UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

for the quarterly period ended September 30, 2007

Or

Commission file # 000-28229

CALIPER LIFE SCIENCES, INC.(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, Massachusetts 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 ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ON October 31, 2007: 47,539,267



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CALIPER LIFE SCIENCES, INC.  TABLE OF CONTENTS

|                                         |  |                                                                                          |  | Page
|---------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ----
|PART I FINANCIAL INFORMATION             |  |                                                                                         
|Item 1.                                  |  | Consolidated Financial Statements (unaudited)                                            |  | 2   
|                                         |  | Balance Sheets as of September 30, 2007 and December 31, 2006                            |  | 2   
|                                         |  | Statements of Operations for the Three and Nine Months Ended September 30, 2007 and 2006 |  | 3   
|                                         |  | Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006           |  | 4   
|                                         |  | Notes to Consolidated Financial Statements                                               |  | 5   
|Item 2.                                  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations    |  | 17  
|Item 3.                                  |  | Quantitative and Qualitative Disclosures About Market Risk                               |  | 25  
|Item 4.                                  |  | Controls and Procedures                                                                  |  | 26  
|PART II OTHER INFORMATION                |  |                                                                                         
|Item 1.                                  |  | Legal Proceedings                                                                        |  | 27  
|Item 1A.                                 |  | Risk Factors                                                                             |  | 29  
|Item 2.                                  |  | Unregistered Sales of Equity Securities and Use of Proceeds                              |  | 29  
|Item 3.                                  |  | Defaults Upon Senior Securities                                                          |  | 29  
|Item 4.                                  |  | Submission of Matters to a Vote of Security Holders                                      |  | 29  
|Item 5.                                  |  | Other Information                                                                        |  | 29  
|Item 6.                                  |  | Exhibits                                                                                 |  | 30  
|SIGNATURES                               |  | 31                                                                                      
|EXHIBIT INDEX                            |  | 32                                                                                      
|Ex-31.1 Section 302 Certification of CEO |  |                                                                                         
|Ex-31.2 Section 302 Certification of CFO |  |                                                                                         
|Ex-32.1 Section 906 Certification of CEO |  |                                                                                         
|Ex-32.2 Section 906 Certification of CFO |  |                                                                                         

1

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PART I. FINANCIAL INFORMATION

CALIPER LIFE SCIENCES, INC.        CONSOLIDATED BALANCE SHEETS        (unaudited, in thousands)

Item 1.    Financial Statements

|                                            |                                                                                                                                                       | September 30, 2007         |         | December 31, 2006 |        
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------------- | -------
|ASSETS                                      |                                                                                                                                                       |                            |         |                  
|Current assets:                             |                                                                                                                                                       |                            |         |                   |        
|                                            | Cash and cash equivalents                                                                                                                             |                            | $       | 14,174            |        
|                                            | Marketable securities                                                                                                                                 |                            |         | 3,770             |        
|                                            | Accounts receivable, net                                                                                                                              |                            |         | 28,874            |        
|                                            | Inventories                                                                                                                                           |                            |         | 21,816            |        
|                                            | Prepaid expenses and other current assets                                                                                                             |                            |         | 2,469             |        
|                                            |                                                                                                                                                       |                            |         |                   |        
|                                            |                                                                                                                                                       | Total current assets       |         |                   | 71,103 
|Property and equipment, net                 |                                                                                                                                                       |                            | 11,630  |                   |        
|Intangible assets, net                      |                                                                                                                                                       |                            | 45,413  |                   |        
|Goodwill                                    |                                                                                                                                                       |                            | 80,836  |                   |        
|Other assets                                |                                                                                                                                                       |                            | 1,822   |                   |        
|                                            |                                                                                                                                                       |                            |         |                   |        
|                                            | Total assets                                                                                                                                          |                            | $       | $210,804          |        
|                                            |                                                                                                                                                       |                            |         |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY        |                                                                                                                                                       |                            |         |                  
|Current liabilities:                        |                                                                                                                                                       |                            |         |                   |        
|                                            | Accounts payable                                                                                                                                      |                            | $       | 8,256             |        
|                                            | Accrued compensation                                                                                                                                  |                            |         | 5,841             |        
|                                            | Other accrued liabilities                                                                                                                             |                            |         | 11,353            |        
|                                            | Deferred revenue and customer deposits                                                                                                                |                            |         | 15,226            |        
|                                            | Current portion of accrued restructuring                                                                                                              |                            |         | 2,908             |        
|                                            | Current portion of credit facility and other long-term obligations                                                                                    |                            |         | 12,909            |        
|                                            |                                                                                                                                                       |                            |         |                   |        
|                                            |                                                                                                                                                       | Total current liabilities  |         |                   | 56,493 
|Noncurrent portion of accrued restructuring |                                                                                                                                                       |                            | 591     |                   |        
|Noncurrent portion of credit facility       |                                                                                                                                                       |                            |        |                   |        
|Other noncurrent liabilities                |                                                                                                                                                       |                            | 7,389   |                   |        
|Deferred tax liability                      |                                                                                                                                                       |                            | 1,130   |                   |        
|Commitments and contingencies (Note 9)      |                                                                                                                                                       |                            |         |                   |        
|Stockholders' equity:                       |                                                                                                                                                       |                            |         |                   |        
|                                            | Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding                                                      |                            |         |                  |        
|                                            | Common stock, $0.001 par value; 100,000,000 shares authorized; 47,473,779 and 46,812,315 shares issued and outstanding in 2007 and 2006, respectively |                            |         | 47                |        
|                                            | Additional paid-in capital                                                                                                                            |                            |         | 372,834           |        
|                                            | Accumulated deficit                                                                                                                                   |                            |         | (228,386          | )      
|                                            | Accumulated other comprehensive income                                                                                                                |                            |         | 706               |        
|                                            |                                                                                                                                                       |                            |         |                   |        
|                                            |                                                                                                                                                       | Total stockholders' equity |         |                   | 145,201
|                                            |                                                                                                                                                       |                            |         |                   |        
|Total liabilities and stockholders' equity  |                                                                                                                                                       | $                          | 210,804 |                   | $      
|                                            |                                                                                                                                                       |                            |         |                   |        

See accompanying notes.

2

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CALIPER LIFE SCIENCES, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (unaudited, in thousands, except per share data)

|                                                                      |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|--------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|Revenues:                                                             |  |                                  |        |                                 |  
|Product revenue                                                       |  | $                                | 18,504 |                                 | $
|Service revenue                                                       |  |                                  | 10,172 |                                 |  
|License fees and contract revenue                                     |  |                                  | 8,045  |                                 |  
|                                                                      |  |                                  |        |                                 |  
|Total revenue                                                         |  |                                  | 36,721 |                                 |  
|Costs and expenses:                                                   |  |                                  |        |                                 |  
|Cost of product revenue                                               |  |                                  | 11,278 |                                 |  
|Cost of service revenue                                               |  |                                  | 5,511  |                                 |  
|Cost of license revenue                                               |  |                                  | 971    |                                 |  
|Research and development                                              |  |                                  | 5,666  |                                 |  
|Selling, general and administrative                                   |  |                                  | 13,399 |                                 |  
|Amortization of intangible assets                                     |  |                                  | 2,522  |                                 |  
|Restructuring charges, net                                            |  |                                  | 22     |                                 |  
|                                                                      |  |                                  |        |                                 |  
|Total costs and expenses                                              |  |                                  | 39,369 |                                 |  
|                                                                      |  |                                  |        |                                 |  
|Operating loss                                                        |  |                                  | (2,648 | )                               |  
|Interest income (expense), net                                        |  |                                  | (205   | )                               |  
|Other income, net                                                     |  |                                  | 446    |                                 |  
|                                                                      |  |                                  |        |                                 |  
|Loss before income taxes                                              |  |                                  | (2,407 | )                               |  
|Benefit (provision) for income taxes                                  |  |                                  | (21    | )                               |  
|                                                                      |  |                                  |        |                                 |  
|Net loss                                                              |  | $                                | (2,428 | )                               | $
|                                                                      |  |                                  |        |                                 |  
|Net loss per share, basic and diluted                                 |  | $                                | (0.05  | )                               | $
|Shares used in computing net loss per common share, basic and diluted |  |                                  | 47,425 |                                 |  

See accompanying notes.

3

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CALIPER LIFE SCIENCES, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (unaudited, in thousands)

|                                                                         |  | Nine Months Ended
September 30, |        
|------------------------------------------------------------------------ |  | ------------------------------- | -------
|
|Operating activities                                                     |  |                                 |        
|Net loss                                                                 |  | $                               | (18,346
|Adjustments to reconcile net loss to net cash from operating activities: |  |                                 |        
|Depreciation and amortization                                            |  |                                 | 10,462 
|Stock-based compensation expense, net                                    |  |                                 | 3,970  
|In-process research and development                                      |  |                                 |       
|Non-cash restructuring charge, net                                       |  |                                 | 30     
|Other charges                                                            |  |                                 | 639    
|Foreign currency exchange gains                                          |  |                                 | (352   
|Changes in operating assets and liabilities:                             |  |                                 |        
|Accounts receivable                                                      |  |                                 | 2,481  
|Inventories                                                              |  |                                 | (2,804 
|Prepaid expenses and other current assets                                |  |                                 | 188    
|Accounts payable and other accrued liabilities                           |  |                                 | (670   
|Accrued compensation                                                     |  |                                 | (1,765 
|Deferred revenue and customer deposits                                   |  |                                 | (239   
|Other noncurrent liabilities                                             |  |                                 | 1,552  
|Payments of accrued restructuring obligations, net                       |  |                                 | (6,310 
|                                                                         |  |                                 |        
|Net cash from operating activities                                       |  |                                 | (11,164
|                                                                         |  |                                 |        
|Investing activities                                                     |  |                                 |        
|Purchases of marketable securities                                       |  |                                 | (1,795 
|Proceeds from sales of marketable securities                             |  |                                 | 4,102  
|Proceeds from maturities of marketable securities                        |  |                                 | 7,246  
|Other assets                                                             |  |                                 | (944   
|Change in restricted cash                                                |  |                                 |       
|Purchases of property and equipment                                      |  |                                 | (1,278 
|Purchase of intangible assets                                            |  |                                 | (250   
|Xenogen acquisition, cash and marketable securities acquired, net        |  |                                 |       
|                                                                         |  |                                 |        
|Net cash from investing activities                                       |  |                                 | 7,081  
|                                                                         |  |                                 |        
|Financing activities                                                     |  |                                 |        
|Borrowings under credit facility                                         |  |                                 | 6,500  
|Repayments under credit facility and other obligations                   |  |                                 | (2,276 
|Proceeds from issuance of common stock                                   |  |                                 | 2,145  
|                                                                         |  |                                 |        
|Net cash from financing activities                                       |  |                                 | 6,369  
|                                                                         |  |                                 |        
|Effect of exchange rates on changes in cash and cash equivalents         |  |                                 | 254    
|Net increase in cash and cash equivalents                                |  |                                 | 2,540  
|Cash and cash equivalents at beginning of period                         |  |                                 | 11,634 
|                                                                         |  |                                 |        
|Cash and cash equivalents at end of period                               |  | $                               | 14,174 
|                                                                         |  |                                 |        
|Supplemental disclosure of cash flow information                         |  |                                 |        
|Stock issued for acquisition of Xenogen                                  |  |                                 |        
|Warrants issued for acquisition of Xenogen                               |  |                                 |        
|Value of Xenogen warrants assumed in acquisition                         |  |                                 |        
|                                                                         |  |                                 |        
|Total non-cash consideration                                             |  |                                 |        
|Non-cash assets and liabilities                                          |  |                                 |        
|                                                                         |  |                                 |        
|Xenogen cash acquired, net of $2.8 million in acquisition costs          |  |                                 |        
|                                                                         |  |                                 |        
|Non-cash purchase of property and equipment                              |  |                                 |        
|                                                                         |  |                                 |        

See accompanying notes.

4

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CALIPER LIFE SCIENCES, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        SEPTEMBER 30, 2007        (Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of Caliper Life Sciences, Inc. and its wholly owned subsidiaries (collectively, the "Company"
or "Caliper") have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and generally accepted accounting principles for interim
financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been
condensed or omitted pursuant to such rules or regulations. The December 31, 2006 consolidated balance sheet has been derived from the Company's audited financial statements as of that date,
but does not include all disclosures required by U.S. generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring entries) considered
necessary for a fair presentation have been included. However, these unaudited consolidated financial statements should be read in conjunction with Caliper's Annual Report on
Form 10-K for the year ended December 31, 2006.

Operating
results for the three and nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the full fiscal year or for any
future periods. For example, the Company typically experiences higher revenue in the fourth quarter of its fiscal year due to spending patterns of its customers, and may realize significant periodic
fluctuations in license and contract revenue depending on the timing and circumstances of underlying individual transactions.

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
development and other life sciences research.

Summary of Significant Accounting Principles

The accounting policies underlying the accompanying unaudited consolidated financial statements are those set forth in Note 2 to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006, filed with the SEC. Those policies are not presented herein, except to
the extent that new policies have been adopted or that the description of existing policies has been meaningfully updated.

Income Taxes

Caliper accounts for income taxes in accordance with FAS 109,Accounting for Income Taxes, and accounts for
uncertainty in income taxes recognized in financial statements in accordance with FIN 48,Accounting for Uncertainty in Income Taxes.FIN 48 prescribes
a comprehensive model for the recognition, measurement, and financial statement disclosure of uncertain tax positions. Unrecognized tax benefits are the differences between tax positions taken, or
expected to be taken, in tax returns, and the benefits recognized for accounting purposes pursuant to FIN 48. Caliper classifies uncertain tax positions as short-term liabilities within
accrued expenses.

The
total amount of unrecognized tax benefits as of September 30, 2007 was approximately $333,000, all of which, if recognized, would affect our effective tax rate, and was
unchanged from

5

---



December 31,
2006. In the ordinary course of business, Caliper's income tax filings are regularly audited by tax authorities. While we believe we have appropriately provided for all uncertain
tax positions, amounts asserted by taxing authorities could be greater or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of previously accrued
provisions, could be recorded in the future as we revise our estimates due to changing facts and circumstances or the underlying matters are settled or otherwise resolved. We are currently undergoing
tax examinations by one state tax authority and we anticipate that this examination will be concluded within the next twelve months, and it is possible that this event will affect existing tax
reserves. An estimate of the range of possible changes to existing reserves cannot be made at this time. Federal and remaining state taxes for the years 2002 through 2006 are subject to examination,
as well as foreign jurisdiction tax returns covering these same periods.

We
recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties accrued as of September 30, 2007 were not material.

During
the three and nine month periods in 2007 and 2006, Caliper's tax provision primarily relates to foreign taxes in jurisdictions where our wholly owned subsidiaries are profitable.

Reclassifications

Certain amounts in the 2006 financial statements have been reclassified to conform to the 2007 financial statement presentation. This reclassification had no
effect on previously reported net loss, total stockholders' equity or net loss per share.

2. Acquisitions

On August 9, 2006, Caliper completed its acquisition of Xenogen Corporation for $62.1 million, consisting of $52.2 million in Caliper common
stock, $7.1 million in warrants and $2.8 million of estimated direct acquisition costs. The final allocation of the purchase price was completed by August 9, 2007 and resulted in
a $60,000 increase in goodwill. Xenogen's operations are included in the results of Caliper for all periods after August 9, 2006.

3. Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out basis, or "FIFO") or market. Amounts are relieved from
inventory and recognized as a component of cost of sales on a FIFO basis. Inventories consist of the following (in thousands):

September 30,
2007

December 31,
2006Raw material

$
12,078

$
9,998Work-in-process


1,403


1,380Finished goods


8,335


7,380$
21,816

$
18,758


6

---



4. Intangibles

Intangibles consist primarily of assets acquired in connection with the Xenogen Corporation acquisition in August 2006, the NovaScreen Biosciences
Corporation acquisition in October 2005, and the Zymark Corporation acquisition in July 2003. Intangibles, net, consist of the following (in thousands):

September 30,
2007

December 31,
2006Core technologies

$
26,183

$
28,765Developed and contract technologies


10,642


14,285Customer contracts, lists and relationships


5,434


6,716Trade names


2,898


2,898Other intangibles


256


142$
45,413

$
52,806


5. Warranty Obligations

Caliper provides for estimated warranty expenses as a component of cost of revenue at the time product revenue is recognized in accordance with FAS 5, Accounting
for Contingencies,and FASB Interpretation No. 45 (FIN 45),Guarantor's Accounting and Disclosure Requirements
for Guarantees, including Indirect Guarantees of Indebtedness of Others. Caliper offers a one-year limited warranty on most products, which is included in the
selling price. Caliper's standard limited warranty covers repair or replacement of defective goods, a preventative maintenance visit on certain products, and telephone-based technical support. 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 are as follows (in thousands):

Nine Months Ended September 30,2007

2006Balance at beginning of period

$
2,223

$
1,555Warranties issued during the period


957


2,065Settlements made during the period


(1,309
)

(1,482
)Balance at end of period

$
1,871

$
2,138


7

---



6. Comprehensive Loss

Comprehensive loss is as follows (in thousands):

|                                         |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|---------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|Net loss                                 |  | $                                | (2,428 | )                               | $
|Unrealized gain on marketable securities |  |                                  | 3      |                                 |  
|Foreign currency translation gain        |  |                                  | 65     |                                 |  
|                                         |  |                                  |        |                                 |  
|Comprehensive loss                       |  | $                                | (2,360 | )                               | $
|                                         |  |                                  |        |                                 |  

7. Restructuring Obligations

The following table summarizes the Company's restructuring obligations as of September 30, 2007 and related activity during the nine months ended
September 30, 2007 (in thousands):

|                                     |  | Severance and
Related |        | Facilities |   | Total  |  
|------------------------------------ |  | --------------------- | ------ | ---------- | - | ------ | -
|Balance, December 31, 2006           |  | $                     | 3,041  |            | $ | 6,119  |  
|Adjustments to estimated obligations |  |                       | (187   | )          |   | 561    |  
|Interest accretion                   |  |                       |       |            |   | 275    |  
|Payments                             |  |                       | (2,837 | )          |   | (3,473 | )
|                                     |  |                       |        |            |   |        |  
|Balance, September 30, 2007          |  | $                     | 17     |            | $ | 3,482  |  
|                                     |  |                       |        |            |   |        |  

The
remaining severance and facility obligations are payable as follows (in thousands):

|Years Ended December 31:             |  | Severance and
Related |    | Facilities |   | Total |  
|------------------------------------ |  | --------------------- | -- | ---------- | - | ----- | -
|2007 (remainder of fiscal year)      |  | $                     | 17 |            | $ | 1,001 |  
|2008                                 |  |                       |   |            |   | 2,311 |  
|2009                                 |  |                       |   |            |   | 432   |  
|2010                                 |  |                       |   |            |   | 199   |  
|2011                                 |  |                       |   |            |   | 26    |  
|                                     |  |                       |    |            |   |       |  
|Total minimum payments               |  |                       | 17 |            |   | 3,969 |  
|Less: Amount representing interest   |  |                       |   |            |   | (487  | )
|                                     |  |                       |    |            |   |       |  
|Present value of future payments     |  |                       | 17 |            |   | 3,482 |  
|Less: Current portion of obligations |  |                       | 17 |            |   | 2,891 |  
|                                     |  |                       |    |            |   |       |  
|Non-current portion of obligations   |  | $                     |   |            | $ | 591   |  
|                                     |  |                       |    |            |   |       |  

The
restructuring obligations reflected above resulted from the following actions.

During
the period from May 2003 through December 2006, Caliper consolidated certain facilities, the effects of which were originally reflected have been subsequently
adjusted through restructuring

8

---



charges
(credits) in the accompanying statement of operations. These facility closures, which are detailed in the Company's Annual Report on Form 10-K for the year ended
December 31, 2006, filed with the SEC, were accounted for in accordance with SFAS No. 146,Accounting for Costs Associated with Exit or Disposal
Activities, pursuant to which Caliper recorded a liability equal to the fair value of the remaining lease payments as of the cease-use date for each of the closed
facilities. Fair value was determined based upon the discounted present value of remaining lease rentals (5% discount rate used), for the space no longer occupied, considering sublease income at each
point in time. The two vacated facilities in Mountain View, California each include 28,800 square feet of space. Minimum annual lease and operating expense payments remaining under these leases, which
escalate at 3 to 4% annually, are approximately $1.9 million in each of 2007 and 2008. During 2005, Caliper entered into sublease agreements for approximately 73% of its idled facilities in
Mountain View, California. The agreements extend through June 2008, the end of the current lease agreement for the facilities. Basic rent and operating expenses remaining under the subleases is
approximately $0.2 million in 2007 and $0.4 million in 2008. In connection with the subleases, $76,000 in deposits is being held by Caliper.

In
connection with the acquisition of Xenogen, Caliper incurred costs that have been accounted for in accordance with EITF No. 95-3, Recognition of Liabilities in Connection with a Purchase
Business Combination, pursuant to which Caliper recorded a liability based on a defined exit plan equal to the fair value of the facility obligations and the costs related to
the involuntarily terminated individuals.



Caliper
also assumed a $1.0 million obligation related to Xenogen's St. Louis, Missouri facility. The facility closure was previously accounted for in accordance with EITF
94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring). The fair value of the assumed obligation was determined based upon the discounted present value of remaining lease rentals (using a discount rate of 8.75%) for
the space no

9

---



longer
occupied, considering sublease income potential of the property. The lease term expires April 30, 2011. During 2007, Caliper increased the accrual by $0.1 million based upon the
level of operating expenses required to maintain the facility. The adjustment was recorded in the purchase price allocation.

8. Revolving Credit Facility

During 2006, Caliper entered into a credit facility with a bank, as modified by a First Loan Modification Amendment dated February 26, 2007 and a Second
Loan Modification Amendment dated June 28, 2007 (the "Credit Facility"). The Credit Facility permits Caliper to borrow up to $20.0 million in the form of revolving loan advances
including up to $5.0 million in the form of letters of credit, and serves as a source of capital for ongoing operations and working capital needs. Borrowings under the Credit Facility accrue
interest at a floating per annum rate equal to the prime rate if Caliper's unrestricted cash held at the bank exceeds $20.0 million, or otherwise at prime plus one-half of one
percentage point. Caliper is permitted to borrow up to the full $20.0 million, provided it maintains unrestricted cash of at least $20.0 million with the bank, or is otherwise subject to
a borrowing base limit consisting of up to (a) 80% of eligible accounts receivable, as defined, plus (b) the lesser of 90% of Caliper's unrestricted cash maintained at the bank or
$10.0 million. The Credit Facility has been classified as short-term as of September 30, 2007 in accordance with its final maturity date which is August 9, 2008. The
Credit Facility requires Caliper to pay interest on a minimum of $8.0 million of outstanding borrowings through February 9, 2008.

The
Credit Facility includes traditional lending and reporting covenants including that certain financial covenants applicable to liquidity and earnings are to be maintained by Caliper
and tested as of the last day of each quarter. As of September 30, 2007, Caliper was in compliance with these covenants. The Credit Facility also includes several potential events of default
such as payment default, material adverse change conditions and insolvency conditions that could cause interest to be charged at prime plus two percentage points, or in the event of any uncured events
of default, could result in the bank's right to declare all outstanding obligations immediately due and payable.

As
of September 30, 2007, $12.9 million of borrowings and $2.8 million in outstanding letters of credit (related primarily to security deposits under Caliper's
operating leases) were outstanding under the Credit Facility leaving $4.3 million available for future borrowings. The Credit Facility is classified as short-term based upon the
maturity date; however refer to the Liquidity and Capital Resources discussion in Item 2 of this Form 10Q filing for additional details.

10

---





9. Commitments and Contingencies

License Obligations and Contingencies

On March 30, 2007, Caliper entered into an exclusive license agreement with Monogram Biosciences, Inc. ("Monogram"). Under the license agreement,
Caliper is obligated to pay ongoing royalties related to product and service revenues that encompass the use of the Monogram patents, and royalty sharing for any sublicense revenue generated by
Caliper. A portion of the initial license fee was credited against royalties due to Monogram in 2007. Over the term of the patents, Caliper owes minimum royalties of up to $100,000 per year for
calendar years 2007 through 2024.

On
August 9, 2006, Stanford University provided Xenogen with the results of an audit performed pursuant to the exclusive license agreement between Stanford and Xenogen. The audit
report, which was prepared by a third party consultant, asserted certain claims of underpayments during the period from 2002 through March 31, 2006 based upon the consultant's interpretation of
the license. Upon review of the audit report, Caliper determined that additional royalties of $71,000 were owed to Stanford, and paid this obligation in 2006. Caliper is contesting the remaining
payment obligation that is claimed in the Stanford audit report, and as a result, has not accrued for any additional liability. The amount of any remaining contingent obligation, if any, cannot
currently be estimated, nor does Caliper believe that it is probable that a liability exists. At any time, either party may choose binding arbitration to resolve any dispute over the amount of back
royalties owed, if any.

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 against approximately 300 other public companies that conducted initial public
offerings of their common stock during 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 as defendants. 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. During 2003, a settlement, subject to final approval by Judge Scheindlin, was reached among the plaintiffs, the issuers

11

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and
their insurers 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 terms of this settlement, which was subject to approval by Judge Scheindlin. Judge Scheindlin held a fairness hearing for final
approval of the settlement on April 24, 2006, but did not issue an approval order. On December 5, 2006 the Court of Appeals for the Second Circuit issued an opinion reversing Judge
Scheindlin's prior certification of the plaintiff classes in several "focus" cases pending before her as part of the consolidated IPO Lawsuits. As a result of this ruling, on June 25, 2007,
Judge Scheindlin issued an order terminating the settlement among the plaintiffs, the issuers and their insurers. The parties in the "focus" cases have agreed to a schedule for the filing of papers
seeking certification of a new class of plaintiffs, which will not be completed until February 2008. The final resolution of this litigation is not expected to have a material impact on
Caliper.

On
March 7, 2005, AntiCancer, Inc. filed a lawsuit against Xenogen in the U.S. District Court for the Southern District of California (the "Court") alleging infringement of
five patents of AntiCancer. The complaint seeks damages and injunctive relief against the alleged infringement. On March 29, 2005, AntiCancer amended its complaint to include an additional
claim seeking a judgment that one of Xenogen's imaging patents exclusively in-licensed from Stanford University, U.S. patent No. 5,650,135 (the "135 Patent"), is invalid. On
May 10, 2005, Xenogen filed its answer to AntiCancer's amended complaint. Xenogen denied all of AntiCancer's allegations and asserted various affirmative defenses, including its position that
AntiCancer's patents cited in its complaint, and its patent claims relating to in vivo imaging of fluorescence, are invalid, unenforceable, and not infringed by Xenogen. Caliper, as
successor-in-interest to Xenogen, continues to vigorously defend itself against AntiCancer's claims and believes AntiCancer's complaint is without merit. Concurrent with filing
Xenogen's answer to AntiCancer's original complaint, Xenogen had filed its own counterclaims against AntiCancer. Xenogen's counterclaims allege that AntiCancer infringes four of Xenogen's U.S.
patents, Nos. 5,650,135, 6,649,143 (the "143 Patent"), 6,939,533, and 6,916,462, all of which relate to in vivo imaging and have earlier priority dates than each of the patents asserted by AntiCancer
in its amended complaint. Both parties seek injunctive relief and an unspecified amount of damages, including enhanced damages for willful infringement. Caliper intends to vigorously pursue its claims
against AntiCancer. The Court completed the first three days of a Markman hearing relating to these claims from June 13, 2006 through June 15, 2006. The Court then stopped the Markman
hearing in order to permit Xenogen to pursue a motion to disqualify counsel for AntiCancer based on information discovered by Xenogen on the first day of the Markman hearing. On July 14, 2006,
Xenogen filed a motion to disqualify AntiCancer's attorneys due to numerous violations of ethical rules by such attorneys. After a hearing on Xenogen's motion to disqualify AntiCancer's attorneys due
to numerous violations of ethical rules by such attorneys, on August 10, 2006, the Court issued detailed findings of fact which found several violations of applicable ethical rules by counsel
for AntiCancer. As a result, the Court issued an Order which granted Xenogen's motion to disqualify AntiCancer's attorneys. On October 18, 2006, the Court issued a supplemental and clarifying
Order to its previous August 10, 2006 Order in which the Court, among other things, (i) granted Xenogen's motion to restart the Markman hearing, (ii) granted Xenogen's motion to
prohibit the transfer of tainted files to AntiCancer's successor counsel, and (iii) granted AntiCancer permission until November 6, 2006 to amend its

12

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complaint.
On November 6, 2006, AntiCancer filed its third amended complaint in this matter and voluntarily dismissed Stanford University from this proceeding. In response to AntiCancer's third
amended complaint, Xenogen filed a motion to strike and for a more definite statement. On April 12, 2007, the Court issued an Order which noted that all of Xenogen's objections set forth in its
motion to strike and for a more definite statement had merit, and granted AntiCancer leave to file a fourth amended complaint.

AntiCancer
filed its fourth amended complaint on May 15, 2007. The fourth amended complaint names Xenogen, Caliper Life Sciences, Inc., and Caliper Holdings, Inc. as
defendants. In its fourth amended complaint, AntiCancer dropped three of the five patents it had previously asserted. Caliper filed a motion to dismiss AntiCancer's fourth amended complaint on
June 18, 2007. A hearing on this motion was held on August 13, 2007, and the Court issued an Order granting Caliper's motion, but with leave for AntiCancer to file a fifth amended
complaint. On August 27, 2007, AntiCancer filed its fifth amended complaint, which continued to assert infringement of the two remaining patents asserted in its fourth amended complaint, but
which dropped any allegations of contributory infringement of these remaining patents. AntiCancer's fifth amended complaint also continues to seek declaratory judgment of invalidity of the "135 Patent
and seeks declaratory judgment of invalidity of the "143 Patent. Caliper
filed its answer to AntiCancer's fifth amended complaint on September 26, 2007, in which Caliper (i) denies all of AntiCancer's allegations of infringement and allegations of invalidity
of the "135 and "142 Patents, (ii) asserts a number of affirmative defenses to AntiCancer's allegations, (iii) seeks declaratory judgment of invalidity and unenforceability of the two
patents asserted by AntiCancer in its fifth amended complaint, and (iv) asserts counterclaims of infringement against AntiCancer under five patents controlled by Caliper, including the "135
Patent and "143 Patent. On October 16, 2007, AntiCancer filed its reply to the counterclaims asserted by Caliper, in which reply AntiCancer (i) denies all of Caliper's allegations of
infringement, (ii) asserts a number of affirmative defenses to Caliper's allegations, and (iii) seeks declaratory judgment of invalidity and unenforceability of the five patents asserted
by Caliper against AntiCancer. A case management conference was held on October 10, 2007, and discovery is proceeding. The Markman hearing for this case is presently expected to occur in
May 2008, and the Court has scheduled another case management conference for April 28, 2008.

Caliper
currently is not able to predict the outcome of the patent infringement lawsuit with AntiCancer. Even if Caliper prevails in this lawsuit, the defense of the lawsuit or similar
lawsuits will be expensive and time-consuming and may distract Caliper management from operating Caliper's business.

From
time to time Caliper is involved in litigation arising out of claims in the normal course of business. Based on the information presently available, management believes that there
are no other claims or actions pending or threatened against Caliper, the ultimate resolution of which will have a material adverse effect on our financial position, liquidity or results of
operations, although the results of litigation are inherently uncertain, and adverse outcomes are possible.

13

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10. Stock-Based Compensation, Options and Restricted Stock Activity and Net Loss per Weighted Average Common Share Outstanding

Stock-Based Compensation

Caliper accounts for stock-based compensation in accordance with Statement of Financial Accounting Standard No. 123R,Share-Based
Payment("SFAS 123R"), which requires all share-based payments, including grants of stock options, to be recognized in the income statement as an operating expense,
based on their fair values. Caliper estimates the fair value of each option award on the date of grant using a Black-Scholes-Merton based option-pricing model.

Stock-based
compensation expense is included within costs and expenses as follows (in thousands):

|                                    |  | Three Months Ended
September 30, |       | Nine Months Ended
September 30,
|----------------------------------- |  | -------------------------------- | ----- | -------------------------------
|
|Cost of product revenue             |  | $                                | 87    |                                
|Cost of service revenue             |  |                                  | 22    |                                
|Research and development            |  |                                  | 159   |                                
|Selling, general and administrative |  |                                  | 968   |                                
|                                    |  |                                  |       |                                
|Total                               |  | $                                | 1,236 |                                
|                                    |  |                                  |       |                                

On
September 30, 2007, Caliper had five share-based compensation plans (the "Plans"), which are described within Note 13 of Caliper's audited financial statements included
in Caliper's Annual Report on Form 10-K for the year ended December 31, 2006.

The
fair value of each option award issued under Caliper's equity plans is estimated on the date of grant using a Black-Scholes-Merton based option pricing model that uses the
assumptions noted in the following table. Expected volatilities are based on historical volatility of Caliper's stock. The expected term of the options is based on Caliper's historical option exercise
data taking into consideration the exercise patterns of the option holders during the option's life. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the
date of the grant.

Nine Months Ended September 30,2007

2006Expected volatility (%)

39-45

45Risk-free interest rate (%)

4.50-5.00

4.80Expected term (years)

3.2-4.2

4.3Expected dividend yield (%)






14

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Options and Restricted Stock Activity

A summary of stock option and restricted stock activity under the Plans as of September 30, 2007, and changes during the nine months then ended is as
follows:

|Stock Options                     |  | Shares    |   | Weighted
Average
Exercise
Price |       | Weighted
Average
Remaining
Contractual
Term |     | Aggregate
Intrinsic Value
|--------------------------------- |  | --------- | - | ------------------------------- | ----- | ------------------------------------------- | --- | -------------------------
|
|Outstanding at December 31, 2006  |  | 6,713,292 |   | $                               | 6.31  |                                             |     |                          
|Granted                           |  | 1,650,645 |   |                                 | 5.72  |                                             |     |                          
|Exercised                         |  | (378,397  | ) |                                 | 3.94  |                                             |     |                          
|Canceled                          |  | (586,954  | ) |                                 | 10.95 |                                             |     |                          
|                                  |  |           |   |                                 |       |                                             |     |                          
|Outstanding at September 30, 2007 |  | 7,398,586 |   | $                               | 5.99  |                                             | 6.7 |                          
|                                  |  |           |   |                                 |       |                                             |     |                          
|Exercisable at September 30, 2007 |  | 4,736,742 |   | $                               | 6.06  |                                             | 5.1 |                          
|                                  |  |           |   |                                 |       |                                             |     |                          
|Unvested at September 30, 2007    |  | 2,661,844 |   | $                               | 5.85  |                                             |     |                          
|                                  |  |           |   |                                 |       |                                             |     |                          

Restricted Stock Units

Shares

Weighted Average
Grant Date
Fair Market
per ShareOutstanding and non-vested at December 31, 2006

567,090

$
6.30Granted

322,498


5.64Vested

(190,694
)

6.04Unvested repurchases

(25,566
)

5.91Outstanding and non-vested at September 30, 2007

673,328


6.03


During
the nine months ended September 30, 2007, Caliper granted its employees and directors 1,650,645 options at a weighted average grant date fair value of $2.23 per share using
a Black-Scholes-Merton based option pricing model. The total intrinsic value of options exercised during the nine months ended September 30, 2007 was approximately $0.7 million. The
total fair value of restricted stock that vested during the nine months ended September 30, 2007 was approximately $1.1 million.

As
of September 30, 2007, there was $8.3 million of total unrecognized compensation cost related to unvested stock-based compensation arrangements granted under the Plans.
That cost is expected to be recognized over a weighted-average remaining service (vesting) period of approximately 2.7 years.

15

---



Common Shares Outstanding

During the nine months ended September 30, 2007, Caliper issued 661,464 shares of common stock as a result of stock purchases under Caliper's employee
stock purchase plan, stock option exercises and vesting of restricted stock.

Net Loss per Weighted Average Common Share Outstanding

Basic net loss per share is calculated based upon net loss divided by the weighted-average number of common shares outstanding during the period. The calculation
of diluted net loss per share excludes common stock equivalents consisting of stock options, unvested restricted stock, unvested restricted stock units and warrants (calculated using the treasury
stock method) which would have an anti-dilutive effect.

The
weighted average number of shares used to compute both basic and diluted net loss per share consists of the following (in thousands):

|                                                                                                                                                       |  | Three Months Ended
September 30, |  | Nine Months Ended
September 30,
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- |  | -------------------------------
|
|Basic and diluted                                                                                                                                      |  | 47,425                           |  | 40,939                         
|Anti-dilutive common stock equivalents excluded from calculation of diluted net loss per share (prior to the application of the treasury stock method) |  | 14,086                           |  | 13,456                         

16

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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, 2007 and for the
three and nine months ended September 30, 2007 and September 30, 2006 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, 2006.

The discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations
and intentions. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include those discussed under the caption "Risk
Factors" 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

Caliper Life Sciences sells products, services and integrated systems comprised of instruments, software and reagents to life sciences biomedical and
pharmaceutical researchers. We believe our offerings enable our customers to accelerate drug discovery, enhance the diagnosis of disease and facilitate scientific research. Our strategy is to
transform drug discovery and development through technologies and services that are relevant to and predictive of drug effects in humans. On August 9, 2006, we acquired Xenogen Corporation,
which provided us entry into the fast-growing preclinical non-invasive imaging market, and positions us as one of the first life science instrumentation companies able to
provide an integrated portfolio of products and services for both in vitro (in an artificial environment) and in vivo (in a living organism) research.

We
have multiple channels of distribution for our products: direct to customers, indirect through our international network of distributors, through partnership channels under our
Caliper Driven program and through joint marketing agreements. Through our direct and indirect channels, we sell products, services and complete system solutions, developed by us, to end customers.
Our Caliper Driven program is core to our business strategy and complementary to our direct sales and distribution network activities, as it enables us to extend the commercial potential of our
LabChip and advanced liquid handling technologies into new industries and new applications with commercial partners. We also utilize joint marketing agreements to enable others to market and
distribute our products. By using direct and indirect distribution, and collaborating and/or out-licensing our technology under our Caliper Driven program, we seek to maximize penetration
of our products and technologies into the marketplace and position Caliper as a leader in the life sciences tools market.

General Overview

During the three and nine months ended September 30, 2007, our revenues increased to $36.7 and $100.5 million, respectively, from
$26.5 million and $73.2 million for the same periods in 2006. In addition, our operating losses decreased to $2.6 million and $18.2 million, respectively, from
$13.8 million and $20.7 million for the same periods in 2006.

Significant
developments impacting our performance during the three and nine months ended September 30, 2007 include strong overall combined product and service revenue growth
aided by our recent acquisitions of Xenogen in 2006, improvement in gross margin performance as a result of increased leverage of our manufacturing and services capacity combined with the effects of
cost savings and margin enhancement initiatives, and substantial microfluidic patent portfolio license revenues.

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During
the three months ended September 30, 2007, we benefited from approximately $5.2 million of microfluidic patent portfolio license revenue and a full quarter of
biophotonic molecular imaging license revenue compared to the same period in 2006. A portion of the microfluidic license revenue related to commercial milestone payments from one of our licensees
which were anticipated to be realized in the fourth quarter of 2007. We were pleased to secure these new license arrangements, but do not consider such revenue to be a stable source of recurring
revenues in the future. Our direct channel microfluidic products, on the other hand, have demonstrated growth which we expect will continue, driven by the strong potential of our new microfluidic
products such as EZ Reader and ProfilerPro Kinase Assay kits.

In
addition to the license revenue increases, in vivo and in vitro drug discovery services performed by Caliper Discovery Alliances & Services (CDAS) (our services unit comprised
of Xenogen Biosciences and Novascreen Biosciences) exhibited strong organic revenue performance on top of acquisition related growth. Novascreen's Toxcast Screening contract with the U.S.
Environmental Protection Agency (EPA) was a primary driver of our third quarter service revenue, with remaining services growth resulting primarily from Xenogen Biosciences which we owned for a
partial quarter in 2006.

Improved
service and license revenue performance compensated for mixed results in third quarter product sales. Overall product sales were flat, reflecting strong growth in microfluidic
instruments and reagents, flat performance in automation products and a decline in IVIS instrument sales due to seasonal performance and funding delays. We have evaluated the sales pipeline for IVIS
imaging instruments, the primary driver of overall in vivo imaging product growth, and expect to see a return to double-digit growth in the fourth quarter of 2007.

Looking
beyond the third quarter, we believe that our product and services are well-positioned to take advantage of attractive growth opportunities in the life sciences
industry that will support ongoing double digit product and service revenue growth. We are committed to our goals to aggressively innovate new technology to bridge the gap between in vitro assays and
in vivo results, and to translate those findings into cures for human disease. We are projecting revenue in the range of $37 to $40 million for the fourth quarter, and have narrowed our
estimated revenue range to $137 to $140 million for full fiscal 2007.

Critical Accounting Estimates

The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our consolidated financial statements
presented in this report are described in our Management's Discussion and Analysis of Financial Condition and Results of Operations, and in the Notes to the Consolidated Financial Statements, each
included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. During the first quarter of 2007, we adopted FIN 48, Accounting for Uncertainty in Income Taxes.The
adoption of FIN 48 had no impact on our financial statements. Aside from the adoption of FIN 48, there
have been no material changes to the critical accounting policies since the filing of that report.

Results of Operations for the Three and Nine Months Ended September 30, 2007 and 2006

Operating results for the nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2007. For example, Caliper typically

18

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experiences
higher revenues in the fourth quarter of its fiscal year as a result of the capital spending patterns of its customers.

|                                  |  |   |        | Three Months Ended
September 30, |   |        |  | Nine Months Ended
September 30, |       
|--------------------------------- |  | - | ------ | -------------------------------- | - | ------ |  | ------------------------------- | ------
|
|
|Product revenue                   |  | $ | 18,504 |                                  | $ | 18,501 |  | $                               | 3     
|Service revenue                   |  |   | 10,172 |                                  |   | 5,934  |  |                                 | 4,238 
|License fees and contract revenue |  |   | 8,045  |                                  |   | 2,091  |  |                                 | 5,954 
|                                  |  |   |        |                                  |   |        |  |                                 |       
|Total Revenues                    |  | $ | 36,721 |                                  | $ | 26,526 |  | $                               | 10,195
|                                  |  |   |        |                                  |   |        |  |                                 |       

Product Revenue.

Product revenue during the three months ended September 30, 2007 was approximately equal to product revenue for the same period of 2006 on an overall
basis. On a comparative basis, microfluidic instruments and consumables increased by approximately $1.9 million, or 49%; molecular imaging instruments and consumables decreased by approximately
$1.5 million, or 26%; and liquid handling and automation instruments and consumables decreased by approximately $0.4 million, or 4%. Microfluidic product line growth mainly resulted from
increased direct channel instrument and consumables sales. The EZ Reader kinase screening platform and associated ProfilerPro reagent kits provided $1.0 million of the revenue increase, and
continuing strong demand for the LabChip 90 automated electrophoresis system provided $0.4 million of the revenue increase. All other microfluidic product sales provided for the remaining
$0.5 million increase. Molecular imaging product sales decreased by $1.5 million, primarily as a result of lower than anticipated academic customer orders of IVIS imaging systems due
primarily to delays in underlying government grant funding, the mix of IVIS systems sales toward Lumina instruments that feature a lower average selling price. We believe customer demand for IVIS
imaging systems remains strong, and expect to experience improved performance reflecting continued strong revenue growth in the fourth quarter. Liquid handling and automation product line performance
reflected a $1.3 million decrease in liquid handling product sales, mainly involving large, higher priced Staccato systems which are more easily influenced by customer budget constraints and
strong competition from competitors; a $1.2 million increase in pharmaceutical development and quality and specialty instrument product sales driven by continuing strong demand for automated
sample preparation and analysis instrumentation; and a $0.3 million decrease in all other liquid handling and automation product sales. We introduced the Zephyr liquid handler during the first
quarter of 2007, and recently announced the first targeted application solution to perform solid phase extraction using the Zephyr platform. We expect that sales of Zephyr instruments and additional
applications based on the Zephyr platform will strengthen liquid handling and automation product sales in future periods. In addition, we are investing additional resources to develop new automation
collaborations with potential OEM partners to enhance OEM product revenue opportunities.

Product
revenue increased during the nine months ended September 30, 2007 compared to the same period in 2006, primarily as a result of revenue generated by our molecular imaging
product line acquired from Xenogen, Inc. in August 2006, and continuing strong direct channel performance of our microfluidic product lines, offset by revenue declines in liquid handling
and automation. Sales of IVIS imaging systems and related consumables and reagents generated an increase of approximately $12.0 million of revenue during the nine months ended
September 30, 2007. Microfluidic product line sales increased on a net basis by approximately $1.0 million, driven by our direct channel instrument and consumable sales. Such instruments
include our EZ Reader kinase screening platform and associated ProfilerPro reagent kits, which were introduced in the first quarter of 2007, and the LabChip 90 automated electrophoresis system. Within
this net increase, we experienced a $0.6 million decrease in microfluidic OEM product sales resulting from Agilent directly taking over sourcing of its 2100 BioAnalyzer platform reagents in the
second half of 2006. Liquid handling and automation product

19

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sales
declined $6.7 million during the nine months ended September 30, 2007 compared to the same period of 2006 on a net basis. This net decline was comprised of a $2.9 million
decrease in large Staccato system sales, a $1.0 million decrease in liquid handling instrument sales, a $2.8 million decrease in OEM and other automation instrument revenues. Within the
nine months ended September 30, 2007 there was an offsetting increase of $2.9 million in sales of pharmaceutical development and quality and specialty instrument product sales. In
general, the market environment for liquid handling instruments and systems is characterized by a high level of direct competition and occasional budget constraints experienced by our customers.

Service Revenue.Service revenue increased during the three months ended September 30, 2007 compared to the same
period in 2006 primarily due to the addition of the Xenogen Biosciences' in vivo drug discovery services following the Xenogen acquisition in August 2006, as well as IVIS imaging system service
growth which we have been able to successfully grow as a result of our commercial instrument service organization. Combined, these factors resulted in an increase of approximately $2.0 million
in service revenues over 2006. In addition, service revenues of NovaScreen, our in vitro drug discovery business, increased approximately $1.9 million compared to the same period in 2006. The
majority of this increase resulted from the ToxCast Screening contract that we were awarded by the EPA. All other sources of service revenue increased by approximately $0.3 million compared to
the same period of 2006.

Service
revenue increased during the nine months ended September 30, 2007 compared to the same period of 2006 for similar reasons as stated above, including an additional
$9.5 million of service revenue from Xenogen (including Xenogen Biosciences) and an additional $1.3 million of service revenue from NovaScreen and of $0.9 million from all other
sources.

License Fees and Contract Revenue.License fees and contract revenue increased on a combined net basis during the three
months ended September 30, 2007 compared to the same period in 2006 primarily as a result of an increase in microfluidics patent portfolio related license revenue, and more specifically due to
commercial milestone payments achieved under one of our molecular diagnostic license agreements and an expansion of licensed rights under multiple agreements with one of our microfluidic patent
portfolio licensees. The remaining increase during the quarter resulted from biophotonic imaging
license fees associated with our in vivo imaging patent portfolio. Combined, these sources of revenue resulted in a $6.3 million increase in license revenue during the third quarter compared to
last year. This was partially offset by a decrease in contract research collaboration revenue of approximately $0.2 million due to completed projects, and a decrease of $0.1 million from
government funded research projects. Significant license revenue transactions are subject to significant uncertainty and variation from period to period.

License
fees and contract revenue increased during the nine months ended September 30, 2007 compared to the same period in 2006 primarily as a result of $3.7 million of
biophotonic imaging license revenue attributable to our Xenogen business, and an increase of $4.2 million in revenue from license rights granted to our microfluidic patent portfolio under our
Caliper Driven program. These sources of revenue were partially offset by decreases in revenue during this same period from contract research collaborations of approximately $0.9 million, and
government funded research projects of approximately $0.6 million.

20

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Costs of Revenue

|                     |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|-------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|
|Product              |  | $                                | 11,278 |                                 | $
|Service              |  |                                  | 5,511  |                                 |  
|License and contract |  |                                  | 971    |                                 |  
|                     |  |                                  |        |                                 |  
|Total Costs          |  | $                                | 17,760 |                                 | $
|                     |  |                                  |        |                                 |  

Cost of Product Revenue.Cost of product revenue decreased during the three months ended September 30, 2007 due
primarily to the underlying volume and mix of product sales which exhibited a greater mix of lower cost, higher margin, instruments and consumable sales through our direct channel, especially within
our microfluidics and development and specialty instrument product lines. In addition, increased volumes and renegotiated supply arrangements have resulted in material cost reductions within the
current year. Overall spending levels, including miscellaneous variable costs, decreased $0.4 million during the period. The decrease in overall spending was driven by $0.7 million in
manufacturing indirect labor spending and $0.4 million in reduced warranty costs. These savings were partially offset by an increase of $0.2 million in royalties paid on product sales
and increases to all other product costs of $0.5 million.

Cost
of product revenue increased during the nine months ended September 30, 2007 due primarily to overall higher product sales, especially resulting from our acquisition of
Xenogen. Xenogen product costs incurred during the nine months ended September 30, 2007 were approximately $5.0 million higher than the same period of 2006. In addition to Xenogen, all
other product costs decreased by $2.6 million reflecting the following changes: $2.0 million related to reduced volumes and mix; a reduction of $0.6 million in indirect
manufacturing labor spending; reduced warranty costs of $0.8 million due to improvements in quality management; an increase in product related royalties of $0.3 million; and an increase
of $0.5 million in all other product costs.

Cost of Service Revenue.Cost of service revenue increased during both the three and nine months ended September 30,
2007 primarily due to our acquisition of Xenogen, including especially costs associated with the Xenogen Biosciences' in vivo drug discovery service business.

Cost of License Revenue.Cost of license revenue increased during both the three and nine months ended September 30,
2007 compared to the same periods in 2006 as a result of sublicense royalties due to certain third parties for in-licensed patent technologies. The increase over the same periods in 2006
primarily relate to the obligations arising under Xenogen's exclusive license with Stanford University, which we assumed with our acquisition of Xenogen, and obligations to Monogram Biosciences under
our exclusive license agreement entered into on March 30, 2007. See Note 9 of the Notes to Consolidated Financial Statements for more information on our license agreement with Monogram
Biosciences.

Gross Margins.Gross margin on product revenue was 39% for the three months ended September 30, 2007, as compared to
31% in the same period in 2006. The increase in margin was primarily driven by the combined effect of enhanced product mix toward lower cost instrument products, ProfilerPro kits and other
consumables, and reduced manufacturing costs as described under Cost of Product Revenue above. Gross margin on service revenue was 46% for the three months ended September 30, 2007, as compared
to 30% in the same period in 2006. The increase in 2007 resulted primarily from higher gross margins associated with NovaScreen, our in vitro drug discovery business which benefited from utilization
of its fixed cost base in connection with the volumes achieved with the ToxCast Screening contract that we were awarded by the EPA.

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Gross
margin on product revenue was 38% for the nine months ended September 30, 2007, as compared to 31% in the same period during 2006 which was a result of the combined effects
of product mix improvement and reduced manufacturing costs as described above. Gross margin on service revenue was 41% for the nine months ended September 30, 2007 and 2006. The benefit of
volumes achieved at NovaScreen related to the EPA ToxCast contract were offset by lower gross margins associated with Xenogen Biosciences' in vivo drug discovery service revenues. Xenogen Biosciences
contributed approximately one-third of total service revenue during the nine months ended September 30, 2007 at an approximately 30% gross margin.

Expenses

|                                      |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|
|Research and development              |  | $                                | 5,666  |                                 | $
|Selling, general and administrative   |  |                                  | 13,399 |                                 |  
|Amortization of intangible assets     |  |                                  | 2,522  |                                 |  
|Restructuring charges, (credits), net |  |                                  | 22     |                                 |  

Research and Development Expenses.Research and development expenses decreased overall during the three months ended
September 30, 2007 compared to the same period in 2006 primarily as a result of the $2.9 million charge taken for acquired in-process research and development projects in
connection with our acquisition of Xenogen in 2006. Beside this charge, we incurred expense increases including $0.7 million of incremental expense associated with a full quarter of in vivo
imaging
research and development as a result of the Xenogen acquisition and $0.2 million of in vitro spending as a result of a modest headcount increase at NovaScreen. These increases were offset in
total by $0.8 million of various expense decreases including, primarily, $0.6 million related to a small reduction in personnel and their associated costs.

Research
and development expenses increased during the nine months ended September 30, 2007 compared to the same period in 2006 primarily as a result of $4.4 million of in
vivo research and development spending we assumed as a result of the Xenogen acquisition, offset by the absence of the $2.9 million charge taken for acquired in-process research and
development projects in connection with our acquisition of Xenogen in 2006. Other research and development expenses decreased by approximately $0.4 million during this period, primarily related
to a decrease in personnel and other related costs.

As
a percentage of revenues, we expect research and development spending generally to decrease in the future, to the extent our revenues grow, and as we continue to closely manage
discretionary spending on research and development programs.

Selling, General and Administrative Expenses.Selling, general and administrative expenses were up $0.9 million during
the quarter ended September 30, 2007 compared to the same period in 2006. Within the overall change in selling, general and administrative expenses, sales and marketing expenses increased by
approximately $1.0 million, comprised primarily of $0.9 million salary and related costs in an effort to improve the commercial operations in North America. This increase was partially
offset by a $0.1 million decrease in general and administrative costs, which consists of a $0.6 million increase in legal and advisory services related to merger and acquisition activity
offset by approximately $0.7 million of expenses previously incurred by Xenogen.

Selling,
general and administrative expenses increased by $9.4 million during the nine months ended September 30, 2007 compared to the same period in 2006 primarily as a
result of approximately $3.4 million of incremental spending we assumed by acquiring Xenogen. The increase in expenses attributable to the Xenogen acquisition related primarily to
$1.8 million of additional personnel costs,

22

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including
approximately 20 additional sales and marketing employees, $1.0 million in increased legal expenses, $0.4 million in sales and marketing related expenses and
$0.2 million of all other expenses. The remaining increase of $6.0 million related primarily to sales and marketing expenses of $4.1 million and $1.9 million in general and
administrative costs. The sales and marketing increase primarily resulted from personnel added within our direct channel sales force and marketing groups, which also included a reallocation of
existing personnel resources from other areas of the business. The increase of $1.9 million in general and administrative expenses resulted from $0.6 million of legal and advisory
services related to merger and acquisition activity, $0.5 million of in-sourced information technology services, $0.3 million of increased provision for doubtful accounts and
$0.5 million of other general and administrative costs.

As
noted under Part II, Item 1 "Legal Proceedings," we are presently involved in certain litigation matters, and we are currently unable to predict the level of ongoing legal
costs that we will have to incur with respect to these matters.

Amortization of Intangible Assets.The increase in amortization of intangible assets for both the three and nine months ended
September 30, 2007 relates to the intangible assets acquired in the Xenogen acquisition in August 2006.

Restructuring Charges.We incurred restructuring charges in 2007 and 2006 related to acquisition and integration activities
that are more fully discussed in Note 7 to the accompanying financial statements. Restructuring charges during the three and nine month periods relate to accretion of interest on facilities,
net of sub-lease income and adjustments to the operating expense assumptions on certain facilities.

Interest and Other Expense, Net

|                               |  | Three Months Ended
September 30, |      | Nine Months Ended
September 30, |  
|------------------------------ |  | -------------------------------- | ---- | ------------------------------- | -
|
|
|Interest income (expense), net |  | $                                | (205 | )                               | $
|Other income (expense), net    |  |                                  | 446  |                                 |  

Interest Income (Expense), Net.Interest income (expense), net, decreased during the three and nine months ended
September 30, 2007 compared to the same period in 2006, primarily due to an increase in interest expense of $0.2 and $0.6 million, respectively, incurred on increased outstanding
borrowing under our credit facility. In addition, interest income decreased during the three and nine months ended September 30, 2007, compared to 2006 primarily due to lower balances of cash,
cash equivalents and marketable securities.

Other Income, Net.Other income, net, increased on a three month basis compared to 2006 due to transaction gains on foreign
denominated accounts receivable due to weakening of the dollar in comparison primarily to the British Pound, the Euro, the Yen and the Canadian Dollar. During the three months ended
September 30, 2007, we incurred foreign currency transaction gains of approximately $0.4 million, compared to no impact (gain or loss) for the same period in 2006. During the three
months ended September 30, 2006 there were $0.1 million in gains from investments. During the nine months ended September 30, 2007, compared to the same period in 2006, other
income, which was comprised primarily of foreign currency transaction gains, was relatively unchanged.

Liquidity and Capital Resources

As of September 30, 2007, we had $17.9 million in cash, cash equivalents and marketable securities, as compared to $24.9 million as of
December 31, 2006.

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As
noted in Note 8 of the Notes to Consolidated Financial Statements, on August 9, 2006, we entered into a credit facility with a bank which permits us to borrow up to
$20.0 million in the form of revolving loan advances including up to $5.0 million in the form of letters of credit. Principal borrowings under the credit facility accrue interest at a
floating per annum rate equal to the prime rate if our unrestricted cash held at the bank exceeds $20.0 million, or prime plus one-half of one percentage point if our unrestricted
cash held at the bank is below $20.0 million. Under the credit
facility, we are permitted to borrow up to $20.0 million, provided we maintain unrestricted cash of at least $20.0 million with the bank, or are otherwise subject to a borrowing base
limit consisting of up to (a) 80% of eligible accounts receivable, as defined, plus (b) the lesser of 90% of our unrestricted cash maintained at the bank or $10.0 million. The
credit facility has a two-year initial maturity. Through February 9, 2008, we are required to pay interest on a minimum of $8.0 million of outstanding borrowings.

The
credit facility includes traditional lending and reporting covenants including that certain financial covenants applicable to liquidity and earnings are to be maintained by us and
tested as of the last day of each quarter. As of September 30, 2007, we were in compliance with these covenants. The credit facility also includes several potential events of default that could
cause interest to be charged at prime plus two percentage points, or, in the event of any uncured events of default, could result in the bank's right to declare all outstanding obligations immediately
due and payable. We expect to renew the facility upon its maturation (August 2008), however, based upon the current maturity we have classified all borrowings outstanding as
short-term as of September 30, 2007. The credit facility will serve as a source of capital for ongoing operations and working capital needs.

We
assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Our primary ongoing cash requirements will be to fund
operating activities, capital expenditures, investments in businesses, product development, restructured facility obligations, and debt service. Our primary sources of liquidity are internally
generated cash flows and borrowings under our credit facility. Significant factors affecting the management of our ongoing cash requirements are the adequacy of available bank lines of credit and our
ability to attract long term capital with satisfactory terms. The sources of our liquidity are subject to all of the risks of our business and could be adversely affected by, among other factors, a
decrease in demand for our products, our ability to integrate acquisitions, deterioration in certain financial ratios, and market changes in general.

We
believe our future operating cash flows will be sufficient to meet our future operating cash needs. Furthermore, our ability to obtain equity financing, as well as availability of
additional borrowings under our credit facility, provide additional potential sources of liquidity should they be required.

We
maintain cash balances in many subsidiaries through which we conduct our business. The repatriation of cash balances from certain of our subsidiaries could have adverse tax
consequences. However, these cash balances are generally available without legal restrictions to fund ordinary business operations. We have transferred, and will continue to transfer, cash from our
subsidiaries to us and to other international subsidiaries when it is cost effective to do so.

Cash Flows

|                           |  | Nine Months Ended September 30, |        
|-------------------------- |  | ------------------------------- | -------
|
|
|Cash provided by (used in) |  |                                 |        
|Operating Activities       |  | $                               | (11,164
|Investing Activities       |  |                                 | 7,081  
|Financing Activities       |  |                                 | 6,369  

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Operating Activities.During the nine months ended September 30, 2007 we used $11.2 million of cash for
operating activities which included approximately $2.8 million related to severance payments to former Xenogen employees and payments of $3.5 million related to our idle facilities. We
used approximately $4.9 million of cash to fund operations and working capital needs, which primarily related to a $2.8 million investment in inventory within the period.

Investing Activities.During the nine months ended September 30, 2007, net proceeds from purchases, sales and
maturities of marketable securities generated $9.6 million of cash which we used primarily for operations. Our primary investing activities were the purchase of property and equipment of
$1.3 million.

Financing Activities.During the nine months ended September 30, 2007, financing cash proceeds were principally
comprised of $4.2 million of net borrowings under our credit facility. Other proceeds were
from stock proceeds realized from employee participation in our employee stock purchase plan and option exercises.

Contractual Obligations

The commitments under leases and other obligations are described in our Management's Discussion and Analysis of Financial Condition and Results of Operations and
in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Other than the
in-license arrangement with Monogram Biosciences described in footnote 9 in Notes to Consolidated Financial Statements included in this Form 10-Q filing, there has been
no material change during the nine months ended September 30, 2007 in the contractual obligations disclosed at December 31, 2006.

Capital Requirements

Our capital requirements depend on numerous factors, including market acceptance of our products, the resources we devote to developing and supporting our
products, and acquisitions. We expect to devote substantial capital resources to continuing our research and development efforts, expanding our support and product development activities, and for
other general corporate activities. Our future capital requirements will depend on many factors, including:



Based
on current plans, we expect that revenue from operations, our current cash balances and borrowing availability under our credit facility will be sufficient to fund our operations
at least through the end of 2008.

Item 3    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

Our primary market risk exposures are foreign currency fluctuation and interest rate sensitivity. There have been no material changes to the information included
under Item 7A, "Quantitative and

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Qualitative
Disclosures About Market Risk," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

Item 4.    Controls and Procedures

We evaluated our "disclosure controls and procedures" as defined by Exchange Act Rules 13a-15(e) and 15d-15(e), as of
June 30, 2007. This evaluation was done under the supervision and with the participation of Caliper's management, including our chief executive officer and our chief financial officer.

Evaluation of Disclosure Controls and Procedures.We have established disclosure controls and procedures that are designed to
provide reasonable assurance 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 SEC's rules and forms. Disclosure controls are also designed to provide reasonable assurance that such information
is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based
on their evaluation as of September 30, 2007, the chief executive officer and the chief financial officer have concluded that our disclosure controls and procedures are
effective to provide reasonable assurance 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.

Limitations on the Effectiveness of Disclosure Controls and Procedures.Our management, including our chief executive officer
and chief financial officer, does not expect that our disclosure controls and procedures 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 controls. Because of the inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls.No changes in our internal control over financial reporting identified in connection with the
evaluation of such internal control occurred during the third quarter of 2007, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 against approximately 300 other public companies that conducted initial public
offerings of their common stock during 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 as defendants. 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. During 2003, a settlement, subject to final approval by Judge Scheindlin, was reached among the plaintiffs, the issuers and their insurers 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 terms of this settlement, which was subject to approval by Judge Scheindlin. Judge Scheindlin held a fairness hearing for final approval of the settlement on April 24,
2006, but did not issue an approval order. On December 5, 2006 the Court of Appeals for the Second Circuit issued an opinion reversing Judge Scheindlin's prior certification of the plaintiff
classes in several "focus" cases pending before her as part of the consolidated IPO Lawsuits. DAs a result of this ruling, on June 25, 2007, Judge Scheindlin issued an order terminating the
settlement among the plaintiffs, the issuers and their insurers. The parties in the "focus" cases have agreed to a schedule for the filing of papers seeking certification of a new class of
plaintiffs, which will not be completed until February 2008. The final resolution of this litigation is not expected to have a material impact on Caliper.

On
March 7, 2005, AntiCancer, Inc. filed a lawsuit against Xenogen in the U.S. District Court for the Southern District of California (the "Court") alleging infringement of
five patents of AntiCancer. The complaint seeks damages and injunctive relief against the alleged infringement. On March 29, 2005, AntiCancer amended its complaint to include an additional
claim seeking a judgment that one of Xenogen's imaging patents exclusively in-licensed from Stanford University, U.S. patent No. 5,650,135 (the "135 Patent"), is invalid. On
May 10, 2005, Xenogen filed its answer to AntiCancer's amended complaint. Xenogen denied all of AntiCancer's allegations and asserted various affirmative defenses, including its position that
AntiCancer's patents cited in its complaint, and its patent claims relating to in vivo imaging of fluorescence, are invalid, unenforceable, and not infringed by Xenogen. Caliper, as
successor-in-interest to Xenogen, continues to vigorously defend itself against AntiCancer's claims and believes AntiCancer's complaint is without merit. Concurrent with filing
Xenogen's answer to AntiCancer's original complaint, Xenogen had filed its own counterclaims against AntiCancer. Xenogen's counterclaims allege that AntiCancer infringes four of Xenogen's U.S.
patents, Nos.

27

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5,650,135,
6,649,143 (the "143 Patent"), 6,939,533, and 6,916,462, all of which relate to in vivo imaging and have earlier priority dates than each of the patents asserted by AntiCancer in its amended
complaint. Both parties seek injunctive relief and an unspecified amount of damages, including enhanced damages for willful infringement. Caliper intends to vigorously pursue its claims against
AntiCancer. The Court completed the first three days of a Markman hearing relating to these claims from June 13, 2006 through June 15, 2006. The Court then stopped the Markman hearing in
order to permit Xenogen to pursue a motion to disqualify counsel for AntiCancer based on information discovered by Xenogen on the first day of the Markman hearing. On July 14, 2006, Xenogen
filed a motion to disqualify AntiCancer's attorneys due to numerous violations of ethical rules by such attorneys. After a hearing on Xenogen's motion to disqualify AntiCancer's attorneys due to
numerous violations of ethical rules by such attorneys, on August 10, 2006, the Court issued detailed findings of fact which found several violations of applicable ethical rules by counsel for
AntiCancer. As a result, the Court issued an Order which granted Xenogen's motion to disqualify AntiCancer's attorneys. On October 18, 2006, the Court issued a supplemental and clarifying Order
to its previous August 10, 2006 Order in which the Court, among other things, (i) granted Xenogen's motion to restart the Markman hearing, (ii) granted Xenogen's motion to
prohibit the transfer of tainted files to AntiCancer's successor counsel, and (iii) granted AntiCancer permission until November 6, 2006 to amend its complaint. On November 6,
2006, AntiCancer filed its third amended complaint in this matter and voluntarily dismissed Stanford University from this proceeding. In response to AntiCancer's third amended complaint, Xenogen filed
a motion to strike and for a more definite statement. On April 12, 2007, the Court issued an Order which noted that all of Xenogen's objections set forth in its motion to strike and for a more
definite statement had merit, and granted AntiCancer leave to file a fourth amended complaint.

AntiCancer
filed its fourth amended complaint on May 15, 2007. The fourth amended complaint names Xenogen, Caliper Life Sciences, Inc., and Caliper Holdings, Inc. as
defendants. In its fourth amended complaint, AntiCancer dropped three of the five patents it had previously asserted. Caliper filed a motion to dismiss AntiCancer's fourth amended complaint on
June 18, 2007. A hearing on this motion
was held on August 13, 2007, and the Court issued an Order granting Caliper's motion, but with leave for AntiCancer to file a fifth amended complaint. On August 27, 2007,
AntiCancer filed its fifth amended complaint, which continued to assert infringement of the two remaining patents asserted in its fourth amended complaint, but which dropped any allegations of
contributory infringement of these remaining patents. AntiCancer's fifth amended complaint also continues to seek declaratory judgment of invalidity of the "135 Patent and seeks declaratory judgment
of invalidity of the "143 Patent. Caliper filed its answer to AntiCancer's fifth amended complaint on September 26, 2007, in which Caliper (i) denies all of AntiCancer's allegations of
infringement and allegations of invalidity of the "135 and "142 Patents, (ii) asserts a number of affirmative defenses to AntiCancer's allegations, (iii) seeks declaratory judgment of
invalidity and unenforceability of the two patents asserted by AntiCancer in its fifth amended complaint, and (iv) asserts counterclaims of infringement against AntiCancer under five patents
controlled by Caliper, including the "135 Patent and "143 Patents. On October 16, 2007, AntiCancer filed its reply to the counterclaims asserted by Caliper, in which reply AntiCancer
(i) denies all of Caliper's allegations of infringement, (ii) asserts a number of affirmative defenses to Caliper's allegations, and (iii) seeks declaratory judgment of invalidity
and unenforceability of the five patents asserted by Caliper against AntiCancer. A case management conference was held on October 10, 2007, and discovery is proceeding. The Markman hearing for
this case is presently expected to occur in May 2008, and the Court has scheduled another case management conference for April 28, 2008.

Caliper
currently is not able to predict the outcome of the patent infringement lawsuit with AntiCancer. Even if Caliper prevails in this lawsuit, the defense of the lawsuit or similar
lawsuits will be expensive and time-consuming and may distract Caliper management from operating Caliper's business.

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From
time to time Caliper is involved in litigation arising out of claims in the normal course of business. Based on the information presently available, management believes that there
are no other claims or actions pending or threatened against Caliper, the ultimate resolution of which will have a material adverse effect on our financial position, liquidity or results of
operations, although the results of litigation are inherently uncertain, and adverse outcomes are possible.

Item 1A.    Risk Factors

Our risk factors are described in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission
for the year ended December 31, 2006. There have been no material changes in the risks affecting Caliper since the filing of our Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

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

None.

Item 5.    Other Information

None.

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Item 6.    Exhibits

EXHIBIT INDEX

|Exhibit
Number |  | Description of document                                                                                                                                                                                    
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                   

---

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SIGNATURES

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

|                       |  | CALIPER LIFE SCIENCES, INC.
|---------------------- |  | ---------------------------
|Date: November 9, 2007 |  | By:                        
|                       |  | By:                        

31

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EXHIBIT INDEX

|Exhibit
Number |  | Description of document                                                                                                                                                                                    
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                   

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