##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 for the quarterly period ended September 30, 2005.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 for the transition period from  to .
 Commission file # 000-28229
 CALIPER LIFE SCIENCES, INC.
  Delaware
(State of Incorporation)
    
    33-0675808
(I.R.S. Employer Identification Number)
 
  þ o
 þ o
 o þ
 NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING ON OCTOBER 31, 2005: 33,413,838




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CALIPER LIFE SCIENCES, INC.
TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2005 and 2004
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 6. Exhibits
    
    
    24SIGNATURES
    
    
    25EXHIBIT INDEXEx-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32.1 Section 906 Certification of CEOEx-32.2 Section 906 Certification of CFO




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 CALIPER LIFE SCIENCES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,719
    
    
    $
    10,403Marketable securities
    
    
    25,043
    
    
    
    39,834Accounts receivable, net
    
    
    13,657
    
    
    
    17,040Inventories
    
    
    12,459
    
    
    
    9,828Note receivable from director
    
    
    
    
    
    
    146Prepaid expenses and other current assets
    
    
    2,315
    
    
    
    1,992Total current assets
    
    
    63,193
    
    
    
    79,243Restricted cash
    
    
    3,424
    
    
    
    2,151Property and equipment, net
    
    
    6,995
    
    
    
    6,186Intangibles, net
    
    
    10,024
    
    
    
    12,745Goodwill
    
    
    47,215
    
    
    
    47,215Other assets
    
    
    914
    
    
    
    407Total assets
    
    $
    131,765
    
    
    $
    147,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,109
    
    
    $
    3,164Accrued compensation
    
    
    5,488
    
    
    
    6,348Other accrued liabilities
    
    
    5,130
    
    
    
    5,841Deferred revenue and customer deposits
    
    
    6,253
    
    
    
    7,769Current portion of accrued restructuring
    
    
    3,264
    
    
    
    3,177Current portion of long-term obligations and sale-leaseback arrangements
    
    
    
    
    
    
    710Total current liabilities
    
    
    23,244
    
    
    
    27,009Noncurrent portion of accrued restructuring
    
    
    5,975
    
    
    
    8,428Other noncurrent liabilities
    
    
    1,516
    
    
    
    931Commitments (Note 5)Stockholders equity:Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    31
    
    
    
    30Additional paid-in capital
    
    
    283,559
    
    
    
    280,709Deferred stock compensation
    
    
    (2,967
    )
    
    
    (2,666
    )Accumulated deficit
    
    
    (179,618
    )
    
    
    (166,649
    )Accumulated other comprehensive income
    
    
    25
    
    
    
    155Total stockholders equity
    
    
    101,030
    
    
    
    111,579Total liabilities and stockholders equity
    
    $
    131,765
    
    
    $
    147,947
 See accompanying notes.
 1




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##### Table of Contents



CALIPER LIFE SCIENCES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Product revenue
    
    $
    15,813
    
    
    $
    14,759
    
    
    $
    41,394
    
    
    $
    39,753Service revenue
    
    
    3,437
    
    
    
    3,438
    
    
    
    10,293
    
    
    
    10,079License fees and contract revenue
    
    
    2,082
    
    
    
    1,984
    
    
    
    8,380
    
    
    
    6,203Total revenue
    
    
    21,332
    
    
    
    20,181
    
    
    
    60,067
    
    
    
    56,035Costs and expenses:Cost of product revenue
    
    
    10,478
    
    
    
    9,209
    
    
    
    28,287
    
    
    
    26,321Cost of service revenue
    
    
    1,662
    
    
    
    1,792
    
    
    
    5,054
    
    
    
    5,076Research and development
    
    
    4,203
    
    
    
    5,287
    
    
    
    12,638
    
    
    
    18,032Selling, general and administrative
    
    
    7,792
    
    
    
    7,641
    
    
    
    23,082
    
    
    
    24,004Employee stock compensation, net(1)
    
    
    339
    
    
    
    475
    
    
    
    1,170
    
    
    
    2,405Amortization of intangible assets
    
    
    897
    
    
    
    936
    
    
    
    2,693
    
    
    
    2,879Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,218Total costs and expenses
    
    
    25,371
    
    
    
    25,340
    
    
    
    72,924
    
    
    
    80,935Operating loss
    
    
    (4,039
    )
    
    
    (5,159
    )
    
    
    (12,857
    )
    
    
    (24,900
    )Interest income, net
    
    
    140
    
    
    
    129
    
    
    
    427
    
    
    
    465Other expense, net
    
    
    (50
    )
    
    
    (21
    )
    
    
    (504
    )
    
    
    (64
    )Loss before income taxes
    
    
    (3,949
    )
    
    
    (5,051
    )
    
    
    (12,934
    )
    
    
    (24,499
    )Provision for income taxes
    
    
    97
    
    
    
    (78
    )
    
    
    (35
    )
    
    
    (140
    )Net loss
    
    $
    (3,852
    )
    
    $
    (5,129
    )
    
    $
    (12,969
    )
    
    $
    (24,639
    )Net loss per common share, basic
and diluted
    
    $
    (0.13
    )
    
    $
    (0.17
    )
    
    $
    (0.42
    )
    
    $
    (0.85
    )Shares used in computing net loss
per common share, basic and diluted
    
    
    30,763
    
    
    
    29,508
    
    
    
    30,602
    
    
    
    29,071
 
 (1)
    
    Includes employee stock compensation, net, related to employees classified within
expenses as follows: Cost of product revenue
    
    $
    42
    
    
    $
    40
    
    
    $
    137
    
    
    $
    153Research and development
    
    
    56
    
    
    
    86
    
    
    
    219
    
    
    
    383Selling, general and administrative
    
    
    241
    
    
    
    349
    
    
    
    814
    
    
    
    1,869Total
    
    $
    339
    
    
    $
    475
    
    
    $
    1,170
    
    
    $
    2,405
 See accompanying notes.
 2




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CALIPER LIFE SCIENCES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Nine Months EndedSeptember 30,2005
    
    
    2004Operating activitiesNet loss
    
    $
    (12,969
    )
    
    $
    (24,639
    )Adjustments to reconcile net loss to net cash from operating activities:Depreciation and amortization
    
    
    5,130
    
    
    
    7,954Stock-based compensation expense, net
    
    
    1,188
    
    
    
    2,446Non-cash restructuring charges
    
    
    
    
    
    
    2,218Non-cash interest expense
    
    
    270
    
    
    
    110Loss from disposal of fixed assets
    
    
    34
    
    
    
    119Changes in operating assets and liabilities:Accounts receivable
    
    
    2,840
    
    
    
    (2,195
    )Inventories
    
    
    (2,888
    )
    
    
    (794
    )Prepaid expenses and other current assets
    
    
    (365
    )
    
    
    1,084Notes receivable from director
    
    
    151
    
    
    
    34Accounts payable and other accrued liabilities
    
    
    (492
    )
    
    
    (225
    )Accrued compensation
    
    
    (913
    )
    
    
    1,361Deferred revenue and customer deposits
    
    
    (1,301
    )
    
    
    35Other noncurrent liabilities
    
    
    585
    
    
    
    (196
    )Payments of accrued restructuring obligations
    
    
    (2,636
    )
    
    
    (3,717
    )Net cash from operating activities
    
    
    (11,366
    )
    
    
    (16,405
    )Investing activitiesPurchases of marketable securities
    
    
    (5,927
    )
    
    
    (44,888
    )Proceeds from sales of marketable securities
    
    
    9,966
    
    
    
    51,434Proceeds from maturities of marketable securities
    
    
    10,798
    
    
    
    7,832Other assets
    
    
    (519
    )
    
    
    176Restricted cash, net
    
    
    (1,273
    )
    
    
    Purchases of property and equipment
    
    
    (3,468
    )
    
    
    (2,665
    )Net cash from investing activities
    
    
    9,577
    
    
    
    11,889Financing activitiesPayments of obligations under sale-leaseback arrangements
    
    
    (301
    )
    
    
    (1,266
    )Payments of long-term obligations
    
    
    (367
    )
    
    
    (357
    )Proceeds from issuance of common stock
    
    
    1,492
    
    
    
    3,261Net cash from financing activities
    
    
    824
    
    
    
    1,638Effect of exchange rates on changes in cash and cash equivalents
    
    
    281
    
    
    
    58Net decrease in cash and cash equivalents
    
    
    (684
    )
    
    
    (2,820
    )Cash and cash equivalents at beginning of period
    
    
    10,403
    
    
    
    8,889Cash and cash equivalents at end of period
    
    $
    9,719
    
    
    $
    6,069
 See accompanying notes.
 3




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##### Table of Contents



CALIPER LIFE SCIENCES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
 1. Summary of Significant Accounting Principles
 Basis of Presentation
   Use of Estimates
  Revenue Recognition
 General Policy
   Contract Revenue
  4




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License and Royalty Fees
  Warranty Obligations
   2005
    
    
    2004Balance, at beginning of period
    
    $
    1,436
    
    
    $
    1,108Warranties issued during the period
    
    
    1,191
    
    
    
    945Settlements made during the period
    
    
    (1,126
    )
    
    
    (926
    )Balance at end of period
    
    $
    1,501
    
    
    $
    1,127
 Net Loss Per Share
   Stock-Based Compensation
  5




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss:As reported
    
    $
    (3,852
    )
    
    $
    (5,129
    )
    
    $
    (12,969
    )
    
    $
    (24,639
    )Add: Share-based
employee
compensation
expense included
in reported net
loss
    
    
    339
    
    
    
    475
    
    
    
    1,170
    
    
    
    2,405Deduct: Total
share-based
employee
compensation
expense determined
under fair value
based method for
all awards
    
    
    (697
    )
    
    
    (1,858
    )
    
    
    (5,164
    )
    
    
    (11,199
    )Pro forma net loss
    
    $
    (4,210
    )
    
    $
    (6,512
    )
    
    $
    (16,963
    )
    
    $
    (33,433
    )Net loss per share:As reported:Basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.17
    )
    
    $
    (0.42
    )
    
    $
    (0.85
    )Pro forma:Basic and diluted
    
    $
    (0.14
    )
    
    $
    (0.22
    )
    
    $
    (0.55
    )
    
    $
    (1.15
    )
  Recent Accounting Pronouncements
 requires
  
    
    A modified prospective method in which compensation cost is
recognized beginning with the effective date (a) based on the
requirements of Statement 123(R) for all share-based payments granted
after the effective date and (b) based on the requirements of
Statement 123 for all awards granted to employees prior to the
effective date of Statement 123(R) that remain unvested on the
effective date.
    
    A modified retrospective method which includes the
requirements of the modified prospective method described
above, but also permits entities to restate based on the
amounts previously recognized under Statement 123 for
purposes of pro forma disclosures for either (a) all prior
periods presented or (b) prior interim periods of the year
of adoption.
  6




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##### Table of Contents



2. Inventories
  September 30,
    
    
    December 31,2005
    
    
    2004Raw material
    
    $
    5,028
    
    
    $
    4,780Work-in-process
    
    
    854
    
    
    
    852Finished goods
    
    
    6,577
    
    
    
    4,196Inventories
    
    $
    12,459
    
    
    $
    9,828
 3. Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (3,852
    )
    
    $
    (5,129
    )
    
    $
    (12,969
    )
    
    $
    (24,639
    )Unrealized gain (loss) on marketable securities
    
    
    46
    
    
    
    20
    
    
    
    71
    
    
    
    (398
    )Foreign currency translation gain (loss)
    
    
    7
    
    
    
    34
    
    
    
    (201
    )
    
    
    19Comprehensive loss
    
    $
    (3,799
    )
    
    $
    (5,075
    )
    
    $
    (13,099
    )
    
    $
    (25,018
    )
 4. Restructuring Activities
  FacilityLeaseAccrualBalance, December 31, 2004
    
    $
    11,605Interest accretion
    
    
    270Payments
    
    
    (2,636
    )Balance, September 30, 2005
    
    $
    9,239
  Years ending December 31:2005 (3 months)
    
    $
    8992006
    
    
    3,6572007
    
    
    3,7842008
    
    
    1,924Total minimum lease and principal payments
    
    
    10,264Less: Amount representing interest
    
    
    1,025Present value of future payments
    
    
    9,239Less: Current portion of obligations
    
    
    3,264Non-current portion of obligations
    
    $
    5,975
 7




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##### Table of Contents




    
    In November 2003, Caliper closed one of its three
facilities in Mountain View, California that was used
primarily for instrument manufacturing and research and
development activities, and recognized a $7.4 million
charge.
    
    In June 2004, as a result of efficiencies achieved
following Calipers strategic prioritization of research
and development programs, Caliper vacated and shut down
approximately one half of a second Mountain View facility
that was primarily used for research and development
activities, and recognized an additional $2.1 million
charge.
    
    In December 2004, Caliper recognized a $3.6 million charge
related to the full closure of the second facility above,
and to reflect the fair value of its remaining lease
payments for both idled facilities as of December 31, 2004.
   5. Commitments
 Leases and Other Obligations
   Years ending December 31:2005 (3 months)
    
    $
    1,0512006
    
    
    4,1332007
    
    
    3,8982008
    
    
    3,7602009
    
    
    1,870Thereafter
    
    
    9,943Total minimum lease payments
    
    $
    24,655
 Letters-of-Credit
  8




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##### Table of Contents



6.
    
    Stockholders EquityDuring 2005 Caliper issued 461,332 shares of common stock to increase the total shares
outstanding as of September 30, 2005 to 30,821,620. The increase in shares relates to
approximately 328,000 shares issued from the exercise of stock options and vesting of restricted
stock units and approximately 133,000 shares issued under Calipers Employee Stock Purchase
Plan.
 7.
    
    Subsequent Event
   9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 This Managements Discussion and Analysis of Financial Condition and Results of Operations as
of September 30, 2005 and for the three and nine month periods ended September 30, 2005 and
September 30, 2004 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, 2004.
 The discussion in this report contains forward-looking statements that involve risks and
uncertainties, such as our financial projections in the last paragraph under the caption Overview
of Third Quarter 2005 below, as well as other statements of our plans, objectives, expectations
and intentions. Our actual results could differ materially from those discussed here. Factors that
could cause or contribute to these differences include those discussed under the caption 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.
 Executive Summary
 Business
    Overview of Third Quarter 2005
   10




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Critical Accounting Policies
  Results of Operations for the Three and Nine Months Ended September 30, 2005 and 2004
 Revenue
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    %(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    ChangeProduct revenue
    
    $
    15,813
    
    
    $
    14,759
    
    
    
    1,054
    
    
    
    7
    %
    
    $
    41,394
    
    
    $
    39,753
    
    
    $
    1,641
    
    
    
    4
    %Service revenue
    
    
    3,437
    
    
    
    3,438
    
    
    
    (1
    )
    
    
    
    
    
    
    10,293
    
    
    
    10,079
    
    
    
    214
    
    
    
    2
    %License fees and contract revenue
    
    
    2,082
    
    
    
    1,984
    
    
    
    98
    
    
    
    5
    %
    
    
    8,380
    
    
    
    6,203
    
    
    
    2,177
    
    
    
    35
    %Total revenue
    
    $
    21,332
    
    
    $
    20,181
    
    
    $
    1,151
    
    
    
    6
    %
    
    $
    60,067
    
    
    $
    56,035
    
    
    $
    4,032
    
    
    
    7
    %
 Total Revenue.
  Product Revenue
 11




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##### Table of Contents



Service Revenue
 License Fees and Contract Revenue.
 Costs of Revenue
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    %(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    ChangeProduct
    
    $
    10,478
    
    
    $
    9,209
    
    
    $
    1,269
    
    
    
    14
    %
    
    $
    28,287
    
    
    $
    26,321
    
    
    $
    1,966
    
    
    
    7
    %Service
    
    
    1,662
    
    
    
    1,792
    
    
    
    (130
    )
    
    
    (7
    %)
    
    
    5,054
    
    
    
    5,076
    
    
    
    (22
    )
    
    
    Total cost of revenue
    
    $
    12,140
    
    
    $
    11,001
    
    
    $
    1,139
    
    
    
    10
    %
    
    $
    33,341
    
    
    $
    31,397
    
    
    $
    1,944
    
    
    
    6
    %
 Cost of Product Revenue and Gross Margins.
  Cost of Service Revenue and Gross Margins.
 12




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Expenses
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,%(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeResearch and development
    
    $
    4,203
    
    
    $
    5,287
    
    
    $
    (1,084
    )
    
    
    (21
    %)
    
    $
    12,638
    
    
    $
    18,032
    
    
    $
    (5,394
    )
    
    
    (30
    %)Selling, general and
administrative
    
    
    7,792
    
    
    
    7,641
    
    
    
    151
    
    
    
    2
    %
    
    
    23,082
    
    
    
    24,004
    
    
    
    (922
    )
    
    
    (4
    %)Employee stock compensation, net
    
    
    339
    
    
    
    475
    
    
    
    (136
    )
    
    
    (29
    %)
    
    
    1,170
    
    
    
    2,405
    
    
    
    (1,235
    )
    
    
    (51
    %)Amortization of intangible assets
    
    
    897
    
    
    
    936
    
    
    
    (39
    )
    
    
    (4
    %)
    
    
    2,693
    
    
    
    2,879
    
    
    
    (186
    )
    
    
    (6
    %)Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,218
    
    
    
    (2,218
    )
    
    
    (100
    %)
 Research and Development Expenses.
  Selling, General and Administrative Expenses.
  Employee Stock Compensation.
  Amortization of Intangible Assets.
 Restructuring Charges.
 
    
    We incurred a $2.2 million charge in June 2004, which
primarily reflected the net present value of future lease
payments on a portion of a building that became idle.
    
    We incurred a $0.2 million charge in June 2004 related to
severance and benefits associated with the elimination of
14 positions, primarily affecting manufacturing operations
in our Mountain View location.
    
    We incurred a $0.1 million credit in the first quarter of
2004 to adjust the estimated restructuring liability
related to severance and benefits associated with the
December 2003 reduction in force.
 13




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##### Table of Contents



Interest and Other Expense, Net
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    %(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    ChangeInterest income, net
    
    $
    140
    
    
    $
    129
    
    
    $
    11
    
    
    
    9
    %
    
    $
    427
    
    
    $
    465
    
    
    $
    (38
    )
    
    
    (8
    %)Other expense, net
    
    
    (50
    )
    
    
    (21
    )
    
    
    29
    
    
    
    138
    %
    
    
    (504
    )
    
    
    (64
    )
    
    
    440
    
    
    
    688
    %
   Liquidity and Capital Resources
  Cash Flows
 Nine Months EndedSeptember 30,(In thousands)
    
    2005
    
    
    2004
    
    
    $ ChangeCash provided by (used in)Operating Activities
    
    $
    (11,366
    )
    
    $
    (16,405
    )
    
    $
    5,039Investing Activities
    
    
    9,577
    
    
    
    11,889
    
    
    
    (2,312
    )Financing Activities
    
    
    824
    
    
    
    1,638
    
    
    
    (814
    )
 Operating Activities.
 Investing Activities.
 Financing Activities.
  OperatingLeasesYears ending December 31:2005 (3 months)
    
    $
    1,0512006
    
    
    4,1332007
    
    
    3,8982008
    
    
    3,7602009
    
    
    1,870Thereafter
    
    
    9,943Total minimum lease and other payments
    
    $
    24,655




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##### Table of Contents




    
    continued market acceptance of our microfluidic and lab automation products;
    
    the magnitude and scope of our research and product development programs;
    
    our ability to maintain existing, and establish additional, corporate partnerships and licensing arrangements;
    
    the time and costs involved in expanding and maintaining our manufacturing facilities;
    
    the potential need to develop, acquire or license new technologies and products; and
    
    other factors not within our control.
  Factors Affecting Operating Results
 Risks Related To Our Business
 Our LabChip products may not achieve widespread market acceptance, which
could cause our revenue to grow slowly or decline and make it more difficult for us to achieve or
maintain profitability.
       15




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##### Table of Contents




    
    our ability to demonstrate the advantages and potential economic value of our LabChip
drug discovery systems over alternative, well-established technologies;
    
    our ability to develop a broader range of standard assays and applications that
enable customers and potential customers to perform many different types of experiments
on a single LabChip instrument system; and
    
    our ability to market and sell our drug discovery systems and related consumable
products through our marketing and sales organization without the involvement of our
senior management.
 If we are not successful in developing new and enhanced liquid handling, LabChip and other
life sciences products, we may lose market share to our competitors.
  If we are not successful in improving the cost of our LabChip products relative to the
performance delivered, we may not be successful in displacing alternative or more established
products and technologies that are competitive with our LabChip products.
  We are subject to the capital spending patterns of the pharmaceutical industry, which recently
have been adversely impacted by general economic conditions, industry consolidation and increased
competition, and which have resulted in severe price competition among suppliers of products to
that industry.
  Our future revenue growth depends to a significant extent on sales by Affymetrix of the GCAS
automated target preparation system, which is based on the Caliper Sciclone liquid handling
instrument. If end-user demand for this product is not as strong as anticipated by Affymetrix, our
future revenue targets may not be achieved.
  16




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##### Table of Contents



Our future revenue growth also depends to a significant extent on the revenue growth of
NovaScreen, which we recently acquired. If NovaScreens revenue does not grow as we anticipate,
our future revenue targets may not be achieved.
  A significant portion of our business depends upon collaborations with business partners, and
our financial success depends upon our ability to develop new product concepts with compelling
value propositions to generate new Caliper Driven collaboration relationships, as well as our
ability to manage our existing relationships.
   Acquisitions may have unexpected consequences or impose additional costs on us.
   
    
    difficulties in integration of the operations, technologies and products and services of the acquired companies;
    
    the risk of diverting managements attention from normal daily operations of the business;
    
    potential cost and disruptions caused by the integration of financial reporting
systems and development of uniform standards, controls, procedures and policies;
    
    accounting consequences, including amortization of acquired intangible assets or
other required purchase accounting adjustments, resulting in variability or reductions
of our reported earnings;
    
    potential difficulties in completing projects associated with purchased in-process
research and development;
    
    risks of entering markets in which we have no or limited direct prior experience and
where competitors in these markets have stronger market positions;
    
    the potential loss of our key employees or the acquired company due to the employment
uncertainties inherent in the acquisition process;
    
    the assumption of known and potentially unknown liabilities of the acquired company;
    
    the risk that we may find that the acquired company or business does not further our
business strategy or that we paid more than what the company or business was worth;
    
    we may disagree with the former management of businesses that we acquire with respect
to the interpretation of provisions in the acquisition agreement relating to earnout
provisions or other provisions that have ongoing effect after
 17




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##### Table of Contents



the completion of the acquisition, which could result in disputes or litigation with
current employees who joined us as part of the acquisition or former management of
acquired businesses;
    
    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
    
    there may be insufficient revenues to offset increased expenses associated with
acquisitions.
   We expect to incur future operating losses and may not achieve profitability.
  Our operating results fluctuate significantly and any failure to meet financial expectations
may disappoint securities analysts or investors and result in a decline in our stock price.
   We have relatively limited experience in manufacturing our LabChip products and may encounter
manufacturing problems or delays, which could result in lost revenue.
  18




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##### Table of Contents



Our revenue from Agilent could decline due to a number of different factors, including a
reduction in planar LabChip purchases by Agilent and reduced sales of the Agilent 2100 Bioanalyzer
and LabChip products sold by Agilent, or reduced sales of such products by Agilent due to
competition from us or our other commercial partners.
    We depend on our key personnel, the loss of whom would impair our ability to compete.
  Our products could infringe on the intellectual property rights of others, which may cause us
to engage in costly litigation and, if we are not successful, could also cause us to pay
substantial damages and prohibit us from selling our products.
  19




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##### Table of Contents



We may need to initiate lawsuits to protect or enforce our patents, which would be expensive
and, if we lose, may cause us to lose some of our intellectual property rights, which would reduce
our ability to compete in the market.
  The rights we rely upon to protect our intellectual property underlying our products may not
be adequate, which could enable third parties to use our technology and would reduce our ability to
compete in the market.
  We are dependent on a single-source supplier for the glass used in our LabChip products and if
we are unable to buy this glass on a timely basis, we will not be able to deliver our LabChip
products to customers.
  We obtain some of the components and subassemblies included in our systems from a single
source or a limited group of suppliers, and the partial or complete loss of one of these suppliers
could cause production delays and a substantial loss of revenue.
    If a natural disaster strikes our manufacturing facilities, we would be unable to manufacture
our products for a substantial amount of time and we would experience lost revenue.
  20




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##### Table of Contents



Failure to raise additional capital or generate the significant capital necessary to expand
our operations and invest in new products could reduce our ability to compete and result in lower
revenue.
   Our tax net operating losses and credit carryforwards may expire if we do not achieve or
maintain profitability.
    Risks Related to Owning Our Common Stock
 Our stock price is volatile and you may not be able to resell your shares at a profit.
  
    
    announcements by analysts regarding their assessment of us and our prospects;
    
    announcements by our competitors of complementary or competing products and technologies;
    
    announcements of our financial results, particularly if they differ from investors expectations;
    
    the relatively low average trading volume for our stock; and
    
    general market volatility for technology stocks.
  Our stock is thinly traded, and as a result sales of even small numbers of shares may decrease
the market price of our stock.
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##### Table of Contents



We have been sued and we are at risk of future securities class action litigation.
  Provisions of our charter documents and Delaware law may inhibit a takeover, which could limit
the price investors might be willing to pay in the future for our common stock.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Sensitivity
  
 Item 4. Controls and Procedures
  Evaluation of Disclosure Controls and Procedures.
  Limitations on the Effectiveness of Disclosure Controls and Procedures.
 22




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##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  MaximumTotal
    
    
    DollarNumber of
    
    
    Value ofShares
    
    
    SharesPurchased as
    
    
    that May YetPart of
    
    
    BePublicly
    
    
    PurchasedTotal Number of
    
    
    Average Price Paid
    
    
    Announced
    
    
    Under thePeriod
    
    Shares Purchased
    
    
    Per Share
    
    
    Programs
    
    
    ProgramsJuly 1, 2005
through September
30, 2005
    
    
    5,000
    
    
    $
    .001
    
    
    
    
    
    
    
    Total
    
    
    5,000
    
    
    $
    .001
    
    
    
    
    
    
    
    
 23




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##### Table of Contents



EXHIBIT INDEX
 
 Item 6. Exhibits
 ExhibitNumber
    
    Description of document3.1(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.3.4(4)
    
    Amendment No. 1 to Bylaws of Caliper.4.2(5)
    
    Specimen Stock Certificate.4.3(2)
    
    Rights Agreement, dated as of December 18, 2001, between Caliper and Wells
Fargo Bank Minnesota, N.A., as Rights Agent.31.1
    
    Certification of Chief Executive Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, and
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, and
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Required Under Rule 13a-14(b) or
Rule 15d-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) or
Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18
U.S.C. Section 1350.
 
 (1)
    
    Previously filed as the like-numbered Exhibit to Form
10-Q for the quarterly period ended March 31, 2004 and
incorporated by reference herein.(2)
    
    Previously filed as Exhibit 99.1 to Current Report on
Form 8-K filed December 19, 2001 and incorporated by
reference herein.(3)
    
    Previously filed as Exhibit 3.4 to our Registration
Statement on Form S-1, as amended, File No. 333-88827,
filed on October 12, 1999 and incorporated by reference
herein.(4)
    
    Previously filed as the like-numbered Exhibit to Form
10-K for the year ended December 31, 2002 and
incorporated by reference herein.(5)
    
    Previously filed as the like-numbered Exhibit to Annual
Report on Form 10-K for the annual period ended December
31, 2004 and incorporated by reference herein.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on
Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed
by Caliper for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 24




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##### Table of Contents



SIGNATURES
  CALIPER LIFE SCIENCES, INC.Date: November 9, 2005
    
    By:
    
    /s/ E. Kevin HrusovskyE. Kevin HrusovskyChief Executive Officer and PresidentBy:
    
    /s/ Thomas T. HigginsThomas T. HigginsExecutive Vice President and
Chief Financial Officer
 25




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of document3.1(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.3.4(4)
    
    Amendment No. 1 to Bylaws of Caliper.4.2(5)
    
    Specimen Stock Certificate.4.3(2)
    
    Rights Agreement, dated as of December 18, 2001, between Caliper and Wells
Fargo Bank Minnesota, N.A., as Rights Agent.31.1
    
    Certification of Chief Executive Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, and
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, and
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Required Under Rule 13a-14(b) or
Rule 15d-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) or
Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18
U.S.C. Section 1350.
 
 (1)
    
    Previously filed as the like-numbered Exhibit to Form
10-Q for the quarterly period ended March 31, 2004 and
incorporated by reference herein.(2)
    
    Previously filed as Exhibit 99.1 to Current Report on
Form 8-K filed December 19, 2001 and incorporated by
reference herein.(3)
    
    Previously filed as Exhibit 3.4 to our Registration
Statement on Form S-1, as amended, File No. 333-88827,
filed on October 12, 1999 and incorporated by reference
herein.(4)
    
    Previously filed as the like-numbered Exhibit to Form
10-K for the year ended December 31, 2002 and
incorporated by reference herein.(5)
    
    Previously filed as the like-numbered Exhibit to Annual
Report on Form 10-K for the annual period ended December
31, 2004 and incorporated by reference herein.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on
Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed
by Caliper for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.