UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _________________.
Commission file # 000-28229
CALIPER TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
Delaware 33-0675808
(State of Incorporation) (I.R.S. Employer Identification Number)
605 FAIRCHILD DRIVE
MOUNTAIN VIEW, CA 94043-2234
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (650) 623-0700
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
COMMON SHARES OUTSTANDING ON NOVEMBER 2, 2001: 24,131,170
CALIPER TECHNOLOGIES CORP.
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Balance Sheets as of September 30, 2001
and December 31, 2000.............................................. 2
Condensed Statements of Operations for the Three and Nine Months
Ended September 30, 2001 and 2000.................................. 3
Condensed Statements of Cash Flows for the Nine Months
Ended September 30, 2001 and 2000.................................. 4
Notes to Unaudited Condensed Financial Statements.................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk............. 20
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 21
Item 2. Changes in Securities and Use of Proceeds.............................. 21
Item 3. Defaults upon Senior Securities........................................ 22
Item 4. Submission of Matters to a Vote of Security Holders.................... 22
Item 5. Other Information...................................................... 22
Item 6. Exhibits and Reports on Form 8-K....................................... 22
SIGNATURES............................................................................... 23
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIPER TECHNOLOGIES CORP.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------------------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents ............................. $ 5,156 $ 36,294
Marketable securities ................................. 85,760 106,303
Accounts receivable ................................... 3,826 2,991
Inventories ........................................... 4,677 2,206
Other receivable ...................................... 26,475 1,033
Prepaid expenses and other current assets ............. 2,524 1,237
--------- ---------
Total current assets .................................... 128,418 150,064
Marketable securities ................................... 79,522 49,102
Investment in common stock .............................. 5.070 --
Security deposits ....................................... 3,200 3,000
Property and equipment, net ............................. 12,727 9,101
Notes receivable from officers .......................... 475 615
Other assets, net ....................................... 547 632
--------- ---------
Total assets ............................................ $ 229,959 $ 212,514
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 2,974 $ 2,960
Accrued compensation .................................. 2,949 1,946
Other accrued liabilities ............................. 358 1,351
Deferred revenue ...................................... 3,071 3,763
Current portion of equipment financing ................ 1,806 1,671
--------- ---------
Total current liabilities ............................... 11,158 11,691
Noncurrent portion of equipment financing ............... 3,665 3,534
Deferred revenue and income credit ...................... 166 194
Other noncurrent liabilities ............................ 1,191 638
Commitments and contingencies
Stockholders' equity:
Common stock .......................................... 24 23
Additional paid-in capital ............................ 250,448 249,004
Deferred stock compensation ........................... (2,745) (4,772)
Accumulated deficit ................................... (36,585) (48,426)
Accumulated other comprehensive income ................ 2,637 628
--------- ---------
Total stockholders' equity .............................. 213,779 196,457
--------- ---------
Total liabilities and stockholders' equity .............. $ 229,959 $ 212,514
========= =========
See accompanying notes.
2
CALIPER TECHNOLOGIES CORP.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2001 2000 2001 2000
--------------- -------------- -------------- --------------
Revenue:
Product revenue .......................................... $ 1,581 $ 1,209 $ 4,769 $ 1,998
Product revenue-related party (Note 4) ................... 2,017 -- 2,017 --
License fees and contract revenue ........................ 3,043 4,298 14,935 11,578
-------- -------- -------- --------
Total revenue .............................................. 6,641 5,507 21,721 13,576
Costs and expenses:
Cost of product revenue .................................. 893 839 2,857 1,672
Cost of product revenue-related party (Note 4) ........... 1,382 -- 1,382 --
Research and development ................................. 9,985 8,987 28,358 22,650
Selling, general and administrative ...................... 4,327 2,464 10,692 7,300
Amortization of deferred stock compensation (Note 1) .... 587 1,020 2,027 3,663
-------- -------- -------- --------
Total costs and expenses ................................... 17,174 13,310 45,316 35,285
-------- -------- -------- --------
Operating loss ............................................. (10,533) (7,803) (23,595) (21,709)
Interest income, net ....................................... 2,165 1,870 7,936 4,528
Gain on settlement of litigation ........................... -- 12,000 27,500 12,000
-------- -------- -------- --------
Net income(loss) before accounting change .................. (8,368) 6,067 11,841 (5,181)
Cumulative effect of a change in accounting principle ...... -- -- -- (2,294)
-------- -------- -------- --------
Net income(loss) ........................................... $ (8,368) $ 6,067 $ 11,841 $ (7,475)
======== ======== ======== ========
Net income(loss) per share, basic:
Net income(loss) before accounting change .................. $ (0.35) $ 0.28 $ 0.49 $ (0.24)
Cumulative effect of a change in accounting principle ...... -- -- -- (0.11)
-------- -------- -------- --------
Net income(loss) per share ................................. $ (0.35) $ 0.28 $ 0.49 $ (0.35)
======== ======== ======== ========
Shares used in computing net income(loss) per share, basic . 24,059 21,971 23,947 21,278
Net income(loss) per share, diluted:
Net income(loss) before accounting change .................. $ (0.35) $ 0.25 $ 0.46 $ (0.24)
Cumulative effect of a change in accounting principle ...... -- -- -- (0.11)
-------- -------- -------- --------
Net income(loss) ........................................... $ (0.35) $ 0.25 $ 0.46 $ (0.35)
======== ======== ======== ========
Shares used in computing net income(loss) per share, diluted 24,059 24,281 25,641 21,278
(1) Amortization of deferred stock compensation relates
to the following:
Research and development ................................... $ 383 $ 663 $ 885 $ 1,599
General and administrative ................................. 204 357 1,142 2,064
-------- -------- -------- --------
Total ...................................................... $ 587 $ 1,020 $ 2,027 $ 3,663
======== ======== ======== ========
See accompanying notes.
3
CALIPER TECHNOLOGIES CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2001 2000
--------- ---------
OPERATING ACTIVITIES
Net income(loss) .............................................. $ 11,841 $ (7,475)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Gain on settlement of litigation and non-cash license revenue (32,500) --
Cumulative effect of a change in accounting principle ....... -- 2,294
Depreciation and amortization ............................... 2,626 1,449
Amortization of deferred stock compensation ................. 2,027 3,663
Stock options issued to non-employees ....................... (79) 483
Changes in operating assets and liabilities:
Accounts receivable ....................................... 256 (573)
Inventories ............................................... (2,471) (1,938)
Other receivable .......................................... (58) (12,000)
Prepaid expenses and other current assets ................. (320) (339)
Notes receivable from officers ............................ 140 10
Other noncurrent asset .................................... (211) (182)
Accounts payable and other accrued liabilities ............ (979) 1,762
Accrued compensation ...................................... 1,003 639
Deferred revenue .......................................... (720) (852)
Other noncurrent liabilities .............................. 553 271
--------- ---------
Net cash used in operating activities ......................... (18,892) (12,788)
--------- ---------
INVESTING ACTIVITIES
Purchases of available-for-sale securities .................... (167,755) (136,731)
Proceeds from sales of available-for-sale securities .......... 87,326 12,012
Proceeds from maturities of available-for-sale securities ..... 72,561 38,251
Purchase of property and equipment ............................ (6,168) (2,433)
--------- ---------
Net cash used in investing activities ......................... (14,036) (88,901)
--------- ---------
FINANCING ACTIVITIES
Proceeds from equipment financing ............................. 1,686 1,378
Payments of obligations under equipment financing ............. (1,420) (1,224)
Proceeds from issuance of common stock ........................ 1,524 105,486
--------- ---------
Net cash provided by financing activities ..................... 1,790 105,640
--------- ---------
Net decrease in cash and cash equivalents ..................... (31,138) 3,951
Cash and cash equivalents at beginning of period .............. 36,294 44,772
--------- ---------
Cash and cash equivalents at end of period .................... $ 5,156 $ 48,723
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid ................................................. $ 486 $ 464
========= =========
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NONCASH
INVESTING ACTIVITIES
Other receivable .............................................. 26,475 --
Investment in common stock .................................... 5,058 --
Other assets .................................................. 967 --
See accompanying notes.
4
CALIPER TECHNOLOGIES CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring entries) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 2001 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2001. For further information, refer to the
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 2000 filed by Caliper Technologies Corp.
REVENUE RECOGNITION
Revenue is earned from Caliper's collaboration agreement, Technology Access
Program agreements, LabChip(R) High Throughput Screening System, Automated
Microfluidics Systems 90, Applications Developer Program, licensing and royalty
agreements and government grants.
COLLABORATION AGREEMENT
Revenue from development activities under Caliper's collaboration agreement
is recorded in the period in which the costs are incurred. Direct costs
associated with this contract are reported as research and development expense.
Revenue related to the reimbursement of costs for the supply of chips and
reagents to Caliper's collaboration partner is recognized upon shipment.
Caliper's share of gross margin on components of the LabChip(R) system sold by
the collaboration partner is recognized as revenue upon shipment by the
collaboration partner to the end user.
TECHNOLOGY ACCESS PROGRAM AGREEMENTS
Caliper has entered into a number of multi-year Technology Access Program
agreements that include: (1) access to existing technology; (2) a multi-year
subscription for technology developed during the subscription period; (3)
development and support services; and (4) access to prototype LabChip(R)
systems developed during the subscription period. Caliper allocates the total
arrangement fees to each element based on fair value. Fair value is based on
renewal rates for subscriptions, prices established by Caliper's management
having the relevant authority for development and support services and the price
at which a program participant has the ability to purchase unspecified
quantities of a specific prototype product.
Prior to January 1, 2000, Caliper recognized non-refundable license fees
under its Technology Access Programs as revenue upon transfer of the license to
third parties and when no further performance obligations existed. Effective
January 1, 2000, Caliper changed its method of accounting for non-refundable
license fees to recognize such fees ratably over the term of the committed
related Technology Access Program agreement. Caliper believes the change in
accounting principle is preferable based on guidance provided in SEC Staff
Accounting Bulletin No. 101 -- Revenue Recognition in Financial Statements.
Caliper further believes that the change is preferable as it is possible that
Technology Access Program participants would not pay the non-refundable license
fees without Caliper's continuing involvement in the subscription period, in
providing support services, and in making prototype products available for
purchase during the subscription period. The $2.3 million cumulative effect of
the change in accounting principle was reported as a charge in the period ended
March 31, 2000. The cumulative effect was initially recorded as deferred revenue
and is being recognized as revenue over the remaining contractual terms of the
Technology Access Program agreements. During the quarter ended March 31, 2000,
the impact of the change in accounting was to increase net loss by ($1.8
million), or ($0.09 per share), comprised of the $2.3 million cumulative effect
of the change in accounting principle ($0.11 per share), net of $450,000 of the
related deferred revenue which was recognized as revenue during the quarter
($0.02 per share). During the three and nine months ended September 30, 2001,
Caliper recorded $200,000 ($0.01 per share) and $600,000 ($0.02 per share) of
the related deferred revenue as revenue. The remainder
5
of the related deferred revenue will be recognized as revenue approximately as
follows: $200,000 in the last quarter of 2001 and $194,000 in 2002.
Subscription fees are recognized ratably over the subscription period. When
payment of the subscription fee is contingent upon reaching a milestone, revenue
is deferred until the milestone is met. Support and development services revenue
is recognized in the periods the costs are incurred. Product revenue is
recognized upon transfer of title to the customer.
LABCHIP(R) HIGH THROUGHPUT SCREENING SYSTEM, AUTOMATED MICROFLUIDICS SYSTEMS 90
AND APPLICATIONS DEVELOPER PROGRAM
Product revenue is recognized upon the transfer of title to customers and
is recorded net of discounts, rebates and allowances. Service revenue is
recognized ratably over the service term.
LICENSING AND ROYALTY
Revenue from Caliper's up-front license fees is recognized when the
earnings process is complete and no further obligations exist. If further
obligations exist, the up-front license fee is recognized ratably over the
obligation period. Royalties from licenses are based on third-party sales and
recorded as earned in accordance with contract terms, when third-party results
are reliably measured and collectibility is assured.
GOVERNMENT GRANTS
Caliper's grant from the National Institute of Standards and Technology
provides for the reimbursement of qualified expenses for research and
development as defined under the terms of the grant agreement. Revenue under
grant agreements is recognized when the related research expenses are incurred.
DERIVATIVE AND HEDGING ACTIVITIES ACCOUNTING POLICY FOR DERIVATIVE INSTRUMENTS
Effective January 1, 2001, Caliper adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended. In connection with the adoption of SFAS No. 133,
Caliper recognizes derivative financial instruments in the financial statements
at fair value regardless of the purpose or intent for holding the instrument.
Changes in the fair value of derivative financial instruments are either
recognized periodically in income or in shareholders' equity as a component of
comprehensive income (loss) depending on whether the derivative financial
instrument qualifies for hedge accounting, and if so, whether it is designated
as a fair value hedge or cash flow hedge. For derivative instruments that are
designated and qualify as fair value hedge (i.e., hedging the exposure to
changes in the fair value of an asset or a liability or an identified portion
thereof that is attributable to a particular risk), the gain or loss on the
derivative instrument as well as the offsetting loss or gain on the hedged item
attributable to the hedged risk are recognized in current earnings during the
period of the change in fair values. For derivative instruments that are
designated and qualify as a cash flow hedge (i.e., hedging the exposure to
variability in expected future cash flows that is attributable to a particular
risk), the effective portion of the gain or loss on the derivative instrument is
reported as a component of other comprehensive income and is reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. The remaining gain or loss on the derivative instrument in
excess of the cumulative change in the present value of future cash flows of the
hedged item, if any, is recognized in current earnings during the period of
change. Hedge effectiveness is assessed on a quarterly basis.
As discussed in Note 5, Caliper has entered into a settlement agreement
with Aclara Biosciences. The terms of the agreement provide that if Caliper
sells any of the 900,000 shares of Aclara's common stock received in the
settlement between 18 and 24 months from the effective date of the settlement
agreement, and the then fair value of Aclara's stock is less than $36.11 per
share, Aclara will pay Caliper in cash a dollar amount equal to the difference
between the aggregate fair value of the Aclara stock at the date the shares are
disposed and $32.5 million. If the then fair value of the Aclara stock is
greater than $36.11 per share, Caliper will receive no additional consideration
from Aclara. Caliper is restricted from selling its shares of Aclara for 18
months following the effective date of the settlement agreement. If Caliper
sells its shares of Aclara stock at any time after 24 months from the effective
date of the settlement agreement, Aclara will have no obligation to provide any
additional consideration to Caliper. As discussed in Note 5, Aclara has executed
a fully-funded $32.5 million standby letter of credit in favor of Caliper to
secure its performance under this potential obligation. In effect, Aclara has
guaranteed the aggregate settlement amount of $32.5 million, so long as Caliper
sells its Aclara stock within a specified period of time.
6
Caliper has accounted for this arrangement by recording $4.3 million in
Aclara stock at fair market value, with a note face value of $28.2 million
including other receivable for the fully funded letter of credit which was
reduced by the initial fair value ($2.7 million) of an embedded derivative. The
embedded derivative has been designated as a fair value hedge of the Aclara
stock. The mark-to-market change in the fair value of the Aclara stock is
recorded in earnings in the other income or expense line on the statement of
operations and is offset by the gains or losses in the fair value of the
derivative reported in the same other income or expense line. The ineffective
portion of the embedded derivative is also recorded in the other income or
expense line on the statement of operations.
STOCK-BASED COMPENSATION
Caliper accounts for its stock options and equity awards in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and has elected to follow the "disclosure only"
alternative prescribed by Financial Accounting Standards Board's SFAS No. 123,
"Accounting for Stock-Based Compensation." Caliper accounts for stock options
issued to non-employees in accordance with the provisions of SFAS No. 123 and
Emerging Issues Task Force 96-18. For the three and nine months ended September
30, 2001, compensation expense related to stock options issued to non-employees
was ($21,000) and ($79,000), respectively, compared to $92,000 and $483,000 for
the three and nine months ended September 30, 2000.
NET INCOME (LOSS) PER SHARE
Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded from the diluted earnings per
share computations as they have an antidilutive effect due to Caliper's net
loss.
A reconciliation of shares used in the calculations is as follows (in
thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2001 2000 2001 2000
------- ------- ------- -------
Basic:
Weighted-average shares of common stock outstanding ..... 24,068 22,021 23,961 21,370
Less: weighted-average shares subject to repurchase ..... (9) (50) (14) (92)
------- ------- ------- -------
Weighted-average shares used in basic net income(loss)
per share ............................................... 24,059 21,971 23,947 21,278
======= ======= ======= =======
Diluted:
Weighted average shares of common stock outstanding ..... 24,068 22,021 23,961 21,370
Plus: weighted average shares of common stock equivalents -- 2,310 1,694 --
Less: weighted average shares subject to repurchase ..... (9) (50) (14) (92)
------- ------- ------- -------
Weighted average shares used in diluted net income(loss)
per share ............................................... 24,059 24,281 25,641 21,278
======= ======= ======= =======
7
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
September 30, December 31,
2001 2000
------------- ------------
Raw material ............. $2,878 $2,018
Work in process .......... 1,132 151
Finished goods ........... 667 37
------ ------
Total .................... $4,677 $2,206
====== ======
NOTE 3 -- COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income(loss) for the three and nine months
ended September 30, 2001 and 2000 are as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
2001 2000 2001 2000
------- ------- ------- -------
Net income(loss) ............ $(8,368) $ 6,067 $11,841 $(7,475)
Unrealized gain on securities 1,576 166 2,009 93
------- ------- ------- -------
Comprehensive income(loss) .. $(6,792) $ 6,233 $13,850 $(7,382)
======= ======= ======= =======
NOTE 4 -- RELATED PARTY
In May 2001, Caliper formed Amphora Discovery Corp. ("Amphora") transferring
certain intangibles to Amphora. In September 2001, Amphora completed a private
placement of securities with third party investors raising $25 million which
reduced Caliper's ownership to 28 percent. Caliper's investment in Amphora is
accounted for under the equity method of accounting. As Caliper's investment in
Amphora has no basis for accounting purposes and, because Caliper does not
guarantee debt or have commitments to fund losses, Caliper has not recorded its
proportionate share of Amphora's operating losses in its financial statements
since the completion of Amphora's financing.
In September 2001, Caliper and Amphora entered into a LabChip Solutions
Agreement and an Intellectual Property Agreement. The LabChip Solutions
Agreement provided for the ongoing supply of Caliper high throughput screening
systems and chips to Amphora, and for the provision of related services by
Caliper to Amphora. It also contains certain intellectual property licensing
provisions pertaining to the parties' independent and collaborative efforts to
develop new high throughput screening systems based on Caliper's microfluidic
technologies. Under the Intellectual Property Agreement, Caliper has granted
Amphora certain exclusive rights to use Caliper's High Throughput Screening
products in a chemical genomics database business.
In September 2001, Caliper sold $2.3 million of the Caliper 250 High
Throughput Screening System products to Amphora recording it as a related party
sale on the financial statements. Under the equity accounting method, Caliper
recorded $2.0 million in related party product sales and deferred 28% of the
gross profit, or $249,000 that reflects Caliper's retained ownership interest in
the products sold to Amphora. Caliper will recognize this remaining $249,000 as
revenue ratably over the next 36 months as Amphora records depreciation on its
Caliper 250 High Throughput Screening Systems.
NOTE 5 -- LITIGATION
On March 22, 1999, Caliper filed a lawsuit in California Superior Court for
the County of Santa Clara against Aclara and others alleging that all the
defendants misappropriated certain of Caliper's trade secrets relating to
Caliper business plans, patents and intellectual property strategy. On September
14, 2000, Caliper reached a settlement agreement with the defendants other than
Aclara. On October 27, 2000, the jury returned a verdict in favor of Caliper and
against Aclara on Caliper's claims for misappropriation of
8
trade secrets and conversion of property. The jury awarded Caliper $52.6 million
for damages to Caliper and unjust enrichment to Aclara, which the court reduced
to $35.6 million.
On January 7, 2001, Caliper announced a comprehensive settlement agreement
with Aclara on all pending litigation between the two companies. Under the terms
of the settlement both companies agreed to dismiss all suits and countersuits in
the federal and state court actions and to cross-license selected patents. The
settlement provides Caliper with freedom to operate under Aclara's `022 family
of patents, which includes the `015 and other patents, for its glass chips and
related instruments through a fully paid, royalty-free license. Under the terms
of the agreement, Aclara will also pay Caliper $37.5 million over the next three
years in a combination of stock, cash, and committed minimum royalties. Caliper
has agreed to license to Aclara the "Ramsey" family of patents for use with
Aclara's polymer chips and related instruments in exchange for license fees and
royalties. The two companies have also agreed to an alternative dispute
resolution procedure for handling potential future patent disagreements out of
court.
On March 22, 2001, in connection with the settlement agreement mentioned
above, Caliper received 900,000 shares of Aclara's common stock with a then
current fair value of $4.3 million. The common stock is restricted from sale for
a period of 18 months from the date of the settlement agreement. As a component
of the settlement agreement, Aclara has effectively guaranteed the value of the
Aclara common stock to be $32.5 million at the time of Caliper's sale of the
stock, provided that such sale occurs in the period from 18 months to 24 months
from the effective date of the settlement agreement. Aclara entered into a
fully-funded $32.5 million standby letter of credit in favor of Caliper to
secure its performance under this potential obligation. Accordingly, Caliper has
recognized the entire $32.5 million settlement in the quarter ended March 31,
2001. Caliper has recognized $5.0 million of license fee revenue and $27.5
million of litigation settlement in the income statement pursuant to the terms
contained in the settlement agreement. Caliper does not have any further
obligations under the agreement.
Caliper has accounted for this arrangement by recording $4.3 million in
Aclara stock at fair market value, with a note face value of $28.2 million
including other receivable for the fully funded letter of credit which was
reduced by the initial fair value ($2.7 million) of an embedded derivative. The
latter two elements in combination represent the guarantee. The receivable will
be accreted to its face value of $28.2 million over the life of the receivable
using the level-yield method. The embedded derivative will be accounted for as
discussed in Note 1.
Commencing on June 7, 2001, Caliper and three of its officers and directors
(David V. Milligan, Daniel L. Kisner and James L. Knighton) have been named as
defendants in three securities class action lawsuits filed in the United States
District Court for the Southern District of New York. The first such suit is
captioned Colbert Birnet, L.P v. Caliper Technologies Corp., et al.., No.
01-CV-5072. The other two suits are captioned Kovel v. Caliper Technologies
Corp., et al., No. 01-CV-5964 and Leach v. Caliper Technologies Corp., et al.,
01-CV-6537.Caliper believes that the cases will be consolidated and that a
single consolidated complaint will be filed after the court appoints a lead
plaintiff. The Kovel and Leach complaints allege claims against Caliper and
certain individual officers or directors of Caliper under Sections 11 and 15 of
the Securities Act of 1933. The Birnet and Kovel complaints allege claims
against Caliper and certain individual officers and directors of Caliper under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule
10b-5 of the Securities Exchange Act. Each of the complaints also names as a
defendant one or more of the underwriters of Caliper's December 1999 initial
public offering of common stock. Each of the complaints alleges that one or more
of these underwriters charged excessive, undisclosed commissions to investors
and entered into improper agreements with investors relating to aftermarket
transactions. The complaints seek rescission or rescissionary damages on the
Section 11 claims and an unspecified amount of money damages on the Rule 10b-5
claims. Based on information currently available to Caliper, Caliper believes
that the claims alleged against Caliper and its officers and directors are
without merit. Caliper intends to defend these cases vigorously.
NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets." The statements eliminate the pooling-of-interests method of accounting
for business combinations and require that goodwill and certain intangible
assets not be amortized. Instead, these assets will be reviewed for impairment
annually with any related losses recognized in earnings when incurred. The
statements will be effective for Caliper as of January 1, 2002 for any existing
goodwill and intangible assets and for business combinations initiated after
June 30, 2001. Caliper has not recorded goodwill and other intangibles prior to
September 31, 2001. Additionally, the Company does not have any business
combinations as of September 30, 2001. Caliper will adopt the provisions of SFAS
No. 141 for any business combination initiated after June 30, 2001. Caliper is
currently analyzing the impact these statements will have; however, the impact
is not expected to be material on Caliper's financial position or results of
operations.
9
In July 2001, the FASB also issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and in August 2001, issued No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 143 establishes
accounting standards for the recognition and measurement of an asset retirement
obligation and is effective for financial statements issued for years beginning
after June 15, 2002. SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets, superseding SFAS No. 121
and is effective for Caliper January 1, 2002.Caliper is currently analyzing the
impact these statements will have; however, the impact is not expected to be
material on Caliper's financial position or results of operations.
10
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, 2001 and for the three and nine month periods
ended September 30, 2001 and September 30, 2000 should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K for the year ended
December 31, 2000.
Except for historical information, the discussion in this report contains
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. The cautionary
statements made in this report should be read as applying to all related
forward-looking statements wherever they appear in this report. Our actual
results could differ materially from those discussed here. Factors that could
cause or contribute to these differences include those discussed in " -- Factors
Affecting Operating Results" below as well as those discussed elsewhere.
OVERVIEW
We are a leader in lab-on-a-chip technologies that miniaturize, integrate
and automate many laboratory processes. We develop, manufacture and sell our
proprietary LabChip(R) systems to pharmaceutical and other companies. We
believe our LabChip(R) systems have the potential to assemble the power and
reduce the scale of entire laboratories full of equipment and people. From
inception in July 1995 through September 2001, our operating activities were
primarily devoted to research, development and commercialization of technologies
involving the manipulation of very small amounts of fluid, which are referred to
as "microfluidic technologies," and first-generation products such as the
Agilent 2100 Bioanalyzer, LabChip(R) kits and our high throughput screening
systems, recruiting personnel, business development, raising capital and
acquiring assets. In 1999, we recognized revenue from our first product sales
when we sold initial versions of our high throughput system for drug screening
to three of our Technology Access Program customers, Amgen, Eli Lilly and Roche.
In addition, in September 1999, Agilent Technologies, Inc., our commercial
partner, introduced our first LabChip(R) system for use by individual
researchers. In March 2000, we recognized revenue from our first multi-capillary
sipper chip system and Millennium Pharmaceuticals joined our Technology Access
Program, becoming our fourth Technology Access Program customer, and also joined
our joint applications development program, which was formalized later in the
year as our Applications Developer Program. In May 2000, we introduced the DNA
500 LabChip(R) kit for the automated analysis of small DNA fragments to
determine their size and concentration. In August 2000, we introduced the
Protein 200 LabChip(R) kit for the automated sizing and analysis of protein
samples. In September 2000, we introduced the Automated Microfluidics System 90
to perform automated high throughput nucleic acid analysis. In December 2000,
GlaxoSmithKline became our second Applications Developer Program customer, with
the goal of developing new applications in synthetic chemistry using our
LabChip(R) technology. On January 7, 2001, we announced a comprehensive
settlement agreement with Aclara Biosciences on all pending litigation between
the two companies. As a result, Aclara will pay us $37.5 million over the next
three years in a combination of stock, cash, and committed minimum royalties. We
shipped our first Automated Microfluidics System 90 and our first microfluidics
development workstation, the Caliper 42, in March 2001. In April 2001, we
introduced the DNA 1000 LabChip(R) kit for the automated analysis of DNA
fragments to determine their size and concentration. In July 2001, we announced
the establishment of an Applications Developer Program collaboration with the
National Aeronautics and Space Administration (NASA) to use our LabChip(R)
technology to perform protein crystallization in a microgravity environment. In
August 2001, we introduced the RNA Nano LabChip(R) kit, an enhanced application
for the automated analysis of RNA fragments to determine their size and
concentration. In August 2001, we also introduced new software to improve the
efficiency of the Agilent 2100 Bioanalyzer
In September 2001, as anticipated, we initiated a new commercial program for
selling our high throughput screening (HTS) products. This program is intended
to replace our fee-based Technology Access Program with direct sales of
instruments, chips, services and custom solutions to customers based upon a
product catalogue and established price list. We also introduced a new
instrument platform, the Caliper 250 HTS System, which includes instruments for
assay development and screening, and a menu of chips that perform standard
assays. The Caliper 250 HTS System uses a 4-sipper chip capable of performing
tens of thousands of experiments per chip per day, depending upon assay
conditions, and offers walkaway automation and minimal user intervention. The
Caliper 250 HTS System is being commercialized by our own sales and marketing
force. We are also offering a full range of customer and field support services
and a specialized HTS solutions program that includes specific assay development
support, early access to beta products and customized microfluidic solutions for
customers' individual research challenges. The first sales of the Caliper 250
HTS System were made to Amphora Discovery Corp.
11
In September 2001, we announced the formation of a new company, Amphora
Discovery Corp., to create and commercialize a comprehensive database of
chemical genomics information. The Amphora database is being designed for use in
preclinical drug discovery and is intended to include a comprehensive collection
of information about important aspects of a library of small molecules and their
interactions with therapeutic targets. Amphora plans to sell this database
information directly to pharmaceutical companies, biotechnology firms and
academic laboratories involved in preclinical and clinical research in life
sciences. It also plans to sell analysis tools, reagents from the Amphora
compound library, and licenses to proprietary compounds and targets. Amphora
intends to use Caliper's LabChip(R) HTS systems to create, build and expand its
chemical genomics database. Amphora has agreed to purchase a minimum number of
Caliper instruments and datapoints in its first few years of operations and we
expect that Amphora will be one of our major HTS customers.
Since our inception, we have incurred significant losses and, as of
September 30, 2001, we had an accumulated deficit of $36.6 million. Our losses
have resulted principally from costs incurred in research and development,
manufacturing scale-up, and from general and administrative costs associated
with our operations. We expect to continue to incur substantial research and
development, manufacturing scale-up, and general and administrative costs. As a
result, we will need to generate significantly higher revenue to achieve
profitability.
Historically, prior to the quarter ended September 30, 2001, our revenue has
been derived principally from contract revenue earned under our collaboration
agreement with Agilent and from our Technology Access Program customers and, to
a lesser extent, from the sale of products and government grants. During the
third quarter ended September 30, 2001, largely due to the sales of high
throughput screening systems to Amphora Discovery Corp., a larger portion of our
revenue, about 50%, was derived from product sales. In addition, during the
quarter ended March 31, 2001, we derived revenue of $5.0 million from our
initial licensing of the Ramsey family of patents to Aclara. This licensing
revenue will not recur in year 2001. Although we are developing and plan to
introduce future products, we cannot provide assurance that we will be
successful in these efforts. To date, we have generated a substantial portion of
our revenue from a limited number of sources. During the nine months ended
September 30, 2001, our licensing of the Ramsey family of patents to Aclara
accounted for 23% of our revenue, Agilent alone accounted for 33% of our
revenue, our Technology Access Program customers collectively accounted for 25%
of our revenue, and sales to Amphora accounted for 7% of our revenue. During the
nine months ended September 30, 2000 Agilent alone accounted for 45% of our
revenue in this period and two Technology Access Program customers collectively
accounted for 42% of our revenue.
During the quarter ended September 30, 2001, within the context of our
planned discontinuation of our Technology Access Program and conversion to a
commercial HTS products business structure, we initiated the renegotiation of
our Technology Access Program agreements with Amgen, Eli Lilly and Millennium
Pharmaceuticals. The original agreement with Amgen expires in December 2001 and
the agreement with Millennium expires in March 2002. Negotiations with these two
companies are ongoing and we anticipate completing the restructuring of these
contracts before year-end 2001. The contract with Eli Lilly has been completed
and includes a commitment for their ongoing participation as a customer of
Caliper's high throughput screening commercial business for 12 months.
Historically, under our Technology Access Program agreements, we recognized as
revenue non-refundable license fees over the contract period, product sales upon
the transfer of title to the customer, and development and support fees in the
period in which the costs were incurred. Subscription fees and development and
support fees could be received annually or quarterly in advance depending upon
the terms of the agreement. We recorded payments received in advance under all
of these agreements as deferred revenue until earned. Currently, with the new
HTS commercial structure, customers will purchase instruments, chips, support
services and custom solutions directly from Caliper, and they will be charged on
a data point pricing basis for their usage of chips. We will offer discounts
based on the volume of products and services purchased.
Under our collaboration agreement, Agilent funds our research and
development expenditures related to the collaboration, reimburses us for our
costs of supplying chips and reagents to Agilent and pays us a share of the
gross margin earned on all components of LabChip(R) systems they sell. We
record revenue from development and support activities under our collaboration
agreement in the period in which the costs are incurred. We report direct costs
associated with this contract as research and development expense. We recognize
revenue related to the reimbursement of costs for the supply of chips and
reagents to Agilent upon shipment. We recognize as revenue our share of gross
margin on components of the LabChip(R) system sold by Agilent upon shipment
to the end user. Agilent began marketing and sales efforts for the Agilent 2100
Bioanalyzer in late 1999. Sales of new and innovative instrumentation such as
the Agilent 2100 Bioanalyzer involve a long sales cycle, requiring customer
training and demonstration periods. Sales of the Agilent 2100 Bioanalyzer
increased during the course of 2000 and the nine months of 2001 indicating, we
believe, a growing market acceptance of this technology.
12
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2001 and 2000
Revenue. Total revenue was $6.6 million and $21.7 million for the three and
nine months ended September 30, 2001, respectively, compared to $5.5 million and
$13.6 million for the three and nine months ended September 30, 2000. The
increase of $1.1 million during the three months ended September 30, 2001
compared to the same period in 2000 resulted principally from product sales
growth both to Amphora Discovery Corp., a related party, and third party
customers, offset by declining contract revenues from Technology Access Program
customers. Related party revenue was $2.0 million for the three and nine months
ended September 30, 2001 resulting from sales of the Caliper 250 HTS System
products to Amphora Discovery Corp. There were no related party revenues for the
corresponding periods of 2000.
Product revenue from unrelated customers was $1.6 million and $4.8 million for
the three and nine months ended September 30, 2001, respectively, compared to
$1.2 million and $2.0 million for the three and nine months ended September 30,
2000. This increase of $400,000 and $2.8 million during the three and nine
months ended September 30, 2001 compared to the same periods in 2000 is from
product volume growth under our commercial collaboration with Agilent, and from
sales of our Automated Microfluidics Systems 90 and Applications Developer
Program, both of which were introduced in the first quarter of 2001.
License fees and contract revenues decreased to $3.0 million for the quarter
ended September 30, 2001, compared to $4.3 million for the same period in 2000
due to the anticipated $735,000 decrease resulting from a one time research and
development reimbursement in 2000 under our collaboration with Agilent
Technologies. Additionally, we experienced a 35% decline in our Technology
Access Program revenue in the period as a result of our conversion from a
fee-based technology access program model to a commercial high throughput
screening products business and the associated change in revenue recognition
methods. For the nine months ended September 30, 2001 license fees and contract
revenues increased to $14.9 million compared to $11.6 million for the same
period in 2000. The increase of $3.3 million resulted from the $5.0 million
licensing fee for the Ramsey family of patents to Aclara, offset by a decrease
in the research and development reimbursement from our collaboration with
Agilent Technologies noted above and a 25% decline in our Technology Access
Program revenue.
Cost of Product Revenues. Cost of products sold was $1.4 million for the
related party sales to Amphora Discovery Corp. for the three and nine months
ended September 30, 2001. The profit margins on product sales to Amphora will
vary due to the volume of products purchased and the corresponding commercial
volume discounts earned. Cost of all other products sold were $893,000 and $2.9
million for the three and nine months ended September 30, 2001, respectively,
compared to $839,000 and $1.7 million in the same periods of 2000. The improved
profit margins from product sales to unrelated customers for the quarter ended
September 30, 2001 of $688,000, compared to $370,000 in the same period of 2000
was primarily due to the increased sales of Agilent 2100 Bioanalyzer systems and
sales of Caliper's own products. Product mix will affect future profit margins
as Caliper earns a higher return from its own products sold as opposed to
sharing gross margin revenues on collaboration products with Agilent
Technologies. For the nine months ended September 30, 2001, profit margins
improved from the mix of increased Caliper product sales and increased Agilent
2100 Bioanalyzer systems compared to the same period in 2000.
Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers for chip development, material costs
for prototype and test units, legal expenses resulting from intellectual
property prosecution, and other expenses related to the design, development,
testing and enhancement of our products. Research and development expenses were
$10.0 million and $28.4 million for the three and nine months ended September
30, 2001, respectively, compared to $9.0 million and $22.7 million for the three
and nine months ended September 30, 2000. The increase of $1.0 million during
the three months ended September 30, 2001 compared to the same period in 2000
was attributable to continued growth of research and development activities,
including $2.1 million related to growth in personnel and services to support
our Technology Access Program, partner collaboration and initial product
launches, offset by a decrease in litigation related legal costs due to the
settlement with Aclara Biosciences on all litigation. The increase of $5.7
million during the nine months ended September 20, 2001 compared to the same
period in 2000 resulted from $6.1 million related to growth in personnel and
services to support our Technology Access Program, partner collaboration and
product launches as a result of a 43% increase in headcount from September 30,
2000, offset by decreased litigation costs. We expect research and development
spending to increase over the next year as we continue to focus and expand our
research and the product development efforts.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, recruiting expenses,
marketing and product promotional costs, professional fees, and other corporate
expenses including business development and general legal activities. Selling,
general and administrative expenses were $4.3 million and $10.7 million for the
three and nine months ended September 30, 2001, respectively, compared to $2.5
million and $7.3 million for the three and nine months ended September 30, 2000.
The increase of $1.8 million during the three months ended September 30, 2001
compared to the same period in 2000 resulted from $485,000 related to
compensation for general and administrative personnel, $435,000 in expanded
product promotion and marketing research efforts, and the remaining balance due
to overall expansion in our operations. The increase of $3.4 million during the
nine months ended September 20, 2001 compared to the same period in 2000
resulted from $1.2 million related to compensation for general and
administrative personnel as a result of a 22% increase in headcount from
September 30, 2000. The remaining $2.2 million increase consisted of $1.1
million for expanded product promotion and market research efforts with
remainder due to overall expansion in our operations and facilities. We expect
selling and administrative expenses to continue to increase over the next
several years to support our growing business activities, the commercialization
of our products, and due to the costs associated with operating as a public
company.
13
Amortization of Deferred Stock Compensation. Deferred stock compensation
represents the difference between the deemed fair value of our common stock for
accounting purposes and the exercise price of options at the date of grant.
During 1998 and 1999, we recorded deferred stock compensation totaling $13.2
million. This amount is being amortized over the respective vesting periods of
the individual stock options using the graded vesting method. We recorded
amortization of deferred compensation of $587,000 and $2.0 million,
respectively, for the three and nine months ended September 30, 2001, compared
to $1.0 million and $3.7 million for the three and nine months ended September
30, 2000. We expect to record amortization expense for deferred compensation as
follows: $513,000 for the last quarter of 2001, $1.4 million during 2002,
$670,000 during 2003 and $122,000 during 2004. The amount of deferred
compensation expense to be recorded in future periods may decrease if unvested
options for which deferred compensation has been recorded are subsequently
canceled.
Interest Income, Net. Net interest income consists of income from our cash
and investments offset by expenses related to our financing obligations. Net
interest income was $2.2 million and $7.9 million for the three and nine months
ended September 30, 2001, respectively, compared to $1.9 million and $4.5
million for the three and nine months ended September 30, 2000. The increase
primarily resulted from interest income on the proceeds of $104.9 million raised
in August 2000 from the sale of 2,300,000 shares of common stock in a private
placement.
Gain on Settlement of Litigation. The litigation settlement was $27.5
million for the nine months ended September 30, 2001, resulting from the
comprehensive settlement agreement with Aclara for the dismissal of all suits
and countersuits between the two companies, which occurred in January 2001. The
$12.0 million litigation settlement for the three and nine months ended
September 30, 2000 resulted from a settlement agreement with our former patent
counsel, Bertram Rowland, and his former law firm, Flehr, Hohbach, Test,
Albritton and Herbert, which occurred in September 2000.
LIQUIDITY AND CAPITAL RESOURCES
Our cash, cash equivalents and marketable securities were $170.4 million at
September 30, 2001 compared to $191.7 million at December 31, 2000. We used cash
of $18.9 million for operations for the nine-month period ended September 30,
2001 as compared to $12.8 for the comparable period in 2000. Cash used in the
nine months ended September 30, 2001 consisted primarily of the net income of
$11.8 million and $4.6 million from amortization of deferred stock compensation,
stock options issued to non-employees and depreciation and amortization expense,
more than offset by non-cash charges of $27.5 million related to gain on
litigation settlement, $5.0 million non-cash revenue, and $2.8 million from
changes in operating assets and liabilities. Caliper also has $3.2 million in a
market rate account at September 30, 2001 pledged for facilities deposits
compared to $3.0 million at December 31, 2000.
As of September 30, 2001, we have a committed capital resource of $32.5
million as a result of a litigation settlement. As a component of the settlement
agreement, Aclara has effectively guaranteed the value of the Aclara common
stock to be $32.5 million at the time of our sale of the stock, provided that
the sale occurs in the period from 18 months to 24 months from the effective
date of the settlement agreement. Aclara has entered into a fully-funded $32.5
million standby letter of credit in favor of us to secure its performance under
this potential obligation.
14
Net cash used in investing activities was $14.0 million for the nine months
ended September 30, 2001 as compared to $88.9 million for the comparable period
in 2000. Net cash used in investing consists primarily of purchases of
available-for-sale investments as well as capital expenditures offset by
proceeds from sales and maturities of available-for-sale investments.
Net cash provided by financing activities was $1.8 million for the nine
months ended September 30, 2001 as compared to $105.6 million for the comparable
period in 2000. Net proceeds from financing activities for the nine months ended
September 30, 2001 consisted of $1.7 million from equipment financing and $1.5
million from employee stock option exercises, offset by repayments of equipment
financing arrangements of $1.4 million. Net proceeds from financing activities
for the nine months ended September 30, 2000 consisted principally of
approximately $104.9 million raised from the sale of 2,300,000 shares of common
stock in a private placement, which occurred in August 2000.
Our capital requirements depend on numerous factors, including market
acceptance of our products, the resources we devote to developing and supporting
our products, and other factors. We expect to devote substantial capital
resources to continue our research and development efforts, to expand our
support and product development activities, to expand the commercialization of
our LabChip(R) systems and products and for other general corporate
activities. We believe that our current cash balances, together with the revenue
to be derived from our collaboration with Agilent and our Technology Access
Program agreements and our licensing initiatives will be sufficient to fund our
operations at least through the year 2002. During or after this period, if cash
generated by operations is insufficient to satisfy our liquidity requirements,
we may need to sell additional equity or debt securities or obtain additional
credit arrangements. Additional financing may not be available on terms
acceptable to us or at all. The sale of additional equity or convertible debt
securities may result in additional dilution to our stockholders.
FACTORS AFFECTING OPERATING RESULTS
OUR LABCHIP(R) SYSTEMS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD CAUSE
OUR REVENUE TO GROW SLOWLY OR DECLINE.
Our technologies are still in the early stages of development, and most of
our LabChip(R) systems incorporating these technologies have only recently
been made commercially available. If our LabChip(R) systems do not gain
market acceptance, we will be unable to generate sales and our revenue will
decline. The commercial success of our LabChip(R) systems will depend upon
market acceptance of the merits of our LabChip(R) systems by pharmaceutical
and biotechnology companies, academic research centers and other companies that
rely upon laboratory experimentation. We have not yet demonstrated these
benefits. Market acceptance will depend on many factors, including:
- our ability to demonstrate the advantages and potential economic value
of our LabChip(R) systems over alternative well-established technologies
and products
- the extent of Agilent's efforts to market the Agilent 2100 Bioanalyzer
- our ability to market our HTS systems through our commercial programs
- general economic conditions, which have deteriorated over the last year
Because the products comprising our LabChip(R) systems have been in
operation for a limited period of time, their accuracy, reliability, ease of use
and commercial value have not been fully established. If the Agilent 2100
Bioanalyzer customers or our Technology Access Program customers do not approve
of our LabChip(R) systems because these systems fail to generate the
quantities and quality of data they expect, are too difficult or costly to use,
or are otherwise deficient, market acceptance of these LabChip(R) systems
would suffer and further sales may be limited. We cannot provide assurance that
these customers' efforts to put our LabChip(R) systems into use will continue
or will be expeditious or effective. Potential customers for our high throughput
systems may also wait for indications from our four initial Technology Access
Program customers that our high throughput systems work effectively and generate
substantial benefits. Further, non-acceptance by the market of our LabChip(R)
systems could undermine not only those systems but subsequent LabChip(R)
systems as well.
WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NOT ACHIEVE PROFITABILITY.
15
We have experienced significant operating losses each year since our
inception and expect to incur additional operating losses this year, primarily
as a result of expected increases in expenses for manufacturing capabilities,
research and product development costs and general and administrative costs. We
may not achieve profitability. For example, we experienced net losses of
approximately $3.0 million in 1998, $14.4 million in 1999, $13.3 million in
2000, and $11.8 million in the first nine months of 2001. As of September 30,
2001, we had an accumulated deficit of approximately $36.6 million. Our losses
have resulted principally from costs incurred in research and development and
from general and administrative costs associated with our operations. These
costs have exceeded our litigation settlement and reimbursement, interest income
and revenue which, to date, have been generated principally from collaborative
research and development agreements, technology access fees, cash and investment
balances and, to a lesser extent, product sales and government grants.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND ANY FAILURE TO MEET FINANCIAL
EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.
Our quarterly operating results have fluctuated significantly in the past
and we expect they will fluctuate in the future as a result of many factors,
some of which are outside of our control. For example, our revenues have varied
dramatically as a result of new customers joining our Technology Access Program
and product shipments. It is possible that in some future quarter or quarters,
our operating results will be below the expectations of securities analysts or
investors. In this event, the market price of our common stock may fall abruptly
and significantly. Because our revenue and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.
If revenue declines in a quarter, whether due to a delay in recognizing
expected revenue or otherwise, our earnings will decline because many of our
expenses are relatively fixed. In particular, research and development and
general and administrative expenses and amortization of deferred stock
compensation are not affected directly by variations in revenue.
OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR
PRODUCTS.
Third parties may assert infringement or other intellectual property claims
against us, such as the Aclara litigation that was recently settled and is
described under "Part I -- Item 1. Financial Statements (Note 5)." We may have
to pay substantial damages, including treble damages, for past infringement if
it is ultimately determined that our products infringe a third party's
proprietary rights. Further, we may be prohibited from selling our products
before we obtain a license, which, if available at all, may require us to pay
substantial royalties. Even if these claims are without merit, defending a
lawsuit takes significant time, may be expensive and may divert management
attention from other business concerns. We are aware of third-party patents that
may relate to our technology or potential products. We have also been notified
that third parties have attempted to provoke an interference with one issued
U.S. patent that we have exclusively licensed to determine the priority of
inventions. Any public announcements related to litigation or interference
proceedings initiated or threatened against us could cause our stock price to
decline. We recently settled intellectual property litigation with Aclara
concerning one family of Aclara patents. However, Aclara could assert other
patent infringement claims against us in the future in alternative dispute
resolution proceedings established under our settlement agreement. If we are
found to be infringing any valid patent claims asserted by Aclara in alternative
dispute resolution proceedings, we may be prohibited from selling our products
before we obtain a license, which, if available at all, may require us to pay
substantial royalties.
WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD
BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL
PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
We rely on patents to protect a large part of our intellectual property and
our competitive position. In order to protect or enforce our patent rights, we
may initiate patent litigation against third parties, such as the patent
infringement suit against Aclara that was recently settled and is described
under "Part I -- Item 1. Financial Statements (Note 5)." These lawsuits could be
expensive, take significant time, and could divert management's attention from
other business concerns. They would put our patents at risk of being invalidated
or interpreted narrowly and our patent applications at risk of not issuing. We
may also provoke these third parties to assert claims against us. Patent law
relating to the scope of claims in the technology fields in which we operate is
still evolving and, consequently, patent positions in our industry are generally
uncertain. We cannot provide assurance that we will prevail in any of these
suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, it could cause our stock price to decline.
16
THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
In addition to patents, we rely on a combination of trade secrets, copyright
and trademark laws, nondisclosure agreements and other contractual provisions
and technical measures to protect our intellectual property rights.
Nevertheless, these measures may not be adequate to safeguard the technology
underlying our products. If they do not protect our rights, third parties could
use our technology, and our ability to compete in the market would be reduced.
In addition, employees, consultants and others who participate in the
development of our products may breach their agreements with us regarding our
intellectual property, and we may not have adequate remedies for the breach. We
also may not be able to effectively protect our intellectual property rights in
some foreign countries. For a variety of reasons, we may decide not to file for
patent, copyright or trademark protection outside of the United States. We also
realize that our trade secrets may become known through other means not
currently foreseen by us. Notwithstanding our efforts to protect our
intellectual property, our competitors may independently develop similar or
alternative technologies or products that are equal or superior to our
technology and products without infringing on any of our intellectual property
rights or design around our proprietary technologies.
IF WE DO NOT SUCCESSFULLY INTRODUCE NEW PRODUCTS AND EXPAND THE RANGE OF
APPLICATIONS FOR OUR LABCHIP(R) SYSTEMS, WE MAY EXPERIENCE A DECLINE IN
REVENUE OR SLOW REVENUE GROWTH AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We intend to develop LabChip(R) systems with increasingly high throughput
capabilities and develop a broad range of applications for our LabChip(R)
technology. If we are unable to do so, our LabChip(R) systems may not become
widely used and we may experience a decline in revenue or slow revenue growth
and may not achieve or maintain profitability.
In order for our high throughput systems to achieve the levels of throughput
necessary to meet customers' demands, we may need to develop and manufacture
sipper chips with more than four capillaries. Our current high throughput
systems operate with sipper chips with either one or four capillaries, small
glass tubes used to draw compounds into the chip. In order to achieve the levels
of throughput that our customers desire, we may need to develop a LabChip(R)
system accommodating more than four capillaries, which we may not be able to do.
If we cannot cost-effectively deliver chips with more than four capillaries, we
may not be able to attract new customers to purchase our high throughput
systems, which would seriously harm our future prospects. Further, our existing
Technology Access Program customers may decide not to renew their annual access
subscriptions, which would seriously reduce our revenue.
We must develop new applications for existing LabChip(R) instruments,
which we may not be able to do. The Agilent 2100 Bioanalyzer uses LabChip(R)
kits that we specifically design for each application. We currently have
LabChip(R) kits commercially available for nine applications relating to DNA,
RNA and protein sizing and quantification. DNA and RNA are commonly used
acronyms for chemicals that contain, or transmit, genetic information in living
things. We currently are developing LabChip(R) kits for other applications.
If we are unable to develop LabChip(R) kits for specific applications
required by potential customers, those customers may not purchase the Agilent
2100 Bioanalyzer.
We must also continue to develop applications for our high throughput
systems. If we are not able to complete the development of these applications,
or if we experience difficulties or delays, we may lose our current Technology
Access Program customers and may not be able to obtain new customers.
WE RELY HEAVILY ON AGILENT TO MANUFACTURE, MARKET AND DISTRIBUTE THE AGILENT
2100 BIOANALYZER. IF AGILENT FAILS TO PERFORM UNDER OUR AGREEMENT OR
SUCCESSFULLY COMMERCIALIZE OUR COLLABORATIVE PRODUCTS, OUR REVENUE FROM THE
AGILENT 2100 BIOANALYZER MAY NOT BE MATERIAL AND WE MAY LOSE THE DEVELOPMENT
FUNDING WE CURRENTLY RECEIVE FROM AGILENT.
Agilent manufactures, markets and distributes the Agilent 2100 Bioanalyzer
under an agreement we entered into in May 1998. We also rely on Agilent for
significant financial and technical contributions in the development of products
covered by the agreement. Our ability to develop, manufacture and market these
products successfully depends significantly on Agilent's performance under this
agreement. Sales of new and innovative instrumentation such as the Agilent 2100
Bioanalyzer involve a long sales cycle, requiring customer training and
demonstration periods. Although sales of the Agilent 2100 Bioanalyzer increased
in 2000 and the first nine months of 2001, we cannot predict whether this trend
will continue at its current pace, if at all. If Agilent experiences
manufacturing or distribution difficulties, does not actively market the Agilent
2100 Bioanalyzer, or does not otherwise perform under this agreement, our
revenue from the Agilent 2100 Bioanalyzer may not be material. In addition,
Agilent may terminate the agreement at their discretion at any time. If Agilent
terminates this agreement, we would need to obtain development funding from
other sources,
17
and we may be required to find one or more other collaborators for the
development and commercialization of our products. Our inability to enter into
agreements with commercialization partners or develop our own marketing, sales,
and distribution capabilities would increase costs and impede the
commercialization of our products.
AGILENT MAY COMPETE WITH US IF OUR COLLABORATION TERMINATES AFTER MAY 2003,
WHICH COULD REDUCE THE POTENTIAL REVENUE FROM OUR INDEPENDENT PRODUCT SALES.
Under the terms of our agreement with Agilent, if they, or we, terminate our
agreement after May 2003, we will grant to Agilent a non-exclusive license to
our LabChip(R) technologies as then developed for use in the research
products field. Consequently, there is the possibility that we may experience
competition from Agilent after May 2003, which would reduce our ability to sell
products independently or through other commercial partners.
IF AGILENT DETERMINES THAT WE MAY BE VIOLATING A THIRD-PARTY PATENT, IT MAY
TERMINATE SALES OF THE AGILENT 2100 BIOANALYZER, WHICH WILL DECREASE OUR
REVENUE.
Under our collaboration agreement with Agilent, Agilent may elect at any
time to stop developing, manufacturing or distributing any product that it
reasonably determines, on the advice of counsel, poses a substantial risk of
infringing a third-party patent. For example, if a third party claims that we
are violating their patent, then Agilent may terminate marketing and selling of
the Agilent 2100 Bioanalyzer system, which Agilent began marketing in September
1999, which will decrease our future revenue.
WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND MAY ENCOUNTER
MANUFACTURING PROBLEMS OR DELAYS, WHICH COULD RESULT IN LOST REVENUE.
Although Agilent manufactures the Agilent 2100 Bioanalyzer, we manufacture
the chips used in this instrument and also currently manufacture instruments and
sipper chips for our high throughput systems. We currently have limited
manufacturing capacity for our LabChip(R) system products and experience
variability in manufacturing yields for chips. If we fail to deliver chips and
high throughput screening products in a timely manner, our relationships with
our customers could be seriously harmed, and revenue would decline. We currently
have one manufacturing location in Mountain View, California. The actual number
of chips we are able to sell or use depends in part upon the manufacturing
yields for these chips. We have only recently begun to manufacture significant
numbers of sipper chips and are continuing to develop our manufacturing
procedures for these chips. In order to offer sipper chips with more than four
capillaries for high throughput applications, we will need to continue to
achieve consistently high yields in this process. We cannot provide assurance
that manufacturing or quality problems will not arise as we attempt to scale-up
our production of chips or that we can scale-up manufacturing in a timely manner
or at commercially reasonable costs. If we are unable to consistently
manufacture sipper chips or chips for the Agilent 2100 Bioanalyzer on a timely
basis because of these or other factors, our product sales will decline. We are
currently manufacturing high throughput instruments in-house and in limited
volumes. If demand for our high throughput instruments increases, we will either
need to expand our in-house manufacturing capabilities or outsource to Agilent
or other manufacturers.
WE ARE DEPENDENT ON A SOLE-SOURCE SUPPLIER FOR OUR GLASS AND IF WE ARE UNABLE TO
BUY THIS COMPONENT ON A TIMELY BASIS, WE WILL NOT BE ABLE TO DELIVER OUR
PRODUCTS TO CUSTOMERS.
We currently purchase a key component for our chips from a sole-source
supplier located in Germany. Although we keep surplus inventory in our Mountain
View manufacturing facility, if we are unable to replenish this component on a
timely basis, we will not be able to deliver our chips to our customers which
would harm our business.
IF A NATURAL DISASTER STRIKES OUR MANUFACTURING FACILITY WE WOULD BE UNABLE TO
MANUFACTURE OUR PRODUCTS FOR A SUBSTANTIAL AMOUNT OF TIME AND WE WOULD
EXPERIENCE LOST REVENUE.
We rely on a single manufacturing location to produce our chips and high
throughput systems, and have no alternative facilities. The facility and some
pieces of manufacturing equipment are difficult to replace and could require
substantial replacement lead-time. Our manufacturing facility may be affected by
natural disasters such as earthquakes and floods. Earthquakes are of particular
significance since the manufacturing facility is located in Mountain View,
California, an earthquake-prone area. In the event our existing manufacturing
facility or equipment is affected by man-made or natural disasters, we would be
unable to manufacture products for sale, meet customer demands or sales
projections. If our manufacturing operations were curtailed or ceased, it would
harm our business.
18
BECAUSE A SMALL NUMBER OF CUSTOMERS AND AGILENT HAVE ACCOUNTED FOR, AND ARE
LIKELY TO CONTINUE TO ACCOUNT FOR, A SUBSTANTIAL PORTION OF OUR REVENUE, OUR
REVENUE COULD DECLINE DUE TO THE LOSS OF ONE OF THESE CUSTOMERS OR THE
TERMINATION OF OUR AGREEMENT WITH AGILENT.
Historically we have had very few customers and one commercial partner,
Agilent, from which we have derived the majority of our revenue and, if we were
to lose any one of these, our revenue would decrease substantially. For the nine
months ended September 30, 2001, Agilent, our Technology Access Program
customers, and our initial licensing of the Ramsey family of patents to Aclara
in connection with our litigation settlement with them, accounted for 81% of our
total revenue. Agilent and three customers accounted for 90% of total revenue
for the year ended December 31, 2000. Agilent and four customers accounted for
88% of total revenue in 1999. We and Agilent introduced the Agilent 2100
Bioanalyzer system in September 1999 and have received only modest revenue from
the sale of this product on a commercial scale. Although we anticipate that
future sales of the Agilent 2100 Bioanalyzer system will further expand our
revenue base, we expect that we will continue to rely on our large customers and
on Agilent for the majority of our revenue.
WE HAVE REACHED THE FINAL CONTRACT YEAR FOR SOME OF OUR TECHNOLOGY ACCESS
PROGRAM AGREEMENTS.
The third and final year of our Technology Access Program agreement with
Amgen began on January 1, 2001. In addition, the third and final year of our
Technology Access Program agreement with Eli Lilly began on August 12, 2001.
Although we believe that these customers will continue to use LabChip(R)
products and services, we may not derive significant revenue from them in the
future.
WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.
We are highly dependent on the principal members of our management and
scientific staff. The loss of services of any of these persons could seriously
harm our product development and commercialization efforts. In addition,
research, product development and commercialization will require additional
skilled personnel in areas such as chemistry and biology, software engineering
and electronic engineering. Our business is located in Silicon Valley,
California, where demand for personnel with these skills is extremely high and
is likely to remain high. As a result, competition for and retention of
personnel, particularly for employees with technical expertise, is intense and
the turnover rate for these people is high. If we are unable to hire, train and
retain a sufficient number of qualified employees, our ability to conduct and
expand our business could be seriously reduced. The inability to retain and hire
qualified personnel could also hinder the planned expansion of our business.
POTENTIAL ACQUISITIONS MAY HAVE UNEXPECTED CONSEQUENCES OR IMPOSE ADDITIONAL
COSTS ON US.
Our business is dependent upon growth in the market for microfluidic
products and our ability to enhance our existing products and introduce new
products on a timely basis. One of the ways we may address the need to develop
new products is through acquisitions of complementary businesses and
technologies. From time to time, we may consider and evaluate potential
acquisitions or business combinations, which may include a possible merger or
consolidation of our business with another entity. We may engage in discussions
relating to these types of transactions in the future. Acquisitions involve
numerous risks, including the following:
- difficulties in integration of the operations, technologies, and
products of the acquired companies
- the risk of diverting management's attention from normal daily
operations of the business
- accounting consequences, including charges for in-process research and
development expenses, resulting in variability in our quarterly earnings
- potential difficulties in completing projects associated with purchased
in-process research and development
- risks of entering markets in which we have no or limited direct prior
experience and where competitors in such markets have stronger market
positions
- the potential loss of key employees of the acquired company
- the assumption of unforeseen liabilities of the acquired company
19
We cannot provide assurance that future acquisitions or business
combinations in which we are involved, if any, will be successful and will not
adversely affect our financial condition or results of operations. Failure to
manage growth effectively and successfully integrate acquisitions we make could
harm our business and operating results.
RISKS RELATED TO OWNING OUR COMMON STOCK
OUR STOCK PRICE IS EXTREMELY VOLATILE, AND INVESTORS COULD LOSE A SUBSTANTIAL
PORTION OF THEIR INVESTMENT.
Our stock has been trading on the Nasdaq National Market only since
mid-December 1999. We initially offered our common stock to the public at $16.00
per share. Since then our stock price has been extremely volatile and has
ranged, through October 31, 2001, from a high of approximately $202.00 per share
on March 2, 2000 to a low of $8.40 per share on September 21, 2001. Our stock
price may drop substantially following an investment in our common stock. We
expect that our stock price will remain volatile as a result of a number of
factors, including:
- announcements by analysts regarding their assessment of Caliper and its
prospects
- announcements of our financial results or other corporate developments,
particularly if they differ from investors' expectations
- general market volatility for technology stocks
WE HAVE BEEN SUED, AND ARE AT RISK OF FUTURE SECURITIES CLASS ACTION LITIGATION
In the Spring and Summer of 2001, class action lawsuits against certain
leading investment banks and over 100 companies that did public offerings during
the prior several years were filed, including lawsuits against Caliper and
certain of its officers and directors. See "Part II - Item 1. Legal Proceedings"
for a description of these lawsuits. This and other securities litigation could
result in potential liability, cause us to incur litigation costs and divert
management's attention and resources, any of which could harm our business. In
addition, announcements of future lawsuits of this or some other nature, and
announcements of events occurring during the course of the current and any
future lawsuits, could cause our stock price to drop.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of the outstanding voting
stock, from consummating a merger or combination including us. These provisions
could limit the price that investors might be willing to pay in the future for
our common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. Declines of interest rates over
time will reduce our interest income from our investments. To minimize this risk
in the future, we intend to maintain our portfolio of cash equivalents and
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities.
20
The table below presents our investment portfolio by expected maturity and
related weighted average interest rates at September 30, 2001:
FAIR
2001 2002 2003 2004 TOTAL VALUE
---- ---- ---- ---- ----- -----
Money market fund ...................... $ 5,156 __ __ __ $ 5,156 $ 5,156
Average interest rate .................. 3.55% __ __ __ 3.55%
Available for sale marketable securities $27,662 $62,279 $44,520 $31,384 $165,845 $165,845
Average interest rate .................. 4.45% 5.72% 6.12% 5.19% 5.51%
Total securities ....................... $32,818 $59,470 $27,768 $26,917 $171,001 $171,001
Average interest rate .................. 4.31% 5.72% 6.12% 5.19% 5.45%
Our equipment financings, amounting to $5.5 million as of September 30,
2001, are all at fixed rates and therefore, have minimal exposure to changes in
interest rates.
We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We and three of our officers and directors (David V. Milligan, Daniel L.
Kisner and James L. Knighton) have been named as defendants in three securities
class action lawsuits filed in the United States District Court for the Southern
District of New York. The first such suit is captioned Colbert Birnet, L.P v.
Caliper Technologies Corp., et al.., No. 01-CV-5072, filed on June 7, 2001. The
other two suits are captioned Kovel v. Caliper Technologies Corp., et al., No.
01-CV-5964 and Leach v. Caliper Technologies Corp., et al., 01-CV-6537, filed on
June 29 and July 17, 2001, respectively. These cases have been transferred to a
single federal district court judge together with over 800 similar cases
involving more than 170 other companies that recently have conducted initial
public offerings. Together, those cases are denominated In re Initial Public
Offering Securities Litigation, 21 MC 92(SAS). We believe that the cases against
Caliper will be consolidated and that a single consolidated complaint will be
filed after the court appoints a lead plaintiff. The Kovel and Leach complaints
allege claims against us and certain of our individual officers or directors
under Sections 11 and 15 of the Securities Act of 1933. The Birnet and Kovel
complaints allege claims against us and certain of our individual officers and
directors under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as well as Rule 10b-5 of the Securities Exchange Act. Each of the complaints
also names as a defendant one or more of the underwriters of our December 1999
initial public offering of common stock. Each of the complaints alleges that one
or more of these underwriters charged excessive, undisclosed commissions to
investors and entered into improper agreements with investors relating to
aftermarket transactions. The complaints seek rescission or rescissionary
damages on the Section 11 claims and an unspecified amount of money damages on
the Rule 10b-5 claims. Based on information currently available to us, we
believe that the claims alleged against us and our officers and directors are
without merit. We intend to defend these cases vigorously.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Our initial public offering of common stock was effected through a
Registration Statement on Form S-1 (File No. 333-88827) that was declared
effective by the SEC on December 14, 1999 and pursuant to which we sold all
5,175,000 shares of our common stock registered.
The aggregate offering price of the 5,175,000 shares registered and sold was
$82.8 million. Of this amount, $5.8 million was paid in underwriting discounts
and commissions, and an additional $1.1 million of expenses was incurred through
December 31, 1999. None of the expenses were paid, directly or indirectly, to
directors, officers or persons owning 10 percent or more of our common stock, or
to our affiliates.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
3.1(1) Amended and Restated Certificate of Incorporation of Caliper.
3.2(2) Bylaws of Caliper.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2(3) Specimen Stock Certificate.
10.33(4) LabChip Solutions Agreement, dated as of September 21, 2001, between Caliper and Amphora Discovery Corp.
10.34 Consulting Agreement, dated as of October 8, 2001, between Amphora discovery Corp. and Michael R. Knapp.
10.35 Founder Restricted Stock Purchase Agreement, dated as of October 8, 2001, between Amphora Discovery Corp.
and Michael R. Knapp.
10.36 Consulting Agreement, dated as of October 14, 2001, between Amphora Discovery Corp. and James L. Knighton.
10.37 Founder Restricted Stock Purchase Agreement, dated as of October 14, 2001, between Amphora Discovery Corp.
and James L. Knighton.
10.38(4) Technology Access Agreement Amendment, dated August 20, 2001, between Caliper and Eli Lilly and Company.
(1) Previously filed as Exhibit 3.3 to our Registration Statement on Form
S-1, Registration No. 333-88827.
(2) Previously filed as Exhibit 3.4 to our Registration Statement on Form
S-1, Registration No. 333-88827.
(3) Previously filed as the like-numbered Exhibit to our Registration
Statement on Form S-1, Registration No. 333-88827.
(4) Confidential treatment has been requested for a portion of this
exhibit.
(b) Reports on Form 8-K
We did not file a Current Report on Form 8-K during the quarter ended
September 30, 2001.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CALIPER TECHNOLOGIES CORP.
November 14, 2001 By: /s/ JAMES L. KNIGHTON
--------------------------------
James L. Knighton
Executive Vice President and Chief
Financial Officer
By: /s/ ANTHONY T. HENDRICKSON
-------------------------------
Anthony T. Hendrickson
Corporate Controller and Principal
Accounting Officer
23
EXHIBIT INDEX
3.1(1) Amended and Restated Certificate of Incorporation of Caliper.
3.2(2) Bylaws of Caliper.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2(3) Specimen Stock Certificate.
10.33(4) LabChip Solutions Agreement, dated as of September 21, 2001, between Caliper and Amphora Discovery Corp.
10.34 Consulting Agreement, dated as of October 8, 2001, between Amphora discovery Corp. and Michael R. Knapp.
10.35 Founder Restricted Stock Purchase Agreement, dated as of October 8, 2001, between Amphora Discovery Corp.
and Michael R. Knapp.
10.36 Consulting Agreement, dated as of October 14, 2001, between Amphora Discovery Corp. and James L. Knighton.
10.37 Founder Restricted Stock Purchase Agreement, dated as of October 14, 2001, between Amphora Discovery Corp.
and James L. Knighton.
10.38(4) Technology Access Agreement Amendment, dated August 20, 2001, between Caliper and Eli Lilly and Company.
(1) Previously filed as Exhibit 3.3 to our Registration Statement on Form
S-1, Registration No. 333-88827.
(2) Previously filed as Exhibit 3.4 to our Registration Statement on Form
S-1, Registration No. 333-88827.
(3) Previously filed as the like-numbered Exhibit to our Registration
Statement on Form S-1, Registration No. 333-88827.
(4) Confidential treatment has been requested for a portion of this
exhibit.
24