accounts of the foreign subsidiaries into U.S. dollars,
stockholders equity is translated at historical rates, while assets and
liabilities are translated at the rate of exchange in effect as of the end of
the period. Revenue and expense transactions are translated using the
weighted-average exchange rate in effect during the period in which they arise.
The resulting foreign currency translation adjustments are reflected as a
separate component of stockholders equity.

Foreign currency transaction gains and losses from the settlement of
account balances denominated in another currency are included in current period
income or loss as incurred.

REVENUE RECOGNITION

Revenue Recognition Policy

Caliper recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. Revenue is recognized on product sales when goods
are shipped under Calipers standard terms of FOB origin. Revenues on
shipments subject to customer acceptance provisions are recognized only upon
customer acceptance, provided all other revenue recognition criteria are met.
Services offered by Caliper are generally recognized as revenue as the
services are performed. Revenue from licensing agreements is deferred and
recognized over the term of the agreement, or in certain circumstances, when
milestones are met. Revenue recognized is not subject to repayment. Cash
received that is related to future performance under such contracts is deferred
and recognized as revenue when earned. No sales made by Caliper include any
return rights or privileges. Based upon Calipers prior experience, sales
returns are not significant, and therefore, Caliper has made no provision for
sales returns or other allowances. Provision is made at the time of sale for
estimated costs related to Calipers warranty obligations to customers.

Adoption of EITF Issue 00-21

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. This Issue, which became effective
for revenue arrangements entered into in fiscal periods beginning after June
15, 2003, applies to contractual arrangements that contain multiple contractual
elements such as consumables or other product related accessories, extended
annual maintenance agreements, and services including installation, validation
and training. Under EITF Issue 00-21, revenue arrangements with multiple
deliverables are divided into separate units of accounting if the deliverables
in the arrangement meet certain criteria. The criteria applied to multiple
element arrangements are whether a) each delivered element has standalone value
to the customer, b) there is objective and reliable evidence of fair value of
the undelivered elements and c) delivery of the undelivered elements is
probable and within the control of Caliper. Arrangement consideration is
allocated among the separate units of accounting based on their relative fair
values.

Revenue
arrangements entered into after July 1, 2003 that include
multiple deliverables are divided into separate units of accounting if the
deliverables meet certain criteria, including whether the fair value of the
delivered items can be determined and whether there is evidence of fair value
of the undelivered items. In addition, the consideration is allocated among the
separate units of accounting based on their fair values, and the applicable
revenue recognition criteria is considered separately for each of the separate
units of accounting.

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.

Product and Service Revenue

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 revenue recognition criteria are met.
Service revenue is recognized as services are performed or, as
applicable, ratably over the contract service term. Customers
are able to

7



---



##### Table of Contents



purchase instruments and related accessories, consumables, including
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.

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 technology 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 $1.8 million in minimum datapoint fees from Amphora,
a related party, for the twelve-month period ending November 30, 2003. To the
extent, however, that Amphora does not generate the minimum number of
datapoints by November 30, 2003 as contractually called for, Amphora is not
obligated to make any further datapoint payments to Caliper until this minimum
number of datapoints is achieved. Caliper has also contractually negotiated
datapoint fees with four additional customers for 2003. Under minimum datapoint
fee arrangements, datapoint revenues are recorded in the period the minimum
applies, provided Caliper has no ongoing performance obligations with respect
to these minimum fees.

Contract Revenue

Revenue from contract research and development services is recognized as
earned based on the performance requirements of the contract. Nonrefundable
contract fees for which no further performance obligations exist, and there is
no continuing involvement by Caliper, are recognized on the earlier of when the
payments are received or when collection is assured. Contract fees received in
advance of work performed are recorded as deferred revenue. These upfront fee
payments are recognized as revenue as the work is performed. Contract fees
received that are related to substantive at-risk milestones are recognized when
Calipers performance of the milestone under the terms of the contract is
achieved and there are no further performance obligations.

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 and nine months ended September 30, 2003
and 2002, Caliper recognized $625,000 in the three month periods, and $1.875
million in the nine month periods, in minimum royalties on Aclara sales of
licensed instruments and LabCards.

Annual Maintenance Agreements

Caliper does not include with the initial product purchase any element of
a maintenance contract. Customers may opt to separately purchase premium
service coverage or extended maintenance beyond the expiration of the one-year
standard warranty. Under Calipers standard warranty, the customer is entitled
to repair or replacement of defective goods. No upgrades or operational
support is included in the standard warranty.

8



---



##### Table of Contents



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
potential common shares 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 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 loss and loss per share if
Caliper had applied the fair value recognition provisions of
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 |       | Nine months Ended
|                    |                                                                                                                  |                   |   | September 30,      |       | September 30,    
|                    |                                                                                                                  |                   |   |                    |       |                  
|                    |                                                                                                                  |                   |   | 2003               |       | 2002              |   | 2003    |       | 2002
|                    |                                                                                                                  |                   |   |                    |       |                   |   |         |       |     
|Net loss:           |                                                                                                                  |                   |   |                    |       |                   |   |         |       |      |   |         |       |   |   |        
|                    | As reported                                                                                                      |                   | $ | (10,148            | )     |                   | $ | (9,375  | )     |      | $ | (29,658 | )     |   | $ | (30,429 | )    
|                    | Add: Stock-based
employee
compensation
expense included in
reported net
loss                                     |                   |   | 317                |       |                   |   | (681    | )     |      |   | 657     |       |   |   | 151     |      
|                    | Deduct: Total
stock-based
employee
compensation
expense determined
under fair value
based methods for
all awards |                   |   | (3,170             | )     |                   |   | (6,148  | )     |      |   | (12,604 | )     |   |   | (17,938 | )    
|                    |                                                                                                                  |                   |   |                    |       |                   |   |         |       |      |   |         |       |   |   |         |      
|                    | Pro forma net
loss                                                                                               |                   | $ | (13,001            | )     |                   | $ | (16,204 | )     |      | $ | (41,605 | )     |   | $ | (48,216 | )    
|                    |                                                                                                                  |                   |   |                    |       |                   |   |         |       |      |   |         |       |   |   |         |      
|Net loss per share: |                                                                                                                  |                   |   |                    |       |                   |   |         |       |      |   |         |       |   |   |        
|                    | As reported:                                                                                                     |                   |   |                    |       |                   |   |         |       |      |   |         |       |   |   |         |      
|                    |                                                                                                                  | Basic and diluted |   | $                  | (0.37 | )                 |   | $       | (0.38 | )    |   | $       | (1.15 | ) |   | $       | (1.25 | )
|                    | Pro forma:                                                                                                       |                   |   |                    |       |                   |   |         |       |      |   |         |       |   |   |         |      
|                    |                                                                                                                  | Basic and diluted |   | $                  | (0.47 | )                 |   | $       | (0.66 | )    |   | $       | (1.61 | ) |   | $       | (1.98 | )

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 and nine months ended September 30, 2003 and 2002,
respectively, is not necessarily representative of the pro forma effects on the
results of operations for future periods.

GUARANTEES AND INDEMNIFICATIONS

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligations in assumes under that guarantee.

Caliper, as permitted under Delaware law and in accordance with its
Bylaws, indemnifies its officers and directors for certain events or
occurrences, subject to certain limits, while the officer or director is or was
serving at Calipers request in such capacity. The term of the indemnification
period is for the officers or directors lifetime. Caliper may terminate the
indemnification agreements with its officers and directors upon 90 days written
notice, but termination will not affect claims for indemnification relating to
events occurring prior to the effective date of termination. The maximum amount
of potential future indemnification is unlimited; however, Caliper has a
director and officer insurance policy that limits its exposure and may enable
it to recover a portion of any future amounts paid. Caliper believes the fair
value of these indemnification agreements is minimal. Accordingly, Caliper has
not recorded any liabilities for these agreements as of September 30, 2003.

NOTE 2  INVENTORIES

Inventories for use in the manufacture of Calipers instruments include
electronic components, devices and accessories either produced or purchased
from original equipment manufacturers. Inventories for use in the manufacture
of LabChip technologies consist primarily of glass, quartz and reagents.
Inventories are stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out basis) or market, reflect appropriate reserves
for potential obsolete, slow moving or otherwise impaired material, and include
appropriate elements of material, labor and indirect costs.

Inventories consist of the following (in thousands):

|                |       |   |               |        |              |   |       |       | 
|--------------- | ----- | - | ------------- | ------ | ------------ | - | ----- | ----- | 
|                |       |   | September 30, |        | December 31,
|                |       |   | 2003          |        | 2002        
|                |       |   |               |        |             
|Raw
material    |       | $ | 7,309         |        |              | $ | 3,614 |      
|Work-in-process |       |   | 999           |        |              |   | 1,590 |      
|Finished
goods  |       |   | 6,239         |        |              |   | 760   |      
|                |       |   |               |        |              |   |       |      
|                | Total |   | $             | 14,547 |              |   | $     | 5,964 | 
|                |       |   |               |        |              |   |       |      

9



---



##### Table of Contents



NOTE 3  COMPREHENSIVE LOSS

The components of comprehensive loss for the three and nine months ended
September 30, 2003 and 2002 are as follows (in thousands):

|                                         |  |                    |         |                   |  |      |        |      |  |   |         |   |  |   |         |  
|---------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                         |  | Three Months Ended |         | Nine months Ended
|                                         |  | September 30,      |         | September 30,    
|                                         |  |                    |         |                  
|                                         |  | 2003               |         | 2002              |  | 2003 |        | 2002
|                                         |  |                    |         |                   |  |      |        |     
|Net
loss                                 |  | $                  | (10,148 | )                 |  | $    | (9,375 | )    |  | $ | (29,658 | ) |  | $ | (30,429 | )
|Unrealized gain
(loss) on
securities     |  |                    | (514    | )                 |  |      | 527    |      |  |   | (835    | ) |  |   | (653    | )
|Foreign currency
translation
adjustments |  |                    | 60      |                   |  |      |       |      |  |   | 87      |   |  |   |        |  
|                                         |  |                    |         |                   |  |      |        |      |  |   |         |   |  |   |         |  
|Comprehensive
loss                       |  | $                  | (10,602 | )                 |  | $    | (8,848 | )    |  | $ | (30,406 | ) |  | $ | (31,082 | )
|                                         |  |                    |         |                   |  |      |        |      |  |   |         |   |  |   |         |  

NOTE 4  RELATED PARTY

For the quarter ended September 30, 2003, Caliper recognized $680,000 in
related-party revenue consisting of sales of Caliper 250 Drug Discovery system
products, LabChip products, and datapoints to Amphora Discovery Corp. Of the
$680,000 in total revenue, $450,000 was in minimum datapoint revenues, $58,000
related to revenue recognized on the deferred gross profits on the sales of 21
Caliper 250 Drug Discovery systems to Amphora and the remaining $172,000 was
for LabChip products and services. For the first nine months of 2003, Caliper
recognized $1.8 million in related-party revenue consisting of $1.4 million in
minimum datapoint revenues, $174,000 related to revenue recognized on the
deferred gross profits on the sales of 21 Caliper 250 Drug Discovery systems
and the remaining $293,000 for LabChip products and services. 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 reflected
Calipers retained ownership interest in the products sold to Amphora. No
sales of drug discovery systems to Amphora were recorded in either the quarter
or nine months ended September 30, 2003. Caliper previously recognized $21,000
of this deferred gross profit in 2001 and $177,000 in 2002. The remaining
$325,000 in deferred gross profit as of September 30, 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 instrumentation
products and a 90-day warranty on chips, which is included in the sales price
of many of its products. Provision is made for estimated future warranty costs
at the time of sale. Factors that affect Calipers warranty liability
include the number of installed units, historical and anticipated rates of
warranty claims, and cost per claim. Caliper periodically assesses the
adequacy of its recorded warranty liabilities and adjusts amounts as necessary.

Changes in Calipers warranty obligation during the three and nine months
ended September 30, 2003 are as follows:

|                                                                   |  |   |           |  
|------------------------------------------------------------------ |  | - | --------- | -
|Balance, December 31, 2002                                         |  | $ | 265,000   |  
|Warranties issued during the first quarter of 2003                 |  |   | 49,000    |  
|Settlements made during the first quarter of 2003                  |  |   | (27,000   | )
|                                                                   |  |   |           |  
|Balance, March 31, 2003                                            |  | $ | 287,000   |  
|Warranties issued during the second quarter of 2003                |  |   | 53,000    |  
|Settlements and adjustments made during the second quarter of
2003 |  |   | (119,000  | )
|                                                                   |  |   |           |  
|Balance, June 30, 2003                                             |  | $ | 221,000   |  
|Zymark warranty obligations assumed                                |  |   | 850,000   |  
|Warranties issued during the third quarter of 2003                 |  |   | 200,000   |  
|Settlements and adjustments made during the third quarter of
2003  |  |   | (220,000  | )
|                                                                   |  |   |           |  
|Balance, September 30, 2003                                        |  | $ | 1,051,000 |  
|                                                                   |  |   |           |  

10



---



##### Table of Contents



NOTE 6  SIGNIFICANT CONCENTRATIONS

In the third quarter of 2003, one customer represented 11% of total
revenues. In the first nine months of 2003, one customer represented 24% of
total revenues. In the third quarter of 2002, two customers represented 42%
and 29%, respectively, of total revenues. In the first nine months of 2002,
two customers represented 36% and 29%, respectively, of total revenues.

No individual customer represented greater than 10% of Calipers
outstanding accounts receivable balance as of September 30, 2003. Three
customers represented 42%, 38% and 11%, respectively, of Calipers outstanding
accounts receivable balance as of September 30, 2002.

NOTE 7.  COMMITMENTS

The following are contractual commitments at September 30, 2003 associated
with debt and lease obligations (in thousands):

|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |     |     | 
|----------------------------------------------------------------------- | ---------- | ------------------------------------------ | - | -------------- | ------ | -------------- | ------ | ----------------- | ----- | ----- | ---- | --- | --- | 
|                                                                        |            |                                            |   |                |        |                |        | Obligations Under |       | Other
|                                                                        |            |                                            |   | Operating      |        | Sale-Leaseback |        | Long-Term        
|                                                                        |            |                                            |   | Leases         |        | Arrangements   |        | Obligations      
|                                                                        |            |                                            |   |                |        |                |        |                  
|                                                                        |            |                                            |   | (In thousands)
|12-month periods ending September 30:                                   |            |                                            |   |                |        |                |        |                   |       |       |      |    
|                                                                        | 2004       |                                            | $ | 7,274          |        |                | $      | 1,996             |       |       | $    | 348 |    
|                                                                        | 2005       |                                            |   | 7,115          |        |                |        | 690               |       |       |      | 348 |    
|                                                                        | 2006       |                                            |   | 6,278          |        |                |        |                  |       |       |      |    |    
|                                                                        | 2007       |                                            |   | 6,009          |        |                |        |                  |       |       |      |    |    
|                                                                        | Thereafter |                                            |   | 6,186          |        |                |        |                  |       |       |      |    |    
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|                                                                        |            | Total minimum lease and principal payments |   | $              | 32,862 |                |        |                   | 2,686 |       |      |     | 696 | 
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|Amount representing interest                                            |            |                                            |   |                |        |                | (226   | )                 |       |       | (31  | )  
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|Present value of future payments                                        |            |                                            |   |                |        |                | 2,460  |                   |       |       | 665  |    
|Current
portion of sale-leaseback arrangements and other obligations    |            |                                            |   |                |        |                | (1,812 | )                 |       |       | (349 | )  
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|Noncurrent
portion of sale-leaseback arrangements and other obligations |            |                                            |   |                |        | $              | 648    |                   |       |       | 316  |    
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    

In
connection with the acquisition of Labotec by Zymark in August 2002,
Caliper is obligated to make noninterest-bearing deferred purchase
price payments of 900,000 Euros to the former owner. This obligation
was recorded at its translated and discounted present value of
$880,000 as of August 14, 2002. The guaranteed deferred payments
are due in three annual installments starting on August 13, 2003.

As of
September 30, 2003, Caliper has a non-cancelable purchase commitment in
the amount of approximately $430,000 with its foreign supplier of its
proprietary glass stock used in the manufacture of certain types of
its chips.
Caliper also has 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 $20,000 in the third 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. Caliper also had sublicensing royalty
obligations to UT-Battelle for a portion of its Aclara licensing revenue.
UT-Battelle royalty and sublicensing royalty accruals were $63,000 and
$375,000, respectively, as of September 30, 2003. We anticipate that during
2004 the minimum royalty obligation under the license with the Trustees
of the University of Pennsylvania will exceed the earned royalty obligation. The minimum royalty
obligation under this license was $15,000 each in the first, second and third
quarter of 2003, and the royalty amount under this license is not expected to
exceed the required minimum royalty for 2003. The required minimum
royalty under this license will never exceed $200,000 per year thereafter.

NOTE 8  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. In May 2003, a Memorandum of Understanding was
executed by counsel for plaintiffs, issuers and their insurers setting forth
the terms of a settlement that would result in the termination of all claims
brought by plaintiffs against the issuers and individual defendants named in
the IPO Lawsuits. On July 7, 2003, a Special Litigation Committee of the
Caliper Board of Directors approved the settlement terms described in that
Memorandum of Understanding. Plaintiffs counsel has proposed draft
documentation which is being reviewed by the issuers and their counsel. The
settlement will be subject to numerous conditions, including approval by Judge
Scheindlin.

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 asserted 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
sought both injunctive relief precluding further infringement of the patent and
damages. The answer to the Complaint was filed on May 8, 2002
and asserted a
counterclaim seeking a declaratory judgment that the patent is not infringed
and is invalid. Caliper believes the counterclaim was 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 asserted a
counterclaim seeking a declaratory judgment that both Caliper patents are
invalid, unenforceable and not infringed. Caliper believes the Amended
Counterclaim was 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. The claim
construction hearing occurred at the end of June 2003. During the first week
of November 2003, Caliper entered into a settlement of this lawsuit, and
Calipers claims against Molecular Devices and Molecular Devices counterclaims
against Caliper were dismissed with prejudice. In connection with this
settlement, Caliper and Molecular Devices entered into a nonexclusive license
agreement pursuant to which Molecular Devices has agreed to pay to Caliper a
one-time licensing fee as well as royalties based on future sales of IMAP
products.

11



---



##### Table of Contents



NOTE 9  RECENT ACCOUNTING PRONOUNCEMENTS

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. The adoption of FIN 45 has not had a material effect on
Calipers financial position or its results of operations.

In
January 2003, the FASB issued FASB Interpretation No. 46 (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
at the end of the
first fiscal year or interim period ending after December 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 April 2003, the FASB issued SFAS
No. 149 (SFAS 149), Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This statement amends SFAS 133 to provide clarification on
the financial accounting and reporting of derivative instruments and hedging
activities and requires contracts with similar characteristics to be accounted
for on a comparable basis. Caliper is in the process of assessing the effect of
SFAS 149 and does not expect the adoption of the statement, which will be
effective for contracts entered into or modified after September 30, 2003, to
have a material effect on its financial condition or results of operations.

In May
2003, the FASB issued SFAS No. 150 (SFAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS 150 establishes standards
on the classification and measurement of financial instruments with
characteristics of both liabilities and equity. SFAS 150 will become effective
for financial instruments entered into or modified after May 31, 2003. The
adoption of SFAS 150 has not had a material effect on Calipers financial
condition or results of operation

NOTE 10  RESTRUCTURING ACTIVITIES

On May 6, 2003, due to the continuing broad economic slowdown and reduced
research and development spending by biopharmaceutical companies,
Caliper conducted
a reduction in force that resulted in a further downsizing of its employee work
force by 26 people, or approximately 10%. Caliper believed this planned action,
which was independent of the Zymark acquisition, was necessary to better align
Calipers organizational structure with these depressed market conditions and
customer demand. Previously, in September 2002, Caliper had conducted
its first
reduction in force that resulted in a downsizing of its employee work force by
28 people that was completed prior to December 31, 2002. The reductions in both
September 2002 and May 2003 were primarily in Calipers research

12



---



##### Table of Contents



and development staff where it
continues to change the focus of its product
development and technology research to align more with the changing needs of
its customers. Caliper incurred a charge of $322,000 in the second quarter of 2003
for severance payments and related benefits, with all employee separations
completed and payments distributed by the end of June 2003.

As a
result of the acquisition of Zymark, on August 5, 2003, Caliper
conducted a reduction in force that will downsize its workforce by
approximately 50 positions, or 9% of the total headcount of Caliper
and the newly acquired Zymark. The reduction is part of ongoing
integration efforts to eliminate redundancies and increasing
organizational efficiencies within the newly combined company. Of the
50 positions, 38% occurred in August 2003 with the remainder to take
place by the end of February 2004. Caliper expects to realize
approximately $3.4 million in annualized savings from this
employee downsizing action. Caliper recorded approximately $774,000
of restructuring and integration charges in the third quarter of 2003
with additional related charges of $1.1 million expected. The
integration plans include activities involved with consolidating the
previously separate operations of Zymark with Caliper and to date are
comprised principally of amounts related to employee separations and
outplacement consulting fees. The severance related charges consist
of one-time termination benefits recognized and measured at fair
value at the date the termination was communicated to the employees.
While most functional groups were included in this consolidation
effort, the research and development organization remained unchanged
pending further strategy and product priority decisions that will be
made in the fourth quarter of 2003. These actions will result in an
additional restructuring charge in the fourth quarter of 2003, the
amount of which is not yet determined.

The following table summarizes the restructuring activity during the nine
months ended September 30, 2003:

|                            |  |   |          |  
|--------------------------- |  | - | -------- | -
|Balance, March 31, 2003     |  | $ |         |  
|Restructuring Charges       |  |   | 322,000  |  
|Payments                    |  |   | (322,000 | )
|                            |  |   |          |  
|Balance, June 30, 2003      |  | $ |         |  
|Restructuring
Charges       |  |   | 774,000  |  
|Payments                    |  |   | (450,000 | )
|                            |  |   |          |  
|Balance, September 30, 2003 |  | $ | 324,000  |  
|                            |  |   |          |  

The
$324,000 accrued as of September 30, 2003 is expected to be paid
by the end of December 2003.

13



---



##### Table of Contents






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 September 30, 2003 and for the three and nine month
periods ended September 30, 2003 and September 30, 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. We have attempted to identify these statements by
the use of words such as expect, plan, intend and other similar words
denoting future events. 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, and following the acquisition
of Zymark, we are now also a leading provider of laboratory
automation, liquid handling and robotics solutions to pharmaceutical
and other companies. 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 three
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. Following the
acquisition of Zymark, we also sell our products through a global network of
approximately 30 independent distributors, who in turn sell our 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.

On July 14, 2003, we completed the acquisition of Zymark
and are in the process of
actively integrating our two operations. We anticipate this acquisition will
allow us to leverage our microfluidic LabChip technology and product discovery
engine with Zymarks proven substantial commercial organization focused on
laboratory automation. We expect the acquisition will result in a
state-of-the-art, comprehensive portfolio of laboratory automation products
with a global commercial infrastructure to provide customers with highly
innovative solutions for accelerating drug discovery and development in the
life sciences, pharmaceutical and biotechnology industries. We acquired Zymark
Corporation for approximately $55.7 million in cash,
$3.0 million in estimated acquisition
costs and 3.15 million shares of our common stock with an aggregate value of
$14.6 million based on our average closing stock price for the five (5) days
preceding the definitive stock purchase agreement with Berwind dated June 9,
2003. In the event that revenues from Zymark products and services meet
specified sales targets, we will issue an additional 1.575 million shares to
Berwind as additional consideration.

The acquisition of Zymark resulted in a substantial increase in our
overall customer base and expanded our ability to market our products,
including into new geographic territories. We also acquired Zymark to enable us
to increase in sales of our existing LabChip products as we market these
products through Zymarks established distribution channels. Following the
completion of the Zymark acquisition, we set our new combined business strategy
in motion. As part of this strategy, we are focused on realizing synergies
that we expected from the acquisition by reducing costs, creating a more
efficient company, and increasing or sales and marketing focus and adoption of
our technologies. We have already completed the integration of sales,
marketing, manufacturing, service and administration and have announced a
reduction in force to reduce overhead. We are working on fewer research and
development project areas at any given time, enabling us to be more focused,
productive and efficient with this investment. And we are using our combined
direct and strategic partnership channels to maximize penetration within the
life science research and diagnostics markets. While these initiatives are
providing early positive indications, there can be no assurance that our
efforts will be successful.

14



---



##### Table of Contents



Since our inception, we have incurred significant losses and, as of
September 30, 2003, we had an accumulated deficit of $115.2 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. Although we have taken steps to achieve
significant cost reductions in our business operations, we expect to continue
to incur substantial research and development, manufacturing scale-up and
sales, general and administrative costs. As a result of our cost reductions,
though, we have reduced the amount of cash we need to generate from
sales to achieve positive
operating cash flow. However, we will still need to generate a higher
level of sales to
achieve positive operating cash flow. We believe the acquisition of Zymark
will allow us to more rapidly scale our operations with the goal of achieving
positive operating cash flow in the fourth quarter of 2005.

During the quarter ended September 30, 2003 as compared to the same period
last year, total revenue increased 149% driven mainly by the addition of
Zymarks product and service revenues offset in part by a decline in related
party sales to Amphora and a decline in research and development funding from
Agilent. We also believe our revenues during these periods have been adversely
impacted by the sluggish economic climate with its effect of reducing capital
spending by pharmaceutical and other research companies. We believe that the
general economic climate may improve in 2004, and that our future revenues will
rely to a lesser extent on capital spending patterns as we continue to focus
our strategies on development of our other sources of higher margin, recurring
revenue such as LabChip products, datapoints, and automated disposable dispenser
tips, and continue to expand our base of service business.
Zymarks business has historically experienced a modest level of
seasonality in the pattern of sales, i.e., purchase orders received.
Typically, in the second half of the year, the number of purchase
orders received is greater than those received in the first half of
the year. It should not be assumed, however, that this trend will
continue given our managements intention to emphasize sources of higher
margin, recurring revenues which have the potential to drive greater
operational efficiency and less seasonal impact.

Prior to our acquisition of Zymark, we generated a substantial portion of
our revenue from a limited number of sources. During the quarter ended
September 30, 2003, only Agilent accounted for more than 10% of our overall
revenues. During the comparable third quarter of 2002, Amphora alone accounted
for 29% of our total revenue and 41% of our product revenue, and Agilent alone
accounted for 42% of our total revenue and 37% of our product revenue.
Although Amphora is scheduled to purchase one remaining Caliper 250 drug
discovery instrument by December 31, 2003 as required under an
agreement with them, we have not as yet received a purchase order for
this instrument. Amphora has no further obligation to purchase instruments from
us following this one remaining instrument. In addition, there can be no
assurance that our customers that participated in our Technology Access Program
prior to our conversion to a commercial products business will continue to buy
Caliper  products or services at historical levels, or at all, now that all
purchase obligations by these customers were met as of March 31, 2003.

Amphora sales decreased by 65% in the three month period and 70% in the
nine month period as a result of no Caliper 250 system sales to Amphora in 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 only expect Amphora to buy
one additional Caliper 250 drug discovery system in 2003. Rather, we expect
the bulk of their purchases will be for chips and parts along with contractual
datapoint revenue of approximately $300,000 in the fourth quarter of 2003.
Additionally, Amphora is not obligated to make any further datapoint payments
to us until they have generated the number of datapoints, either in 2003 or
subsequent years, that Amphora is entitled to as a result of the following
payments they paid or are required to pay us: a) $1.8 million minimum datapoint
payment for the 12 months ending November 30, 2003; and b) any payments made
pursuant to a $2.2 million deferred contingent obligation through quarterly
payments based on Amphoras revenue or commissions earned by Amphora for
marketing assistance. If Amphora generates fewer datapoints than the number to
which they are entitled due to the minimum payment and any contingent payments
made, our future datapoint revenues will be adversely affected to the extent of
this shortfall. 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.

15



---



##### Table of Contents



In May 2002, we notified Agilent of our election to terminate the
agreement between the companies, effective as of May 8, 2003. However,
pursuant to the agreement certain terms survive this termination. 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
further reduce product development funding at any time as they make independent
decisions on their product lines. 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 termination of our exclusivity obligations with Agilent, we are
actively working to expand the number and scope of our commercial partnerships.

Under
our collaboration agreement, Agilent funded 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 27% in the first nine months of
2003 as compared to the same period last year indicating, we believe, a
continued growing market acceptance of this technology. However, in the three
and nine months ended September 30, 2003, research and development funding from
Agilent declined 94% and 52%, respectively, as compared to the same periods in
2002 as we have now completed the development programs related to the Agilent
2100 Bioanalyzer product line. We anticipate Agilents research and development
funding in the fourth quarter of 2003 to remain at these reduced levels
experienced in the third quarter of 2003. However, we expect this decrease will
be offset, in part, by research and development funding from our collaboration
with Bio-Rad Laboratories signed in June 2003.

Caliper,
prior to acquiring Zymark, sold only two maintenance contracts covering early
prototype instruments. These contracts provided access to upgrades to
Calipers product, if and when available, and operational support. With the
acquisition of Zymark, which has historically offered extended maintenance
contracts to its customers, Caliper expects maintenance services to be a more
significant source of revenue. Maintenance agreements, as currently offered to
customers, provide for preventive maintenance visits, routine parts replacement
and technical and operational support for products. In the future, Caliper
expects to offer maintenance agreements to customers for access to instrument
hardware and software upgrades. Revenue with respect to maintenance contracts
is deferred and recognized ratably over the term of the contract.

Since early September of 2002 and over the course of the following 12
months, the continuing broad economic slowdown and the adverse impact of
reduced research and development spending by biopharmaceutical companies
required us to streamline our business to better align our organizational
structure with these depressed market conditions and customer demand. Prior to
and independent of the Zymark acquisition, we conducted two reductions in force
as follows:



| |  |  | in September 2002, we conducted our first reduction in
force that resulted in a downsizing of our employee work force by 28
people, or approximately 10%, primarily in our research and
development staff, incurring a restructuring charge of $314,000; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in May 2003, we further downsized of our employee work force
by 26 people, or approximately 10%, again primarily in our research
and development staff incurring a restructuring charge of $322,000.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect to realize approximately $2.0 million and $2.6 million in annualized
savings, respectively, from these employee downsizing actions.

As a
result of the Zymark acquisition, in August 2003 we announced our third reduction in
force to eliminate redundancies, properly size our efforts to the marketplace
and increase organizational efficiencies within our newly combined company.
This reduction in force will downsize our workforce by approximately 50 positions, or 9% of
the total headcount of Caliper and the newly acquired Zymark, with 38%
of the position reductions occurring in August 2003 and the
remainder to take place by the end of February 2004. We incurred a
$774,000 restructuring charge in the third quarter of 2003, with all
functional groups affected except for the research and development
staff which remained unchanged pending further strategic and product priority decisions
that will be made in the fourth quarter of 2003.

16



---



##### Table of Contents



Results of Operations

The results of operations include the financial results of Zymark from July 14,
2003 (acquisition date) through September 30, 2003.

Three and Nine months Ended September 30, 2003 and 2002

Revenue. Total revenue was $16.5 million for the three months ended
September 30, 2003, compared to $6.6 million for the three months ended
September 30, 2002. The substantial increase in total revenue was primarily
due to the contributed revenues from the Zymark acquisition, offset by a $1.2
million decrease in sales to Amphora. For the nine months ended September 30,
2003, total revenue was $28.0 million as compared to $20.9 million in the
comparable period last year. The increase in total revenue was again primarily
due to the contributed revenues from the Zymark acquisition, offsetting a
decline of $4.3 million in sales to Amphora.

Product revenue from unrelated customers was $10.9 million and $16.7
million, respectively, for the three and nine months ended September 30, 2003,
compared to $2.3 million and $7.9 million, respectively, in the same periods of
2002. For both the three and nine month periods, the increases in product
revenue were primarily due to the addition of $8.3 million of Zymark product revenues included
in the periods. For the quarter ended September 30, 2003, microfluidic product
revenues increased $344,000, or 15%, over the same period in 2002 due
to a 21%
product volume growth under our collaboration with Agilent offset, in part by
modest declines in high throughput system sales. For the nine months ended
September 30, 2003, microfluidic product revenues increased by $521,000, or 7%,
over the same period in 2002 due again to a 27% to product volume growth under
our collaboration with Agilent offset by a 15% decline in high throughput
system sales. Datapoint revenues from unrelated customers were
approximately 1%
and 3% of total unrelated product revenues, respectively, for the three and nine months
ending September 30, 2003 and approximately 9% and 7%,
respectively, of total unrelated
product revenues for the same periods of 2002.

Service
revenue, consisting primarily of annual maintenance contracts and
other product support services, was $2.6 million for the three and nine
months ended September 30, 2003, related almost exclusively to
the addition of the existing
Zymark service business.

Related party revenue was $680,000 and $1.8 million, respectively, for the
three and nine months ended September 30, 2003, compared to $1.9 million and
$6.1 million, respectively, in the same periods of 2002. The declines were
primarily due to no drug discovery system sales to Amphora in the first nine
months of 2003 as compared to three and ten system sales to Amphora in the
three and nine months ended September 30, 2002, respectively. Datapoint
revenue from Amphora was $450,000 and $1.4 million for the three and nine
months ended September 30, 2003, respectively, as compared to $500,000 and $1.5
million in the same periods last year. Assay and application development
services to Amphora, decreased $229,000 or 65% and $953,000 or 87%,
respectively, for the three and nine months ended September 30, 2003 as
compared to the comparable periods in 2002, as we completed most contracted services in 2002. We anticipate minimal contract revenues from Amphora during
the rest of 2003.

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 LabChip technology and laboratory automation
solutions in the context of decreased capital spending by our customers.

License
fees and contract revenues remained unchanged at $2.4 million and $6.9
million, for the three and nine months ended September 30, 2003 and 2002,
respectively. Of these amounts, research and development funding from Agilent
accounted for 3% and 25% for the three and nine months ended September 20,
2003, compared to 56% and 51%, respectively, in the same periods of 2002.
Agilents research and development funding is expected to remain at these
reduced levels experienced in the third quarter of 2003 in future periods. The
decrease in Agilent research and development funding was substantially offset
by research and development funding increases from our other collaboration partners
and the addition of contract revenues attributable to Zymark. Licensing fees
were $625,000 and $1.875 million, respectively, in the three and nine months
ended September 30, 2003 and 2002, both resulting from the licensing of the
Ramsey family of patents to Aclara Biosciences which ends in 2003.

Cost of Product Revenue.Cost of product revenue represents manufacturing
costs incurred in the microfluidic and laboratory automation instrument and
chip production process, including component materials, assembly labor and
overhead, packaging and delivery cost. Cost of products sold to unrelated
customers increased to $7.6 million and $12.2 million for the three and nine
months ended September 30, 2003, respectively, as compared to $1.8 million and
$5.8 million for the same periods last year. The increases were driven
primarily by the inclusion of the Zymark product
costs, which were $5.9 million in the three and nine months
periods of 2003. In addition, cost of products sold under our collaboration with Agilent
increased 27% and 40% for the three and nine months ending September 30, 2003,
respectively, as

17



---



##### Table of Contents



compared to the same periods in 2002. Offsetting these increases were
lower costs resulting from lower volume sales of high throughput system product
and reduced warranty costs which declined $104,000 and $418,000, respectively,
in the three and nine month periods of 2003 as compared to the same periods in
2002. As a result of lower warranty costs and a more favorable mix of higher
margin products, the gross margins on total revenues from unrelated customers
were 30% and 27% for the three and nine months ended September 30, 2003, as
compared to 20% and 26% for the same periods in 2002. Product mix will continue
to affect our future gross margins as we earn a higher return from our own high
throughput system products, and to a lesser extent, our lab automation
products, as opposed to sharing gross margin revenues on collaboration products
with Agilent.

Cost of service revenues in the three and nine months ended September 30,
2003, reflects the inclusion of Zymark service revenues and their associated
costs.

Cost of products sold from related party sales to Amphora was $62,000 and
$200,000 for the three and nine months ended September 30, 2003, compared to
$985,000 and $2.8 million for the same periods in 2002. In the
three and nine
months ended September 30, 2003, we had no drug discovery system sales to
Amphora, as compared to three and ten system sales to Amphora in the same
periods of 2002. We also had no warranty costs in the cost of related party
product revenue during the third quarter of 2003 and only $10,000 in the nine
months ended September 30, 2003 as compared to $18,000 and $294,000 in the
comparable periods of 2002. Datapoint revenues, with their minimal associated
costs to us, were 81% and 80%, respectively, of Amphora product revenues in the
third quarter and first nine months of 2003 as compared to only 32% and 30% in
the same periods last year. As a result, the gross margins on total revenues
from Amphora were 89% and 88% for the three and nine months ended September 30,
2003, as compared to 37% and 43% for the same periods in 2002.

In connection with the integration of our operations with those of Zymark,
including moving certain instrument manufacturing operations from our facility
in Mountain View to our facility in Hopkinton, and with our efforts to further
rationalize our research and development expenses, certain expenses that were
previously allocated to research and development are now being allocated to
fixed manufacturing overhead. We expect this revised allocation of expenses
may increase our cost of product revenue and therefore adversely impact our
reported gross margins in future periods, but will not otherwise affect our
reported financial performance. Because we are still in the process of
integrating our operations and rationalizing our research and development
expenses, we cannot presently estimate what the ultimate impact of this
reallocation of expenses will be on our future reported cost of product revenue
and gross margins.

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, 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 $9.1 million and $27.3 million,
respectively, during the three and nine months ended September 30, 2003,
compared to $10.9 million and $33.4 million in the same periods of 2002.
Ongoing research and development associated with the laboratory automation
products acquired in the Zymark acquisition totaled $1.2 million in the three
and nine months ended September 30, 2003. This decline in the third quarter of
2003 was primarily attributable to lower salary and related personnel costs
resulting from a 23% decline in the number of research and development
personnel as of September 30, 2003 as compared at September 30, 2002 as well as
reduced technical services and supplies costs. Of the decreased costs, $2.1 million was related to lower
salaries and related benefit costs for research personnel, $763,000
was related to reduced
outside technical services, $444,000 was related to lower laboratory supplies costs, offset
in part by a $91,000 increase in fees for intellectual property
prosecution, a
$220,000 increase in depreciation costs, and the addition of the
Zymark expenses. Of the decreased costs, in the first nine months of 2003, $4.9 million was
related to lower salaries and related benefit costs for research personnel,
$2.0 million was related to reduced outside technical services,
$1.4 million was related to lower
laboratory supplies costs, and $297,000 was related to lower allocated facilities costs,
offset in part by a $663,000 increase in fees for intellectual property
prosecution, a $619,000 increase in depreciation costs, and the
addition of the Zymark expenses.

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 and on new innovations combining LabChip technology and
laboratory automation. We are now focusing on rationalizing our R&D resources using sequential versus
parallel investment methodology. By doing this, we are working on fewer
project areas at any given time, enabling us to be more focused, productive and
efficient with this investment. Our current focus is building a new, lower
cost, smaller footprint, more usable high throughput system platform. 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 microfluidic research and product
development efforts, offset in part by modest research and development programs
mainly in the areas of laboratory automation and robotic systems. We expect
research and development spending to be based on customer demand, market
conditions, and our commercial growth in subsequent years.

Selling, General and Administrative Expenses.Selling, general and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, marketing and product
promotional costs, professional fees, and other corporate expenses including
business development and general legal activities. Selling, general and
administrative expenses increased to $7.4 million and $16.7 million,
respectively, in the three and nine months ended September 30, 2003, compared

18



---



##### Table of Contents



to $4.1 million and $13.6 million in the same periods of 2002. The $3.3
million increase in the quarter ended September 30, 2003 as compared to the
same period last year was primarily due to the $3.6 million addition of
marketing and sales infrastructure of Zymark offset in part by $128,000 of
lower legal expenses and lower high throughput product marketing expense of
$162,000. The $3.1 million increase in the first nine months of 2003 as
compared to the same period of 2002 was again primarily due to the $3.6 million
additional cost of Zymarks marketing and worldwide sales organization, offset
by lower consultant and outside services costs of $194,000, lower high
throughput product marketing expense of $663,000, lower administrative expenses
of $208,000 and lower legal expenses of $255,000, offset by higher salaries and
related employee expenses of $804,000. We expect marketing and product
promotion expenses to increase over the next several years to support the more
global commercialization of our products utilizing the trained sales force and
commercial infrastructure the acquisition of Zymark has brought us. We
anticipate general administrative expenses to increase only as revenue grows
but at a lesser rate on a percentage basis. We expect the redundancies
identified in the integration of the recently acquired Zymark to offset in part
the increases in selling, general and administrative expenses.

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 $117,000 and $457,000, respectively,
for the three and nine months ended September 30, 2003, compared to a net gain
of $681,000 on the reversal of stock compensation expense and a $151,000
expense for the same periods of 2002. We expect to record amortization expense
for deferred compensation as follows: $85,000 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 $655,000 and $2.7 million, respectively, for the
three and nine months ended September 30, 2003, compared to $1.7 million and
$6.0 million for the same periods 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 three and nine month
periods ending September 30, 2003 as compared to the same periods in 2002. We expect interest income,
net, to be substantially lower in future periods due to the
approximately $53.0 million, net of cash acquired, of cash used in July 2003 to acquire Zymark.

Other Income (Expense), Net.Other income, net, of $189,000 for the three
months ended September 30, 2003 was primarily foreign currency transaction
gains resulting from the settlement of account balances denominated in another
currency. Other income, net, of $155,000 for the nine months ended
September 30, 2003 was on the effect of foreign currency transaction gains offset by
miscellaneous losses including the disposal of surplus manufacturing equipment
no longer needed in our operations. Other expense of $347,000 and $1.3 million,
respectively, for the three and nine months ended September 30, 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.

Provision for Income Taxes.Provision for income taxes during the three
months ended September 30, 2003 related to foreign income taxes provided on
local earnings of Calipers subsidiary operations.

LIQUIDITY AND CAPITAL RESOURCES

Our cash, cash equivalents and marketable securities were $72.2 million at
September 30, 2003 compared to $154.3 million at
December 31, 2002, primarily due to the $55.7 million of
cash used to acquire Zymark, and $25.8 million of cash used in
operations.

We used
cash of $25.8 million for operations for the nine-month period
ended September 30, 2003 as compared to $34.1 million for the comparable period in 2002. Cash
used in operating activities in the nine months ended September 30, 2003
consisted primarily of the net loss of $29.7 million, plus aggregate current
asset and liability changes of $3.4 million, consisting primarily of increases in accounts
receivable and other receivables of $2.4 million, offset in part by a decrease
in inventories of $2.4 million, offset in part by a decrease in accrued
compensation of $4.4 million, and by amortization of deferred stock
compensation and amortization expense of $7.1 million. Cash used in the nine
months ended September 30, 2002 consisted primarily of the net loss of $30.4
million, changes in operating assets and liabilities of $8.5 million, offset in
part by non-cash charges of $4.4 million related to amortization of deferred
stock compensation and depreciation and amortization expense. We also have
$3.3 million in a market rate account at September 30, 2003 pledged for
facilities deposits compared to $2.8 million at September 30, 2002.

Net cash
provided by investing activities was $16.1 million for the nine
months ended September 30, 2003 as compared to $28.4 million for the comparable
period in 2002. Net cash provided by investing consists primarily of proceeds
from sales and maturities of marketable securities offset in part by purchases of
marketable securities as well as capital expenditures and, in the
2003 period, the purchase of Zymark. We sold a large amount
of our marketable securities in the latter part of June 2003 in order to obtain
the cash we used for the acquisition of Zymark in July 2003. We used $1.1
million and $5.3 million for the purchase of property and equipment in the
first nine months of 2003 and 2002, respectively.

19



---



##### Table of Contents



Net cash used in financing activities was $1.5 million for the nine months
ended September 30, 2003 as compared to net cash provided by financing
activities of $237,000 for the comparable period in 2002. Net cash used in
financing activities for the nine months ended September 30, 2003 consisted of
$2.3 million in repayments of sale-leaseback arrangements, and other debt obligations, offset by $763,000
of proceeds from employee stock purchase plan and option exercises. Net
proceeds from financing activities for the same period ended September 30, 2002
consisted of $1.0 million proceeds from employee stock purchase plan and option
exercises and $822,000 proceeds from sale-leaseback arrangements, offset by
repayments of sale-leaseback arrangements of $1.6 million.

The following are contractual commitments at September 30, 2003 associated
with debt and lease obligations (in thousands):

|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |     |     | 
|----------------------------------------------------------------------- | ---------- | ------------------------------------------ | - | -------------- | ------ | -------------- | ------ | ----------------- | ----- | ----- | ---- | --- | --- | 
|                                                                        |            |                                            |   |                |        |                |        | Obligations Under |       | Other
|                                                                        |            |                                            |   | Operating      |        | Sale-Leaseback |        | Long-Term        
|                                                                        |            |                                            |   | Leases         |        | Arrangements   |        | Obligations      
|                                                                        |            |                                            |   |                |        |                |        |                  
|                                                                        |            |                                            |   | (In thousands)
|12-month periods ending September 30:                                   |            |                                            |   |                |        |                |        |                   |       |       |      |    
|                                                                        | 2004       |                                            | $ | 7,274          |        |                | $      | 1,996             |       |       | $    | 348 |    
|                                                                        | 2005       |                                            |   | 7,115          |        |                |        | 690               |       |       |      | 348 |    
|                                                                        | 2006       |                                            |   | 6,278          |        |                |        |                  |       |       |      |    |    
|                                                                        | 2007       |                                            |   | 6,009          |        |                |        |                  |       |       |      |    |    
|                                                                        | Thereafter |                                            |   | 6,186          |        |                |        |                  |       |       |      |    |    
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|                                                                        |            | Total minimum lease and principal payments |   | $              | 32,862 |                |        |                   | 2,686 |       |      |     | 696 | 
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|Amount representing interest                                            |            |                                            |   |                |        |                | (226   | )                 |       |       | (31  | )  
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|Present value of future payments                                        |            |                                            |   |                |        |                | 2,460  |                   |       |       | 665  |    
|Current
portion of sale-leaseback arrangements and other obligations    |            |                                            |   |                |        |                | (1,812 | )                 |       |       | (349 | )  
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    
|Noncurrent
portion of sale-leaseback arrangements and other obligations |            |                                            |   |                |        | $              | 648    |                   |       |       | 316  |    
|                                                                        |            |                                            |   |                |        |                |        |                   |       |       |      |    

In
connection with the acquisition of Labotec by Zymark in August 2002,
Caliper is obligated to make noninterest-bearing deferred purchase
price payments of 900,000 Euros to the former owner. This obligation
was recorded at its translated and discounted present value of
$880,000 as of August 14, 2002. The guaranteed deferred payments
are due in three annual installments starting on August 13, 2003.

As of September 30, 2003, we have a non-cancelable purchase commitment in
the amount of approximately $430,000 with our foreign supplier 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 $20,000 in the third 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 also had sublicensing royalty
obligations to UT-Battelle for a portion of our Aclara licensing revenue.
UT-Battelle royalty and sublicensing royalty accruals were $63,000 and
$375,000, respectively, as of September 30, 2003. We anticipate that during
2004 the minimum royalty obligation under the license with the Trustees
of the University of Pennsylvania will exceed the earned royalty obligation. The minimum royalty
obligation under this license was $15,000 each in the first, second and third
quarter of 2003, and the royalty amount under this license is not expected to
exceed the required minimum royalty for 2003. The required minimum
royalty under this license will never 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, acquisitions 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 updated for the
recent acquisition of Zymark, we believe that our current cash balances,
together with the revenue to be derived from our commercial partners, our
commercial sales from our microfluidic and lab automation 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 and lab
automation products;                                            
| | - |  | ------------------------------------------------------------------------------------------------------------------------
|
| |  |  | continued scientific progress in our microfluidic, lab automation
and robotic 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;          

20



---



##### Table of Contents





| |  |  | the time and costs involved in expanding and maintaining our manufacturing facilities;                   
| | - |  | ---------------------------------------------------------------------------------------------------------
|
| |  |  | the costs involved to integrate Zymark and Calipers operations;                                         
|
| |  |  | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims;
|
| |  |  | 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 remainder of 2003 and over the 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 microfluidic technologies, which we developed prior to our
acquisition of Zymark Corporation on July 14, 2003, are still in the early
stages of development, and our drug discovery systems incorporating these
technologies have only recently begun to be used commercially. If our drug
discovery systems do not gain further market acceptance, we will be unable to
generate significant sales of these products and our revenue may 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. Our microfluidic-based
drug discovery systems are now being marketed and sold principally by the sales
and marketing organization we acquired with our recent acquisition of Zymark.
These systems and the technologies on which they are based are new to this
sales and marketing organization, which may limit our ability to effectively
market and sell these systems.

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

The life sciences productivity tools equipment market, the principal
market for the traditional products of Zymark, is very competitive and is
characterized by rapid technological change and frequent new product
introductions. The commercial success of our liquid handling systems and other
productivity tool technologies depends upon continued and expanding market
acceptance of our systems and products by pharmaceutical and biotechnology
companies and genomics research organizations. We anticipate that our
competitors will introduce new, enhanced products in this market in the near
future. Our future success will depend on our ability to

21



---



##### Table of Contents



offer new products and technologies that researchers believe are an
attractive alternative to current productivity tool technologies, that address
the evolving needs of our customers and that are technologically superior to
new products that may be offered by our competitors. We may experience
difficulties or delays in our development efforts for new products, and we may
not ultimately be successful in developing them. Any significant delay in
releasing new products in this market could adversely affect our reputation,
give a competitor a first-to-market advantage or cause a competitor to achieve
greater market share.

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

We intend to continue developing new, lower cost versions of our
microfluidic-based 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 more widely used
and we may experience a decline in revenue or slow revenue growth and may not
achieve or maintain profitability. Further, 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. We are
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.

Our recent acquisition of Zymark and other potential acquisitions may have
unexpected consequences or impose additional costs on us.

Our business is highly competitive and our growth is dependent upon market
growth 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, such as our acquisition of Zymark. From time to time, we consider
and evaluate potential business combinations both involving our acquisition of
another company and transactions involving the sale of Caliper through, among
other things, a possible merger or consolidation of our business into that of
another entity. 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;                                                                                                       
|
| |                                   |  | potential cost and disruptions caused by the integration of financial reporting systems;                                                                                                         
|
| |                                   |  | accounting consequences, including amortization of acquired
intangible assets or other required purchase accounting adjustments,
resulting in variability or reductions of our reported earnings;
|
| |                                   |  | potential difficulties in completing projects associated with
purchased in-process research and development;                                                                                     
|
| |                                   |  | risks of entering markets in which we have no or limited direct prior
experience and where competitors in these markets have stronger market
positions;                                          
|
| |                                   |  | the potential loss of key employees of Caliper or the acquired
company due to the
employment uncertainties inherent in the acquisition process;                                                  
|
| |                                   |  | the assumption of known and potentially unknown liabilities of the
acquired company;                                                                                                             
|
| |                                   |  | we may find that the acquired company or assets do not further our
business strategy or that we paid more than what the company or assets
are worth;                                             
|
| |                                   |  | we may have product liability associated with the sale of the acquired companys products;                                                                                                       
|
| |                                   |  | we may have difficulty maintaining uniform standards, controls, procedures and policies;                                                                                                         
|
| |                                   |  | our relationship with current and new employees and customers could be impaired;                                                                                                                 
|
| |                                   |  | the acquisition may result in litigation from terminated employees or
third parties who believe a claim against us would be valuable to
pursue;                                                  
|
| |                                   |  | our due diligence process may fail to identify significant issues
with product quality, product architecture and legal contingencies,
among other matters; and                                   
|
| |                                   |  | insufficient revenues to offset increased expenses associated with acquisitions.                                                                                                                 
|
| | Acquisitions may also cause us to:
|
| |                                   |  | issue common stock that would dilute our current stockholders percentage ownership;                                                                                                             

22



---



##### Table of Contents





| |  |  | record goodwill and non-amortizable intangible assets that will be
subject to impairment testing and potential periodic impairment charges;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | incur amortization expenses related to certain intangible assets;                                                                          
|
| |  |  | incur reductions in deferred
revenue of the acquired company, resulting in lower future revenues; or                                       
|
| |  |  | incur other large and immediate write-offs.                                                                                                

We cannot assure you that our acquisition of Zymark and any future
acquisitions will be successful and will not adversely affect our business. We
must also maintain our ability to manage any growth effectively. Failure to
manage growth effectively and successfully integrate acquisitions we make could
harm our business.

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

We have experienced significant operating losses each year since our
inception and expect to incur substantial additional operating losses for at
least the next two years, primarily as a result of 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 September 30, 2003, we had an accumulated
deficit of approximately $115.2 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 continue to fluctuate in the future even with our
combination with Zymark, as a result of many factors, some of which are outside
of our control. For example, many of our products represent relatively large
capital expenditures for our customers, which leads to variations in the amount
of time it takes for us to sell our products because customers may take several
months or longer to evaluate the purchase of our products. In addition, a
significant portion of our revenues is now typically derived from sales of a
small number of relatively high-priced products, and these sales are generally
made by purchase orders and not long-term contracts. Delays in receipt of
anticipated orders for higher-priced products could lead to substantial
variability of revenue from quarter to quarter. Furthermore, Zymark has
historically received purchase orders and shipped a significant portion of each
quarters product orders near the end of the quarter. If that pattern
continues, even short delays in the receipt of orders or shipment of products
at the end of a quarter could result in shipment during the next quarter, which
could have a material adverse effect on results of operations for the quarter
in which the shipment did not occur. In addition, Zymarks business has historically
been affected by capital spending patterns of its customers with a greater percentage
of purchases, and therefore higher revenues, occurring in the second
half of the year. There can be no assurance that this trend will
continue. For all of
these and other reasons, 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 and intangible assets are not affected directly by variations in
revenue.

Because a small number of customers and Agilent have accounted for, and may
continue to account for, a substantial portion of our revenue, our revenue
could decline due to the loss of one of these customers 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. Although our
acquisition of Zymark in July 2003 expanded our customer base, Zymark has also
historically obtained a significant portion of its revenue from a relatively
small number of customers. For the three months ended September 30, 2003,
Agilent alone represented 11% of total revenues, and our next three largest
customers for the quarter collectively accounted for approximately another 15%
of total revenues. Accordingly, if we were to lose any one or more of these
important customers, our revenue could decrease significantly.

23



---



##### Table of Contents



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

Our commercial relationship with Agilent is currently in a state of
transition due to the termination of our agreement with Agilent, effective in
May 2003. Accordingly, we are now operating only under the surviving provisions
of that agreement. We will continue to 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. Although we anticipate that future
sales of the Agilent 2100 Bioanalyzer system will further expand our revenue
base, under the surviving provisions of our agreement with Agilent our gross
margin share of collaboration products sold by Agilent will begin to decline at
the end of 2004. If sales of these products do not increase fast enough to
offset the decline in our gross margin share, the amount of revenue we receive
from Agilent will decline.

In addition, under the surviving terms of our agreement with Agilent, 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 Agilent may manufacture its own supply of LabChip products,
rather than purchasing them from us, or that we may experience competition from
Agilent in the future, which would reduce our ability to sell products
independently or through other commercial partners.

Now that our agreement with Agilent is terminated, Agilents sales of
collaboration products could be reduced due to competition from us or any other
commercial partner of ours. In such event, the revenue we would realize 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.

Finally, we anticipate research and development funding from Agilent to
continue to decline through the remainder of the year from the levels we have
already experienced in the first nine months 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 our largest automated drug discovery customer representing 6% of our
total revenue for the first nine months 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 our 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: 1) quarterly payments to Caliper based on Amphoras revenues; 2)
commissions earned by Amphora as they provide certain marketing assistance to
Caliper for Calipers instruments; and 3) additional datapoint payments if
Amphora exceeds the certain minimum datapoint levels. Amphora will not be
obligated to make any further datapoint payments to Caliper until it has
generated the number of datapoints, either in 2003 or subsequent years, that
Amphora is entitled to based upon a) the payment of the $1.8 million minimum
required payment for the 12 month period ending November 30, 2003 and b) any
payments pursuant to the $2.2 million deferred contingent obligation through
quarterly payments based on Amphoras revenue or commissions earned by Amphora
for marketing assistance. If Amphora generates fewer datapoints than entitled
due to the minimum payment and any contingent payments made, future datapoint
revenues will be adversely affected to the extent of this shortfall. 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

24



---



##### Table of Contents



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.

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 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, especially in our microfluidics business. 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.

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 products 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, and
Zymark has one manufacturing location located in Hopkinton, Massachusetts. The
actual

25



---



##### Table of Contents



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
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. As our exclusive collaboration with Agilent terminated
in May 2003 pursuant to the notice we delivered to Agilent, Agilent now has the
option to manufacture chips itself rather than continue to receive its supply
of chips from Caliper. Accordingly, we face uncertainty regarding future
demand for these chips from our manufacturing operations.

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

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

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

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



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

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

We 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, and, with the acquisition of Zymark, in the Boston

26



---



##### Table of Contents



metropolitan area, 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 a single location to produce Zymarks laboratory
automation and robotics systems, with no alternative facilities. These
facilities and some pieces of manufacturing equipment are difficult to replace
and could require substantial replacement lead-time. Our manufacturing
facilities may be affected by natural disasters such as earthquakes and floods.
Earthquakes are of particular significance since the microfluidic manufacturing
facility is located in Mountain View, California, an earthquake-prone area. In
the event our existing manufacturing facilities 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.

We are still 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 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 Technology Access
Program 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 Technology Access Program
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.

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.

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 November 10, 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;
| | - |  | ----------------------------------------------------------------------------------

27



---



##### Table of Contents





| |  |  | announcements by our competitors of complementary or competing products and technologies;        
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | announcements of our financial results, particularly if they differ from investors expectations;
|
| |  |  | our ability to successfully integrate Zymarks and Calipers operations; 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.

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

Foreign Currency

As a
multinational company, we are subject to changes in foreign
currency fluctuations. As our international sales grow, exposure to
volatility in exchange rates could have a material adverse impact on
our financial results. The exchange risk is generally related to non-dollar
intercompany receivables and advances with our European and Asian subsidiary
operations. To date, exchange rate fluctuations have had little
impact on our financial results.

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 $2.5 million as of
September 30, 2003, are all at fixed rates and, therefore, have minimal
exposure to changes in interest rates.

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 September 30, 2003, approximately 50.3% of our investment
portfolio is composed of investments with original maturities of one year or
less and approximately 1.1% 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 September 30, 2003 by year of maturity (dollars in thousands):

28



---



##### Table of Contents



|                                          |               |                       |       |       |      |      |        |        |      |            |        |        |      |   |        |        |      |   |        |        |      |  
|----------------------------------------- | ------------- | --------------------- | ----- | ----- | ---- | ---- | ------ | ------ | ---- | ---------- | ------ | ------ | ---- | - | ------ | ------ | ---- | - | ------ | ------ | ---- | -
|                                          |               |                       |       | 2003  |      | 2004 |        | 2005   |      | Thereafter |        | Total 
|                                          |               |                       |       |       |      |      |        |        |      |            |        |       
|Cash and money market funds:              |               |                       |       |       |      |      |        |        |      |            |        |        |      |   |        |        |      |   |        |       
|                                          | Fixed rate    |                       | $     | 5,076 |      |      |        |       |      |            |        |       |      |   |        |       |      |   | $      | 5,076  |     
|                                          |               | Average interest rate |       |       | 0.58 | %    |        |        |     |            |        |        |     |   |        |        |     |   |        |        | 0.58 | %
|Available for sale marketable securities: |               |                       |       |       |      |      |        |        |      |            |        |        |      |   |        |        |      |   |        |       
|                                          | Fixed rate    |                       | $     | 1,029 |      |      | $      | 23,310 |      |            | $      | 18,869 |      |   |        | 18,769 |      |   | $      | 61,977 |     
|                                          |               | Average interest rate |       |       | 5.88 | %    |        |        | 4.97 | %          |        |        | 5.34 | % |        |        | 3.36 | % |        |        | 4.60 | %
|                                          | Variable rate |                       |       |      |      |      | $      | 3,261  |      |            | $      | 1,856  |      |   |        |       |      |   | $      | 5,117  |     
|                                          |               | Average interest rate |       |       |     |      |        |        | 1.43 | %          |        |        | 1.35 | % |        |        |     |   |        |        | 1.40 | %
|Total securities                          |               | $                     | 6,105 |       |      | $    | 26,571 |        |      | $          | 20,725 |        |      |   | 18,769 |        |      | $ | 72,170 |       
|                                          |               | Average interest rate |       |       | 1.47 | %    |        |        | 4.54 | %          |        |        | 4.98 | % |        |        | 3.36 | % |        |        | 4.09 | %

This differs from our position at December 31, 2002, which the following
table presents (dollars in thousands):

|                                          |               |                       |        |        |      |      |        |        |      |       |        |        |      |   |         |         |      |  
|----------------------------------------- | ------------- | --------------------- | ------ | ------ | ---- | ---- | ------ | ------ | ---- | ----- | ------ | ------ | ---- | - | ------- | ------- | ---- | -
|                                          |               |                       |        | 2003   |      | 2004 |        | 2005   |      | Total
|                                          |               |                       |        |        |      |      |        |        |      |      
|Cash and money market funds:              |               |                       |        |        |      |      |        |        |      |       |        |        |      |   |         |        
|                                          | Fixed rate    |                       | $      | 16,184 |      |      |        |       |      |       |        |       |      |   | $       | 16,184  |     
|                                          |               | Average interest rate |        |        | 1.29 | %    |        |        |     |       |        |        |     |   |         |         | 1.29 | %
|Available for sale marketable securities: |               |                       |        |        |      |      |        |        |      |       |        |        |      |   |         |        
|                                          | Fixed rate    |                       | $      | 40,397 |      |      | $      | 55,299 |      |       | $      | 19,611 |      |   | $       | 115,307 |     
|                                          |               | Average interest rate |        |        | 3.88 | %    |        |        | 4.47 | %     |        |        | 4.85 | % |         |         | 4.32 | %
|                                          | Variable rate |                       | $      | 7,308  |      |      | $      | 6,249  |      |       | $      | 7,758  |      |   | $       | 21,315  |     
|                                          |               | Average interest rate |        |        | 1.70 | %    |        |        | 1.92 | %     |        |        | 1.68 | % |         |         | 1.76 | %
|Total securities                          |               | $                     | 63,889 |        |      | $    | 61,548 |        |      | $     | 27,369 |        |      | $ | 152,806 |        
|                                          |               | Average interest rate |        |        | 2.97 | %    |        |        | 4.21 | %     |        |        | 3.92 | % |         |         | 3.63 | %

Total securities at December 31, 2001 were $166.2 million with average
interest rates ranging between 4.45% and 6.18%.




ITEM 4. CONTROLS AND PROCEDURES

We evaluated our disclosure controls and procedures and our internal
controls and procedures for financial reporting as of September 30, 2003. 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, 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.

Subject
to the limitations set forth below, based on their evaluation, as of
the end of this reporting period, 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 Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms.

(b)  Changes in internal controls.Internal controls over financial
reporting 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 over financial reporting to determine whether there were any
significant deficiencies or material

29



---



##### Table of Contents



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 may be interpreted as being comparable 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.

There were no changes in our internal controls over financial reporting
during the quarter ended September 30, 2003 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.

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

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. In May 2003, a Memorandum of Understanding was
executed by counsel for plaintiffs, issuers and their insurers setting forth
the terms of a settlement that would result in the termination of all claims
brought by plaintiffs against the issuers and individual defendants named in
the IPO Lawsuits. On July 7, 2003, a Special Litigation Committee of the
Caliper Board of Directors approved the settlement terms described in that
Memorandum of Understanding. Plaintiffs counsel has proposed draft
documentation which is being reviewed by the issuers and their counsel. The
settlement will be subject to numerous conditions, including approval by Judge
Scheindlin.

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 asserted that Molecular Devices
Corp.s IMAP and Reagent Assay Kits willfully infringe one or more claims of
United

30



---



##### Table of Contents



States Patent No. 6,287,774, which Caliper owns. Calipers complaint
sought both injunctive relief precluding further infringement of the patent and
damages. The answer to the Complaint was filed on May 8, 2002
and asserted a
counterclaim seeking a declaratory judgment that the patent is not infringed
and is invalid. Caliper believes the counterclaim was 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 asserted a
counterclaim seeking a declaratory judgment that both Caliper patents are
invalid, unenforceable and not infringed. Caliper believes the Amended
Counterclaim was 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. The claim
construction hearing occurred at the end of June 2003. During the first week
of November 2003, Caliper entered into a settlement of this lawsuit, and
Calipers claims against Molecular Devices and Molecular Devices counterclaims
against Caliper were dismissed with prejudice. In connection with this
settlement, Caliper and Molecular Devices entered into a nonexclusive license
agreement pursuant to which Molecular Devices has agreed to pay to Caliper a
one-time licensing fee as well as royalties based on future sales of IMAP
products.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On
July 14, 2003, Caliper completed the acquisition of ZYAC Holding
Corporation (ZYAC) from The Berwind Company LLC
(Berwind) for consideration of approximately
$73.3 million in the form of $55.7 million in cash,
3.15 million shares of Calipers common stock value at
$14.6 million,
and acquisition costs of $3.0 million. The 3.15 million shares of Calipers
common stock were issued to Berwind in a private placement in
reliance on Section 4(2) of the Securities Act of 1933 and
Regulation D, in that the issuance of the securities was to only
one entity, Berwind, which is an accredited investor as
defined in Regulation D. In addition, in the event that Zymark
Corporation (the wholly-owned subsidiary of ZYAC) meets specified
sales targets set forth in the acquisition agreement. Caliper will
issue up to an additional 1.575 million shares of its common stock to
Berwind as part of the sales price in reliance on the same provisions
of the Securities Act and Regulation D, the exact amount to be
determined based on extent the sales targets are met. Up to one half
of these contingent shares will be issued based on sales targets for
2003, and the remainder for sales targets for 2004.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




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

Not applicable.




ITEM 5. OTHER INFORMATION

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, 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. In June 2003 our Audit Committee approved
non-audit services performed by Ernst & Young LLP for $230,000 in connection
with the acquisition of Zymark. Through September 30, 2003, $207,000 has been
incurred related to these approved non-audit services. The only other
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.

31



---



##### Table of Contents






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)  |  | Restated Bylaws of Caliper.                                                                                                                                          
|        |  |                                                                                                                                                                      
|10.57   |  | Key Employee Agreement, dated July 8, 2003, between Caliper and Michael R. Knapp.                                                                                    
|        |  |                                                                                                                                                                      
|10.58   |  | Key Employee Agreement, dated July 2, 2003, between Caliper and James L. Knighton.                                                                                   
|        |  |                                                                                                                                                                      
|10.59   |  | Key Employee Agreement, dated July 10, 2003, between Caliper and Anthony T. Hendrickson.                                                                             
|        |  |                                                                                                                                                                      
|10.60   |  | Key Employee Agreement, dated September 17, 2003, between Caliper and William M. Wright III.                                                                         
|        |  |                                                                                                                                                                      
|10.61   |  | Letter Agreement, dated September 17, 2003, between Caliper and Berwind Company LLC
regarding the Appointment of a Berwind Nominee to the Caliper Board of Directors.
|        |  |                                                                                                                                                                      
|31.1    |  | Certification of Chief Executive Officer Required Under Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.                                           
|        |  |                                                                                                                                                                      
|31.2    |  | Certification of Chief Financial Officer Required Under Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.                                           
|        |  |                                                                                                                                                                      
|32.1    |  | Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.               
|        |  |                                                                                                                                                                      
|32.2    |  | Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.               



|(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 3.3 to Quarterly Report on Form 10-Q for the
Quarter ended June 30, 2003, filed August 14, 2003, and incorporated by reference herein.                                                                                                                                                                                                                                                                                 
|   
|(b) |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | On July 25, 2003, Caliper filed a Current Report on Form 8-K announcing
under Item 2 the acquisition Zymark Corporation, and announcing
under Item 7 that it was filing the Zymark acquisition agreement
with the Form 8-K and would provide the required financial
statements relating to the acquisition within 60 days of the
required filing date of the Form 8-K.                                                                             
|   
|    |  | On July 31, 2003, Caliper filed a Current Report on Form 8-K announcing
under Item 9 that it was furnishing pursuant to Item 12 of Form 8-K its
financial results for the second quarter of fiscal 2003.                                                                                                                                                                                                                                           
|   
|    |  | On September 29, 2003, Caliper filed a Current Report on Form 8-K/A
amended the Form 8-K filed on July 25, 2003 to include
under Item 7 (1) the financials statements of Zymark for
the six months ended June 28, 2003 and for the years ended
December 21, 2002 and 2001, and (2) the required pro forma
financial information relating to the combined companies for the six
months ended June 28, 2003 and for the year ended
December 31, 2002.
|   
|    |  | On September 30, 2003, Caliper filed a Current Report on Form 8-K/A
amending the Form 8-K filed on July 25, 2003 to include
under Item 7 the filing of the accountants
consent related to the financial statements of Zymark for
the six months ended June 28, 2003 and for the years ended
December 31, 2002 and 2001.                                                                                                                           

32



---



##### Table of Contents






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.
|                  |  |                            |                                                                                   | 
|November 14, 2003 |  |                            | By: /s/ JAMES L. KNIGHTON                                                        
|                  |  |                            |                                                                                   | 
|                  |  |                            | James L. Knighton                                                                
|                  |  |                            | 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

33



---



##### Table of Contents






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) |  | Restated Bylaws of Caliper.                                                                                                                                          
|       |  |                                                                                                                                                                      
|10.57  |  | Key Employee Agreement, dated July 8, 2003, between Caliper and Michael R. Knapp.                                                                                    
|       |  |                                                                                                                                                                      
|10.58  |  | Key Employee Agreement, dated July 2, 2003, between Caliper and James L. Knighton.                                                                                   
|       |  |                                                                                                                                                                      
|10.59  |  | Key Employee Agreement, dated July 10, 2003, between Caliper and Anthony T. Hendrickson.                                                                             
|       |  |                                                                                                                                                                      
|10.60  |  | Key Employee Agreement, dated September 17, 2003, between Caliper and William M. Wright III.                                                                         
|       |  |                                                                                                                                                                      
|10.61  |  | Letter Agreement, dated September 17, 2003, between Caliper and Berwind Company LLC
regarding the Appointment of a Berwind Nominee to the Caliper Board of Directors.
|       |  |                                                                                                                                                                      
|31.1   |  | Certification of Chief Executive Officer Required Under Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.                                           
|       |  |                                                                                                                                                                      
|31.2   |  | Certification of Chief Financial Officer Required Under Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.                                           
|       |  |                                                                                                                                                                      
|32.1   |  | Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.               
|       |  |                                                                                                                                                                      
|32.2   |  | Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.               



|(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 3.3 to Quarterly Report on Form 10-Q for the
Quarter ended June 30, 2003, filed August 14, 2003, and
incorporated by reference herein.

34