<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-45942
PROSPECTUS SUPPLEMENT
NO. 1
(TO PROSPECTUS DATED SEPTEMBER 26, 2000)
CALIPER TECHNOLOGIES CORP.
2,300,000 SHARES
COMMON STOCK
The selling stockholders identified in the prospectus referred to above, to
which this prospectus supplement forms a part, are selling 2,300,000 shares of
common stock. We are not selling any shares of our common stock under this
prospectus or prospectus supplement and we will not receive any of the proceeds
from the shares of common stock sold by the selling stockholders. We are
providing this prospectus supplement to update the information contained in the
prospectus referred to above. This prospectus supplement includes our third
quarter financial statements, related management's discussion and analysis of
financial condition and results of operations, and a discussion of recent
developments in litigation in which we are involved. This prospectus supplement
should be read in connection with the related prospectus.
Our common stock is listed on The Nasdaq Stock Market's National Market
under the symbol "CALP." On November 13, 2000, the last reported sale price for
our common stock was $56.13 per share.
The selling stockholders may sell the shares of common stock described in
the prospectus in a number of different ways and at varying prices. We provide
more information about how the selling stockholders may sell their shares in the
section entitled "Plan of Distribution" on page 60 of the prospectus.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 7
OF THE PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus supplement is November 14, 2000.
<PAGE> 2
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CALIPER.
THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES OR
CONVERSION SHARES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
NOTES OR CONVERSION SHARES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS NOR ANY SALE MADE UNDER
THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CALIPER SINCE THE
DATE OF THIS PROSPECTUS SUPPLEMENT OR IMPLY THAT INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Financial Statements...............................................S-3
Disclosure Regarding Forward-Looking Statements..............................S-11
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................S-11
Litigation Update............................................................S-15
</TABLE>
S-2.
<PAGE> 3
UNAUDIDTED FINANCIAL STATEMENTS
CALIPER TECHNOLOGIES CORP.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 48,723 $ 44,772
Marketable securities ........................... 85,106 28,520
Accounts receivable, net ........................ 1,628 1,055
Other receivable ................................ 12,000 --
Inventories ..................................... 2,225 287
Prepaid expenses and other current assets ....... 1,093 754
--------- ---------
Total current assets ............................ 150,775 75,388
Marketable securities ........................... 56,899 26,924
Property and equipment, net ..................... 6,416 5,346
Notes receivable from officers .................. 615 625
Other assets, net ............................... 660 564
--------- ---------
Total assets .................................... $ 215,365 $ 108,847
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 1,650 $ 1,321
Accrued compensation ............................ 1,721 1,082
Other accrued liabilities ....................... 2,444 1,011
Deferred revenue ................................ 3,258 2,210
Current portion of equipment financing .......... 1,665 1,454
--------- ---------
Total current liabilities ....................... 10,738 7,078
Noncurrent portion of equipment financing ....... 3,614 3,671
Deferred revenue ................................ 394 --
Other noncurrent liabilities .................... 506 235
Commitments
Stockholders' equity:
Common stock .................................... 23 21
Additional paid-in capital ...................... 248,368 142,401
Deferred stock compensation ..................... (5,654) (9,317)
Accumulated deficit ............................. (42,584) (35,109)
Accumulated other comprehensive loss ............ (40) (133)
--------- ---------
Total stockholders' equity ...................... 200,113 97,863
--------- ---------
Total liabilities and stockholders' equity ...... $ 215,365 $ 108,847
========= =========
</TABLE>
See accompanying notes.
S-3.
<PAGE> 4
CALIPER TECHNOLOGIES CORP.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ................................................ $ 5,507 $ 3,414 $ 13,576 $ 8,859
Costs and expenses:
Research and development ............................ 9,826 4,860 24,322 12,302
General and administrative .......................... 2,464 1,400 7,300 3,487
Amortization of deferred stock compensation(1) ...... 1,020 936 3,663 1,997
-------- -------- -------- --------
Total costs and expenses ............................... 13,310 7,196 35,285 17,786
-------- -------- -------- --------
Operating loss ......................................... (7,803) (3,782) (21,709) (8,927)
Interest income, net ................................... 1,870 212 4,528 801
Litigation settlement .................................. 12,000 -- 12,000 --
-------- -------- -------- --------
Net income/(loss) before accounting change ............. 6,067 (3,570) (5,181) (8,126)
Cumulative effect of a change in accounting
principle .............................................. -- -- (2,294) --
-------- -------- -------- --------
Net income/(loss) ...................................... 6,067 (3,570) (7,475) (8,126)
Accretion on redeemable convertible
preferred stock ........................................ -- (608) -- (1,822)
-------- -------- -------- --------
Net income/(loss) attributable to common
stockholders ........................................... $ 6,067 $ (4,178) $ (7,475) $ (9,948)
======== ======== ======== ========
Net income/(loss) per common share, basic:
Net income/(loss) before accounting change ............. $ 0.28 $ (1.48) $ (0.24) $ (3.71)
Cumulative effect of a change in accounting
principle .............................................. -- -- $ (0.11) --
-------- -------- -------- --------
Net income/(loss) per share ............................ $ 0.28 $ (1.48) $ (0.35) $ (3.71)
======== ======== ======== ========
Shares used in computing net income/(loss) per
common share, basic .................................... 21,971 2,821 21,278 2,684
Net income/(loss) per common share, diluted:
Net income/(loss) before accounting change ............. $ 0.25 $ (1.48) $ (0.24) $ (3.71)
Cumulative effect of a change in accounting
principle .............................................. -- -- (0.11) --
-------- -------- -------- --------
Net income/(loss) per share ............................ $ 0.25 $ (1.48) $ (0.35) $ (3.71)
======== ======== ======== ========
Shares used in computing net income/(loss) per
common share, diluted .................................. 24,281 2,821 21,278 2,684
Pro forma net income/(loss) per share, diluted ......... $ 0.25 $ (0.23) $ (0.35) $ (0.53)
======== ======== ======== ========
Shares used in computing pro forma net
income/(loss) per share, diluted ....................... 24,281 15,354 21,278 15,217
(1)Amortization of deferred stock compensation
relates to the following:
Research and development ............................... $ 357 $ 221 $ 1,293 $ 405
General and administrative ............................. 663 715 2,370 1,592
-------- -------- -------- --------
Total .................................................. $ 1,020 $ 936 $ 3,663 $ 1,997
======== ======== ======== ========
</TABLE>
See accompanying notes.
S-4.
<PAGE> 5
CALIPER TECHNOLOGIES CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .............................................. $ (7,475) $ (8,126)
Adjustments to reconcile net loss to net cash
used in Operating activities:
Cumulative effect of a change in accounting
principle ............................................. 2,294 --
Depreciation and amortization ......................... 1,449 935
Amortization of deferred stock compensation ........... 3,663 1,997
Stock options issued to non-employees ................. 483 --
Issuance of common and preferred stock for
services .............................................. -- 83
Changes in operating assets and liabilities:
Accounts receivable ................................... (573) 692
Other receivable ...................................... (12,000) --
Notes receivable from officers ........................ 10 (425)
Inventories ........................................... (1,938) (206)
Prepaid expenses and other assets ..................... (339) (161)
Other noncurrent asset ................................ (182) --
Accounts payable and other accrued liabilities ........ 1,762 797
Accrued compensation .................................. 639 258
Deferred revenue ...................................... (852) 1,773
Other noncurrent liabilities .......................... 271 184
--------- ---------
Net cash used in operating activities ................. (12,788) (2,199)
--------- ---------
INVESTING ACTIVITIES
Purchases of available-for-sale securities ............ (136,731) (16,610)
Proceeds from sales of available-for-sale
securities ............................................ 12,012 4,813
Proceeds from maturities of available-for-sale
securities ............................................ 38,251 13,499
Capital expenditures .................................. (2,433) (2,995)
--------- ---------
Net cash used in investing activities ................. (88,901) (1,293)
--------- ---------
FINANCING ACTIVITIES
Proceeds from equipment financing ..................... 1,378 2,523
Payments of obligations under equipment financing ..... (1,224) (821)
Proceeds from issuance of common stock ................ 105,486 260
--------- ---------
Net cash provided by financing activities ............. 105,640 1,962
--------- ---------
Net decrease in cash and cash equivalents ............. 3,951 (1,530)
Cash and cash equivalents at beginning of period ...... 44,772 5,158
--------- ---------
Cash and cash equivalents at end of period ............ $ 48,723 $ 3,628
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid ......................................... $ 464 $ 275
========= =========
SCHEDULE OF NONCASH TRANSACTIONS
Deferred stock compensation ........................... $ -- $ 7,355
========= =========
</TABLE>
See accompanying notes.
S-5.
<PAGE> 6
CALIPER TECHNOLOGIES CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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, 2000 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2000. 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, 1999 filed by Caliper Technologies Corp.
PRIVATE PLACEMENT OF EQUITY
On August 30, 2000, Caliper completed a private placement of 2,300,000
shares of its common stock to selected accredited institutional investors,
raising net proceeds of approximately $104.9 million.
REVENUE RECOGNITION
Revenues are earned from services performed pursuant to Caliper's
collaboration agreement, technology access program 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 consisting of four basic elements: (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.
Prior to January 1, 2000, Caliper recognized non-refundable license fees
under its technology access programs as revenues 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
S-6.
<PAGE> 7
guidance provided in SEC Staff Accounting Bulletin No. 101 - Revenue Recognition
in Financial Statements. The $2.3 million cumulative effect of the change in
accounting principle was reported as a charge in the quarter ended March 31,
2000. The cumulative effect was initially recorded as deferred revenue that will
be recognized as revenue over the remaining contractual terms of the technology
access program agreements. During the nine months ended September 30, 2000, the
impact of the change in accounting was to increase net loss by $1.2 million, or
$0.06 per diluted share, comprised of the $2.3 million cumulative effect of the
change as described above ($0.11 per diluted share), net of $1.1 million of the
related deferred revenue which was recognized as revenue during the nine months
ended September 30, 2000 ($0.05 per diluted share). The remainder of the related
deferred revenue will be recognized as revenue approximately as follows:
$200,000 over the remainder of 2000, $800,000 in 2001 and $194,000 in 2002. Had
the change in accounting been adopted as of January 1, 1999, revenue for the
three and nine months ended September 30, 1999 would have increased by $422,000
and $656,000, respectively, or decreased pro forma net loss by $0.03 per diluted
share and $0.04 per diluted share, respectively.
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.
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.
DEFERRED COMPENSATION ARRANGEMENTS
Caliper maintains trading assets to generate returns that offset changes in
certain liabilities related to deferred compensation arrangements. The trading
assets consist of marketable equity securities and are stated at fair value.
Both realized and unrealized gains and losses generally offset the change in the
deferred compensation liability and to date have not been material.
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 Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). 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 nine months ended September 30, 2000,
compensation expense related to stock options issued to non-employees was
$483,000.
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 gives
effect to the dilutive effect of common stock equivalents consisting of stock
options and warrants (calculated using the treasury stock method).
S-7.
<PAGE> 8
Pro forma net income/(loss) per share has been computed to give effect to
the automatic conversion of preferred stock into common stock which occurred at
the completion of Caliper's initial public offering in December 1999 (using the
as-if converted method) from the original date of issuance.
A reconciliation of shares used in the calculations is as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic:
Net income/(loss) ................................ $ 6,067 $ (3,570) $ (7,475) $ (8,126)
Accretion on redeemable convertible
preferred stock .................................. -- (608) -- (1,822)
-------- -------- -------- --------
Net income/(loss) attributable to common
stockholders ..................................... $ 6,067 $ (4,178) $ (7,475) $ (9,948)
======== ======== ======== ========
Weighted-average shares of common stock
outstanding ........................................ 22,021 3,044 21,370 2,953
Less: weighted-average shares subject to
repurchase ......................................... (50) (223) (92) (269)
-------- -------- -------- --------
Weighted-average shares used in net
income/(loss) per common share, basic .............. 21,971 2,821 21,278 2,684
======== ======== ======== ========
Diluted:
Net income/(loss) ................................ $ 6,067 $ (3,570) $ (7,475) $ (8,126)
Accretion on redeemable convertible
preferred stock .................................. -- (608) -- (1,822)
-------- -------- -------- --------
Net income/(loss) attributable to
common stockholders .............................. $ 6,067 $ (4,178) $ (7,475) $ (9,948)
======== ======== ======== ========
Weighted-average shares of common stock
outstanding ........................................ 22,021 3,044 21,370 2,953
Plus: weighted-average shares of common
stock equivalents .................................. 2,310 -- -- --
Less: weighted-average shares subject
to repurchase ...................................... (50) (223) (92) (269)
-------- -------- -------- --------
Weighted-average shares used in net
income/(loss) per common share, diluted ............ 24,281 2,821 21,278 2,684
======== ======== ======== ========
Pro forma diluted:
Net income/(loss) ................................. $ 6,067 $ (3,570) $ (7,475) $ (8,126)
======== ======== ======== ========
Shares used above ................................. 24,281 2,821 21,278 2,684
Adjustment to reflect weighted-average effect
of assumed conversion of preferred stock ........... -- 12,533 -- 12,533
-------- -------- -------- --------
Weighted-average shares used in pro forma net
income/(loss) per share, diluted ................... 24,281 15,354 21,278 15,217
======== ======== ======== ========
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Financial Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. In June 1999, FASB issued Financial
Accounting Standards No. 137 which deferred the effective date of SFAS 133 to
fiscal years beginning after June 15, 2000. The adoption of SFAS 133 is not
anticipated to have an impact on the Company's results of operations of
financial condition when adopted as the Company holds no derivative financial
instruments and does not currently engage in hedging actvities.
In March 2000, the FASB issued No. 44 ("FIN 44"), "Accounting for Certain
Transactions Involving Stock compensation - an Interpretation of APB 25." This
Interpretation clarifies (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15, 1998,
or January 12, 2000, but before the effective date of July 1, 2000, the effects
of applying this Interpretation are recognized on a pospective basis from July
1, 2000. The adoption of FIN 44 does not have a material impact on the Company's
financial statements.
S-8.
<PAGE> 9
NOTE 2 - CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
As of September 30, 2000 Caliper invests its excess cash in U.S. government
and agency securities, debt instruments of financial institutions and
corporations and money market funds with strong credit ratings. They are
classified as available-for-sale and are carried at fair value with unrealized
gains and losses reported in stockholders' equity.
NOTE 3 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Raw material ............ $ 1,501 $ 253
Work in process ......... 688 13
Finished goods .......... 36 21
------- ------
Total .............. $ 2,225 $ 287
======= ======
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME/(LOSS)
The components of comprehensive income/(loss) for the three and nine months
ended September 30, 2000 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- -----------------------
2000 1999 2000 1999
------- --------- -------- --------
<S> <C> <C> <C> <C>
Net income/(loss) attributable to common
stockholders....................................... $ 6,067 $ (4,178) $ (7,475) $ (9,948)
Unrealized gain on securities...................... 166 -- 93 --
------- -------- -------- --------
Comprehensive income/(loss)........................ $ 6,233 $ (4,178) $ (7,382) $ (9,948)
======= ======== ======== ========
</TABLE>
NOTE 5 - LITIGATION
On March 22, 1999, Caliper filed a lawsuit in California Superior Court for
the County of Santa Clara against Aclara Biosciences, Inc. and Caliper's former
patent counsel, a patent attorney named Bertram Rowland, and his former law
firm, Flehr, Hohbach, Test, Albritton and Herbert alleging that all the
defendants misappropriated certain of Caliper's trade secrets relating to
Caliper business plans, patents and intellectual property strategy. The suit
also alleges that Caliper's former patent counsel committed a breach of the
duties they owed to Caliper as its former attorneys. On September 14, 2000,
Caliper reached a settlement agreement with Dr. Rowland and Flehr, Hohbach,
Albritton, Test and Herbert in this case. The settlement provides Caliper with a
$12.0 million cash payment from these defendants as well as other terms. This
settlement has no effect on Caliper's lawsuits with Aclara. In this same case,
on October 27, 2000, the jury returned a verdict in favor of Caliper and against
Aclara on Caliper's claims for misappropriation of trade secrets and conversion
of property. The jury awarded Caliper $52.6 million for damages to Caliper and
unjust enrichment to Aclara. Caliper has also requested certain equitable
relief, including certain rights to the Aclara patent that is the subject of
Aclara's suit against Caliper. The court has not yet ruled on that issue. Aclara
has requested that the jury award be substantially reduced on several legal
grounds. The court has not yet ruled on that request either. Aclara has publicly
stated its intention to appeal this case.
S-9.
<PAGE> 10
On January 12, 2000, Caliper filed a lawsuit in United States District
Court for the Northern District of California alleging that Aclara is infringing
four U.S. patents licensed to Caliper by Lockheed Martin Energy Research
Corporation. These patents cover technology for controlling the flow of
materials in microfluidic chips, as well as devices, systems and applications
that make use of this technology. Caliper subsequently amended this complaint to
add a fifth, related patent. Aclara has counterclaimed for a declaratory
judgment that the patents in this suit are invalid, unenforceable and are not
infringed by Aclara.
While Caliper believes that its complaints in these cases are meritorious,
there can be no assurance that Caliper will prevail in its actions against any
or all of the defendants, or that if Caliper prevails, the damages or equitable
remedies awarded, if any, will be commercially valuable. The jury's award in the
state court case may be set aside or reduced by the state judge or on appeal.
Furthermore, Caliper has incurred and is likely to continue to incur substantial
costs and expend substantial personnel time in pursuing its claims against
Aclara and Caliper's former patent counsel.
On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California alleging that Caliper is
making, using, selling or offering for sale microfluidic devices that infringe
United States Patent Number 5,750,015 in willful disregard of Aclara's patent
rights. This patent concerns methods and devices for moving molecules by the
application of electrical fields. The Aclara action seeks damages for past and
future reduced sales or lost profits based upon Caliper's alleged fabrication,
use, sale or offer for sale of allegedly infringing products and processes, and
seeks to enjoin Caliper's continued activities relating to these products.
Caliper has counterclaimed for a declaratory judgment of noninfringement,
invalidity and unenforceability of all claims of the Aclara patent. On July 19,
2000, the federal judge in this action issued an order finding that eight of the
eleven claims asserted against Caliper are invalid, and interpreting the
remaining asserted claims. On October 27, 2000, the federal judge issued a
second order holding that our products do not literally infringe Aclara's
patent, but allowing the suit to proceed on the issue of whether our products
infringe under a legal theory known as the doctrine of equivalents and whether
the patent is valid and enforceable. This action subjects Caliper to potential
liability for damages, including treble damages, and could require Caliper to
cease making, using or selling the affected products, or to obtain a license in
order to continue to manufacture, use or sell the affected products. While
Caliper believes that it has meritorious defenses in this action, there can be
no assurance that Caliper will prevail or that any license required would be
made available on commercially acceptable terms, if at all. Even if Caliper
prevails in the current action, there can be no assurance that we will prevail
again if Aclara appeals the case to a higher court. Furthermore, Caliper has
incurred and is likely to continue to incur substantial costs and expend
substantial personnel time in defending against the claims filed by Aclara.
Caliper's failure to successfully defend itself against the Aclara action could
have a material adverse effect on Caliper's business, financial condition and
operating results.
S-10.
<PAGE> 11
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this prospectus supplement and in the prospectus contains
forward-looking statements that involve risks and uncertainties. Those
statements include words such as "anticipate," "estimate," "project," "intend,"
and similar expressions which we have used to identify these statements as
forward-looking statements. These statements appear throughout this prospectus
supplement and prospectus and are statements regarding our intent, belief, or
current expectations, primarily with respect to the operations of Caliper or
related industry developments. These forward-looking statements do not guarantee
future performance and involve risks and uncertainties, and that actual results
could differ materially from those discussed here, including under "Risk
Factors" in the prospectus.
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, 2000 and for the three and nine month
periods ended September 30, 2000 and September 30, 1999 should be read in
conjunction with the Management's Discussion and Analysis of Financial Condition
and Results of Operations included in Caliper's Annual Report on Form 10-K for
the year ended December 31, 1999.
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 2000, 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 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 our three technology access
program customers. 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. In May 2000, we introduced the DNA 500 LabChip(R) kit for the
automated analysis of 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 which automates the sizing, concentration and
purity analysis of nucleic acid fragments using only nanoliters of sample.
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Since our inception, we have incurred significant losses and, as of
September 30, 2000, we had an accumulated deficit of $42.6 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.
Our revenue has been derived principally from contract revenue earned under
our collaboration agreement with Agilent and from our technology access program
customers. To a lesser extent, we have derived revenue from the sale of products
and government grants. Although we are developing and plan to introduce future
products, we cannot assure you 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. Two of our technology access program partners, Eli Lilly and
Millennium, and our commercial partner, Agilent, each accounted for in excess of
10% of our revenue in the three months ended September 30, 2000. Agilent alone
accounted for 45% of our revenue in this period, and the two technology access
program customers collectively accounted for 42% of our revenue in this period.
During the quarter ended September 30, 1999, Agilent accounted for 43% of our
revenue and a technology access program customer accounted for 50% of our
revenue.
Under our 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. Revenue from
development and support activities under our 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 Agilent is
recognized upon shipment. Our share of gross margin on components of the
LabChip(R) system sold by Agilent is recognized as revenue upon shipment to the
end user. Agilent only began in late 1999 the marketing and sales efforts for
the Agilent 2100 Bioanalyzer. Sales of new and innovative instrumentation such
as the Agilent 2100 Bioanalyzer involve a long sales cycle, requiring customer
training and demonstration periods. As a result, to date Agilent has sold a
modest number of Agilent 2100 Bioanalyzers, and it is too early for us to
predict market acceptance of this technology.
Under our technology access program agreements, we recognize as revenue
non-refundable license subscription fees over the term of the subscription,
product sales upon the transfer of title to the customer, and development and
support fees in the period in which the costs are incurred. Subscription fees
and development and support fees may be received annually or quarterly in
advance depending upon the terms of the agreement. Payments received in advance
under all of these agreements are recorded as deferred revenue until earned. We
have evaluated the applicability of SAB 101 to our existing technology access
program agreements. We have concluded that the approach described in SAB 101 is
preferable and have changed our method of accounting effective January 1, 2000
to recognize such fees over the term of the related agreement. The cumulative
effect of this change in accounting principle is approximately $2.3 million as
of January 1, 2000 and has been recognized as a charge in the quarter ended
March 31, 2000. The cumulative effect was recorded as deferred revenue and is
being recognized as revenue over the remaining contractual terms of the
technology access program agreements. As of September 30, 2000, a total of $3.7
million of revenue was deferred. We expect to recognize this deferred revenue
through the third quarter of year 2002.
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RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2000 and 1999
Revenue. Revenue was $5.5 million and $13.6 million for the three and nine
months ended September 30, 2000, respectively, compared to $3.4 million and $8.9
million for the three and nine months ended September 30, 1999. The increase of
$2.1 million during the three months ended September 30, 2000 compared to the
same period in 1999 resulted from increased revenue generated from product sales
under our technology access program and our collaboration agreement with
Agilent. The increase of $4.7 million during the nine months ended September 30,
2000 compared to the same period in 1999 resulted primarily from increased
revenue generated under our technology access program, including $1.1 million
attributed to up-front fees received in prior years which were ratably recorded
as revenue during the nine months ended September 30, 2000, as prescribed by SAB
101.
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 litigation, and other expenses related to the design,
development, testing, and enhancement of our products. We expense our research
and development costs as they are incurred. Research and development expenses
were $9.8 million and $24.3 million for the three and nine months ended
September 30, 2000, respectively, compared to $4.9 million and $12.3 million for
the three and nine months ended September 30, 1999. The increase of $5.0 million
during the three months ended September 30, 2000 compared to the same period in
1999 was attributed to continued growth of research and development activities,
including $1.9 million related to growth in personnel and services to support
our technology access program, partner collaboration and product launches, $1.9
million for costs related to intellectual property matters, and the remainder
for supplies required to assemble, build and test prototype LabChip(R) systems
along with expansion in our operating activities. The increase of $12.0 million
during the nine months ended September 30, 2000 compared to the same period in
1999 resulted from $5.0 million related to growth in personnel and services to
support our technology access program, partner collaboration and product
launches, $5.0 million for costs related to intellectual property matters,
primarily legal fees, and the remainder for supplies required to assemble, build
and test prototype LabChip(R) systems along with expansion in our operating
activites. We expect research and development spending to continue to rise and
increase in proportion to our revenue growth over the next several years as we
expand our research and product development efforts.
General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance and
other administrative personnel, recruiting expenses, professional fees, and
other corporate expenses including business development and general legal
activities. General and administrative expenses were $2.5 million and $7.3
million for the three and nine months ended September 30, 2000, respectively,
compared to $1.4 and $3.5 million for the three and nine months ended September
30, 1999. The increase of 1.1 million during the three months ended September
30, 2000 compared to the same period in 1999 resulted from $487,000 related to
employment costs for general and administrative personnel and the remaining
balance due to costs associated with being a public company and overall
expansion in our operations. The increase of $3.8 million during the nine months
ended September 30, 2000 compared to the same period in 1999 resulted from $2.3
million related to employment costs for general and administrative personnel and
the remaining balance due to costs associated with being a public company and
overall expansion in our operations. We expect general and administrative
expenses to continue to increase over the next several years to support our
growing business activities, the commercialization of our products, and costs
associated with operating a public company.
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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 $3.7 million for the nine months ended
September 30, 2000, which includes $1.0 million for the three months ended
September 30, 2000. We expect to record amortization expense for deferred
compensation as follows: $882,000 for the remainder of 2000, $2.5 million during
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 $1.9 million and $4.5 million for the three and nine months
ended September 30, 2000, respectively, compared to $212,000 and $801,000 for
the three and nine months ended September 30, 1999. This increase was due to
higher cash and investment balances as a result of $75.9 million net proceeds
raised in our December 1999 initial public offering and $104.9 million raised in
August 2000 from the sale of 2,300,000 shares of common stock in a private
placement, partially offset by increased interest charges from higher financing
obligation balances.
Litigation Settlement. We recorded a $12.0 million litigation settlement
receivable during the quarter ended September 30, 2000. For further information
regarding this settlement, refer to note 5 to the financial statements included
in this prospectus supplement and "Litigation Update" below.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, cash, cash equivalents and marketable securities
were $190.7 million compared to $100.2 million at December 31, 1999. We used
$12.8 million for operations for the nine months ended September 30, 2000 as
compared to $2.2 for the comparable period in 1999. This consisted of the net
loss of $7.5 million and working capital changes of $13.2 million, which
includes a $12.0 million litigation settlement receivable, offset by non-cash
charges of $7.9 million related to a change in accounting principle,
amortization of deferred stock compensation, stock options issued to
non-employees and depreciation and amortization expense.
Net cash used in investing activities was $88.9 million for the nine months
ended September 30, 2000 as compared to $1.3 million for the comparable period
in 1999. Net cash used in investing consists primarily of purchases of
available-for-sale investments offset by proceeds from sales and maturities of
available-for-sale investments, as well as capital expenditures.
We received $105.6 million from financing activities for the nine months
ended September 30, 2000 as compared to $2.0 million for the comparable period
in 1999. Net proceeds from financing activities consisted principally of
approximately $104.9 million raised in August 2000 from the sale of 2,300,000
shares of common stock in a private placement.
In May 2000 we entered into a $5.0 million financing arrangement for the
purchase of property and equipment. As of September 30, 2000, we had $5.3
million in capitalized lease obligations outstanding compared to $5.1 million at
December 31, 1999.
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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, 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, will be sufficient to fund our operations at least into 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.
LITIGATION UPDATE
On March 22, 1999, we filed a lawsuit in California Superior Court for the
County of Santa Clara (Case No. CV 780743), against Aclara Biosciences Inc., a
patent attorney named Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
our trade secrets relating to our business plans, patents and intellectual
property strategy. The suit also alleges that Dr. Rowland and Flehr Hohbach
committed a breach of the duties they owed to us as our former attorneys. The
suit seeks damages and equitable remedies to prevent Aclara, Dr. Rowland and
Flehr Hohbach from benefiting from the alleged misappropriation and breach of
duties. On September 14, 2000, we reached a settlement agreement with Dr.
Rowland and Flehr Hohbach in the case pending in Santa Clara County. The
settlement provides Caliper with a $12.0 million cash payment by Dr. Rowland and
Flehr Hohbach, as well as other terms. This settlement has no effect on
Caliper's lawsuits with Aclara. In this same case, on October 27, 2000, the jury
returned a verdict in favor of Caliper and against Aclara on Caliper's claims
for misappropriation of trade secrets and conversion of property. The jury
awarded Caliper $52.6 million for damages to Caliper and unjust enrichment to
Aclara. Caliper has also requested certain equitable relief, including certain
rights to the Aclara patent that is the subject of Aclara's suit against
Caliper. The court has not yet ruled on that issue. Aclara has requested that
the jury award be substantially reduced on several legal grounds. The court has
not yet ruled on that request either. Aclara has publicly stated its intention
to appeal this case.
On January 12, 2000, we filed a lawsuit in the United States District Court
for the Northern District of California against Aclara (Case No.
C-00-0145CRB(JCS)) alleging that Aclara is infringing four U.S. patents that
have been licensed to us by Lockheed Martin Energy Research Corporation, which
operates the Department of Energy's Oak Ridge National Laboratory where the
inventions were made. These patents cover technology for controlling the flow of
materials in microfluidic chips, as well as devices, systems and applications
that make use of this technology. We subsequently amended this complaint to add
a fifth, related patent. Aclara has counterclaimed for a declaratory judgment
that the patents in this suit are invalid, unenforceable and are not infringed
by Aclara.
While we believe that our complaints in these cases are meritorious, we
cannot assure you that we will prevail in our actions against Aclara and
Aclara's counterclaims against us, or that if we prevail, the damages or
equitable remedies awarded, if any, will be commercially valuable. The jury's
award in the state court case may be set aside or reduced by the state judge or
on appeal. Furthermore, we have incurred and are likely to continue to incur
substantial costs and expend substantial personnel time in pursuing our claims
against Aclara.
On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California (Case No. C-99-1968BZ)
alleging that we are making, using, selling or offering for
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sale microfluidic devices that infringe United States Patent Number 5,750,015 in
willful disregard of Aclara's patent rights. This patent concerns methods and
devices for moving molecules by the application of electrical fields. The Aclara
action seeks damages for past and future reduced sales or lost profits based
upon our alleged fabrication, use, sale or offer for sale of allegedly
infringing products and processes, and seeks to enjoin our continued activities
relating to these products. We have counterclaimed for a declaratory judgment of
noninfringement, invalidity and unenforceability of all claims of the Aclara
patent. On July 19, 2000, the federal judge in this action issued an order
finding that eight of the eleven claims asserted against us are invalid, and
interpreting the remaining asserted claims. On October 27, 2000, the federal
judge issued a second order holding that our products do not literally infringe
Aclara's patent, but allowing the suit to proceed on the issue of whether our
products infringe under a legal theory known as the doctrine of equivalents and
whether the patent is valid and enforceable. This action subjects us to
potential liability for damages, including treble damages, and could require us
to cease making, using or selling the affected products, or to obtain a license
in order to continue to manufacture, use or sell the affected products. While we
believe we have meritorious defenses and counterclaims to this action, we cannot
assure you that we will prevail in this action nor can we assure you that any
license required would be made available on commercially acceptable terms, if at
all. Even if we prevail in the current action, there can be no assurance that we
will prevail again if Aclara appeals the case to a higher court. Furthermore, we
have incurred and are likely to continue to incur substantial costs and expend
substantial personnel time in defending against the claims filed by Aclara.
Failure to successfully defend ourselves against the Aclara action could have a
material adverse effect on our business, financial condition and operating
results.
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