##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 for the quarterly period ended June 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  .
  CALIPER LIFE SCIENCES, INC.
  Delaware
(State of Incorporation)
    
    33-0675808
(I.R.S. Employer Identification Number)
 
  þ  o
 þ  o
 NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ON July 29, 2005: 30,707,820




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##### 





CALIPER LIFE SCIENCES, INC.
TABLE OF CONTENTS


PagePART IItem 1.
    
    FINANCIAL INFORMATIONFinancial StatementsCondensed
Consolidated
Balance Sheets as of June 30, 2005and
December 31, 2004
    
    
    2Condensed Consolidated Statements of Operations for the Three and SixMonths Ended June 30, 2005 and 2004
    
    
    3Condensed Consolidated Statements of Cash Flows for the SixMonths Ended June 30, 2005 and 2004
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2.
    
    Management's Discussion and Analysis of Financial Condition andResults
of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4.
    
    Controls and Procedures.
    
    
    26PART II
    
    
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    27Item 2.
    
    Unregistered Sales
of Equity Securities and Use of Proceeds
    
    
    27Item 3.
    
    Defaults upon Senior Securities
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    28SIGNATURES
    
    
    
    
    
    
    29


1



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##### 



PART I. FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
 
 CALIPER LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
 June 30,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,107
    
    
    $
    10,403Marketable securities
    
    
    35,731
    
    
    
    39,834Accounts receivable, net
    
    
    12,791
    
    
    
    17,040Inventories
    
    
    12,194
    
    
    
    9,828Note receivable from director
    
    
    150
    
    
    
    146Prepaid expenses and other current assets
    
    
    2,925
    
    
    
    1,992Total current assets
    
    
    68,898
    
    
    
    79,243Restricted cash
    
    
    3,424
    
    
    
    2,151Property and equipment, net
    
    
    7,100
    
    
    
    6,186Intangibles, net
    
    
    10,922
    
    
    
    12,745Goodwill
    
    
    47,215
    
    
    
    47,215Other assets
    
    
    714
    
    
    
    407Total assets
    
    $
    138,273
    
    
    $
    147,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,007
    
    
    $
    3,164Accrued compensation
    
    
    4,579
    
    
    
    6,348Other accrued liabilities
    
    
    6,208
    
    
    
    5,841Deferred revenue and customer deposits
    
    
    7,447
    
    
    
    7,769Current portion of accrued restructuring
    
    
    3,234
    
    
    
    3,177Current portion of obligations and sale-leaseback arrangements
    
    
    362
    
    
    
    710Total current liabilities
    
    
    25,837
    
    
    
    27,009Noncurrent portion of accrued restructuring
    
    
    6,815
    
    
    
    8,428Other noncurrent liabilities
    
    
    1,179
    
    
    
    931Commitments and contingencies (Note 5)Stockholders equity:Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    31
    
    
    
    30Additional paid-in capital
    
    
    282,395
    
    
    
    280,709Deferred stock compensation
    
    
    (2,191
    )
    
    
    (2,666
    )Accumulated deficit
    
    
    (175,765
    )
    
    
    (166,649
    )Accumulated other comprehensive income (loss)
    
    
    (28
    )
    
    
    155Total stockholders equity
    
    
    104,442
    
    
    
    111,579Total liabilities and stockholders equity
    
    $
    138,273
    
    
    $
    147,947
 See accompanying notes.
 2




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##### 



CALIPER LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Product revenue
    
    $
    12,443
    
    
    $
    12,985
    
    
    $
    25,581
    
    
    $
    24,994Service revenue
    
    
    3,600
    
    
    
    3,581
    
    
    
    6,856
    
    
    
    6,641License fees and contract revenue
    
    
    4,290
    
    
    
    2,356
    
    
    
    6,298
    
    
    
    4,219Total revenue
    
    
    20,333
    
    
    
    18,922
    
    
    
    38,735
    
    
    
    35,854Costs and expenses:Cost of product revenue
    
    
    9,016
    
    
    
    8,491
    
    
    
    17,808
    
    
    
    17,112Cost of service revenue
    
    
    1,739
    
    
    
    1,643
    
    
    
    3,392
    
    
    
    3,284Research and development
    
    
    4,497
    
    
    
    6,592
    
    
    
    8,436
    
    
    
    12,745Selling, general and administrative
    
    
    7,804
    
    
    
    8,350
    
    
    
    15,290
    
    
    
    16,363Employee stock compensation, net(1)
    
    
    422
    
    
    
    235
    
    
    
    831
    
    
    
    1,930Amortization of intangible assets
    
    
    898
    
    
    
    896
    
    
    
    1,796
    
    
    
    1,943Restructuring charges
    
    
    
    
    
    
    2,352
    
    
    
    
    
    
    
    2,218Total costs and expenses
    
    
    24,376
    
    
    
    28,559
    
    
    
    47,553
    
    
    
    55,595Operating loss
    
    
    (4,043
    )
    
    
    (9,637
    )
    
    
    (8,818
    )
    
    
    (19,741
    )Interest income, net
    
    
    145
    
    
    
    137
    
    
    
    287
    
    
    
    336Other income (expense), net
    
    
    (240
    )
    
    
    43
    
    
    
    (453
    )
    
    
    (43
    )Loss before income taxes
    
    
    (4,138
    )
    
    
    (9,457
    )
    
    
    (8,984
    )
    
    
    (19,448
    )Provision for income taxes
    
    
    (48
    )
    
    
    (16
    )
    
    
    (132
    )
    
    
    (62
    )Net loss
    
    $
    (4,186
    )
    
    $
    (9,473
    )
    
    $
    (9,116
    )
    
    $
    (19,510
    )Net loss per share, basic and diluted
    
    $
    (0.14
    )
    
    $
    (0.33
    )
    
    $
    (0.30
    )
    
    $
    (0.68
    )Shares used in computing net loss
per common share, basic and diluted
    
    
    30,586
    
    
    
    29,111
    
    
    
    30,520
    
    
    
    28,850
  Cost of product revenue
    
    $
    49
    
    
    $
    31
    
    
    $
    95
    
    
    $
    112Research and development
    
    
    83
    
    
    
    140
    
    
    
    163
    
    
    
    297Selling, general and administrative
    
    
    290
    
    
    
    64
    
    
    
    573
    
    
    
    1,521Total
    
    $
    422
    
    
    $
    235
    
    
    $
    831
    
    
    $
    1,930
 See accompanying notes.
 3




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##### 



CALIPER LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Six Months Ended June 30,2005
    
    
    2004Operating activitiesNet loss
    
    $
    (9,116
    )
    
    $
    (19,510
    )Adjustments to reconcile net loss to net cash from operating activities:Depreciation and amortization
    
    
    3,515
    
    
    
    5,197Share-based compensation
    
    
    842
    
    
    
    1,946Non-cash restructuring charges
    
    
    
    
    
    
    2,218Interest accretion
    
    
    176
    
    
    
    110Changes in operating assets and liabilities:Accounts receivable
    
    
    3,739
    
    
    
    (1,860
    )Inventories
    
    
    (2,585
    )
    
    
    (737
    )Prepaid expenses and other current assets
    
    
    (974
    )
    
    
    482Other assets
    
    
    (319
    )
    
    
    53Notes receivable from director
    
    
    
    
    
    
    36Accounts payable and other accrued liabilities
    
    
    1,492
    
    
    
    (150
    )Accrued compensation
    
    
    (1,700
    )
    
    
    300Deferred revenue and customer deposits
    
    
    (114
    )
    
    
    1,748Other noncurrent liabilities
    
    
    249
    
    
    
    (176
    )Payments of accrued restructuring obligations
    
    
    (1,737
    )
    
    
    (3,026
    )Net cash from operating activities
    
    
    (6,532
    )
    
    
    (13,369
    )Investing activitiesPurchases of marketable securities
    
    
    (4,214
    )
    
    
    (27,197
    )Proceeds from sales of marketable securities
    
    
    3,759
    
    
    
    31,418Proceeds from maturities of marketable securities
    
    
    4,559
    
    
    
    6,882Restricted cash, net
    
    
    (1,273
    )
    
    
    Purchases of property and equipment
    
    
    (2,713
    )
    
    
    (2,061
    )Net cash from investing activities
    
    
    118
    
    
    
    9,042Financing activitiesPayments of obligations under sale-leaseback arrangements
    
    
    (301
    )
    
    
    (921
    )Proceeds from issuance of common stock
    
    
    1,316
    
    
    
    2,963Net cash from financing activities
    
    
    1,015
    
    
    
    2,042Effect of exchange rates on changes in cash and cash equivalents
    
    
    103
    
    
    
    13Net decrease in cash and cash equivalents
    
    
    (5,296
    )
    
    
    (2,272
    )Cash and cash equivalents at beginning of period
    
    
    10,403
    
    
    
    8,889Cash and cash equivalents at end of period
    
    $
    5,107
    
    
    $
    6,617
 See accompanying notes.
 4




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##### 



CALIPER LIFE SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
(Unaudited)
 1. Summary of Significant Accounting Principles
 Basis of Presentation
   Use of Estimates
  Revenue Recognition
 General Policy
   5




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##### 



Contract Revenue
  License and Royalty Fees
  Warranty Obligations
   2005
    
    
    2004Balance, at beginning of period
    
    $
    1,436
    
    
    $
    1,108Warranties issued during the period
    
    
    907
    
    
    
    478Settlements made during the period
    
    
    (811
    )
    
    
    (489
    )Balance at end of period
    
    $
    1,532
    
    
    $
    1,097
 Net Loss Per Share
  6




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##### 



Stock-Based Compensation
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss:As reported
    
    $
    (4,186
    )
    
    $
    (9,473
    )
    
    $
    (9,116
    )
    
    $
    (19,510
    )Add: Share-based employee compensation expense
included in reported net loss
    
    
    422
    
    
    
    235
    
    
    
    831
    
    
    
    1,930Deduct:
Total share-based employee compensation
expense determined under fair value based methods
for all awards
    
    
    (1,860
    )
    
    
    (2,451
    )
    
    
    (4,467
    )
    
    
    (9,342
    )Pro forma net loss
    
    $
    (5,624
    )
    
    $
    (11,689
    )
    
    $
    (12,752
    )
    
    $
    (26,922
    )Net loss per share:As reported:Basic and diluted
    
    $
    (0.14
    )
    
    $
    (0.33
    )
    
    $
    (0.30
    )
    
    $
    (0.68
    )Pro forma:Basic and diluted
    
    $
    (0.18
    )
    
    $
    (0.40
    )
    
    $
    (0.42
    )
    
    $
    (0.93
    )
  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
 7




---



##### 



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.
  2. Inventories
  June 30,
    
    
    December 31,2005
    
    
    2004Raw material
    
    $
    6,962
    
    
    $
    4,780Work-in-process
    
    
    700
    
    
    
    852Finished goods
    
    
    4,532
    
    
    
    4,196Inventories
    
    $
    12,194
    
    
    $
    9,828
 3. Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    
    
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (4,186
    )
    
    $
    (9,473
    )
    
    $
    (9,116
    )
    
    $
    (19,510
    )Unrealized loss on marketable securities
    
    
    (103
    )
    
    
    (369
    )
    
    
    (210
    )
    
    
    (418
    )Foreign currency translation gain (loss)
    
    
    100
    
    
    
    (42
    )
    
    
    27
    
    
    
    (15
    )Comprehensive loss
    
    $
    (4,189
    )
    
    $
    (9,884
    )
    
    $
    (9,299
    )
    
    $
    (19,943
    )
 4. Restructuring Activities
  FacilityLeaseAccrualBalance, December 31, 2004
    
    $
    11,605Interest accretion
    
    
    181Payments
    
    
    (1,737
    )Balance, June 30, 2005
    
    $
    10,049
 8




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##### 



Years ending December 31:2005 (6 months)
    
    $
    1,7972006
    
    
    3,6572007
    
    
    3,7842008
    
    
    1,922Total minimum lease and principal payments
    
    
    11,160Less: Amount representing interest
    
    
    1,111Present value of future payments
    
    
    10,049Less: Current portion of obligations
    
    
    3,234Non-current portion of obligations
    
    $
    6,815
  
    
    In November 2003, Caliper closed one of its three facilities
in Mountain View, CA that was used primarily for instrument
manufacturing and research and development activities, and
recognized a $7.4 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
 9




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##### 



Years ending December 31:2005 (6 months)
    
    $
    2,0302006
    
    
    3,9702007
    
    
    3,7482008
    
    
    3,6732009
    
    
    1,857Thereafter
    
    
    9,949Total minimum lease payments
    
    $
    25,227
  Letters-of-Credit
  10




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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 June 30, 2005 and for the three and six month periods ended June 30, 2005 and June 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 Second 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
    11




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##### 



Overview of Second Quarter 2005
  ®
   Critical Accounting Policies
  Results of Operations for the Three and Six Months Ended June 30, 2005 and 2004
 Revenue
 12




---



##### 



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeProduct revenue
    
    $
    12,443
    
    
    $
    12,985
    
    
    
    (542
    )
    
    
    (4
    %)
    
    $
    25,581
    
    
    $
    24,994
    
    
    $
    587
    
    
    
    2
    %Service revenue
    
    
    3,600
    
    
    
    3,581
    
    
    
    19
    
    
    
    1
    %
    
    
    6,856
    
    
    
    6,641
    
    
    
    215
    
    
    
    3
    %License fees and contract revenue
    
    
    4,290
    
    
    
    2,356
    
    
    
    1,934
    
    
    
    82
    %
    
    
    6,298
    
    
    
    4,219
    
    
    
    2,079
    
    
    
    49
    %Total Revenues
    
    $
    20,333
    
    
    $
    18,922
    
    
    $
    1,411
    
    
    
    7
    %
    
    $
    38,735
    
    
    $
    35,854
    
    
    $
    2,881
    
    
    
    8
    %
 Total Revenues. ®
 Product Revenue
  Service Revenue
 License fees and Contract Revenue.
 Costs of Revenue
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeProduct
    
    $
    9,016
    
    
    $
    8,491
    
    
    $
    525
    
    
    
    6
    %
    
    $
    17,808
    
    
    $
    17,112
    
    
    $
    696
    
    
    
    4
    %Service
    
    
    1,739
    
    
    
    1,643
    
    
    
    96
    
    
    
    6
    %
    
    
    3,392
    
    
    
    3,284
    
    
    
    108
    
    
    
    3
    %Total Costs
    
    $
    10,755
    
    
    $
    10,134
    
    
    $
    621
    
    
    
    6
    %
    
    $
    21,200
    
    
    $
    20,396
    
    
    $
    804
    
    
    
    4
    %
 13




---



##### 



Cost of Product Revenue and Gross Margins.
  Cost of Service Revenue and Gross Margins.
 Expenses
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeResearch and development
    
    $
    4,497
    
    
    $
    6,592
    
    
    $
    (2,095
    )
    
    
    (32
    %)
    
    $
    8,436
    
    
    $
    12,745
    
    
    $
    (4,309
    )
    
    
    
    
    
    
    (34
    %)Selling, general and administrative
    
    
    7,804
    
    
    
    8,350
    
    
    
    (546
    )
    
    
    (7
    %)
    
    
    15,290
    
    
    
    16,363
    
    
    $
    (1,073
    )
    
    
    
    
    
    
    (7
    %)Employee stock compensation, net
    
    
    422
    
    
    
    235
    
    
    
    187
    
    
    
    80
    %
    
    
    831
    
    
    
    1,930
    
    
    
    (1,099
    )
    
    
    
    
    
    
    (57
    %)Amortization of intangible assets
    
    
    898
    
    
    
    896
    
    
    
    2
    
    
    
    
    
    
    
    1,796
    
    
    
    1,943
    
    
    
    (147
    )
    
    
    
    
    
    
    (8
    %)Restructuring charges
    
    
    
    
    
    
    2,352
    
    
    
    (2,352
    )
    
    
    (100
    %)
    
    
    
    
    
    
    2,218
    
    
    
    (2,218
    )
    
    
    
    
    
    
    (100
    %)
 Research and Development Expenses.
 14




---



##### 



Selling, General and Administrative Expenses.
  Stock-based 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.
 15




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##### 



Interest
and Other Income (Expense), Net
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands)
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeInterest income, net
    
    $
    145
    
    
    $
    137
    
    
    $
    8
    
    
    
    6
    %
    
    $
    287
    
    
    $
    336
    
    
    $
    (49
    )
    
    
    (15
    %)Other income (expense)
    
    
    (240
    )
    
    
    43
    
    
    
    (283
    )
    
    
    (658
    %)
    
    
    (453
    )
    
    
    (43
    )
    
    
    (410
    )
    
    
    (953
    %)
   Liquidity
and Capital Resources
  Cash
Flows
 Six Months EndedJune 30,(In thousands)
    
    2005
    
    
    2004
    
    
    $ ChangeCash provided by (used in)Operating Activities
    
    $
    (6,632
    )
    
    $
    (13,369
    )
    
    $
    6,737Investing Activities
    
    
    118
    
    
    
    9,042
    
    
    
    (8,924
    )Financing Activities
    
    
    1,015
    
    
    
    2,042
    
    
    
    (1,027
    )
 Operating Activities.
 Investing Activities.
 Financing Activities.
  Operating
    
    
    OtherLeases
    
    
    ObligationsYears ending December 31:2005 (6 months)
    
    $
    2,030
    
    
    $
    3622006
    
    
    3,970
    
    
    
    2007
    
    
    3,748
    
    
    
    2008
    
    
    3,673
    
    
    
    2009
    
    
    1,857
    
    
    
    Thereafter
    
    
    9,949
    
    
    
    Total minimum lease and other payments
    
    $
    25,227
    
    
    
    362
 16




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##### 




    
    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.
    17




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##### 




    
    our ability to demonstrate the advantages and potential economic value of our LabChip
drug discovery systems over alternative well-established technologies;
    
    our ability to develop a broader range of standard assays and applications that enable
customers and potential customers to perform many different types of experiments on a
single LabChip instrument system; and
    
    our ability to market and sell our drug discovery systems and
related consumable products through our marketing and sales
organization, without the involvement of Caliper 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.
  If we do not successfully expand the range of applications for our drug discovery systems, we may
experience a decline in revenue or slow revenue growth and may not achieve or maintain
profitability.
 18




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##### 



We are subject to the capital spending patterns of the pharmaceutical industry, which over the
past several years have been adversely impacted by general economic conditions, industry
consolidation and increased competition.
  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, and which our collaboration partner Affymetrix
intends to launch during the third quarter of 2005.  If end-user demand for this
product is not as strong as anticipated by Affymetrix, our future revenue targets may
not be achieved.
  A significant portion of our business depends upon collaborations with OEM business partners, and
our financial success depends upon our ability to develop new product concepts with compelling
value propositions to generate new OEM collaboration relationships, as well as our ability to
manage our existing OEM relationships.
   Potential future acquisitions may have unexpected consequences or impose additional costs on
us.
 19




---



##### 




    
    difficulties in integration of the operations, technologies, and products of the acquired companies;
    
    the risk of diverting managements attention from normal daily operations of the business;
    
    potential cost and disruptions caused by the integration of financial reporting systems and
development of uniform standards, controls, procedures and policies;
    
    accounting consequences, including amortization of acquired intangible assets or other required
purchase accounting adjustments, resulting in variability or reductions of our reported earnings;
    
    potential difficulties in completing projects associated with purchased in-process research and
development;
    
    risks of entering markets in which we have no or limited direct prior experience and where
competitors in these markets have stronger market positions;
    
    the potential loss of key employees of Caliper or the acquired company due to the employment
uncertainties inherent in the acquisition process;
    
    the assumption of known and potentially unknown liabilities of the acquired company;
    
    the risk that we may find that the acquired company or business does not further our business
strategy or that we paid more than what the company or business was worth;
    
    our relationship with current and new employees and customers could be impaired;
    
    the acquisition may result in litigation from terminated employees or third parties who believe a
claim against us would be valuable to pursue;
    
    our due diligence process may fail to identify significant issues with product
quality, product architecture and legal contingencies, among other matters; and
    
    insufficient revenues to offset increased expenses associated with acquisitions.
  
    
    issue common stock that would dilute our current stockholders percentage ownership;
    
    record goodwill and non-amortizable intangible assets that will be subject to
impairment testing and potential periodic impairment charges;
    
    incur amortization expenses related to certain intangible assets; or
    
    incur other large and immediate write-offs.
 20




---



##### 



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.
   21




---



##### 



Our revenue could decline due to a number of different factors, including a reduction in planar
LabChip device purchases by Agilent, 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 further
commercialize our products, to develop new products, and to compete effectively in
life sciences instrumentation markets.
  22




---



##### 



Our
products as presently manufactured and sold or as modified in the future, could infringe on the intellectual property rights of others, which may cause us to
engage in costly litigation and, if we are not successful, could also cause us to pay substantial
damages and prohibit us from selling our products.
  We may need to initiate lawsuits to protect or enforce our patents, which would be expensive and,
if we lose, may cause us to lose some of our intellectual property rights, which would reduce our
ability to compete in the market.
  The rights we rely upon to protect our intellectual property underlying our products may not be
adequate, which could enable third parties to use our technology and would reduce our ability to
compete in the market.
  23




---



##### 



We are dependent on a single-source supplier for the glass used in our LabChip products and if we
are unable to buy this glass on a timely basis, we will not be able to deliver our LabChip
products to customers.
  We obtain some of the components and subassemblies included in our systems from a single source
or a limited group of suppliers, and the partial or complete loss of one of these suppliers could
cause production delays and a substantial loss of revenue.
   
    
    we may be unable to obtain an adequate supply of required components;
    
    we have reduced control over pricing and the timely delivery of components and subassemblies; and
    
    our suppliers may be unable to develop technologically advanced products to support our growth
and development of new systems.
  If a natural disaster strikes our manufacturing facility we would be unable to manufacture our
products for a substantial amount of time and we would experience lost revenue.
  24




---



##### 



Failure to raise additional capital or generate the significant capital necessary to expand our
operations and invest in new products could reduce our ability to compete and result in lower
revenue.
   Our tax net operating losses and credit carryforwards may expire if we do not achieve or maintain
profitability.
    Risks Related to Owning Our Common Stock
 Our stock price is extremely volatile, and you could lose a substantial portion of your investment.
  
    
    announcements by analysts regarding their assessment of Caliper and its prospects;
    
    announcements by our competitors of complementary or competing products and
technologies;
    
    announcements of our financial results, particularly if they differ from
investors expectations;
    
    general market volatility for technology stocks.
 25




---



##### 



We have been sued, and are at risk of future securities class action litigation.
  Provisions of our charter documents and Delaware law may inhibit a takeover, which could limit the
price investors might be willing to pay in the future for our common stock.
  
 Item 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.
 26




---



##### 



Changes in Internal Controls over Financial Reporting
  
 Part II  Other Information
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  27




---



##### 



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.4.1
    
    Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4.2(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.10.14(6)
    
    Lease Agreement, dated as of April 25, 2005, between Caliper and BCIA New England Holdings LLC.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.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.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.(6)
    
    Previously filed as Exhibit 99.1 to Current Report on Form 8-K filed April 28, 2005 and incorporated by reference herein.
  28




---



##### 



SIGNATURES
  CALIPER LIFE SCIENCES, INC.Date: August 9, 2005
    By:
    /s/ E. Kevin HrusovskyE. Kevin Hrusovsky
Chief Executive Officer and PresidentBy:
    /s/ Thomas T. HigginsThomas T. Higgins
Executive Vice President and
Chief Financial Officer 29




---



##### 



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.4.1
    
    Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4.2(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.10.14(6)
    
    Lease Agreement, dated as of April 25, 2005, between Caliper and BCIA New England Holdings LLC.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.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.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.(6)
    
    Previously filed as Exhibit 99.1 to Current Report on Form 8-K filed April 28, 2005 and incorporated by reference herein.
  30