SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------
                                   FORM 10-KSB

 (MARK ONE)

     |X|       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
               SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
                                       OR

     |_|       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
               SECURITIES EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM _____________ TO ____________

                        COMMISSION FILE NUMBER: 000-20985

                             ----------------------

                         CALYPTE BIOMEDICAL CORPORATION
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


                 DELAWARE                                       06-1226727
      (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NUMBER)

1265 HARBOR BAY PARKWAY, ALAMEDA CALIFORNIA                       94502
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)

                    ISSUER'S TELEPHONE NUMBER: (510) 749-5100

         SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:

                                      NONE

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

                     COMMON STOCK, $.03 PAR VALUE PER SHARE

      Check  whether  the issuer (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 ?

      Check if there is no disclosure  of delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|?
      Issuer's revenues for its most recent fiscal year: $3,467,000

      As of March 22, 2004, 137,039,316 shares of the registrant's common stock,
$.03 par value, were outstanding. The aggregate market value of the common stock
held  by  non-affiliates  of the  registrant  (i.e.,  excluding  shares  held by
executive  officers,  directors,  and control persons as defined in Rule 405) on
that date was  approximately  $51,002,000  based on the $0.52 per share  closing
price of the common stock on that date reported on the Over the Counter Bulletin
Board.


<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the issuer's  definitive proxy statement on Schedule 14A to be
filed with the Securities and Exchange  Commission relative to the issuer's 2004
Annual Meeting of  Shareholders  are  incorporated by reference into Part III of
this Form 10-KSB.

Transitional Small Business Disclosure Format (Check one):  Yes  |_|    No  |X|


<PAGE>


================================================================================

                         CALYPTE BIOMEDICAL CORPORATION
                                   FORM 10-KSB
                                      INDEX
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                                NO.
                                                                                                               ----
<S>             <C>                                                                                            <C>
PART I.
Item 1.         Business                                                                                          1
Item 2.         Properties                                                                                       18
Item 3.         Legal Proceedings                                                                                18
Item 4.         Submission of Matters to a Vote of Security Holders                                              19
PART II.
Item 5.         Market for the Registrant's Common Equity and Related Stockholder Matters                        20
Item 6.         Management's Discussion and Analysis of Financial Condition and Results of Operations            33
Item 7.         Financial Statements and Supplementary Data                                                      68
Item 8.         Changes in and Disagreements with Accountants on Accounting and Financial Disclosure             69
Item 8A.        Controls and Procedures                                                                          70
PART III.
Item 9.         Executive Officers and Directors of the Registrant                                               72
Item 10.        Executive Compensation                                                                           72
Item 11.        Security Ownership of Certain Beneficial Owners and Management                                   72
Item 12.        Certain Relationships and Related Transactions                                                   72
PART IV.
Item 13.        Exhibits and Reports on Form 8-K                                                                 73
Item 14.        Principal Accountant Fees and Services                                                           82
                Signatures                                                                                      S-1
                Certifications                                                                                 II-1
</TABLE>

Except for the  historical  information  contained in this annual report on Form
10-KSB, the matters discussed herein contain forward-looking statements that are
subject to certain risks and  uncertainties  that could cause actual  results to
differ materially from those projected.  These risks and uncertainties  include,
but are not limited to, uncertain market acceptance of our proprietary method of
determining the presence of HIV antibodies,  our limited  experience selling and
marketing HIV diagnostic tests,  limited operating  history,  and our ability to
obtain  additional  financing,  as well as the  other  risks  and  uncertainties
described  under "Risk  Factors"  and  elsewhere  in this Annual  Report on Form
10-KSB.  The  Company  assumes  no  obligation  to  update  any  forward-looking
statements contained herein.


<PAGE>


                                     PART I

ITEM 1. BUSINESS

Our business  involves the  development,  manufacture  and marketing of in vitro
diagnostic  tests  primarily  for  the  detection  of  antibodies  to the  Human
Immunodeficiency  Virus ("HIV") and other  sexually  transmitted  and infectious
diseases. We have historically focused our business on urine-based screening and
supplemental tests for use in laboratories.  By integrating  several proprietary
technologies,   we  developed  novel  urine  HIV  antibody  tests,  the  Calypte
urine-based enzyme immunoassay  ("EIA") HIV Type 1 ("HIV-1")  screening test and
the Cambridge  Biotech  urine-based  HIV-1 western blot ("Urine  Western  Blot")
supplemental  test.  We  also  manufacture  and  market  the  Cambridge  Biotech
serum-based  western blot ("Serum Western Blot") supplemental test for detecting
HIV-1  antibodies in serum.  Our revenues are currently  generated from sales of
these three  products,  which we refer to collectively as our "ELISA tests." The
ELISA  tests are  manufactured  in  formats  that make  them most  suitable  for
high-volume laboratory settings. We shall sometimes refer to ourselves herein as
"Calypte" or the "Company."

We are the only company with Food and Drug  Administration  ("FDA") approval for
the  marketing  and sale of  urine-based  HIV-1  antibody  tests.  Our EIA HIV-1
screening test received FDA approval for use in laboratories in August 1996. Our
Urine  Western Blot  supplemental  test  received FDA approval in May 1998.  Our
urine-based ELISA tests together,  with their screening and confirmatory testing
components, are the only complete FDA approved urine-based HIV testing method.

Our  business is also  involved in  developing  new test  products for the rapid
detection  of HIV-1 and HIV Type 2, a second  type of HIV  ("HIV-2"),  and other
infectious  diseases.  In  November  2003,  we filed an  Investigational  Device
Exemption  ("IDE")  with  the FDA  announcing  our  intent  to  develop  a rapid
serum-based HIV screening test. Rapid tests provide test results in less than 20
minutes and are particularly suitable for point-of-care  testing,  especially in
lesser  developed  countries  which lack the medical  infrastructure  to support
laboratory  based  testing.   We  are  currently   developing  both  serum-  and
urine-based  HIV-1 and HIV-2 rapid tests and  anticipate  that our primary focus
will be the development,  manufacture and sale of our rapid test products,  both
internationally and domestically.


BACKGROUND

HIV

HIV, the cause of AIDS, is a leading cause of death for persons ages 25 to 44 in
the U.S.  and for  persons  of all  ages in many  international  locales.  Those
infected  with HIV  generally do not show  symptoms of AIDS until  several years
after HIV  infection,  if at all.  Because  most persons  infected  with HIV are
unaware  of their HIV status and are  asymptomatic  for AIDS,  they do not avail
themselves of medical treatment and may unknowingly expose others to the risk of
HIV infection.

Prior exposure to HIV can be detected in laboratory and point-of-care tests even
though the infected individual is asymptomatic. Although the human immune system
typically  requires  a number of weeks or months to begin  producing  antibodies
following exposure to HIV, there is no consensus in the scientific  community as
to whether antibodies can first be detected in blood, urine or oral fluid.

According to the December 2003 AIDS  Epidemic  Update  published  jointly by the
Joint United  Nations  Programme  on HIV/AIDS and the World Health  Organization
(the "WHO"),  at the end of 2003 an estimated 40 million  people  globally  were
living with HIV; over 30.9 million people had already died from the disease, and
an estimated 5 million  people were newly  infected  with HIV during  2003.  The
Update  reported  that about 3 million  people died of AIDS during 2003.  HIV is
spread by a transfer of bodily fluids,  primarily through sexual contact,  blood
transfusions,   sharing  intravenous   needles,   accidental  needle  sticks  or
transmission from infected mothers to newborns.

In its February  2004  presentation,  Global  Health,  The Bill & Melinda  Gates
Foundation (the "Gates  Foundation")  cites a mid-2002 UNAIDS report  indicating
that in the absence of dramatically  expanded  prevention and treatment efforts,
68 million  people will die of AIDS in the 45 most  affected  countries  between


                                       1
<PAGE>


2000 and 2020, a mortality outlook that is five times the number of AIDS-related
deaths in the  previous  two  decades  in these  countries.  Further,  the Gates
Foundation report projects  approximately 45 million new HIV/AIDS  infections by
the year 2010, with 28 million of these infections considered to be preventable.
Whereas the epidemic is currently  centered  primarily  in  sub-Saharan  Africa,
where  expectations of current and future  infection range from 30 to 35 million
adults by 2010,  the Gates  Foundation  study  identifies  countries in northern
Africa as well as Russia,  India and China as the "next  wave"  countries  which
will experience the HIV/AIDS pandemic, as demonstrated in the following chart:

                  High and Low Estimates of Current and Future
              HIV/AIDS-Infected Adults in Next-Wave Countries, 2002
                                    and 2010

                                            (in millions)

                                           High      Low
                                           ----      ---
Nigeria                           2002        4        2
                                  2010       10        5
Ethiopia                          2002        3        2
                                  2010        7        3
Russia                            2002        1        1
                                  2010        5        3
India                             2002        5        3
                                  2010       20        5
China                             2002        1        1
                                  2010     10.5      4.5

source: Bill & Melinda Gates Foundation Global Health report 2/2004


HIV Testing

The  discovery  in 1984 of HIV  antibodies  circulating  in the blood led to the
development and widespread use of blood screening tests for the detection of HIV
antibodies.  Blood banks began testing  their  supplies of blood in an effort to
maintain  and protect the  integrity  of the blood.  Most  current HIV  antibody
screening  tests are EIA tests which  operate on the principle  that  antibodies
react with  antigens.  Antibodies  are produced by the human body in response to
the presence of an infectious disease, such as HIV. Antigens are substances that
stimulate production of antibodies.  EIA tests provide an antigen base that will
react with HIV antibodies,  if such antibodies are present.  Enzymes are used to
detect the reaction between the antigens and antibodies.

Since then, the blood  screening  test has been  considered the gold standard of
HIV testing. In the United States, in addition to blood banks, physicians,  life
insurance companies,  the military, the criminal justice system, the Immigration
and Naturalization Service and community-based organizations all use blood-based
testing.  Unfortunately,  HIV blood  testing can be expensive  and poses risk of
infection  to health  care  personnel.  Blood is  typically  drawn at  physician
offices, clinics,  hospitals or blood draw stations, where trained personnel are
available.  The blood is then sent to a laboratory  where a trained  health care
worker or phlebotomist  must first  centrifuge the blood sample and then test it
for the presence of HIV  antibodies.  Blood  samples and related  blood-sampling
equipment  require careful handling to avoid accidental  exposure to blood-borne
pathogens,   such  as  HIV.   Additionally,   blood-based   testing  has  become
increasingly  more  costly as the costs of  disposing  of  potentially  infected
specimens,  syringes,  needles and  transfer  tubes has  increased.  The cost of
blood-based  testing  is  prohibitive  to many  large  public  health  screening
programs,  particularly  in  lesser-developed  countries,  many  of  which  have
significantly higher rates of HIV infection.  Even in the United States, certain
populations  are not  routinely  screened  due to the high  cost of  blood-based
testing.


                                       2
<PAGE>


We have always  maintained that urine-based  testing offers unique advantages to
blood-based testing. The following table illustrates these advantages:

<TABLE>
<CAPTION>
<S>                      <C>
   +---------------------+--------------------------------------------------------------------------+
   |                     | ADVANTAGE OF URINE OVER BLOOD                                            |
   +---------------------+--------------------------------------------------------------------------+
   |SAFETY               | o Urine is non-invasive                                                  |
   |                     | o Urine collection uses no needles or lancets                            |
   |                     | o Urine does not spread HIV                                              |
   +---------------------+--------------------------------------------------------------------------+
   |COST EFFECTIVE,      | o No special handling. Urine is stable for 4 weeks without refrigeration |
   |SIMPLE TO            | o A urine sample is easier to obtain                                     |
   |COLLECT              | o Urine is not a bio-hazard and does not require expensive disposal      |
   +---------------------+--------------------------------------------------------------------------+
   |CONVENIENCE          | o Urine collection does not require sterile collection devices  or       |
   |                     |   trained health care providers                                          |
   +---------------------+--------------------------------------------------------------------------+
   |PATIENT APPEAL       | o Urine has been shown to increase voluntary testing by up to 73%        |
   |                     |   (Source: University of Pennsylvania study results)                     |
   +---------------------+--------------------------------------------------------------------------+
   |PATIENT SUITABILITY  | o Urine is easy to collect from patients and is the most commonly        |
   |                     |   collected bodily fluid                                                 |
   +---------------------+--------------------------------------------------------------------------+
   |COMPLEMENTARY        | o Similar  commercialized  urine  tests  exist for                       |
   |MENU OF TESTS        |   drugs of abuse, pregnancy,  other sexually transmitted diseases        |
   +---------------------+--------------------------------------------------------------------------+
   |ACCURACY             | o Clinical data of urine testing shows a high correlation to blood,      |
   |                     |   approaching 100%                                                       |
   +---------------------+--------------------------------------------------------------------------+
</TABLE>

All methods of HIV testing follow the same testing protocol.  The protocol is to
first test a sample for the presence of HIV  antibodies.  Any sample found to be
reactive is then  retested in  duplicate.  If either of the retests is reactive,
the same sample is tested again using a more precise and expensive  supplemental
test. The presence of HIV antibodies,  based on the results of the  supplemental
test,  is  considered  a positive  diagnosis  of HIV  infection.  This  protocol
minimizes  the risk of  incorrectly  reporting a false  positive  result that an
individual is infected with HIV.

ORGANIZATION
We were  incorporated  in California in 1989 and  reincorporated  in Delaware in
1996 at the time of our initial public  offering.  In December 1998, we acquired
certain  assets  from  Cambridge  Biotech  Corporation,  an entity  now owned by
bioMerieux,  Inc.  The  acquisition  included  the Urine  Western Blot and Serum
Western Blot supplemental tests and leasehold rights to the Rockville,  Maryland
facility.

We are headquartered in Alameda,  California and have  manufacturing  facilities
there  and in  Rockville,  Maryland.  Historically,  the  Alameda  facility  has
manufactured our EIA screening test and the Rockville  facility has manufactured
our Urine and Serum Western Blot tests. However, we are currently in the process
of consolidating our manufacturing operations by moving all manufacturing to our
Rockville  facility.  We  expect  the  closure  of the  Alameda  facility  to be
completed  by June 30,  2004,  when the current  lease  expires.  Our  corporate
headquarters will remain in the San Francisco bay area.

In November,  2003, we became the 51% owner of a joint venture,  Beijing Calypte
Biomedical  Technology Ltd. (the "Beijing  Calypte Joint  Venture"),  created to
market  existing and  potential  new products in the People's  Republic of China
("China").  The remaining 49% of the joint venture is owned by Marr Technologies
Limited, an affiliate of Marr Technologies BV ("Marr"), our largest stockholder,
holding approximately 28% of our outstanding stock as of March 22, 2004.

Currently,  we and our distributors market our ELISA tests in approximately half
a dozen  countries  worldwide,  primarily,  however,  in China and  Brazil.  Our
current marketing  strategy is to use  distributors,  both third party and joint
venture partners,  to penetrate targeted domestic and international  markets. In
the future, we may


                                       3
<PAGE>


use the Beijing Calypte Joint Venture or other joint ventures to manufacture and
market  our  products  in  international  markets or as  vehicles  to manage our
international manufacturing arrangements.

FINANCIAL CONSIDERATIONS

To successfully  implement our business plans, we must obtain  sustainable  cash
flow and  profitability.  Our future  liquidity  and capital  requirements  will
depend on numerous factors,  including successful  completion of the development
of our new rapid tests,  acquisition  and  protection of  intellectual  property
rights,  costs of developing our new products,  ability to transfer  technology,
set up  manufacturing  and obtain  regulatory  approvals of our new rapid tests,
market  acceptance  of all our products,  competing  products in our current and
anticipated  markets,  actions  by the FDA and  other  international  regulatory
bodies, and the ability to raise additional capital in a timely manner.

Since  December 31, 2003, we have entered into new financing  arrangements  (see
Item 5) that  management  believes  will be  adequate to sustain  operations  at
expected levels through at least 2004. Under our new financing arrangements,  we
will have the  ability to borrow up to  $15,000,000  pursuant  to 5%  promissory
notes we may issue  between  February  28,  2004 and May 31, 2004 to finance our
operations.  Each  promissory  note will be due and payable 12 months  after its
issuance,  which will be no later than May 31, 2005. If sufficient funds are not
available  from our  operations to repay the  promissory  notes when due, we may
need to arrange additional financing,  attempt to extend or otherwise modify the
promissory  notes or make other  arrangements.  There can be no  assurance  that
additional  financing,  if and as  necessary,  would be  available  or, if it is
available,  that it would be on  acceptable  terms.  The terms of an  additional
financing could involve a change of control and/or require stockholder  approval
or could require us to obtain waivers of certain covenants that are contained in
existing  agreements.  We  would  or might be  required  to  consider  strategic
opportunities,  such  as a  merger,  consolidation,  sale  or  other  comparable
transaction,  to sustain our operations. We do not currently have any agreements
in place with respect to any such new strategic opportunity, and there can be no
assurance  that any such  opportunities  will be available  to us on  acceptable
terms, or at all. If additional  financing is not available when and if required
or is not available on acceptable  terms, or we are unable to arrange a suitable
strategic  opportunity,  we will be in significant financial jeopardy and may be
unable to continue our operations at current levels, or at all.

PRODUCTS

The Calypte  Urine-Based HIV-1 Screening and Supplemental Tests (the urine ELISA
tests)

Our   proprietary   urine-based   HIV-1  EIA  (the  "EIA  Screening   Test")  is
non-invasive,  easy to use,  reliable  and  avoids  many of the  costs and risks
associated with blood-based  testing. Our EIA Screening Test, when used with our
Urine Western Blot supplemental test provides the only complete  urine-based HIV
testing method.  Laboratories using our urine-based  testing method can complete
the entire testing profile for HIV-1 antibody using a single urine specimen. Key
benefits of our test include:

Convenience and Safety.  Urine is the most commonly  collected  bodily fluid for
laboratory  testing.  Collection of urine can take place any time of day.  Urine
testing does not require a 24-hour voided  specimen or a midstream,  clean-catch
sample.  Because it requires no special  preservatives  or containers,  urine is
also easy to collect,  handle and discard. Our EIA Screening Test is in standard
EIA format and is designed to be used with standard laboratory equipment.

Independent studies have concluded that the likelihood of contracting infectious
HIV  virus in urine is  extremely  low.  There  have been no  reported  cases of
transmission of HIV virus through  contact with urine of HIV-infected  patients.
Accordingly,  the risk of HIV  infection to health care and  laboratory  workers
accidentally exposed to urine samples appears to be negligible. Since no needles
are used in the urine sampling process, our test avoids this route of accidental
infection.  In lesser-developed  countries,  where the supply of sterile needles
and syringes  cannot be  guaranteed  and the medical  infrastructure  to support
laboratory testing is scarce or nonexistent,  the safety benefits of using urine
sampling extend to patients as well as to health care workers.

Patient  Appeal  The  ability to screen  non-invasively  for HIV in all types of
patients,  including injection drug users and newborns, may both enhance patient
comfort and  significantly  increase the voluntary testing rates in patients who
might  otherwise  decline  testing.  A recent study  conducted by Johns  Hopkins
University  entitled


                                       4
<PAGE>


"Screening  for  HIV  Infection  in  High-Risk  Communities  by  Urine  Antibody
Testing,"  published in the December  2002 volume of Journal of Acquired  Immune
Deficiency  Syndromes  utilized  Calypte's  EIA Screening and Urine Western Blot
Tests.  The study concluded that  "[u]rine-based  screening for HIV infection in
high-prevalence  inner city communities can be an effective tool for identifying
and treating infected persons who are unaware of their infection."

Cost Effective.  Our EIA Screening Test may significantly lower the overall cost
of testing  for HIV  infection  because  the cost of  collecting,  transporting,
testing and disposing of urine  specimens is relatively  inexpensive.  Our urine
ELISA tests do not require the use of trained healthcare professionals to obtain
samples  and we believe  that a urine  collection  cup costs  between  $0.05 and
$0.50. Moreover,  since urine is often already being collected for other testing
purposes,  the  incremental  cost of  collecting  urine  samples is likely to be
insignificant.

Domestically,  our current testing products qualify for insurance  reimbursement
coverage.  We sell our current ELISA tests  primarily to reference  laboratories
which in turn receive  compensation  from the insurance  companies who order the
tests.  Even with  reimbursement  approvals,  there can be no assurance that our
ELISA  tests  will  gain any  significant  degree  of  market  acceptance  among
physicians,  patients,  or healthcare payers. As we seek to develop new products
and obtain FDA approval for them in the future,  insurance reimbursements may be
necessary to facilitate their market acceptance.

Accuracy We have performed  clinical studies  demonstrating the effectiveness of
using urine as a reliable and  clinically  valid sample for HIV testing.  In the
clinical  trials for FDA approval of our urine ELISA tests,  which  followed FDA
protocol of using the  screening  and  supplemental  tests  together,  our tests
detected the presence of HIV-1  antibodies  in urine with 99.7%  sensitivity  in
subjects previously  identified as HIV-1 infected through blood-based  screening
tests.  Approximately  13,000 paired blood and urine  specimens were tested.  In
subjects at low risk for HIV, the  specificity of tests was 100%.  "Specificity"
is  the  ability  to  identify  all  non-HIV  infected  individuals   correctly.
"Sensitivity" is the ability to detect HIV infected individuals. Specificity and
sensitivity of our urine ELISA tests in certain populations,  including those at
high risk and those with other  medical  conditions,  was lower when compared to
blood-based testing.

Calypte's  HIV-1 antibody test is a much-needed  alternative for people who fail
to get  tested for HIV  because  they are afraid of  needles.  According  to the
Centers  for Disease  Control  and  Prevention  ("CDC"),  approximately  665,000
Americans  are living with HIV and AIDS.  An estimated one in four does not know
they are  infected.  It is  critical  for all people at  potential  risk for HIV
infection to learn their status because early  detection and treatment have been
shown to  prevent  debilitating  opportunistic  infections  and to extend  life.
Studies  have shown that between 21% and 50% of people would prefer a urine test
to a blood test, and up to 80% of these individuals cited fear of needles as the
reason for preferring a urine test.

In spite of the  benefits of our urine ELISA  tests,  these tests  represent  an
alternative  method of determining the presence of HIV  antibodies.  Blood-based
and oral  fluid-based  tests have the  advantage of already  being  commercially
marketed  and of having  gained  acceptance  from the  medical  community.  Both
blood-based and oral fluid-based  tests have been shown to be reliable media for
HIV  detection.  There can be no assurance  that our urine ELISA tests will gain
any significant degree of market acceptance among physicians,  other health care
providers or patients.

Moreover,  some blood-based HIV tests have also been proven effective in testing
for both HIV-1 and HIV-2. Our urine ELISA tests are currently limited to testing
for HIV-1 only. Although HIV-1 is the predominant strain of the virus, there are
certain regions of the world,  such as western Africa,  where HIV-2 also exists.
To date,  although  our urine ELISA tests are limited to HIV-1,  we believe that
factor has not had a materially  adverse  effect on our operations and revenues.
However, there can be no assurance that this HIV-1 screening limitation will not
have an adverse  effect on our  ability to market our urine  ELISA  tests in the
future if another strain of HIV not detectable by our urine ELISA tests develops
or if HIV-2  becomes more  prevalent.  Additionally,  although we are working on
development  of rapid HIV diagnostic  tests,  there can be no assurance that our
current  lack of a rapid  test will not  adversely  affect  our  operations  and
revenues.

Test  Methodology.  Our EIA  Screening  Test uses an  industry-standard  96 well
microtiter plate to detect  antibodies to HIV-1 in urine. The HIV-1  antibodies,
when  present  in urine,  bind to our  proprietary  antigen


                                       5
<PAGE>


coated on prepared microtiter plates. A subsequent enzymatic reaction produces a
color change revealing the presence of HIV-1 antibodies.

The screening test requires only 200  microliters of urine  (approximately  four
drops) and can be performed using standard laboratory equipment.  Samples can be
shipped and stored at 15 to 30 degrees  centigrade  for up to 55 days, or for up
to 1 year at 2 to 8 degrees centigrade,  before testing. The laboratory protocol
for testing urine is nearly identical to that of blood,  and therefore  requires
few, if any, modifications to existing laboratory protocols.

Our Urine Western Blot test is an in vitro  qualitative  assay for the detection
and identification of antibodies to HIV-1. This more specific assay is used as a
supplemental test with urine specimens that tested repeatedly reactive using our
EIA Screening Test.

Our  Urine  Western  Blot  test is  manufactured  from  HIV-1  propagated  in an
H9/HTLV-IIIB T-Lymphocyte cell line. The virus is inactivated and specific HIV-1
proteins are bound to a  nitrocellulose  strip.  Each strip  contains all of the
proteins and glycoproteins of HIV arranged in bands across the strip in order of
molecular  weight.  If HIV-1  antibodies are present in the specimen,  they will
bind to the viral antigens present on the nitrocellulose  strip. The position of
bands  on the  nitrocellulose  strips  allows  this  antibody  reactivity  to be
associated with specific viral antigens.

Our Urine Western Blot supplemental  test uses the same  commercially  available
western blot kit components as used in our Serum Western Blot supplemental test.
The test procedure is virtually identical as well, except that the Urine Western
Blot  supplemental  test requires 1.0  milliliter of urine added directly to the
standard kit diluent and requires  additional  times of  incubation  for the two
detection  steps.  The same laboratory  equipment is used for both the Urine and
Serum Western Blot supplemental tests.

Additionally, our Urine Western Blot test is differentiated by the blot controls
it  employs  and the use of a positive  criterion  for blot  interpretation.  In
urine,  blots showing the presence of a single band, gp160,  equal to or greater
in intensity than the low positive urine western blot control are interpreted as
a positive HIV-1 result. Urine blots have a lower indeterminate rate than blood,
allowing more definitive negative or positive results.

The Cambridge Biotech Serum-Based HIV-1 Supplemental Test

Our Serum Western Blot test was the first  supplemental  western blot test to be
FDA-approved  and licensed for the detection of HIV-1  antibodies in blood.  Our
Serum  Western  Blot  test has been  distributed  commercially  for more than 15
years.  Today,  there are only two such products on the market.  Since the FDA's
November  1999  approval  of a "Day  Assay"  format,  the  supplemental  test is
available in both a five-hour and an overnight format. We sell our Serum Western
Blot test as a supplemental  test to HIV-1 EIA screening tests produced by other
manufacturers.  Additionally,  our Serum  Western Blot test has been approved by
the FDA for use as a  supplemental  test to HIV-1 rapid blood tests  products by
other manufacturers.

Products Under Development

Our  research  and  development   efforts  are  currently  directed  toward  the
development  of select  high-priority  new diagnostic  tests,  primarily for the
detection  of  HIV-1  and  HIV-2.   Priority  is  determined  on  the  basis  of
feasibility, probable cost to develop, ability to acquire necessary intellectual
property rights, regulatory complexity, market size and competition. Our product
development  strategy includes both internal product  development and partnering
with other  companies to optimize  existing tests and test formats and to obtain
freedom to operate in conformity  with other  companies'  intellectual  property
rights.

Rapid  Tests.  In  response  to  reports  by the CDC on the  value of rapid  HIV
antibody test results,  we have been pursuing the development of HIV-1 and HIV-2
rapid tests as our primary new products effort. We believe that such rapid tests
are  feasible  and that a  significant  market  exists for such tests.  The high
number  of  individuals  who do not  return  for  test  results  and  counseling
constitutes a threat to public health. In addition, in emergency rooms, delivery
rooms and other  settings,  there is an urgent need to immediately  know the HIV
status of  patients.  For example,  since  azidothymidine  ("AZT")  treatment of
pregnant  mothers,  even at delivery,  has been shown to result in a substantial
decrease in mother-to-child HIV transmission, there appears to be a ready market
for reliable rapid HIV tests.  Internationally,  lesser-developed countries have
the  highest  incidence  of  HIV  infection  and  the  least  effective  medical
infrastructure  with which to  diagnose  and treat it.  This  situation  largely
exists in


                                       6
<PAGE>


the "next  wave"  countries  in northern  Africa,  Russia,  India and China.  We
believe that a rapid test is much more  appropriate  in these  countries  than a
laboratory test.

We are  designing  our rapid  tests to comply  with the rapid  testing  protocol
promulgated  by WHO.  Under that protocol,  if a sample is  non-reactive  on the
basis  of a  single  rapid  test,  testing  is  complete  and the  diagnosis  is
considered negative for HIV infection. If the sample is reactive using the first
rapid test, it is tested with a second,  different rapid test. A reactive sample
using the second test,  having already been indicated as a presumptive  positive
by the first test, is  considered  to be a positive  diagnosis for HIV. A sample
that is non-reactive to the second test, after having been reactive to the first
test, is re-tested using a third, different rapid test. A reactive sample on the
third test is considered a positive diagnosis for HIV; a non-reactive  sample is
considered a negative diagnosis.

We have already conducted in-house trials of certain blood and urine rapid tests
in development  and are currently  conducting  field  evaluations in Thailand to
validate the performance of these products.  Through the validation process, any
enhancements  necessary  and/or desired in the performance of the rapid tests in
the field are worked on in the  laboratory.  The  reworked  rapid tests are then
returned to the field for further  evaluation.  This  process is  iterative  and
precedes  the  larger  clinical  trials  that will be  required  for  regulatory
approval in many countries  prior to bringing the products to market.  Once each
of these rapid tests demonstrates the desired  performance in field evaluations,
we will begin the  manufacturing  and clinical trial testing  processes.  We may
elect to proceed with the commercialization of one of the tests while continuing
to evaluate or modify the other.

One of the most critical components  affecting the design and composition of our
rapid test products is the  acquisition  of patent  rights.  A number of patents
from a number of third  parties are  required for the  manufacture  of the rapid
test  platforms  and  contents.  These patent  rights may restrict us as to use,
territories  in  which we may  sell  products  and  modes  of  operation.  These
restrictions may impact whether we can transfer any of our rights to manufacture
and/or  distribute  products  incorporating  particular  patents  and how we may
conduct such  manufacturing  and/or  distribution  arrangements.  We may need to
enter into partnering  arrangements  with other entities in order to manufacture
and/or  distribute our products,  but we may be restricted from doing so because
of  restrictions  on  certain  patent  rights.  We may  be  required  to  devote
substantial  funds and other resources to acquire the necessary patent rights in
a manner that will not hinder our ability to commercialize  our products.  There
can be no assurance that we will be successful in our endeavors to commercialize
these products.

Over-the-Counter.  There are currently no FDA approved over-the-counter HIV test
products providing an immediate diagnosis.  Nonethless,  we believe there may be
interest  in an  over-the-counter  in-home  rapid test in a number of  countries
worldwide.  We will continue to explore the  potential  for an  over-the-counter
in-home  urine  collection  kit  for  use  in  HIV  diagnosis.  However,  due to
regulatory  approval  uncertainties  and cost  concerns  in the  more  developed
countries, and especially in the United States, this is not a near-term priority
development for us on our own.

Other  Diagnostics.  We intend to develop  and/or market  additional or improved
tests,  focusing  on our  expertise  in urine,  for other  infectious  and viral
diseases,  including other sexually transmitted  diseases. We intend to focus on
developing and marketing products that are complementary to our existing product
lines,  technical expertise and market  opportunities.  These efforts are in the
early research and evaluation  stages and are not expected to result in revenues
in 2004, if at all.

Research and Development  Spending.  We continue to invest funds in research and
development  that we believe are  necessary and  appropriate  to bring our rapid
HIV-1 and HIV-2 tests to market,  to ensure  that our ELISA tests meet  customer
requirements  and to  explore  the  potential  for  other  new  diagnostic  test
products.  We spent  $1.5  million  and $0.9  million on  product  research  and
development  in 2003 and 2002,  respectively.  We expect  future  spending  will
continue to be devoted to development and  commercialization  of HIV-1 and HIV-2
rapid  tests  and  improvements  for  our  existing  products,  as  well  as  to
investigation  of other  potential new test products.  There can be no assurance
that we will achieve or sustain any revenues from sales of rapid HIV  diagnostic
tests,  internationally  or  domestically,  or from  other new  products  we may
develop or introduce.


                                       7
<PAGE>


SALES, MARKETING AND DISTRIBUTION

Our marketing strategy is to continue to expand our global distribution  network
through the use of third  party  distributors  and joint  venture  partners.  In
addition to FDA  approvals,  to date,  we have  received  approval to market our
ELISA urine tests in Indonesia, South Africa, Uganda, Kenya, China and Malaysia.
Other  international  approvals  for the ELISA urine tests are  pending.  We are
working  collaboratively  with our third  party  distributors  and  through  our
Beijing  Calypte  Joint  Venture  to obtain  regulatory  approval  to market and
promote our products in certain international markets.

We anticipate  that a greater portion of our revenues for the next several years
will be derived from sales to  international  distributors  and by manufacturing
collaborations  in key markets.  International  sales and  operations  involve a
number of inherent  risks and may be limited or disrupted by the  imposition  of
government controls, export license requirements,  political instability,  trade
restrictions,   changes  in  tariffs,  difficulties  in  managing  international
operations and fluctuations in foreign currency exchange rates.  Distributors of
medical products in developing  countries where the need for  cost-effective HIV
diagnostic  tests may be the most acute often find it difficult to establish and
maintain the necessary transportation, storage and credit facilities. Certain of
our distributors have limited international marketing experience,  and there can
be no assurance that our  distributors  will be able to successfully  market our
products in any international market.

The following  table  summarizes the markets and geographic  regions that we and
our current  marketing  partners for our ELISA tests cover.  The table  includes
marketing and distribution arrangements that were in effect at December 31, 2003
and those expected to become effective in the first half of 2004. Material terms
of the respective distribution arrangements are described in more detail below.


<TABLE>
<CAPTION>
                                                                                                                 TYPE OF
                                     EFFECTIVE DATE      TERM OF          GEOGRAPHIC                            ARRANGEMENT
MARKETING PARTNER/ COMPANY           OF ARRANGEMENT    ARRANGEMENT          REGION          MARKETS/PRODUCTS        (1)
-------------------------------    -----------------  -------------      ------------     ------------------- ---------------
<S>                                <C>                <C>                <C>              <C>                 <C>
Calypte                                                                  United           All
                                                                         States and
                                                                         Canada

Otsuka Pharmaceutical                12/98            Evergreen          Japan            Urine only          Exclusive

Teva Medical Ltd.                    12/94            Evergreen          Israel           Urine only          Exclusive

Uni-Health Services Sdn. Bhd.         4/01            3 years, with 2    Malaysia         All                 Exclusive-
                                                      year renewal                                            urine
                                                      option                                                  Non-
                                                                                                              exclusive-
                                                                                                              serum

BioBras S. A.                         5/00            3 years; 2 year    Brazil           All                 Exclusive-
                                                      renewal option                                          urine
                                                                                                              Non-
                                                                                                              exclusive-
                                                                                                              serum

Medicure, Inc.                        3/01            3 years with 2     Philippines      All                 Exclusive-
                                                      year renewal                                            urine
                                                      option                                                  Non-
                                                                                                              exclusive-
                                                                                                              serum

PCN Healthcare                        6/01            3 years with 2     Thailand         All                 Exclusive
                                                      year renewal                                            urine
                                                      option                                                  Non-
                                                                                                              exclusive-
                                                                                                              serum


Centrum Promotora Internacional       4/01            2/04               Mexico           All                 Exclusive-
                                                                                                              urine
                                                                                                              Non-
                                                                                                              exclusive-
                                                                                                              serum
</TABLE>


                                       8
<PAGE>


<TABLE>
<CAPTION>
                                                                                                                 TYPE OF
                                     EFFECTIVE DATE      TERM OF          GEOGRAPHIC                            ARRANGEMENT
MARKETING PARTNER/ COMPANY           OF ARRANGEMENT    ARRANGEMENT          REGION          MARKETS/PRODUCTS        (1)
-------------------------------    -----------------  -------------      ------------     ------------------- ---------------
<S>                                <C>                <C>                <C>              <C>                 <C>
REM Industria E. Comerica LTDA       12/01            3 years with 2     Brazil           Serum only          Non-
                                                      year renewal                                            Exclusive
                                                      option

Zhong Yang Pute Biomedical Co.       10/02            2 years, with 2    20 Provinces     All except drug     Exclusive-
                                                      year renewal       in China         rehabilitation      urine
                                                      option (2)                          and criminal        Non-
                                                                                          justice             exclusive-
                                                                                                              serum

Beijing Calypte Biomedical           11/03            Not applicable     China            All                 51%-owned
  Technology Ltd.                                                                                             joint venture

Sumit Exports and Trades              6/02            3 years, with 2    India            All                 Exclusive-
  Pvt. Ltd.                                           year renewal                                            urine
                                                      option                                                  Non-
                                                                                                              exclusive-
                                                                                                              serum

bioMerieux Mexico S.A. de C.V.       12/01            3 years with 2     Mexico           Serum only          Non-
                                                      year renewal                                            exclusive
                                                      option

bioCiencia Tecnologia e               4/02            3 years with 2     Brazil           Serum only          Non-
  Comercio Ltda.                                      year renewal                                            exclusive
                                                      option

Adaltis Inc.                          3/02            3 years with 2     Worldwide        Serum only          Non-
                                                      year renewal                                            exclusive
                                                      option

Mistaire LLC                          3/03            3 years with 2     Gulf             All                 Exclusive-
                                                      year renewal       Cooperative                          serum in GCC
                                                      option             Council,                             Non-exclusive-
                                                                         Botswana                             urine and
                                                                                                              serum in Botswana
</TABLE>

     (1) All  serum  products  are  sold on a  non-exclusive  basis.  Urine  EIA
         screening  and  supplemental  tests  are  distributed  on the  basis of
         country or territory exclusivity.

     (2) The  agreement  calls for  minimum  purchases  of $3  million  over the
         two-year term of the agreement,  and provides for a two-year  extension
         contingent  upon the  distributor's  purchase  of a  specified  minimum
         number of tests  (EIA -  1,500,000  tests the first  twelve  months and
         2,500,000  tests the second twelve months;  Urine Western Blot - 15,000
         tests the first  twelve  months  and  30,000  tests the  second  twelve
         months) during the original term of the  agreement.  Based on purchases
         to  date,  it is not  likely  that the  distributor  will  achieve  the
         required minimum purchases and, consequently, the agreement will likely
         not be  renewed.  This  distribution  agreement  has been  assigned  to
         Beijing  Calypte  Joint  Venture.  The  agreement  can be terminated by
         either party upon ninety days notice.

In 2003, our revenue from product sales totaled $3.5 million.  Approximately 95%
of our 2003 revenues were derived from sales to customers in the United States.


                                       9
<PAGE>


MANUFACTURING

The  manufacture of our urine ELISA tests  involves  antigen  production,  plate
processing and preparation of certain washes and other  reagents.  All processes
are carried out under FDA Quality System/ Good  Manufacturing  Practices ("GMP")
regulations.  Antigen production  involves cell culture,  antigen expression and
purification.  Following  purification,  the antigen is tested  extensively  and
optimized for plate coating.  The coating of standard 96 well microtiter  plates
with antigen is completed  using  industry  standard  plate  coating  equipment.
Following  binding of the  antigen to the  plates,  the plates are  blocked  and
stabilized to prevent  nonspecific  binding of the antigen.  The plates are then
dried and packaged in foil pouches.  The washes and reagents are produced  using
standard solution preparation techniques.

The  consolidation  of our  manufacturing  operations in Rockville  will require
significant  capital  investments  to transfer the  manufacturing  processes and
procedures  for our urine ELISA  tests,  to  reconfigure  space and purchase new
equipment, to hire and train current and additional staff, to conduct validation
studies, and to complete comparability studies for FDA review and approval.

We have pre-market approval ("PMA") from the FDA for the manufacture and sale of
our EIA screening test for our Alameda, California facility. We have a Biologics
License  ("BL") from the FDA for the  manufacture  and sale of our serum Western
Blot tests for our Rockville, Maryland facility. We also have a PMA from the FDA
for the  manufacture  and sale of our urine Western Blot tests for our Rockville
facility. We have applied for a PMA to manufacture and sell our EIA test kits at
our Rockville  facility and expect to receive it in the spring of 2005. Until we
receive the PMA, we will not be able to  manufacture  our EIA screening test for
sale in the  United  States at our  Rockville  facility.  As a  result,  we have
recently increased our production of EIA screening tests at our Alameda facility
in an attempt to establish a sufficient supply of inventory to meet our expected
demand during the consolidation  period.  We considered  historical sales levels
and the  expected  length of time  required to complete  the  consolidation  and
obtain the PMA in  determining  the amount of  inventory  we would need to cover
demand  during  the  transition  period.   Demand  could  significantly   exceed
historical  levels and  consolidation  of operations or FDA approval  could take
longer than  expected.  If one or more of these  events  occur,  our  transition
inventory may not be sufficient to supply customer orders. Alternatively, demand
could fall  significantly  below historical  levels,  in which case we will have
manufactured excess inventory that we may have to dispose of at additional cost.

The lease for our Alameda  facility  expires on June 30, 2004. We intend to wind
up manufacturing  operations in our Alameda facility in early June 2004. We plan
to keep our corporate  headquarters in the San Francisco bay area and are in the
process of looking for suitable office space.

The FDA did not inspect either of our  facilities  during 2002. It inspected our
Alameda  facility in June 2003 and our Rockville  facility in October 2003. Both
inspections  resulted  in  a  few  minor  observations   requiring  response  or
corrective action,  which we have made. Although we believe the FDA is currently
satisfied  with our responses and corrective  actions  resulting from its latest
inspections,  if it  subsequently  determines that it is not satisfied with them
or, if it observes new  conditions  requiring  corrective  actions  which remain
unresolved following a future inspection,  the FDA could take regulatory actions
against us, including license suspension,  revocation, and/or denial, seizure of
products and/or injunction,  and/or civil penalties or criminal  sanctions.  Any
such FDA action would likely have a material  adverse effect upon our ability to
conduct our ELISA test business.

Except  as may be  limited  by  licensed  patent  right  restrictions  and other
regulatory  or  government  imposed  considerations,  we expect to outsource the
manufacture  of our rapid test  products  and are in the process of  identifying
manufacturers  and  potential  joint  venture  partners  that we  believe  could
manufacture  the rapid tests in the quantity  and quality that we desire.  There
can be no assurance that we can successfully develop and transfer our rapid test
technologies to another  manufacturer or that the  manufacturer  will be able to
successfully  obtain  local  regulatory  approval  or meet  expected  commercial
demand. Additionally,  more than one manufacturer may produce various components
of the tests,  and there can be no assurance  that the  production  from various
sources will be successfully  coordinated.  Governmental regulations will likely
affect the cost of production and time to production in amounts and manners that
we cannot quantify.


                                       10
<PAGE>


We purchase and expect to purchase or have our  manufacturing  partners purchase
raw  materials  and other  components  obtained  from  various  suppliers in the
manufacture of our test products. We also use some single-source components. Any
delay or interruption in supply of these raw materials or components, especially
in regard to single-source components, could significantly impair our ability to
manufacture products in sufficient quantities to meet established and increasing
commercial demand because additional or replacement  suppliers cannot be quickly
established.

As a result of limited  financial  resources  in the past and related  personnel
turnover, we have had limited experience in the commercial-scale  manufacture of
our products.  We currently manufacture our products for sale, for submission to
FDA for ongoing compliance, for clinical trials, and for building our inventory.
We  may  encounter  difficulties  in  scaling-up  production  of  our  products,
including problems involving  production yields,  quality control and assurance,
raw material  supply and  shortages of qualified  personnel.  Due to our limited
manufacturing  experience,   our  estimates  with  regard  to  these  and  other
operational  requirements  may be  incomplete or  inaccurate  and  unanticipated
events and circumstances  are likely to occur.  Difficulties we may encounter in
the current scale-up of manufacturing  inventory for our transition period or in
our  consolidation  of  manufacturing  operations  could have a material adverse
effect on our business, financial condition and results of operations.

Due to the nature of our  manufacturing  processes,  we are subject to stringent
federal,  state and local laws,  rules,  regulations and policies  governing the
use, generation,  manufacture,  storage, air emission,  discharge,  handling and
disposal of certain materials and wastes. There can be no assurance that we will
not be  required  to  incur  significant  costs  to  comply  with  land  use and
environmental  regulations as manufacturing  is scaled-up to commercial  levels,
nor that our operations,  business or financial condition will not be materially
and  adversely  affected  by  current  or  future   environmental  laws,  rules,
regulations  and  policies.  There can be no  assurance  that we will be able to
obtain and maintain all required permits in connection with the operation of our
manufacturing  facilities. If we attempt to manufacture our products on a larger
commercial  scale, we may become a significant  user and disposer of water.  The
disposal  of  water  used  in  our  manufacturing  processes  must  comply  with
applicable  federal,   state  and  local  environmental   protection  laws,  and
compliance with these laws may be costly and difficult.

Our Rockville facility is a specialized facility incorporating Biosafety Level 3
controls for the manipulation of potentially  infectious  biological agents (HIV
viruses). It also uses hazardous chemical materials.  As such, this facility and
the products manufactured there are subject to rigorous federal, state and local
regulatory controls including registration,  licensing and specific material use
permits.

TECHNOLOGY

Our urine ELISA tests are based on the  discovery by  scientists at the New York
University  Medical Center ("NYU") in 1988 that antibodies to HIV could be found
in urine.  Prior to this  discovery,  it was commonly  held that  antibodies  to
systemic  infections could not pass through the kidneys,  and thus, could not be
found in the urine of  infected  individuals.  The NYU  scientists  showed  that
antibodies  to HIV-1  envelope  antigens  were present in all urine samples from
HIV-1 seropositive subjects. Building on this discovery, we developed our enzyme
immunoassay  ("EIA")  to  detect  antibodies  to HIV-1 in  urine.  There are two
proprietary features of our EIA test that result in a format sensitive enough to
detect the low levels of HIV  antibodies  in urine,  the antigen  target and the
sample buffer in the assay.

Recognizing the prominence of envelope  antibodies in urine,  the antigen target
in the assay is a full length,  recombinant glycosylated HIV-1 envelope protein,
rgp160. Although this antigen is a recombinant glycoprotein,  it is identical to
the viral  envelope  protein gp160 in amino acid sequence and in the presence of
carbohydrate at glycosylation sites. This kind of antigen target can efficiently
capture the full range of HIV-1  envelope  specific  antibodies  produced in the
human  polyclonal  response to the virus. The microwell assay format permits the
high  availability  of epitopes of the  recombinant  envelope  glycoprotein  for
antibody  binding.  This  availability  of epitopes  results in the  sensitivity
verified in clinical trials.

We have  non-exclusive  rights to the  proprietary  process  used to express the
recombinant  HIV-1  envelope  glycoprotein  from  Texas  A&M  University  System
("TAMUS").  This  proprietary  process for the manufacture of rgp160 begins with
the baculovirus  expression vector system established in an insect cell culture.
The  consistent


                                       11
<PAGE>


and high levels of rgp160 expression in baculovirus infected insect cell culture
are a critical  step in the overall  manufacturing  of rgp160.  We improved  and
upgraded the Repligen  Corporation process with a proprietary process which uses
a system in which the HIV-1  envelope  protein is  produced  in the insect  cell
membrane  rather  than  typical  tissue  culture  systems  where the  protein is
secreted  into insect cell culture  media.  Rgp160 is an  insoluble  protein and
requires  detergent  based  extraction  and  purification  procedures  which are
proprietary.  We developed and have  obtained a United States patent  claiming a
sample buffer  formulation,  which is used in the HIV-1 urine test.  This sample
buffer  acts as a diluent  for urine in the assay  procedure  and  significantly
increases test specificity by reducing  non-specific  binding of immunoglobulins
(non-specific  antibodies)  and other  substances  in urine that would  decrease
specificity  and  sensitivity  of  HIV-1  antibody  binding.  Sample  buffer  is
currently  manufactured in our Alameda  facility and will be transferred as part
of our consolidation in our Rockville facility.

Our  products   incorporate   established   immunoassay   technology   based  on
antibody-antigen reactions.  Antibodies are immune system proteins produced as a
result of an organism's immune response to substances  (antigens) foreign to the
body and specifically bind to antigens and signal the immune system to assist in
eliminating them.  Immunoassays are used for diagnostic  applications  where the
presence  or  absence of a specific  analyte  is being  evaluated  and allow the
detection of some  analytes at levels as low as one part per  billion.  Antigens
include  viruses,  bacteria,   parasites,  chemical  toxins  and  other  foreign
substances and hormones.

The HIV-1 urine assay format includes a standard 96 well microtiter  plate which
is compatible with standard laboratory instrumentation. The microwell plates are
coated with proprietary  recombinant  HIV-1 envelope  protein  antigen.  Patient
urine  and  the  unique  specimen   diluent  are  introduced  to  the  microwell
simultaneously. If HIV-1 antibodies are present, they bind to the antigen coated
well and remain during the subsequent wash steps. An enzyme labeled conjugate is
added to the well. This conjugate binds  specifically to human  antibodies which
remain from the previous  step.  Following  another wash,  substrate  reagent is
added and color  development  occurs due to the presence of the enzyme conjugate
in the  well.  This  color  is  measured  spectrophotometrically  on a  standard
laboratory  microwell  plate  reader.  The  presence  of HIV  antibodies  in the
specimen is  indicated by the  development  of color in the  microwell,  and the
intensity of the color is proportional to the amount of antibody.

Our Urine Western Blot  supplemental  test combines the Cambridge  Biotech HIV-1
Western Blot test with a procedure we developed for testing urine specimens. Our
Urine  Western  Blot  test  is  based  on  the  combination  of  electrophoretic
separation  of  complex   mixtures  of  proteins   with  the  highly   sensitive
immunoblotting  technique.  This method has been highly useful in characterizing
the antigenic  profile of HIV-1 and describing  the immune  response to HIV-1 in
the serum/plasma of exposed or infected persons.

The  manufacture of our Urine Western Blot and Serum Western Blot tests involves
the  production of an  inactivated,  partially  purified HIV-1 lysate from HIV-1
propagated  in  an  H9/HTLV-IIIb  T-lymphcyte  cell  line.  HIV-1  proteins  are
separated  by  molecular  size  using gel  electrophoresis  of the lysate in the
presence of detergent (sodium dodecylsulfate).  The separated HIV-1 proteins are
electrotransferred from gel to a nitrocellulose membrane that is washed, blocked
to  minimize  non-specific  immunoglobulin  binding  and  packaged.  These tests
provide controls and components which enable the detection and  visualization of
HIV-1   antibodies   present  in  the   specimen   incubated   with   individual
nitrocellulose  membrane strips.  Bands  corresponding  to specific  location of
HIV-1  proteins  are used to  interpret  a positive,  negative or  indeterminate
result.

The format of both of our urine and blood rapid tests under development is based
on a lateral flow device where the  specimen  enters by capillary  action into a
sample pad, where  conditioning  of the specimen takes place.  The specimen then
moves into a  conjugate  pad where the  presence of  antibodies  in the urine or
blood  results in binding to a detection  molecule  carrying a color  indicator.
This antibody complex moves to a nitrocellulose  test strip containing the HIV-1
and HIV-2 antigen  targets and in a separate area as a control zone. If HIV-1 or
HIV-2 specific antibodies are present in the complex, binding occurs between the
antibody complex and the antigen band forming a red line.  Absence of a red line
at this location  indicates the absence of HIV-1 and/or HIV-2  antibodies  and a
non-reactive result for the specimen. The validity of that result depends on the
binding of the antibody complex to the control zone to form a red line.  Results
are seen in about 20 minutes in  contrast  with the  laboratory  based EIA tests
that take 2 to 3 hours to perform.


                                       12
<PAGE>


PATENTS, PROPRIETARY RIGHTS AND LICENSES

We seek patent and other  intellectual  property  rights to protect and preserve
our  proprietary  technology  and our right to  capitalize on the results of our
research and development  activities.  We also rely on trade secrets,  know-how,
continuing  technological  innovations  and licensing  opportunities  to provide
competitive  advantages  for our  products  in our  markets  and to develop  new
products.

We have two United States patents, one pending United States patent application,
six foreign patents, and eight pending foreign patent applications. In addition,
we  currently  license the right to use certain  patents and other  intellectual
proprietary  rights from NYU, Cambridge Biotech and TAMUS. These licenses secure
intellectual property rights necessary for the manufacture and sale of our ELISA
test products as summarized below:


<TABLE>
<CAPTION>
<S>                         <C>                 <C>                          <C>                      <C>
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|                          |                   |                            |                        |EXPIRATION -     |
|                          |                   |                            |                        |UPON EXPIRATION  |
|                          |                   |                            |                        |OF PATENT IN:    |
|ISSUER OF LICENSE         |OWNER              |DESCRIPTION                 |ADDITIONAL PROVISIONS   |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|EIA:                      |                   |                            |                        |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|  NYU                     |NYU                |Exclusive license for       |Right to make, use,     | 2009            |
|                          |                   |using urine in place of     |sell and sublicense     |                 |
|                          |                   |blood as a specimen sample  |products utilizing the  |                 |
|                          |                   |for detecting HIV           |technology described    |                 |
|                          |                   |                            |in the patent           |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|  Texas A&M University    |TAMUS              |Non-exclusive license for   |Right to make, have     | 2009            |
|  System (TAMUS)          |                   |using insect cells to       |made, use and sell      |                 |
|                          |                   |obtain gp160                |products based on its   |                 |
|                          |                   |                            |proprietary             |                 |
|                          |                   |                            |recombinant expression  |                 |
|                          |                   |                            |systems                 |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|  bioMerieux (Cambridge   |Harvard University | Non-exclusive license for  | Sublicense to make,    |  2005           |
|  Biotech Corporation)    |                   | using gp160 to detect HIV  | have made, use and     |                 |
|                          |                   | infection                  | sell products that     |                 |
|                          |                   |                            | relate to the licensed |                 |
|                          |                   |                            | technology             |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|URINE WESTERN BLOT        |                   |                            |                        |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|  NYU                     |NYU                |Exclusive license for       |Right to make, use,     | 2009            |
|                          |                   |using urine in place of     |sell and sublicense     |                 |
|                          |                   |blood as a specimen sample  |products utilizing the  |                 |
|                          |                   |for detecting HIV           |technology described    |                 |
|                          |                   |                            |in the patent           |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|  NIH                     |Pasteur Institute  |HIV 1 virus                 |                        | 2112            |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|SERUM WESTERN BLOT        |                   |                            |                        |                 |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
|  NIH                     |Pasteur Institute  |HIV 1 virus                 |                        | 2112            |
+--------------------------+-------------------+----------------------------+------------------------+-----------------+
</TABLE>

As we pursue  the  development  of our rapid HIV  tests,  we will need to obtain
licenses or other rights under,  or enter into  distribution  or other  business
arrangements in connection with, certain patents for HIV-2,  peptides,  analytes
and lateral  flow  technology,  in order to  manufacture  and sell our rapid HIV
tests.  See the Section  entitles,  "Risk  Factors" for a further  discussion of
these  issues.  To obtain these  licenses,  we will have to pay upfront fees and
ongoing royalties.

We have filed patent  applications in the United States,  China and Russia for a
"Rapid Test For Antibodies  Against HIV In Urine." These applications are in the
early stages of prosecution but establish a priority date for our invention.

Although important,  the issuance of a patent or existence of trademark or trade
secret  protection  does not in  itself  ensure  the  success  of our  business.
Competitors may be able to produce products competing with our patented products
without  infringing  our  patent  rights.  Issuance  of a patent in one  country
generally does not prevent


                                       13
<PAGE>


manufacture or sale of the patented product in other countries.  The issuance of
a patent is not conclusive as to validity or as to the enforceable  scope of the
patent.  The  validity  or  enforceability  of a  patent  can be  challenged  by
litigation  after its issuance.  If the outcome of such litigation is adverse to
the owner of the patent,  the owner's  rights could be  diminished or withdrawn.
Trade secret protection does not prevent independent  discovery and exploitation
of the secret product or technique.

We are not aware of any pending claims of  infringement  or other  challenges to
our patents or our rights to use our  trademarks  or trade secrets in the United
States or in other countries.

We require our employees, consultants, outside collaborators, and other advisors
to execute  confidentiality  agreements  upon the  commencement of employment or
consulting relationships with us. These agreements provide that all confidential
information  developed by or made known to the  individual  during the course of
the  individual's  relationship  with  us is to be  kept  confidential  and  not
disclosed  to third  parties  except in specific  circumstances.  In the case of
employees,   the  agreements  provide  that  all  inventions  conceived  by  the
individual during his or her tenure with us will be our exclusive property.

GOVERNMENT REGULATION

Overview

Our  products  are subject to  extensive  regulation  by the FDA and, to varying
degrees, by state and foreign regulatory agencies. Our products are regulated by
the FDA under the Federal Food,  Drug, and Cosmetic Act (the "Act"),  as amended
by the Medical Device  Amendments of 1976, the Safe Medical Devices Act of 1990,
the  FDA  Modernization  Act of  1997,  and the  Medical  Devices  User  Fee and
Modernization  Act ("MDUFMA") among other laws. Under the Act, the FDA regulates
the pre-clinical and clinical testing,  manufacturing,  labeling,  distribution,
sale and promotion of medical devices in the United States. Beginning in October
2002,  MDUFMA  requires  companies  to pay  substantial  user  fees for many FDA
applications for new product approvals and for some product  modifications.  The
FDA  prohibits  a  device,  whether  or not  cleared  under a 510(k)  pre-market
notification,  or approved  under a pre-market  approval  ("PMA") or a biologics
license  application,  from  being  marketed  for  unapproved  uses.  If the FDA
believes  that a  company  is not in  compliance  with the  regulations,  it can
institute  proceedings  to detain or seize a product,  issue a recall,  prohibit
marketing  and sales of the  company's  products  and assess  civil and criminal
penalties against the company, its officers or its employees.

We plan to sell our  products in certain  foreign  countries  which impose local
regulatory requirements. The preparation of required applications and subsequent
FDA and  foreign  regulatory  approval  processes  are  expensive,  lengthy  and
uncertain.  Failure to comply with FDA and foreign regulatory requirements could
result in civil monetary  penalties or criminal  sanctions,  restrictions  on or
injunctions  against marketing of our products.  Additional  enforcement actions
may potentially include seizure or recall of our products,  and other regulatory
actions.  There can be no  assurance  that we will be able to  obtain  necessary
regulatory  approvals or  clearances in a timely manner or at all, and delays in
receipt of or  failure to receive  such  approvals  or  clearances,  the loss of
previously received approvals or clearances,  or failure to comply with existing
or future  regulatory  requirements  would have a material adverse effect on our
business, financial condition and results of operations.

HIV-1 Screening and Supplemental Tests

Our ELISA tests are  regulated by the FDA Center for  Biologics  Evaluation  and
Research.  When our EIA  screening  test was  submitted  to the FDA in September
1992,  the  FDA  required  a  product   license   application   ("PLA")  and  an
establishment  licensing  application  ("ELA")  for  our  Berkeley,   California
manufacturing  facility.  In August 1996,  we received a product  license and an
establishment  license from the FDA to  manufacture  and sell, in interstate and
foreign commerce, our EIA screening test for use in laboratory settings.

In December 1998, when we acquired the assets relating to the Cambridge  Biotech
Western  Blot tests for HIV-1,  Cambridge  Biotech had a product  license and an
establishment  license from the FDA for both the urine and  serum-based  Western
Blot tests. In March 1999, the licenses were transferred from Cambridge  Biotech
to us and replaced with a Biologics  License  ("BL").  In January 2001,  our EIA
screening  test was  transferred  from the biologics  license to an approved PMA
license  as a Class III  medical  device  concurrent  with the  approval  of our


                                       14
<PAGE>


Alameda, California manufacturing facility. In June 2001, our urine Western Blot
test, manufactured in our Rockville, Maryland facility, was transferred from the
biologics license to an approved PMA license as a Class III medical device.

In December 2002, we received FDA approval to eliminate the lot release  testing
requirement  for our EIA test.  In February  2003,  we received FDA approval for
elimination of lot release testing for our urine Western Blot test.

Clinical Laboratory

We have  not  established  nor do we  plan to  establish  a  clinical  reference
laboratory. Our customers depend upon the services and facilities of independent
clinical reference laboratories to process our ELISA tests.

Manufacturing Facilities

The FDA requires our products to be  manufactured in compliance with its Quality
System/Good  Manufacturing  Practices ("GMP") regulations.  In addition,  we are
subject to certain additional manufacturing  regulations imposed by the State of
California for our Alameda  facility and the State of Maryland for our Rockville
facility.  These  regulations  require  that we  manufacture  our  products  and
maintain  related   documentation  for  testing  and  control  activities.   Our
facilities and manufacturing  processes have been periodically  inspected by the
FDA and other agencies and remain subject to audit from time to time. We believe
that we are in  substantial  compliance  with all  applicable  federal and state
regulations.  Nevertheless,  there can be no  assurance  that our  manufacturing
facilities  will  satisfy  FDA, GMP or  California  and  Maryland  manufacturing
requirements.  Enforcement of the GMP regulations has increased significantly in
the last several years,  and the FDA has publicly stated that compliance will be
more  strictly  enforced.  In the  event the FDA  determines  that we are not in
compliance  with its  regulations  and,  to the  extent  that we are  unable  to
convince  the FDA of the  adequacy of our  compliance,  the FDA has the power to
assert  penalties,  including  injunctions  or temporary  suspension of shipment
until compliance is achieved. In addition,  the FDA will not approve a biologics
license  or PMA if the  facility  is  found in  noncompliance  with  GMPs.  Such
penalties  could  have a  material  adverse  effect on our  business,  financial
condition and results of operations.

We are also  subject  to  regulation  by  other  federal  entities,  such as the
Occupational Safety and Health Agency, the Environmental  Protection Agency, and
by various state  agencies,  including the California  Environmental  Protection
Agency. Federal and state regulations regarding the manufacture,  sale or use of
our  products  are  subject to future  change,  and these  changes  could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

Product Liability and Recall Risk; Limited Insurance  Coverage.  The manufacture
and  sale of  medical  diagnostic  products  subjects  us to  risks  of  product
liability claims or product recalls, particularly in the event of false positive
or false negative  reports.  A product recall or a successful  product liability
claim or claims that exceed our insurance coverage could have a material adverse
effect on us. We maintain a $10,000,000  claims made policy of product liability
insurance  against which no claims have been made.  However,  product  liability
insurance is expensive.  In the future, we may not be able to obtain coverage on
acceptable terms, if at all. Moreover, our insurance coverage may not adequately
protect us from  liability that we incur in connection  with clinical  trials or
sales of our products.

International

Our   Alameda,   California   manufacturing   site  was  awarded   International
Organization for Standardization  ("ISO") 9001/EN 46001/ ISO 13485 certification
on March 14,  2001 and we expect  this  approval  to remain in effect  until the
facility is closed as part of our  consolidation of manufacturing  operations in
Rockville. Our Rockville, Maryland manufacturing site underwent an assessment in
December  2003  for  ISO   certification.   We  believe  we  will  receive  such
certification shortly.

Distribution of our products  outside the United States is subject to regulatory
requirements  that vary from  country to  country.  Our  export  from the United
States of certain  of  products  that have not yet been  approved  for  domestic
commercial  distribution  is subject to FDA export  restrictions.  The  European
Union ("EU") requires a CE mark as well as ISO 9001 certification to qualify for
sale in the EU.  We have no  immediate  plans to seek


                                       15
<PAGE>


such qualification.  In a number of foreign countries,  FDA approval is required
prior to  approval in that  country to avoid  additional  in-country  regulatory
processes.  Other  countries  require  approval in the country of manufacture to
avoid the in-country  regulatory  processes.  Still other  countries look to the
results of WHO evaluations for guidance.

WHO serves as both a  quasi-regulatory  body and a potential  funding source for
many  developing  countries  that might not  otherwise  possess  the  regulatory
infrastructure  or financial  resources to avail  themselves of products for the
diagnosis and treatment of HIV and AIDS. We believe that a strong performance of
our proposed rapid urine tests in a WHO evaluation  would be an equally,  if not
more,  effective  demonstration  of the  viability  of  urine  testing  for  HIV
antibodies than the evaluation we earlier  contemplated  for our ELISA tests. We
have been advised by WHO that its bulk procurement program for HIV tests focuses
on  diagnostic  and blood  donation  screening  tests  capable of detecting  the
presence  of both  HIV-1  and  HIV-2  antibodies.  Although  WHO has  previously
reported  the results of its Phase 1 trials of our current EIA and Western  Blot
tests on its  website,  WHO has advised us that,  in  principle,  it views those
tests as suitable only for surveillance  purposes and therefore not eligible for
WHO's bulk procurement  program.  We anticipate that certain countries will look
to the results of WHO  evaluations  for guidance on the potential  uses of urine
tests and for this  reason we intend to  continue to work with WHO. In our view,
the  attributes of our planned rapid tests for HIV-1 and HIV-2 in both urine and
whole blood  samples more closely match the needs of the  developing  world and,
once evaluated by WHO, are more likely to meet its bulk procurement  eligibility
criteria.  For  these  reasons,  we  may  request  WHO  either  to  put  further
evaluations of our ELISA tests on hold or to drop them entirely in order to help
WHO focus its limited  resources on evaluation of the  technology to be employed
by the rapid tests.

We  have   obtained   regulatory   approval  for  our  ELISA  tests  in  certain
international  markets including  Malaysia,  China,  Indonesia,  the Republic of
South  Africa,  Kenya and  Uganda.  These  approvals  validate  the use of urine
testing in the  diagnosis of HIV. We believe that the two largest  international
markets  for our urine  ELISA  tests are (1) China,  where our ELISA  tests have
already been granted approval as a medical device and where we are attempting to
achieve  expanded  access to governmental  testing  applications by obtaining an
additional  Biologics Branch approval,  and (2) Russia, where we are considering
expansion.  Although  we have  obtained  approval  for our urine  ELISA tests in
certain African  countries and are engaged in the approval process in others, we
have  determined  that most  hospitals  and voluntary  testing  centers in these
countries,  due to their limited  infrastructure,  can best utilize our proposed
HIV urine rapid test. Even though many hospitals, clinics or testing centers may
recognize the advantages of and prefer urine testing, there is negligible demand
for  our  current  urine  ELISA  tests  as they  would  prefer  to wait  for the
availability  of our announced  rapid test products  than  implement  procedures
applicable to the current lab-based urine testing alternative.

Since we are still in the development stage for our rapid test products, we have
not begun the  regulatory  process  for those  tests in any  target  market.  We
believe that the  regulatory  processes in certain  foreign  countries  having a
greater  prevalence  of HIV will be  faster,  which  should  result in a quicker
timeframe   for  approval  and  right  to  bring  our  rapid  tests  to  market.
Consequently,  we plan to focus our efforts on obtaining approvals for our rapid
tests in those  countries.  We  expect  that our  initial  focus  for  obtaining
approval of our rapid tests will be in Africa and the key "next wave"  countries
of China,  Russia and,  subsequently,  India.  We anticipate  that there will be
distinct approval  processes for the professional  market  (hospitals,  clinics,
testing centers and government  testing  applications) and the  over-the-counter
market.   The   over-the-counter   approval   process  may  include   additional
requirements relating to self-testing with the rapid test. In China,  regulatory
approval for a product is granted only for  products  manufactured  in China and
only  to the  Chinese  manufacturer  of such  product.  As a  result,  for us to
maintain  control of our products in China,  we plan to manufacture our products
in China through our Beijing Calypte Joint Venture.  Failure to obtain necessary
regulatory approvals for our rapid tests would have a material adverse effect on
our business, financial condition and results of operations.

COMPETITION

Competition  in the  market  for HIV  testing  is  intense  and is  expected  to
increase.  We believe that the  principal  competition  will come from  existing
laboratory-based blood tests,  point-of-care rapid blood tests, oral fluid-based
tests,  or  other  laboratory-based  urine  assays  that may be  developed.  Our
competitors  include  specialized  biotechnology firms as well as pharmaceutical
companies with biotechnology divisions and medical diagnostic


                                       16
<PAGE>


companies,  many of which are substantially  larger and have greater  financial,
research, manufacturing, and marketing resources.

Important  competitive factors for our products include product quality,  price,
ease of use, customer service, and reputation.  Industry competition is based on
the following:

     o   Scientific and technological capability;
     o   Proprietary know-how;
     o   The ability to develop and market products and processes;
     o   The ability to obtain FDA or other regulatory approvals;
     o   The  ability  to   manufacture   products  that  meet   applicable  FDA
         requirements (i.e., good manufacturing practices);
     o   Access to adequate capital;
     o   The  ability  to  attract  and retain  qualified  personnel;  and
     o   The availability of patent protection.

We expect competition to intensify as technological advances are made and become
more  widely  known,  and as new  products  reach the market.  Furthermore,  new
testing  methodologies could be developed in the future that render our products
impractical,  uneconomical  or  obsolete.  There  can be no  assurance  that our
competitors  will not  succeed  in  developing  or  marketing  technologies  and
products that are more  effective than those we develop or that would render our
technologies and products obsolete or otherwise  commercially  unattractive.  In
addition,  there can be no assurance  that our  competitors  will not succeed in
obtaining regulatory approval for these products,  or introduce or commercialize
them  before we can do so.  These  developments  could have a  material  adverse
effect on our business, financial condition and results of operations.

Significant  competitors  for our current and  developmental  stage HIV antibody
tests are Abbott  Laboratories,  bioMerieux,  the Ortho Diagnostics  division of
Johnson & Johnson and Bio-Rad  Laboratories,  which sell blood-based  HIV-1 EIAs
and Orasure Technologies,  Inc., which sells FDA-approved HIV tests including an
oral fluid-based  laboratory test, a blood-based  rapid HIV-1 and HIV-2 test and
an oral fluid-based rapid HIV-1 test.  MedMira and Trinity Biotech each recently
received FDA approval to sell rapid HIV-1 blood tests in the United  States.  We
believe other  companies may seek FDA approval to sell competing rapid HIV tests
in the future.

Several  companies market or have announced plans to market  blood-based or oral
fluid-based  HIV rapid  tests in the  United  States and  abroad.  We expect the
number of blood-based and oral  fluid-based HIV rapid tests to increase as these
tests become more widely accepted.  We are not aware of any companies  marketing
or planning to market  competing  urine-based HIV rapid tests,  although,  Murex
Corporation,  owned by  Abbott  Laboratories,  has  previously  announced  urine
capability for an HIV test.

Outside of the United States,  where  regulatory  requirements for HIV screening
tests are sometimes less  demanding,  a much wider range of  competitors  may be
found. Manufacturers from Japan, Canada, Europe, and Australia offer a number of
HIV screening  tests in those  markets  including  HIV-1 and HIV-2 tests,  rapid
tests and other  non-EIA  format  tests.  There  can be no  assurances  that our
products will compete  effectively against these products in foreign markets, or
that these competing products will not achieve FDA approval.


EMPLOYEES

As of December  31, 2003,  we had an  aggregate  of 70 full time,  part time and
temporary  employees,  11 of whom were  engaged  in or  directly  supported  our
research  and  development  activities,   47  of  whom  were  in  manufacturing,
manufacturing  support and quality assurance,  two of whom were in marketing and
sales and ten of whom were in administration.  Our employees are not represented
by a union or collective  bargaining  entity.  We believe our relations with our
employees are good.


                                       17
<PAGE>


WHERE TO GET MORE INFORMATION

Our Website  address is  http://www.calypte.com.  We file annual,  quarterly and
special reports,  proxy statements and other information with the Securities and
Exchange Commission ("SEC").  These reports are available on our website free of
charge as soon as reasonably  practicable  after such material is electronically
filed with, or furnished to, the SEC.

RISK FACTORS

See Item 6,  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations."


ITEM 2. PROPERTIES

We lease approximately 20,000 square feet of office,  research and manufacturing
space in Alameda, California under a lease that expires in June 2004. We are not
renewing  this lease.  We plan to vacate this space by June 30, 2004 and lease a
smaller  amount  of  office  space in the San  Francisco  bay area to house  our
corporate headquarters.

We also lease two manufacturing  sites in Rockville,  Maryland,  a 26,000 square
foot manufacturing,  research and office site and a 3,000 square foot site which
houses our BSL-3 virus  laboratory.  Our lease on the virus lab site  expires in
October 2006 and our lease on the larger site expires in February 2009.

We believe  that the  facilities  described  above are  adequate for our current
requirements. We are currently evaluating our requirements for our developmental
stage rapid test products.


ITEM 3. LEGAL PROCEEDINGS

On January 27, 2003, an action was filed in San Francisco  County Superior Court
against  us by Heller  Ehrman  White &  McAuliffe,  LLP  ("Heller"),  our former
attorneys.  On April 30,  2003,  we reached a settlement  agreement  with Heller
whereby we agreed to pay a total of $463,000  to settle this claim,  after which
Heller would dismiss the suit. As a part of the settlement, we waived all of our
defenses to Heller's claims, as well as our counterclaims,  should we default on
this payment plan. We made the final required payment to Heller in February 2004
and Heller filed a request for dismissal of the suit with prejudice.

On January 24, 2003, we were informed that one of our former vendors, Validation
Systems,  Inc.  ("Validation"),  had  commenced  an action in Santa Clara County
Superior  Court on an open  book  account  in the  amount of  $79,614,  incurred
between  April  1999 and July  2002 and  which we  accrued,  concurrently,  plus
$20,156 in interest, at the rate of 10% per annum until payment,  wherein it has
claimed  that it  rendered  services  related to the  validation  of  biomedical
equipment and processes at our  facilities.  We have  contested the claim as the
alleged  services  claimed by Validation  were not performed in a timely fashion
and were, thus, unusable. On September 9, 2003 the Court dismissed  Validation's
lawsuit  against us due to the  failure of  Validation's  counsel to appear at a
mediation  status review and to respond to an order to show cause  regarding the
failure to appear.  Validation  has filed a motion to vacate this  dismissal  on
grounds of  inadvertence,  mistake,  surprise and excusable  neglect.  The Court
vacated the dismissal and  reinstated  the case at a hearing on December 2, 2003
in return for  Validation's  payment of fees incurred by us in  connection  with
Validation's  failure to appear.  Additonally,  the Court ordered the parties to
mediation.  The parties  are in the  process of  scheduling  the  mediation.  We
believe that we have meritorious defenses to the action.

On May 22, 2003, we were informed that a former vendor, Professional Maintenance
Management  LLC ("PMM"),  had  instituted an action against us in the Montgomery
County  Circuit  Court of  Maryland  for the sum of $64,925  plus  post-judgment
interest.  We agreed to resolve  the matter by making an initial  payment in the
amount of $10,000 and subsequent monthly payments in the amount of $7,500 toward
the  outstanding  amount  claimed  by PMM.  All  payments  have  been  made  and
plaintiff's counsel has filed a dismissal of the action with the Court.


                                       18
<PAGE>


In  September  of 2003,  we were  served a lawsuit  filed in the  United  States
District  Court for the Northern  District of California  by three  individuals,
Michael Serro,  Michael Caland and Assad Ali Assad,  seeking shares of our stock
to which they claim they are entitled based on consulting services they claim to
have provided  pursuant to consulting  agreements  they had with us. We disputed
the  liability and contended  that these three  individuals  did not provide the
consulting  services to us upon which their claims are based.  A Stipulation  of
Dismissal  was  filed  with the  Court in  February  2004 and the  matter is now
closed.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were  submitted to a vote of our security  holders  during the fourth
quarter of 2003.


                                       19
<PAGE>


                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
         MATTERS


STOCK SPLIT

Our Common Stock  commenced  trading on the Nasdaq  SmallCap  Market on July 26,
1996, the time of our Initial  Public  Offering,  under the symbol  "CALY".  Our
Company's  stock was removed from listing on the Nasdaq Small Cap Market on July
13, 2001 as a result of our  failure to meet the  market's  listing  maintenance
requirements.  Beginning  on July 13,  2001 and  until May 28,  2003,  our stock
traded on the Over the Counter  Bulletin Board under the symbol  "CALY".  On May
20, 2003,  our  shareholders  approved a 1:30 reverse stock split,  which became
effective on May 28, 2003.  Since May 28, 2003, our stock has traded on the Over
the Counter  Bulletin Board under the symbol "CYPT".  At the time of the reverse
split, the stated par value of our common stock was changed to $0.03 from $0.001
per share.  The number of our authorized  shares of common stock remained at 800
million.  High and low sales  prices  reported by the Over the Counter  Bulletin
Board during the periods  indicated are shown below.  All share prices have been
restated to reflect the reverse stock split.

<TABLE>
<CAPTION>
FISCAL YEAR  (REFLECTS STOCK SPLIT)                                        QUARTER       HIGH       LOW
------------------------------------------------------------------------  ----------   --------   --------
<C>                                                                       <C>         <C>         <C>
2003                                                                             4th   $   1.74   $  0.44
2003                                                                             3rd       1.80      0.11
2003                                                                             2nd       1.05      0.25
2003                                                                             1st       3.45      0.75
2002                                                                             4th       4.80      1.50
2002                                                                             3rd      12.90      2.40
2002                                                                             2nd       8.70      0.30
2002                                                                             1st       8.10      5.10

</TABLE>

On March 22, 2004, there were  approximately 200 holders of record of our common
stock,  and the closing price of our common stock was $0.52.  We have never paid
any cash dividends,  and our Board of Directors does not anticipate  paying cash
dividends in the foreseeable  future. We intend to retain any future earnings to
provide funds for the operation and expansion of our business.

SALES OF COMMON STOCK

Private Placements of Common Stock

On January 22, 2001, the Company signed an agreement to place up to $1.1 million
in convertible short-term debentures. Under this arrangement, the Company issued
two convertible  debentures to the debenture  holders in the principal amount of
$550,000,  pursuant to Regulation S of the Securities Act. Each debenture had an
interest rate of 6% and was issued at an original  issue  discount of 9.1%.  The
Company  issued the first  debenture on January 26, 2001 and the second on March
13, 2001. Each debenture matured 90 days from the date of issuance,  or on April
26, 2001 and June 11, 2001, respectively. Under the terms of the debentures, the
debenture  holder  could  elect at any time prior to  maturity  to  convert  the
balance  outstanding on the debentures into shares of the Company's common stock
at a fixed price that  represented a 5% discount to the average trading price of
the shares for the 10 trading days preceding the issuance of each debenture.  If
the Company chose not to redeem the debentures upon maturity,  as in the case of
the second debenture,  the conversion discount to the debenture holder increased
to 15% of the average low bid price for the Company's common stock for any three
of the 22 trading  days  prior to the date of  conversion.  Concurrent  with the
issuance  of the first  debenture,  the  Company  also  issued a warrant  to the
debenture  holder for 6,667 shares of common stock at an exercise  price of $45.
The shares  underlying the debentures and warrant were  registered  using a Form
S-3 Registration Statement. The Company received aggregate net proceeds from the
issuance of the two debentures of $925,000 during the first quarter of 2001.


                                       20
<PAGE>


On January 24, 2001, the Company amended a common stock purchase  agreement with
a private investment fund for the issuance and purchase of its common stock. The
initial  closing of the  transaction  took place on November 2, 2000.  The stock
purchase agreement established what is sometimes termed an equity line of credit
or an equity  draw down  facility.  The  facility  generally  operated  with the
investor  committed to purchase up to $25 million or up to 20% of the  Company's
outstanding shares of common stock over a twelve-month  period. Once during each
draw down pricing period, the Company could request a draw, subject to a formula
based on the Company's  average stock price and average  trading  volume setting
the maximum  amount of the request for any given draw.  The amount of money that
the investor provided to the Company and the number of shares the Company issued
to the  investor  in return for that money was  settled  during a 22 day trading
period  following  the draw  down  request  based on the  formula  in the  stock
purchase agreement.  The investor received a 5% discount to the market price for
the 22 day period and the Company  received the settled amount of the draw down.
By June 30, 2001, the Company had issued 169,500 shares of its common stock, the
total number  registered  for the equity line with the  Securities  and Exchange
Commission,  at an  average  price of  $12.60  per share  and had  received  net
proceeds  of   approximately   $2,014,000   after  deducting   expenses  of  the
transaction.  There are no further  funds  available  to the Company  under this
equity line.

In August 2001,  the Company and the same private  investment  fund mentioned in
the preceding  paragraph signed a common stock purchase agreement for the future
issuance and purchase of up to $10 million of the Company's  common stock over a
twenty-four  month period.  The initial closing of the  transaction  occurred in
October 2001. Under this arrangement, the Company, at its sole discretion, could
draw down on this facility,  sometimes termed an equity line, from time to time,
and the investment fund was obligated to purchase shares of the Company's common
stock.  The purchase  price of the common stock  purchased  pursuant to any draw
down  was  equal  to 88% of the  daily  volume  weighted  average  price  of the
Company's  common stock on the applicable  date. In conjunction with the signing
of the stock  purchase  agreement,  in October 2001, the Company issued a 7-year
fully-vested  warrant to the investment fund to purchase up to 139,742 shares of
common  stock at an  exercise  price of $8.23 per share and 3,833  shares of its
common stock as additional fees to the investment fund. The private placement of
the related warrants was exempt from registration pursuant to Regulation S. From
the time the  Registration  statement  became effective in November 2001 through
the  expiration of the facility in October 2003,  the Company  issued a total of
855,776  shares of its common  stock at an average  price of $3.93 per share and
received proceeds of approximately  $3.2 million after deducting expenses of the
transactions.  At the time the facility expired,  633 registered shares remained
available for sale under this facility.

In  November  2001,  the  Company  sold  52,528  shares  of common  stock  under
Regulation D of the  Securities  Act of 1933 ("the  Securities  Act") to various
investors in a private  placement at $5.70 per share,  receiving net proceeds of
$295,000. The private placement did not include registration rights.  Therefore,
pursuant to Rule 144 of the  Securities  Act,  the  transfer  of the  securities
purchased by the  investors  was  restricted  for twelve months from the date of
purchase. Three former members of the Company's Board of Directors,  Nancy Katz,
Mark Novitch and David Collins,  purchased an aggregate of 24,038 shares of this
offering.  The proceeds of this offering were used to fund the Company's current
operations.  The purchase  transactions by the Company's Board members were on a
fair and reasonable  basis and on terms more favorable to the Company than could
have been  obtained  with  non-affiliated  parties  as a result  of the  tenuous
financial condition of the Company at the time.


                                       21
<PAGE>


Subsequently,  beginning in 2002, the Company  negotiated several new financings
from which, through March 22, 2004, it has raised approximately $21.6 million in
gross  proceeds.  The  following  table  summarizes  these  financings  by major
category and the subsequent table provides the details of these financings.

            SUMMARY OF FINANCINGS - JANUARY 1, 2002 TO MARCH 22, 2004

<TABLE>
<CAPTION>
                                                                 TOTAL
                                              GROSS     NET      SHARES      RESTRICTED
        FINANCING SOURCE                    PROCEEDS  PROCEEDS  ISSUED (1)   SHARES (2)
                                            -------   --------  ----------   ----------
<S>                                         <C>       <C>       <C>          <C>
        Bristol 12% Convertible             $   562   $    505     1,476.1          --
           Debentures and Warrants
        8% Convertible Notes                  3,232      2,594    46,084.3     3,492.6
        Other Restart Financings                750        730     2,720.3      1051.3
        Mercator 12% and 10% Debentures       4,550      3,650    34,153.4    11,643.8
        Marr Private Placements              12,500     11,900    28,333.3    28,333.3
                                            -------   --------   ---------    --------
                                            $21,594   $ 19,379   112,767.4    44,521.0
                                            =======   ========   =========    ========
</TABLE>

     (1) At March 22, 2004,  the holders have  converted  all but  approximately
         $958,000 of principal of the  convertible  notes and debentures  issued
         since February 2002. Based on current market prices,  the Company would
         be required to issue approximately 2.5 to 3.0 million additional shares
         of its common  stock if the holders  elected to convert  the  remaining
         principal and accrued interest of their debentures at this time.

     (2) Based upon  ownership  information  supplied by the Company's  transfer
         agent as of March 11, 2004. Certain of these shares may be eligible for
         resale  under Rule 144 now or at  various  times in the  future.  As of
         March 22, 2004,  approximately 34% of the Company's outstanding shares,
         or approximately 47.1 million shares,  were restricted.  In addition to
         the amounts  summarized here,  certain  vendors,  consultants and other
         parties who have agreed to accept our common stock in lieu of cash hold
         an additional 2.6 million restricted shares.


                                       22
<PAGE>


            DETAIL OF FINANCINGS - JANUARY 1, 2002 TO MARCH 22, 2004

<TABLE>
<CAPTION>
                                                                                             CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS         NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS     PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------     --------        ----          -----       ---------------
<S>                                 <C>            <C>          <C>          <C>             <C>          <C>
12% CONVERTIBLE DEBENTURE AND          Lesser of      $425                      2/11/02       $7.50       1,019.4/ $525
WARRANTS                              (i) 60% of       100                      5/10/02       $0.90
Bristol Investment Fund, Ltd.        the average      ----
                                     of 3 lowest      $525         $468
                                     closing bid
                                      prices for
                                         22 days
                                       preceding
                                      conversion
                                    or (ii)$1.50



Class A Warrant                        Lesser of        $4           $4         2/11/02       $7.50          56.7/ N/A
                                      (i) 70% of
                                     the average
                                     of lowest 3
                                         trading
                                      prices for
                                         20 days
                                       preceding
                                      conversion
                                    or (ii)$3.45

Class B Warrant                        Lesser of      $ 33          $33         2/11/02       $ 7.50         400/ N/A
                                      (i) 70% of                                                             --------
                                     the average
                                     of lowest 3
                                         trading
                                     pricing for
                                         20 days
                                       preceding
                                      conversion
                                         or (ii)
                                          $6.45.

     Total Bristol                                    $562         $505                                   1,476.1/$525
                                                      ====         ====                                   ============
</TABLE>


                                       23
<PAGE>


<TABLE>
<CAPTION>
                                                                                             CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS         NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS     PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------     --------        ----          -----       ---------------
<S>                                 <C>            <C>          <C>          <C>             <C>          <C>
8% CONVERTIBLE NOTES                  Lesser of
Alpha Capital Aktiengesellshaft    (i) $3.00 or       $500                     5/24/02       $ 3.60          7,260.7/$500
Stonestreet Limited Partnership     (ii) 70% of       $500                     5/24/02       $ 3.60          7,075.7/$500
Filter International Ltd.        the average of       $150                     5/24/02       $ 3.60          2,452.4/$150
Camden International Ltd.          the 3 lowest       $350                     5/24/02       $ 3.60          5,279.1/$350
Domino International Ltd.         trades for 30       $150                     5/24/02       $ 3.60          1,767.4/$150
Thunderbird Global Corporation             days       $ 75                     5/24/02       $ 3.60           1,083.1/$75
BNC Bach International Ltd.           preceding       $200                     5/24/02       $ 3.60          2,463.8/$200
Excalibur Limited Partnership        conversion       $200                     5/24/02       $ 3.60          1,678.9/$200
Standard Resources Ltd.                               $100                     5/24/02       $ 3.60          1,542.5/$150
SDS Capital International Ltd.                        $300                     7/10/02       $10.20          4,189.8/$300
Camden International Ltd.                             $100                     7/10/02       $10.20          1,707.9/$100
Excalibur Limited Partnership                         $250                     7/24/02       $ 6.60          4,238.3/$250
Stonestreet Limited Partnership                       $250                     8/21/02       $ 3.90          4,042.2/$250
Alpha Capital Aktiengesellshaft                       $107                      5/9/03       $ 0.63          1,302.5/$107
                                                      ----                                                  -------------
                                                                                                         46,084.3/ $3,232
   Total 8% Convertible Notes                       $3,232        $2,594                                 ================
                                                    ======        ======

OTHER RESTART FINANCINGS:

10% CONVERTIBLE NOTE
BNC Bach International Ltd.          50% of the      $ 150         $ 150       5/14/02        $4.20          2,217.8/$150
   (Note: on 7/14/02 the           average of 3                                           $10.80 on
   maturity date was extended            lowest                                            7/14/02;
   until 12/31/02; on December      closing bid                                            $1.92 on
   27, 2002, the maturity date       prices for                                           12/27/02;
   was extended until January           22 days                                            $1.80 on
   15, 2003; on January 15,           preceding                                            1/15/03;
   2003 the maturity date was        conversion                                            $1.50 on
   extended until March 17,                                                                3/17/03;
   2003, on March 17, 2003 the                                                             $0.99 on
   maturity date was extended                                                                4/2/03
   until April 4, 2003; on                                                                 $0.75 on
   April 2, 2003, the maturity                                                              4/30/03
   date was  extended until May
   5, 2003; on April 30, 2003,
   the maturity date was
   subsequently extended until
   May 10, 2004)(5)

8% CONVERTIBLE DEBENTURES
Su So                                80% of the      $ 100          $ 90       6/17/02         $4.20        36.7 (4)/$100
                                   lower of the
                                        average
                                 closing bid or
                                trade price for
                                     the 5 days
                                      preceding
                                    conversion,
                                   but not less
                                     than $3.00
</TABLE>


                                       24
<PAGE>


<TABLE>
<CAPTION>
                                                                                             CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS         NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS     PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------     --------        ----          -----       ---------------
<S>                                 <C>            <C>          <C>          <C>             <C>          <C>
Jason Arasheben                     70% of the       $ 100          $ 90        7/03/02         $8.10        15.8 (4)/$100
                                  lower of the
                                       average
                                   closing bid
                                      or trade
                                     price for
                                    the 5 days
                                     preceding
                                   conversion,
                                  but not less
                                    than $3.00

PIPE AT $1.50 PER SHARE
Careen Ltd.                          $1.50 per       $ 200         $ 200      8/28/02          $ 4.80            225.0/N/A
Caledonia Corporate Group                Share       $ 200         $ 200      8/28/02          $ 4.80            225.0/N/A
                                                     -----         -----                                         ---------
    Limited

    Total Other Restart
      Financings                                     $ 750         $ 730                                       2,720.3/$350
                                                     =====         =====                                       ============


      Mercator 12% and 10%
Debentures

12% CONVERTIBLE DEBENTURES
Mercator Momentum Fund, L.P.         85% of the      $ 550      $345 (6)         9/12/02        $3.00          4,866.1 (4)/
($2,000 total commitment)            average of                                                                       $550
                                   the 3 lowest
Mercator assigned its rights to:        trading
   Alpha Capital AG                  prices for        250           250         7/24/03       $0.115          2,673.8/$250
   Gamma Opportunity Capital             the 20        250           250         7/24/03       $0.115          2,685.6/$250
     Partners, LP                  trading days
   Goldplate Investment Partners      preceding        250           250         7/24/03       $0.115          2,673.8/$250
   Marr Technologies, B.V. (11)      conversion        570           570          9/1/03       $0.820          5,181.8/$570
                                            (8)     ------        ------
                                                     1,870         1,665
   Dr. Khalid Ahmed                                     50            50         10/2/03       $1.310             84.6/$50
   Roger Suyama                                         20            20         10/2/03       $1.310             33.8/$20
   Logisticorp, Inc.                                    20            20    10/2/03 (12)       $1.310                    -
   Southwest Resource                                   40            40    10/2/03 (12)       $1.310                    -
                                                    ------        ------                                   ---------------
     Preservation Inc.                              $2,000        $1,795                                   18,199.5/$1,940
                                                    ------        ------                                   ---------------

Mercator Momentum Fund, L.P.         80% of the       $300          $260       10/22/02         $3.90         0/$300 (7)
                                     average of
                                   the 3 lowest
                                        trading
                                     prices for
                                         the 20
                                   trading days
                                      preceding
                                    conversion,
                                   but not less
                                     than $1.50
</TABLE>


                                       25
<PAGE>


<TABLE>
<CAPTION>
                                                                                             CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS         NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS     PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------     --------        ----          -----       ---------------
<S>                                 <C>            <C>          <C>          <C>             <C>          <C>
Mercator Momentum Fund L.P. (10)      70% of the      $300          $245        4/29/03        $0.825       3,455.5/ $294
                                      average of
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $1.20

Mercator warrant                       $3.00 per        $0            $0       10/22/02         $3.90                   0
                                          share
10% CONVERTIBLE DEBENTURES
Mercator Focus Fund, L.P. (10)        80% of the    $1,000          $510        1/14/03         $1.92       5,831.8/ $422
                                      average of                     (6)
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $3.00

Mercator   Momentum  Fund,   L.P.     80% of the      $450          $440        1/30/03         $1.86       2,592.6/ $358
(10)                                  average of
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $3.00
Mercator Focus Fund, L.P. (10)                        $400                      3/13/03         $1.47       2,437.7/ $178
Mercator Momentum Fund III, L.P.      65% of the       100                                                  1,636.3/ $100
                                      average of    ------                                                  -------------
                                    the 3 lowest      $500          $400
                                         trading    ------         -----
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $2.10
   Total Mercator Debentures                        $4,550        $3,650                                   34,153.4/ $3,592
                                                    ======        ======                                   ================
</TABLE>


                                       26
<PAGE>


<TABLE>
<CAPTION>
                                                                                             CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS         NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS     PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------     --------        ----          -----       ---------------
<S>                                 <C>            <C>          <C>          <C>             <C>          <C>
MARR PRIVATE PLACEMENTS

PIPE AT $0.30 PER SHARE
Marr Technologies B.V. (9)(11)        $0.30 per       $2,500     $2,300        8/1/03          $0.152             8,333.3
                                          share

PIPE AT $0.50 PER SHARE
Marr Technologies B.V. (9)(11)        $0.50 per      $10,000     $9,600        9/1/03          $0.820            20,000.0
                                                     -------     ------                                          --------
                                          share

 Total Marr Private Placements                       $12,500    $11,900                                          28,333.3
                                                     =======    =======                                          ========
</TABLE>


      (1) The Bristol  Debentures and Warrants,  the 8% Convertible  Notes,  the
Other Restart  Financings,  the Mercator 12% and 10% Debentures and warrants and
the Marr  Technologies  B.V.  PIPE's were issued  under  exemptions  provided by
Regulation  S. The  Company  could  issue no shares  under the equity  line with
Townsbury  until it had completed an effective  registration  for the underlying
shares.  With the exception of Marr Technologies  B.V., which is an affiliate of
the Company  based on its August and  September  2003  investments,  none of the
entities  listed above is or has been an  affiliate  of the Company.  Other than
Marr  Technologies  B.V., all of the listed  investors were subject to ownership
limitations  restricting  their ownership of the Company's stock to a maximum of
4.9% or 9.9%, depending on the specific agreement.

       (2) At March 22, 2004, the holders have  converted all but  approximately
$958,000 of  principal  of the  convertible  notes and  debentures  issued since
February 2002. Based on current market prices,  the Company would be required to
issue  approximately 2.5 to 3.0 million additional shares of its common stock if
the holders elected to convert the remaining  principal and accrued  interest of
their debentures at this time.

       (3) On  February  14,  2003 the  registration  statement  for the  shares
underlying the $525,000 of the Bristol Debentures became effective.  On July 18,
2003,  the  registration  statement for 52,500,000  shares  underlying the Other
Recent Financings became effective. As a result of a decline in the market price
of the  Company's  stock  subsequent  to the  effective  date of the  July  2003
registration  statement,  the number of shares  registered was  insufficient  to
permit the  complete  conversion  of the notes and  debentures  into  registered
shares. The shares underlying certain of the convertible  securities have become
eligible  for  resale  under  Rule  144,  and  certain  investors  have  availed
themselves of that eligibility to convert  restricted  shares issued pursuant to
conversions into free-trading shares. As of March 22, 2004, approximately 34% of
the Company's  outstanding  common stock, or approximately  47.1 million shares,
are  unregistered.   Of  this  amount,  Marr  Technologies  holds  33.5  million
restricted  shares  issued  pursuant  to  their  two PIPE  transactions  and the
conversion of their  investment in $570,000  principal  value of 12% convertible
notes.   Other   investors  in  our   convertible   notes  and  debentures  hold
approximately   11.0  million   restricted   shares  issued  pursuant  to  their
conversions.  The Company has agreed to register the shares of common stock on a
cost-free basis to the holders of said shares of common stock.

       (4) Includes fee shares.

       (5) On April 30, 2003,  when the market price of Calypte common stock was
$0.75,  the Company and BNC Bach  amended the  conversion  price to  eliminate a
conversion  price  ceiling  of $1.50  per  share and to  increase  the  discount
applicable  to the  conversion  price  from  40% to  50%.  In  return  for  this
modification of the conversion  price, BNC Bach agreed to extend the maturity of
the note until May 10, 2004.  BNC Bach  subsequently  converted the  outstanding
principal and accrued interest into shares of the Company's common stock.

       (6)  Reflects  a 10%  cash  commitment  fee  on  the  entire  $2  million
commitment paid to The Mercator Group less  additional fees and expenses.  As of
September  30,  2003,  an  additional  $130,000  remained  available  under this
commitment.  The Company issued the remaining $130,000 of additional  debentures
pursuant  to this  commitment  on  October 2, 2003,  of which  $70,000  has been
converted into approximately 118,000 shares of its common stock. The Company has
not yet  registered  any  underlying  shares  for  the  final  $700,000  of this
commitment.

       (7) In  conjunction  with the issuance of the $1 million 10%  convertible
debenture to Mercator  Focus Fund,  L.P., the Company used the proceeds to repay
the $0.3 million outstanding  principal balance of the 12% convertible debenture
previously  issued to Mercator  Momentum Fund, L.P. plus accrued  interest.  The
balance of costs incurred represents transactional and legal fees.


                                       27
<PAGE>


       (8) On March 31, 2003,  when the market price of Calypte Common Stock was
$0.0295,  the Company  amended the  conversion  price to  eliminate a conversion
price  floor of $0.05 per share in return for an  extension  of time in which to
register the shares of common stock underlying the various Mercator financings.

       (9) The Securities Purchase Agreements for both transactions  between the
Company and Marr require that the Company provide cost-free  registration rights
to Marr; however,  Marr is subject to a one-year lock-up provision following the
transaction date with respect to the shares purchased.

       (10) On January 14, 2004,  when the market price of Calypte  common stock
was $0.60,  the Company  extended the maturity date of the following  debentures
until July 14, 2004:
            o  10% Convertible Debenture dated January 14, 2003 issued to
               Mercator Focus Fund, LP
            o  10% Convertible Debenture dated January 30, 2003 issued to
               Mercator Momentum Fund, LP
            o  10% Convertible Debentures dated March 13, 2003 issued to
               Mercator Momentum Fund III, LP and Mercator Focus Fund
            o  12% Convertible Debenture dated April 29, 2003 issued to Mercator
               Momentum Fund, LP

In return for the extension of the maturity dates, the Company has agreed to pay
an additional extension fee equal to 2% of the outstanding principal balance per
month  until the  earlier  of the  extended  maturity  date or  conversion.  The
extension  fee is  payable 1% in cash and 1% in shares of the  Company's  common
stock.  Additionally,  the  Company  agreed  to  file a  registration  statement
including the shares potentially applicable to the conversion of the outstanding
debenture  balances by no later than April 29,  2004.  The shares  issuable as a
portion of the extension fee are to be included in the registration statement.

       (11) On January 23, 2004,  when the market price of Calypte  common stock
was $0.695, the Company and Marr agreed to extend the registration rights period
attributable  to  5,181,818  shares  of the  Company's  common  stock  issued in
conjunction with Marr's conversion of $570,000 principal amount of the Company's
12%  Convertible  Debentures from February 27, 2004 to April 29, 2004. In return
for the  extension,  the  Company  agreed to  include  in its next  registration
statement  an aggregate of  28,333,333  shares of its common stock  purchased by
Marr in PIPE transactions in the third quarter of 2003.

         (12) The holder claims an earlier  transaction  date, which is disputed
by the Company. This debenture has not yet been converted by the Company pending
resolution of the  transaction  date dispute,  which may determine the number of
shares of the Company's stock to which the holder is entitled upon conversion.

On November 13, 2003,  when the market price of the  Company's  common stock was
$0.88 per share, the Company and Marr, its largest stockholder,  entered into an
agreement  in which Marr  agreed to provide the  Company up to an  aggregate  of
$10,000,000 (the "Marr Credit  Facility")  pursuant to promissory notes issuable
to Marr on an as-needed basis by the Company (the "Notes").  Each Note will bear
interest  at the rate of 5% per annum and will have a  12-month  term.  The Marr
Credit  Facility is available  during the period  beginning on February 28, 2004
and ending on May 31, 2004. The aggregate amount available under the Marr Credit
Facility will be  proportionally  reduced by the amount of any equity  financing
obtained by the Company  during the term of the Marr Credit  Facility.  Marr has
the right of first refusal to  participate  in any such equity  financing on the
same terms as the other investors. The Marr Credit Facility provides for earlier
termination  as of March 31, 2004, if the Company fails to have its common stock
listed on an established stock exchange by that date. Moreover, upon the failure
to obtain such stock exchange  listing,  any outstanding  Notes would be due and
payable on April 30, 2004. As of March 22, 2004, no Notes have been issued under
the Marr Credit  Facility.  As consideration  for the Marr Credit Facility,  the
Company issued to Marr a warrant to purchase  375,000 shares of its common stock
at an exercise price of $0.80 per share. The warrant is immediately  exercisable
and expires two years after issuance on November 12, 2005.

On March 19,  2004,  when the market  price of the  Company's  common  stock was
$0.575 per share,  the  Company and Marr  amended  the Marr  Credit  Facility to
increase  the  aggregate  amount  available  under the Marr  Credit  Facility to
$15,000,000 and to eliminate the termination  provision upon failure to have the
common  stock listed on an  established  stock  exchange by March 31,  2004.  As
additional  consideration  for the  amendment of the Marr Credit  Facility,  the
Company issued to Marr an additional  warrant to purchase  400,000 shares of its
common  stock  at an  exercise  price  of  $0.46  per  share.  This  warrant  is
immediately exercisable and expires two years from its date of issuance on March
18, 2006.


                                       28
<PAGE>


Warrants, Options and Stock Grants

Since  January  2002,  the  Company  has  entered  into  various  contracts  and
agreements with consultants who have agreed to accept payment for their services
in the form of warrants,  options and/or stock grants.  The Company has obtained
various services under these arrangements,  including legal, financial, business
advisory,  and other services including business  introductions and arrangements
with respect to potential  domestic and international  product placement and the
development of potentially  synergistic  relationships  with appropriate  public
service or other governmental and  non-governmental  organizations.  The Company
has generally issued the warrants at a discount to the then-current market price
and has registered the shares underlying the warrants,  options and stock grants
on Form S-8 Registration  Statements for resale by the consultants.  The Company
has, since January 2002,  issued  approximately 9.6 million shares of its common
stock as a result of warrant or option  exercises  and stock  grants  related to
these consulting agreements, of which approximately 7.9 million shares have been
issued during 2003.

In May 2002,  Calypte issued warrants and options to purchase  633,333 shares of
its common stock under agreements with consultants to perform legal,  financial,
business  advisory  and  other  services  associated  with  the  restart  of its
operations.  The warrants were issued at $0.45 per share on May 9, 2002 when the
market price of our common stock was $0.90 per share.  The option was granted at
$0.90 per share on May 10,  2002,  when the market price of our common stock was
$0.90 per share. All of the warrant and option grants were  non-forfeitable  and
fully-vested  at the date of  issuance  and were  registered  for  resale by the
consultants  under Form S-8.  The  consultants  exercised  all the  warrants and
options and Calypte issued 633,333 shares and received proceeds of $292,500. All
but one of the consulting  agreements  discussed  above expired in August and we
have entered into new agreements for legal,  financial,  business advisory,  and
other  services  including   introductions  and  arrangements  with  respect  to
potential  domestic  and  international   product   development  of  synergistic
relationships with appropriate public service  organizations.  In November 2002,
Calypte issued warrants to purchase 950,000 shares of our common stock and stock
grants for 70,000  shares of our stock to  consultants  under the terms of these
new  agreements.  The Company  issued  350,000  warrants at an exercise price of
$1.50 per share on  November  1, 2002,  when the  market  price of our stock was
$4.20 per  share.  The  Company  issued an  additional  600,000  warrants  at an
exercise  price of $1.50 on  November  20,  2002,  when the market  price of our
common  stock was $2.70.  All of the  warrant  grants  were  non-cancelable  and
fully-vested  at the date of  issuance  and were  registered  for  resale by the
consultants  under Form S-8. By February 2003, the consultants had exercised all
the warrants and the Company had received  aggregate proceeds of $1.425 million.
The Company  issued 986,667 shares of its common stock pursuant to the exercises
of the November 2002 warrant and stock grants.

In January  and  February  2003,  the Company  entered  into new  contracts  and
extended  certain other contracts with existing  consultants to perform services
as described above. On February 14, 2003, when the market price of the Company's
stock was $2.01, the Company issued warrants  exercisable at $1.50 per share and
stock  grants  for an  aggregate  of  975,216  shares  of its  common  stock  as
compensation  for  these  services.   The  warrants  were   non-cancelable   and
fully-vested  at the date of issuance.  By May 31,  2003,  the  consultants  had
exercised warrants to purchase all of the shares granted to them and the Company
had received proceeds of $0.8 million.

During  March 2003,  when the market  price of the  Company's  stock ranged from
$1.32 to $1.50 per share,  the Company issued warrants  exercisable at $0.75 per
share and stock  grants  for an  aggregate  of  1,350,400  as  compensation  for
services under new or extended  contracts.  The warrants were non-cancelable and
fully-vested  at the date of issuance.  By May 31,  2003,  the  consultants  had
exercised warrants to purchase all of the shares granted to them and the Company
had received proceeds of approximately $0.9 million.

In April 2003, when the price of the Company's stock ranged from $0.81 to $0.885
per share,  the Company  entered into  additional  contracts,  extended  certain
contracts,  and modified  certain other contracts with existing  consultants who
agreed to settle a portion of the  outstanding  balance due for  services  under
their  contracts in stock.  The Company  issued  warrants at $0.75 per share and
stock  grants  for an  aggregate  of  1,490,600  shares of its  common  stock as
compensation or settlement for these services.  The warrants were non-cancelable
and  fully-vested at the date of issuance.  By May 31, 2003, the consultants had
exercised warrants to purchase all of the shares granted to them and the Company
had received proceeds of approximately $0.1 million.


                                       29
<PAGE>


In May 2003,  when the price of the Company's stock ranged from $0.552 to $0.576
per share,  the Company  again  entered  into new  contracts,  extended  certain
contracts,  and modified  certain other contracts with existing  consultants who
agreed to settle a portion of the  outstanding  balance due for  services  under
their  contracts in shares of stock.  The Company  issued  warrants at $0.30 per
share and stock grants for an aggregate of 2,080,305  shares of its common stock
as   compensation   or  settlement  for  these   services.   The  warrants  were
non-cancelable and fully-vested at the date of issuance.  By September 30, 2003,
the consultants had exercised  warrants to purchase all of the shares granted to
them and the Company had received proceeds of approximately $0.5 million.

In July 2003,  when the price of the Company's  stock ranged from $0.11 to $0.30
per share, the Company extended a contract for consulting and other services and
granted the consultant a warrant to purchase  722,500 shares of its common stock
at 50% of the closing  market price on the date of any exercise as  compensation
under the  contract.  The  warrant was  granted as  fully-vested  and expired on
September  30, 2003.  By September 30, 2003,  the  consultant  had exercised the
entire  warrant at prices  ranging from $0.08 to $0.61 per share and the Company
had received proceeds of approximately $0.4 million.  Also during July 2003, the
Company issued stock grants to consultants for an aggregate of 356,344 shares of
its common stock as compensation under their contracts.

On August 20, 2003,  when the price of the Company's  stock was $0.18 per share,
the Company issued consulting contracts to two new consultants pursuant to which
it issued warrants for 100,000 shares each,  exercisable at $0.18 per share. The
warrants  were  non-cancelable  and  fully-vested  at the date of  issuance.  At
December 31, 2003, the consultants had exercised none of the warrants.

In September  2003,  when the price of the Company's  stock ranged from $0.50 to
$1.80 per share, the Company issued an aggregate of 800,000 shares of its common
stock to  consultants  and other service  providers who agreed to take shares of
stock in lieu of cash as compensation under their contracts.

In October and November 2003,  when the price of the Company's stock ranged from
$0.53 to $1.65 per share,  the Company  issued an aggregate of 125,000 shares of
its common stock to consultants  and other service  providers who agreed to take
shares of stock in lieu of cash as compensation under their contracts.

In February 2004, when the price of the Company's stock was $0.67 per share, the
Company issued 500,000 shares of its common stock to a consultant who had agreed
to accept  shares of stock as a portion of its  compensation  under a consulting
agreement.

To conserve cash and to obtain goods and  services,  the Company may continue to
issue  options and warrants at discounts to market or issue direct stock grants.
In the event that the Company  issues  additional  options and  warrants,  it is
anticipated that the securities will contain cost-free registration rights which
will be granted to holders of the  options and  warrants,  and that there may be
dilution to the Company's existing stockholders.

Restructure of Trade Debt

On February 12, 2002, the Company  completed a  restructuring  of  approximately
$1.7 million of its past due accounts  payable and certain 2002 obligations with
27  of  its  trade  creditors.  Under  the  restructuring,  the  Company  issued
approximately 47,000 shares of its common stock at various negotiated prices per
share with the trade  creditors  in  satisfaction  of the  specified  debt.  The
issuance of shares was exempt from registration  pursuant to Regulation D of the
Securities  Act.  The  shares  issued  are now  eligible  for  resale  under the
provisions of Rule 144.

Summary of Financing Activities

To  successfully  implement our business plan, we must obtain  sustainable  cash
flow and  profitability.  Our future  liquidity  and capital  requirements  will
depend on numerous factors,  including successful  completion of the development
of our new rapid tests,  acquisition  and  protection of  intellectual  property
rights,  costs of developing our new products,  ability to transfer  technology,
set up  manufacturing  and obtain  regulatory  approvals of our new rapid tests,
market  acceptance of all our products,  existence of competing  products in our
current  and


                                       30
<PAGE>


anticipated  markets,  actions  by the FDA and  other  international  regulatory
bodies, and the ability to raise additional capital in a timely manner.

Since  December 31, 2003, we have entered into new financing  arrangements  that
management  believes will be adequate to sustain  operations at expected  levels
through at least year end 2004.  Under our new financing  arrangements,  we will
have the ability to borrow up to $15,000,000  pursuant to 5% promissory notes we
may issue between  February 28, 2004 and May 31, 2004 to finance our operations.
Each promissory note will be due and payable 12 months after its issuance, which
will be no later than May 31, 2005. If sufficient  funds are not available  from
our  operations to repay the  promissory  notes when due, we may need to arrange
additional financing, attempt to extend or otherwise modify the promissory notes
or make other arrangements.  There can be no assurance that additional financing
would be available or, if it is available, that it would be on acceptable terms.

Our  longer-term  liquidity  and capital  requirements  are dependent on factors
similar to those  which  impact  our  current  liquidity  and  capital  resource
considerations  and which will be  critical in  validating  our  business  model
during  2004.  Consequently,  we cannot  predict  the  adequacy  of our  capital
resources on a long-term  basis.  There can be no assurance that we will achieve
or sustain  profitability  or positive  cash flows in the future.  In  addition,
there can be no assurance that additional financings, if and as necessary, would
be available,  or if it is available,  that it would be on acceptable terms. The
terms of an  additional  financing  could  involve  a change of  control  and/or
require stockholder  approval,  or could require us to obtain waivers of certain
covenants  that  are  contained  in  existing  agreements.  We would or might be
required to consider strategic opportunities,  such as a merger,  consolidation,
sale or other  comparable  transaction,  to sustain  our  operations.  We do not
currently  have any  agreements  in place with respect to any such new strategic
opportunity,  and there can be no assurance that any such  opportunities will be
available to us on acceptable  terms, or at all. If additional  financing is not
available  when and if required or is not available on acceptable  terms,  or we
are  unable  to  arrange  a  suitable  strategic  opportunity,  we  will  be  in
significant  financial  jeopardy and we may be unable to continue our operations
at current levels, or at all.

SUBSEQUENT EVENTS

Extension of Mercator Debentures

On January 14, 2004,  when the market  price of Calypte  common stock was $0.60,
the Company  extended the maturity date of the following  debentures  until July
14, 2004:
     o   10% Convertible Debenture dated January 14, 2003 issued to Mercator
         Focus Fund, LP
     o   10% Convertible Debenture dated January 30, 2003 issued to Mercator
         Momentum Fund, LP
     o   10% Convertible Debentures dated March 13, 2003 issued to Mercator
         Momentum Fund III, LP and Mercator Focus Fund
     o   12% Convertible Debenture dated April 29, 2003 issued to Mercator
         Momentum Fund, LP

In return for the extension of the maturity dates, the Company has agreed to pay
an additional extension fee equal to 2% of the outstanding principal balance per
month  until the  earlier  of the  extended  maturity  date or  conversion.  The
extension fee is payable 1% in cash and 1% in stock.  Additionally,  the Company
agreed  to  file a  registration  statement  including  the  shares  potentially
applicable to the conversion of the outstanding  debenture  balances by no later
than April 29, 2004.  The shares  issuable as a portion of the extension fee are
to be included in the registration statement.

Extension of Registration Rights

On January 23, 2004,  when the market price of Calypte  common stock was $0.695,
the  Company  and  Marr  agreed  to  extend  the   registration   rights  period
attributable  to  5,181,818  shares  of the  Company's  common  stock  issued in
conjunction with Marr's conversion of $570,000 principal amount of the Company's
12%  Convertible  Debentures from February 27, 2004 to April 29, 2004. In return
for the  extension,  the  Company  agreed to  include  in its next  registration
statement  an aggregate of  28,333,333  shares of its common stock  purchased by
Marr in PIPE transactions in the third quarter of 2003.


                                       31
<PAGE>


Amendment of Marr Credit Facility

On March 19,  2004,  when the market  price of the  Company's  common  stock was
$0.575 per share,  the  Company and Marr  amended  the Marr  Credit  Facility to
increase  the  aggregate  amount  available  under the Marr  Credit  Facility to
$15,000,000 and to eliminate the termination  provision upon failure to have the
common  stock listed on an  established  stock  exchange by March 31,  2004.  As
additional  consideration  for the  amendment of the Marr Credit  Facility,  the
Company issued to Marr an additional  warrant to purchase  400,000 shares of its
common  stock  at an  exercise  price  of  $0.46  per  share.  This  warrant  is
immediately exercisable and expires two years from its date of issuance on March
18, 2006.

 Management Changes

On January 24, 2004, the Company announced the appointment of J. Richard George,
Ph.D. as its new President and Chief Executive Officer and Richard Van Maanen as
its new Vice  President  of  Operations.  The Company  also  announced  that Jay
Oyakawa had resigned from his position as President, Chief Operating Officer and
as a member of the  Company's  Board of  Directors.  The Company  entered into a
Separation  Agreement  and Release  with Mr.  Oyakawa  wherein he will be paid a
severance  of one year's  salary of $350,000  over a twelve month period and was
vested in options to  purchase  750,000  shares of the  Company's  common  stock
exercisable at $0.32 granted to him in accordance with the Company's 2000 Equity
Incentive  Plan.  Dr. George has been the Company's Vice President of Government
Affairs  since  January 2003 and Mr. Van Maanen has been employed by the Company
since 1993 as Director of  Marketing  and  Director  of  International  Business
Development.

Operating Lease Extension

On March 1,  2004,  we  entered  into a new  lease  agreement  with the  primary
landlord of our manufacturing facility in Rockville, Maryland. The new agreement
extends the lease of the premises through February 28, 2009, or 28 months beyond
the expiration of our current sublease. Additionally, the new lease provides for
tenant  improvements  to be made in  connection  with the  consolidation  of our
manufacturing operations, in the amount of approximately $250,000. The base rent
for the tenant  improvements  will be approximately  $5,500 per month from March
2004 through October 2006. Following the expiration of our current sublease, the
base rent from November 2006 through February 2009 will be approximately $40,000
per month.


                                       32
<PAGE>


ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS The following  information  should be read in conjunction with the
consolidated financial statements and related notes that are provided under Part
II, Item 7 of this Annual Report on Form 10-KSB.

Information we provide in this Form 10-KSB or statements  made by our directors,
officers or employees may  constitute  "forward-looking"  statements  and may be
subject to numerous risks and  uncertainties.  Any statements  made in this Form
10-KSB, including any statements incorporated herein by reference,  that are not
statements of historical fact are forward-looking statements (including, but not
limited to, statements  concerning the  characteristics and growth of our market
and customers,  our objectives and plans for future  operations and products and
our liquidity and capital resources).  Such forward-looking statements are based
on current expectations and are subject to uncertainties and other factors which
may  involve  known and  unknown  risks  that  could  cause  actual  results  of
operations  to differ  materially  from those  projected  or  implied.  Further,
certain  forward-looking  statements  are based upon  assumptions  about  future
events which may not prove to be accurate.  Risks and uncertainties  inherent in
forward looking statements include, but are not limited to:

     o   fluctuations in our operating results;
     o   announcements of technological innovations or new products which we or
         our competitors make;
     o   FDA and international regulatory actions;
     o   developments with respect to patents or proprietary rights;
     o   changes in stock market analysts' recommendations regarding Calypte,
         other medical products companies or the medical product industry
         generally;
     o   changes in domestic or international conditions beyond our control that
         may disrupt our or our customers' or distributors' ability to meet
         contractual obligations;
     o   changes in health care policy in the United States or abroad;
     o   our ability to obtain additional financing as necessary to fund both
         our long- and short-term business plans;
     o   fluctuations in market demand for and supply of our products;
     o   public concern as to the safety of products that we or others develop
         and public concern regarding HIV and AIDS;
     o   availability of reimbursement for use of our products from private
         health insurers, governmental health administration authorities and
         other third-party payors; and
     o   price and volume fluctuations in the stock market at large which do not
         relate to our operating performance.

The  forward-looking  information set forth in this Annual Report on Form 10-KSB
is as of  March  22,  2004,  and  Calypte  undertakes  no  duty to  update  this
information.  Should  events  occur  subsequent  to March 22,  2004 that make it
necessary  to update  the  forward-looking  information  contained  in this Form
10-KSB, the updated forward-looking  information will be filed with the SEC in a
Quarterly  Report on Form  10-QSB,  or as an  earnings  release  included  as an
exhibit to a Form 8-K,  each of which will be available at the SEC's  website at
www.sec.gov or our website at www.calypte.com.  More information about potential
factors that could affect Calypte's  business and financial  results is included
in the section entitled "Risk Factors" beginning on page 55 of this Form 10-KSB.


OVERVIEW AND OUTLOOK

Since 1998,  following  FDA approval for both the current  ELISA  screening  and
supplemental tests,  Calypte has been marketing and selling in the United States
the only available  FDA-approved  urine-based HIV testing method.  We have since
received  regulatory  approval  to sell  our  ELISA  tests in  China,  Malaysia,
Indonesia,  and in parts of Africa.  Unfortunately,  the tests have not received
significant  acceptance  in those  markets.  We  believe  that  there is a small
established  market  for our  current  ELISA  tests in the  United  States and a
potential  market  in  certain  foreign   countries  with  established   medical
diagnostic  and treatment  infrastructures  as well. We believe that rapid tests
are more  suitable in many of the countries in which  HIV/AIDS is epidemic,  and
particularly so in the "next wave" countries of Russia, China, Africa and India.
Consequently,  we are now


                                       33
<PAGE>


actively  working to  commercialize  our HIV rapid test  products -and to obtain
requisite  regulatory  approvals to introduce these products in these countries,
as well as in other  international  markets.  There can be no assurance  that we
will achieve or sustain significant revenues from sales of HIV diagnostic tests,
internationally  or  domestically,  or from other new products we may develop or
introduce.

During the first quarter of 2002, our financial  condition and cash availability
deteriorated so significantly that by early April 2002 we had determined that we
would  need to  curtail  our  operations  and  consider  filing  for  bankruptcy
protection.  We announced  that the  situation  had reached a critical  point in
mid-April  2002,  at which time  management  began the  process of winding  down
operations,  with the likely expectation of a complete cessation of business. In
early May 2002, however, before the wind-down process was completed, we received
commitments for what management deemed to be sufficient  additional financing to
resume operations and stopped the wind-down process. In conjunction with the new
financing  commitment,  the Board of  Directors  appointed a new chairman and we
resumed operations.

Subsequently,  we began an  initiative  to  critically  reassess our current and
long-term  business plan and capital  requirements.  While the validation of our
business  plan is ongoing,  we have  identified  and begun to implement  certain
critical components:

     o   We have  significantly  strengthened  our  financial  position with the
         receipt of an aggregate of $12.5 million in new investment financing in
         two   third-quarter   2003   transactions  from  Marr.  Based  on  this
         investment,  debt  conversion  and its purchase of shares in the public
         market, Marr now owns approximately 28% of our outstanding common stock
         and has identified itself in a public filing with the SEC as a "related
         party." The  availability  of the amended  Marr Credit  Facility in the
         aggregate amount of $15,000,000 has also significantly strengthened our
         financial  position.  We believe that our currently  available  working
         capital,  the  aggregate  investment  of $12.5  million by Marr and the
         funds available through the Marr Credit Facility, should be adequate to
         sustain our  operations  at current  levels  through at least  year-end
         2004.  If,  however,  sufficient  funds  are  not  available  from  our
         operations to repay the promissory  notes issued under the amended Marr
         Credit Facility when due, we may need to arrange additional  financing,
         attempt  to extend or  otherwise  modify the  promissory  notes or make
         other arrangements. There can be no assurance that additional financing
         would  be  available  or,  if it is  available,  that  it  would  be on
         acceptable terms.

     o   The consolidation of our manufacturing  operations,  when completed, is
         expected  to  eliminate  approximately  $1 million of annual  expenses,
         including  approximately $500,000 in annual occupancy costs, and create
         a more efficient and cost effective manufacturing structure.

     o   We are  committed  to and  focused on the  introduction  of one or more
         rapid HIV-1 and HIV-2  diagnostic tests in  international  markets.  We
         will  continue to distribute  our ELISA test  products  internationally
         through  our  current  distribution  networks  and will  also  seek new
         distribution relationships for our current and future test products. We
         may set up  international  manufacturing  and  distribution  facilities
         utilizing  joint  venture or similar  entities.  We believe our initial
         international focus will be on China and Russia, two of the "next wave"
         HIV epidemic  countries.  We intend to pursue additional  international
         distribution   opportunities   from  government  AIDS  initiatives  and
         humanitarian  organizations  as they  provide  funds for HIV testing in
         lesser-developed countries where the HIV infection is epidemic.

Guidance  We  projected  fourth  quarter  2003  revenues  to be in the  range of
$900,000 to $1,000,000.  Revenue for the fourth quarter was $1,037,000.  We have
indicated   that  our  focus  for  2004  is  completing  the   development   and
commercialization  of certain rapid HIV tests. While we are accomplishing  that,
however,  we expect  sales  from our legacy  business,  our  current,  primarily
domestic,  ELISA tests to remain essentially unchanged. On that basis, we expect
sales of those products to generate  approximately  $3.2 million to $4.0 million
in  aggregate  revenues  during  2004,  spread  generally  evenly  over the four
quarters of the year. Sales of our urine ELISA test products will continue to be
primarily to reference  laboratories  supporting  the  domestic  life  insurance
industry and sales of our Serum Western Blot  supplemental test will continue to
be  primarily to  distributors,  blood banks and similar  testing  institutions.
Although we have received certain  international  approvals for our ELISA tests,
we cannot predict any  international  sales volume for these test products as we
have not received any firm purchase orders. We have  contemplated  entering into
an exclusive  distribution


                                       34
<PAGE>


agreement with a third party  distributor which would grant such distributor the
exclusive right to market and sell our ELISA test products in the United States.
While we are  currently  not  contemplating  entering  into  any  such  business
arrangement, if we were to enter into such an agreement,  expected 2004 revenues
for our  ELISA test  products would  be at the  lower end of the guidance range.

We have begun  international  field trials of our developmental  stage urine and
blood rapid HIV tests in Thailand. While the early results from these trials are
favorable,  the trials have identified certain enhancements of the tests that we
plan to make  prior to  initiating  formal  clinical  trials  and  international
manufacturing  operations.  We anticipate that these desired enhancements can be
made  relatively  quickly  and we plan to return the  reworked  rapid  tests for
further field evaluation.  The test development process is iterative and subject
to unanticipated delays.  Attention to intellectual  property  considerations is
critical,  as our choices will affect our future  ability to  commercialize  the
test products. Based on our current estimates, we will need until the end of the
second  quarter  of 2004,  approximately  three  additional  months  beyond  our
previously  anticipated  timetable,  to  improve  the  tests  to meet  our  high
standards of performance and to conduct additional field trials.  However, there
can be no assurance  that we will complete the  development  process during this
timeframe.  Should additional improvements or modifications be required for only
one of the developmental stage rapid HIV tests, we may elect to proceed with the
commercialization  of the other rapid HIV test.  Commercialization  entails many
steps and variables not under our control. We expect that different  regulations
and   customs   in  each   foreign   country   will   further   complicate   the
commercialization  process.  As a  result,  we are  unable to  predict  with any
certainty a timetable  for the various  steps and  milestones  required  for the
successful commercialization of our developmental stage products.  Nevertheless,
we believe that we have identified the primary  milestones  necessary to achieve
commercialization of our rapid HIV tests:

     o   Achievement of desired performance in one or more field evaluations.
     o   Acquisition of necessary intellectual property rights.
     o   Entrance into manufacturing arrangements in targeted countries.
     o   Acquisition of regulatory approval in targeted countries.
     o   Performance of clinical trials.
     o   Initiation of manufacturing and distribution efforts for commercial
         sale.
     o   Prediction with certainty of the amount of investment required.

Based on our current  understanding of the intellectual  property  landscape and
the various  regulatory  processses,  we do not expect to  generate  significant
revenues,  if any, from the sale of any rapid HIV test products  during 2004. We
intend to commence the  regulatory  approval  process in China during the second
quarter of 2004 and anticipate  that the  regulatory  process will take at least
six  months  to  complete.   Depending  on  the  manufacturing  site  chosen  to
manufacture  products for importation into Russia,  we may be able to commence a
regulatory  process  of six to 12  months  there in the third  quarter  of 2004.
Products might then be ready for market late in 2004 or early in 2005.  While we
cannot estimate the regulatory  approval process in various other  international
markets,  we are  encouraged  by the  interest we have  received in our proposed
rapid HIV tests.

We believe that the key to our  penetration  of the Chinese market will hinge on
the  success  of the  Beijing  Calypte  Joint  Venture  in the  manufacture  and
distribution of our rapid HIV test products in China. Early  indications,  based
on  meetings  with  high-level   Chinese   authorities  in  which  both  we  and
representatives  of our joint venture  partner  participated,  lead us to expect
that there is great  potential for  significant  revenues from the sale of rapid
HIV tests in China. We have had similar  indications of interest in our proposed
rapid HIV tests in meetings  with various  Russian  officials.  After  receiving
regulatory approval, we visited local hospitals and voluntary testing centers in
Africa  during the third  quarter of 2003 to determine  how best to proceed with
sales of our current urine ELISA tests there.  As a result of these  visits,  we
have  determined  that  most  of  these  installations,  due  to  their  limited
infrastructure,  can best utilize our rapid HIV tests.  Even though many centers
indicated a preference  for urine  testing,  there is negligible  demand for our
current  ELISA  tests.  The  clinics  and testing  centers  indicated  that they
preferred to wait for the rapid HIV tests.  At this time,  we do not expect that
our rapid HIV tests will be available  for sale in Africa prior to late 2004, if
at all.

We  believe  that  our  currently  available  working  capital  plus  the  up to
$15,000,000 available to us as a result of the amended Marr Credit Facility will
enable  us to  pursue  the  commercialization  of our  rapid  HIV test  products


                                       35
<PAGE>


currently  in  development  at  least  through  2004,  in  the  absence  of  any
unanticipated  material  costs and expenses  that are not factored into our cash
flow  projections.  Our operating cash burn rate for the year ended December 31,
2003 averaged  approximately  $1.1 million per month and averaged  approximately
$1.2 million per month for the quarter  ended  December  31,  2003.  Our working
capital of approximately  $2.9 million at December 31, 2003 plus the $15 million
available  under the amended  Marr Credit  Facility  should  support the current
average  annual  burn rate for over 16 months  and the  higher,  fourth  quarter
average burn rate for  approximately 14 months,  into at least the first quarter
of 2005.

Our cash flow  requirements  may vary  materially  from those now planned due to
many  factors,  including,  but not limited to, the progress of our research and
development  of our rapid HIV test  products,  the scope and timing of strategic
alliances,  the costs and timing of the expansion of our manufacturing capacity,
the results of clinical testing, the magnitude of capital expenditures,  changes
in existing and potential  relationships  with business  partners,  the time and
costs of obtaining  regulatory  approvals,  the costs  involved in obtaining and
enforcing patents, proprietary rights and other necessary licenses, the cost and
timing  of  expansion  of sales  and  marketing  activities,  the  timing of the
commercial  launch of our new rapid HIV test products,  market acceptance of our
new rapid HIV  tests,  competing  technological  and  market  developments,  the
ability to raise additional  capital in a timely manner,  costs and charges that
may  potentially  occur as a result of the pending  informal  inquiry by the SEC
(see Item 8) and other factors.  Additionally, if, and as, we borrow money under
the Marr  Credit  Facility,  the Notes  would  become due 12 months  after their
issuance  dates,  with the full amount  borrowed  due on or before May 31, 2005,
further increasing our capital requirements.

There can be no  assurance  that  subsequent  additional  financings,  if and as
necessary,  would  be  available,  or if it is  available,  that it  would be on
acceptable terms. The terms of an additional financing could involve a change of
control  and/or  require  stockholder  approval,  or could  require us to obtain
waivers of certain covenants that are contained in existing agreements. We would
or might be required  to consider  strategic  opportunities,  including  merger,
consolidation,  sale or other comparable transaction, to sustain our operations.
We do not  currently  have any  agreements in place with respect to any such new
strategic opportunity, and there can be no assurance that any such opportunities
will be available to us on acceptable terms, or at all. If additional  financing
is not available  when and if required or is not available on acceptable  terms,
or we are  unable to  arrange a suitable  strategic  opportunity,  we will be in
significant  financial  jeopardy and we may be unable to continue our operations
at current levels, or at all.

Off-Balance  Sheet  Arrangements The Company does not have any off-balance sheet
arrangements, as defined in Item 303(a)(4)(ii).


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations is based upon Calypte's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments  that affect the reported  amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and liabilities.  On an on-going basis, we evaluate our estimates and judgments,
including those related to bad debts,  inventories,  intangible  assets,  income
taxes,  restructuring  costs,  and  contingencies  and  litigation.  We base our
estimates on historical  experience and on various other factors that we believe
to be reasonable  under the  circumstances,  the results of which form the basis
for making  judgments about the carrying  values of assets and liabilities  that
are not readily  apparent  from other  sources.  Actual  results may differ from
these estimates under different assumptions or conditions.

We believe the following critical accounting policies,  among others, affect our
more  significant  judgments  and  estimates  used  in  the  preparation  of our
consolidated financial statements.

     o   Revenue  Recognition  We  recognize  revenue  from  product  sales upon
         shipment  to  customers  and  when  all  requirements  related  to  the
         shipments have occurred.  Should changes in terms cause us to determine
         these  criteria are not met for certain  future  transactions,  revenue
         recognized for any reporting period could be adversely affected.


                                       36
<PAGE>


     o   Allowance  for Doubtful  Accounts We maintain an allowance for doubtful
         accounts  on a  specific  account  identification  basis for  estimated
         losses  resulting  from the inability of our customers to make required
         payments.   If  the  financial  condition  of  our  customers  were  to
         deteriorate,  resulting  in an  impairment  of  their  ability  to make
         payments,   or  regulatory   issues  with  our  products  were  raised,
         additional allowances may be required.
     o   Inventory  Valuation We adjust the value of our inventory for estimated
         obsolescence or unmarketable  inventory equal to the difference between
         the  cost of  inventory  and the  estimated  market  value  based  upon
         assumptions  about future demand and market  conditions and development
         of new products by our competitors. Further, since we have continued to
         incur  negative  gross profit on an annual  basis,  and have high fixed
         manufacturing  costs,  we also review our inventories for lower of cost
         or market  valuation.  If actual market  conditions  are less favorable
         than those projected by management,  additional  inventory  write-downs
         may be required.  In  connection  with the build-up of inventory of our
         screening  test  prior  to the  transfer  of its  manufacturing  to our
         Rockville,   MD   facility,   demand  for  this   product   could  fall
         significantly  below the historical  levels on which the production was
         based,  in which case we may have built  excess  inventory  that we may
         have to dispose of at additional cost, or at a loss.
     o   Deferred Tax Asset Realization We record a full valuation  allowance to
         reduce our  deferred  tax assets to the amount that is more likely than
         not to be realized.  While we have considered future taxable income and
         ongoing  prudent and feasible tax planning  strategies in assessing the
         need for the  valuation  allowance,  in the event we were to  determine
         that we would be able to realize our  deferred tax assets in the future
         in excess of its net recorded amount, an adjustment to the deferred tax
         asset would increase income in the period such determination was made.

WIND-DOWN AND RESTART

In mid-April 2002, as a result of insufficient  cash to continue our operations,
we announced  that we were winding down our  operations  and might have to cease
our operations entirely and file for bankruptcy.  We immediately  furloughed all
but a few  manufacturing  and  administrative  employees,  making no  separation
payments or payments of accrued  vacation to any  employees.  The  manufacturing
employees who were retained  completed certain lots of in-process  inventory and
readied them for sale and were then also  furloughed.  Immediately  prior to the
restart,  we had  terminated  all but 5  employees,  retaining  only the minimum
necessary to ensure  regulatory  compliance for our facilities should additional
financing  enabling a restart  become  available.  Upon  receipt of the  initial
financing  commitment that permitted the restart, we recalled key management and
manufacturing  employees  and began the  process of resuming  our  manufacturing
operations.  Other employees,  such as administrative and sales personnel,  were
recalled in stages as  required  and as funding  permitted.  We had 73 full- and
part-time  employees  prior  to  our  wind-down  and  we  have  returned  to our
approximate  pre-wind-down  headcount  levels.  Not  all  of  the  pre-wind-down
employees  were  rehired,  and we believe our current  complement  is  generally
sufficient to meet our operational needs.

The costs of the wind-down and restart are difficult to quantify precisely. 2002
operations  reflect  both the  inherent  inefficiencies  in the  restart  of our
manufacturing  processes,  including  the excess  overhead  and  capacity  costs
incurred,  as well as the lower sales  demand  resulting  from  abnormally-large
purchases prior to the wind-down,  and the time required to rebuild demand among
customers  concerned  with  our  longer-term  stability.  Additionally,  we have
incurred  incremental  general and  administrative  costs,  as well as financial
costs in obtaining new capital  investments and financing in the Company,  (some
of them non-cash) attributable to consultants engaged in the restart process and
thereafter in investor relations initiatives within the financial community, and
in other areas of expertise.

CUSTOMER TRENDS

ELISA Test Sales Sales of our EIA  Screening  Test  accounted for 45% and 63% of
our total sales for the years ended December 31, 2002,  and 2003,  respectively.
Sales of our Urine Western Blot supplemental test accounted for approximately 4%
of calendar  year 2002 and 2003 revenue.  The impact of the second  quarter 2002
announcement  of our possible  cessation of operations  caused many customers to
modify their traditional  product purchase patterns during 2002. The increase in
the sales of our urine ELISA screening and supplemental tests as a proportion of
total sales in 2003 is primarily the result of (1) these altered order  patterns
in 2002, and (2) a decrease in sales of Serum Western Blot sales  primarily as a
result of a change in distributors.  We do not expect


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<PAGE>


significant changes in the level of sales or the purchasers of our current urine
EIA screening test in the near future,  although we are exploring  opportunities
in "next wave" countries such as China and Russia. We do expect,  however,  that
our rapid urine HIV tests, once completely  developed and  commercialized,  will
comprise  an  increasing  proportion  of our  future  sales,  as we  expand  our
distribution of these products internationally.

     Domestic  Sales Sales of our EIA Screening  Test to domestic life insurance
     reference  laboratories accounted for 85% and 89% of screening test revenue
     for years 2002 and 2003,  respectively.  These reference  laboratory  sales
     were  distributed  among  four  laboratories  in both  periods.  Individual
     laboratory sales as a percentage of total reference laboratory sales ranged
     from 2% to 59% in calendar  year 2002 and from 2% to 63% during 2003,  with
     LabOne  being the  largest of the four in both  periods.  In October  2003,
     LabOne acquired the smallest of the above mentioned reference laboratories,
     bringing the number of  laboratories  to which we sell to three.  We do not
     expect this acquisition to have a material effect on our sales to reference
     laboratories. We sell our product to the reference laboratories who service
     over 100 life  insurance  companies who have committed to urine testing for
     HIV  screening of at least some of their policy  applicants  and who employ
     the labs to conduct their  applicant  testing.  Individual  life  insurance
     companies  can and do move their  business  from one  laboratory to another
     based on a number of  considerations,  including the  availability of urine
     testing.  As the only  supplier  of an  FDA-approved  urine  based  testing
     algorithm for HIV-1,  reference  laboratories must use our testing products
     to satisfy the demand of insurance companies desiring urine testing.  Based
     on our recent  multi-year  agreement with LabOne,  we do not expect to lose
     LabOne, or any of the other current reference laboratories,  as a customer.
     However,   should  such  a  loss  occur,  the  insurance   companies  using
     urine-based  testing  in their  policy  underwriting  determinations  could
     realign  themselves  with  another lab  offering  our  urine-based  testing
     algorithm.  We could,  however,  potentially  lose a significant  amount of
     business  because  insurance  companies that rely on this large  laboratory
     could  switch to another form of testing,  either blood or oral fluid,  and
     remain with LabOne.  Direct or  distributor  sales of our screening test to
     domestic  diagnostic  clinics,  public health agencies and  community-based
     organizations were not material in either period.  During the third quarter
     of 2003 we eliminated  the sales force that had focused on this diverse and
     disaggregated  market.  We have considered the  consolidation of our United
     States  sales effort under a single  non-affiliated  distributor.  While no
     decision has been made at this time,  this would not change our commitments
     with the reference  laboratories  and we do not expect that the result will
     affect our domestic trends.  However,  any disruption in the supply of this
     sole-source  product would force our customers to find alternative  testing
     solutions - either blood or oral fluid. In such a situation, it is unlikely
     that we could subsequently regain a material amount of this business. Sales
     of our Urine Western Blot test are generally made to the same customers who
     purchase the EIA Screening Test.

     International  Sales  International sales of our EIA Screening Test are not
     currently a material  component of our revenue.  Although we have  obtained
     approval of our EIA Screening Test in several  international markets and we
     believe that such approvals  validate the use of urine as a testing medium,
     we see  little  interest  in our  current  format  screening  test  in most
     international   markets  and  project  minimal  revenues  from  their  sale
     internationally again in 2004. Our distribution  agreement with our initial
     Chinese  distributor  requires  the  purchase of at least $3 million of our
     ELISA tests during the two-year term of the agreement.  Although we resumed
     shipments  of our ELISA tests to our  initial  Chinese  distributor  in the
     third quarter of 2003, the anticipated  introduction of our rapid HIV tests
     is  expected  to impact  the  ability  of this  distributor  to meet its $3
     million  ELISA test  commitment.  We are in the  process of  expanding  our
     Chinese  ELISA  test  approval,  which  may open  new  markets  within  the
     government  sector  in China.  We have no firm  commitments  at this  time,
     however. We are also seeking approval for our ELISA tests in Russia.

     While we believe there is interest in our rapid HIV tests  currently  under
     development,  we do not expect to generate  significant,  if any,  revenues
     from the sale of a rapid HIV test in 2004.  The timing of revenues from our
     rapid HIV tests will be contingent  upon  completing our field  evaluations
     and clinical trials,  acquiring intellectual property rights,  establishing
     manufacturing  operations and obtaining the necessary regulatory approvals,
     as more fully discussed in the comments on Guidance earlier in this Item 6.
     Following the completion of development activities for our rapid HIV tests,
     our primary focus will be on  developing  manufacturing  relationships  and
     developing or expanding distribution  relationships.


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<PAGE>


     While many counties have their own regulatory  approval  processes,  others
     look to the  results of WHO  evaluations  for  guidance.  The World  Health
     Organization ("WHO") serves as both a quasi-regulatory body and a potential
     funding  source for many  developing  countries  that  might not  otherwise
     possess the  regulatory  infrastructure  or  financial  resources  to avail
     themselves  of products for the  diagnosis  and  treatment of HIV and AIDS.
     Calypte  believes that a strong  performance  of the rapid urine tests in a
     WHO evaluation would be an equally, if not more, effective demonstration of
     the  viability of urine  testing for HIV  antibodies  as the  evaluation we
     earlier  contemplated for the EIA and Western Blot algorithm.  We have been
     advised by WHO that its bulk  procurement  program for HIV tests focuses on
     diagnostic  and blood  donation  screening  tests  capable of detecting the
     presence of both HIV-1 and HIV-2  antibodies.  Although WHO has  previously
     reported the results of its Phase 1 trials of Calypte's  current  HIV-1 EIA
     and  Western  Blot  tests on its  website,  WHO has  advised  us  that,  in
     principle,  it views those tests as suitable only for surveillance purposes
     and  therefore  not  eligible  for  WHO's  bulk  procurement   program.  We
     anticipate, however, that certain countries will look to the results of WHO
     evaluations  for guidance on the potential uses of urine tests and for this
     reason the Company  wants to  continue  to work with WHO. In our view,  the
     attributes  of  Calypte's  planned  rapid tests for HIV-1 and HIV-2 in both
     urine and whole  blood  samples  will more  closely  match the needs of the
     developing  world and,  once  evaluated by WHO, are more likely to meet its
     bulk  procurement  eligibility  criteria.  For these  reasons,  Calypte may
     request WHO either to put further  evaluations  of our EIA and Western Blot
     on hold or to drop them  entirely  in order to help WHO  focus its  limited
     resources on evaluation of the technology employed by the rapid tests.

Serum  Western  Blot Sales Sales of our Serum  Western  Blot  supplemental  test
accounted for 43% and 32% of our revenues for the years ended  December 31, 2002
and 2003,  respectively.  We sold this test to bioMerieux Inc. prior to our wind
down in the second  quarter  of 2002,  but  bioMerieux  has not  purchased  this
product  from us since the  restart  of our  operations  in May  2002.  Sales to
bioMerieux  accounted for  approximately 18% of total revenue for the year ended
December 31, 2002.  Although there is limited  competition  in the  supplemental
testing  market,  we have not yet been able to rebuild market share and revenues
to previous levels absent the sales to bioMerieux.  We engaged a new distributor
for  this  product  whose  sales  during  the  second  half of 2002  represented
approximately  5% of our full year 2002  revenues  and whose  sales  during 2003
represented over 6% of our total revenues for that period. Additionally, certain
customers who had  previously  purchased our Serum Western Blot from  bioMerieux
now purchase  directly  from us.  Nevertheless,  the loss of Serum  Western Blot
sales to bioMerieux has had a materially  adverse  impact on revenues.  Further,
while at this time our consolidation and outsourcing evaluations with respect to
the urine EIA product do not impact the Serum Western Blot product, there can be
no assurance  that the final results will not impact the financial  viability of
this product and our ability to maintain it on a long-term  basis.  Furthermore,
while the Western Blot is key in the  FDA-regulated  testing algorithm today, it
is unclear if, or when,  rapid  testing may  substantially  replace  ELISA-based
testing.  If that trend occurs, the need for Western Blot supplemental tests may
also be significantly reduced or eliminated.

RESULTS OF OPERATIONS

Years Ended December 31, 2003 and 2002

Calypte's  2003  revenues  totaled $3.5 million  compared  with $3.7 million for
2002, a decrease of $0.2 million or 6%.  Screening  test  revenues  increased by
$508,000 or 30%.  Sales of the screening  tests to insurance  company  reference
labs  increased  by  $528,000  or 37%.  During the fourth  quarter of 2003,  our
largest customer purchased remaining  consignment inventory on hand and switched
to a standard  contractual  relationship.  This  increased  our  fourth  quarter
revenue by approximately $167,000.  Additionally,  screening tests revenues were
lower than  historical  levels in 2002 due  primarily  to a reduction in product
availability as a result of our wind-down and restart.

International sales of our screening tests accounted for approximately  $173,000
and $143,000 in 2003 and 2002,  respectively.  International  sales  amounted to
approximately  5% of  total  revenue  in  2003  and  4%  in  2002.  Our  primary
international  sales  in both  2003 and 2002  were to our  Chinese  distributor.
Domestic  diagnostic and direct screening test sales were  insignificant in both
2003 and 2002.

Revenue from the sale of our supplemental  tests and viral lysate decreased $0.7
million or 35% in 2003  compared with 2002.  Urine Western Blot sales  decreased
$7,000 or 5%, from  $162,000 in 2002 to $154,000  in


                                       39
<PAGE>


2003.  Serum Western Blot sales decreased by 30% or  approximately  $0.5 million
compared with 2002 levels.  The decrease is due to product  availability  issues
related to the wind-down and restart,  as well as to the loss of bioMerieux as a
distributor after our restart. We engaged Adaltis Inc. as our new distributor in
the second half of 2002, but have yet to regain our pre-wind-down  market share,
as there have not been significant sales by Adaltis.

Sales of HIV viral lysate,  a component we use in the  production of our Western
Blot products and which we previously  sporadically sold to another manufacturer
of serum-based HIV diagnostic tests and other parties, decreased by $0.2 million
or nearly 100% compared to 2002 levels.  The sale of viral lysate  accounted for
approximately  6% of 2002  revenues.  We have not  sold  viral  lysate  since we
restarted  our  operations  in mid-2002  and we do not consider its sale to be a
core component of our on-going business.

Of customers  accounting  individually  for more than 10% of our  revenues,  two
customers  accounted for an aggregate of 50% of our total revenues in 2003 and 3
customers  accounted  for an aggregate of 52% of our total  revenues in 2002. As
noted,  previously,  bioMerieux  accounted  for  approximately  18% of our total
revenues in 2002 and has not purchased from us since our mid-2002 restart.

Gross margin  decreased  from a loss of $2,492,000  (-68% of sales in 2002) to a
loss of $2,654,000  (-77% of sales in 2003). As an  FDA-regulated  manufacturing
entity with two geographically  diverse locations,  we incur a significant level
of relatively  fixed costs,  including  personnel-related  costs, to operate and
maintain our  manufacturing  facilities  in compliance  with Good  Manufacturing
Practices. Once those relatively fixed manufacturing costs are covered, we enjoy
a significant contribution margin on additional sales. When we incur those costs
without  sufficient  revenues  from the sale of our products to offset them,  we
report negative margins. To restart our manufacturing operations in 2002, we had
a  workforce  in  place at both  facilities  and  incurred  both  personnel  and
manufacturing process expenses throughout the second and third quarters of 2002,
however  only late in the third  quarter  was a complete  cycle of  post-restart
production  and  sales  achieved  at both  manufacturing  facilities.  Partially
mitigating the impact of the wind-down and restart on  manufacturing  operations
and expenses during 2002 was the completion of a facility  consolidation project
at our Rockville, Maryland location during the first quarter 2002, which reduced
occupancy  costs  by  approximately  $200,000  on an  annualized  basis  without
impacting  quality or efficiency.  2003 results  include a full year's  facility
costs in  product  cost  expense  whereas  only a portion  of these  costs  were
included in product  costs  during  2002.  Additionally,  the higher  margins we
achieved  from viral lysate sales  compared  with those  achieved  from sales of
either our screening or supplemental  tests improved the overall margin on sales
in 2002.  As noted  previously,  we did not sell viral lysate during 2003 and do
not expect viral lysate sales to recur in the near term.

Included in cost of sales,  a component  of gross  margin,  is royalty  expense,
which  we  pay  on  the  sale  of all  of  our  products.  Royalty  expense  was
approximately  $670,000 in 2003 and $412,000 in 2002. Our effective royalty rate
varies based on our product mix, with the rate being higher on our EIA screening
tests than on our urine or serum supplemental  tests.  Additionally,  certain of
our license  agreements  contain minimum royalty  provisions which, in both 2003
and 2002, exceed amounts due based on the contractual  percentage rates. In both
2002 and 2003, one licensor  accepted shares of our common stock in satisfaction
of  discounted  amounts  due for one or more  years in excess of the  percentage
royalty  rate.  The value of the common  stock  issued in both 2003 and 2002 was
recorded as royalty expense.

R&D costs increased $615,000 or 66% from $929,000 in 2002 to $1,544,000 in 2003.
Approximately  47%  of the  increase  is due to  expenses  associated  with  the
increased  headcount  involved  in our rapid  test  development.  The  remaining
increase is due to expense  associated  with the  acquisition  of specimens  and
product  prototypes in preparation  for clinical trials to pursue our rapid test
initiative.

Selling,  general and administrative  costs increased from $9,006,000 in 2002 to
$15,517,000  in 2003,  an increase of  $6,511,000  or 72%.  Sales and  marketing
expenses increased by approximately $1,096,000 or 70% composed primarily of:
     o   Increases of $1,455,000 in marketing consulting contracts, and
     o   Increases of $247,000 for marketing materials.
     o   Partially offsetting these increases was a decrease in salaries and
         benefits expenses due to the elimination of our direct sales and
         marketing force which occurred between June and August of 2003.


                                       40
<PAGE>


General and  administrative  expenses  increased by approximately  $5,415,000 or
80%. The primary components of the increase include the following:
     o   An increase of $3,325,000  in primarily  non-cash  expense  recorded in
         connection with the issuance of warrants and options to consultants and
         third party firms for various investor relations and other projects;
     o   An increase of $1,200,000 in compensation expense comprised of
              o    Severance costs paid to senior management
              o    Restoration of certain management employees' salaries in June
                   2002 and certain increases in 2003;
              o    Senior management salaries incurred for the full year in 2003
                   versus a portion of the year in 2002 and
              o    Non-cash  expense  attributable  to the  intrinsic  value  of
                   below-market  grants of stock  options to certain  management
                   employees in return for a salary deferral in 2003.
     o   An increase of $259,000 in  international  and domestic  travel related
         expense incurred primarily by senior executives.
     o   Increased  legal and  auditor  fees  incurred  in  connection  with the
         informal SEC inquiry.
     o   Fees  associated  with  our new  auditor's  re-audit  of our  financial
         statements for the year ended December 31, 2002.
     o   Accrued  severance-related costs attributable to the announced shutdown
         of our Alameda, California facility in mid-2004.

The loss from operations for 2003, at $19,715,000,  reflects a 59% increase over
the $12,427,000 loss reported for 2002.

Net interest  expense for 2003 increased by $4,766,000,  from $2,203,000 in 2002
to $6,969,000 in 2003. The change is primarily attributable to (in thousands):

<TABLE>
<CAPTION>
<S>                                                             <C>              <C>               <C>

                                                                   2003              2002            Change
                                                                   ----              ----            ------

 Interest on debt instruments                                    $   425         $     332          $    93

 Non-cash expense composed of:

    Amortization and proportional write-off upon
      conversion of note and debenture discounts                   4,835            1,188             3,647

    Liquidated damages due to delayed registration of
      shares underlying convertible securities                       620              546                74

    Amortization and proportional write-off upon
      conversion of deferred offering costs                          997              210               787

    Expense attributable to warrants issued in
      conjunction with the Marr $10 million Promissory
      Note Agreement                                                 322                -               322

    Warrant liability mark-to-market adjustment (these
      warrants were exercised by Bristol  during  the
      third  quarter  of  2003  and the  remaining
      warrant liability was written off to APIC at the
      time of exercise.)                                            (275)             (70)             (205)

    Expense attributable to dividends on mandatorily
      redeemable Series A preferred stock                             60                -                60
                                                                 -------         --------           -------
 Total interest expense                                            6,984            2,206             4,778

 Interest income                                                     (15)              (3)              (12)
                                                                 -------         --------           -------
 Net interest expense                                            $ 6,969         $  2,203           $ 4,766
                                                                 =======         ========           =======
</TABLE>


                                       41
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Financing Activities

We have financed our operations from our inception primarily through the private
placement of preferred stock and common stock, our Initial Public Offering (IPO)
of common  stock,  two equity line  facilities  and the issuance of  convertible
notes and debentures.  On May 20, 2003, our stockholders approved a 1:30 reverse
split  of our  common  stock,  which  became  effective  on May  28,  2003.  All
references to the number of shares  issued or the issue,  exercise or conversion
price of any  transaction  described in this section reflect the $0.03 par value
post-split  basis of our common  stock.  Our financing  activities  for the most
recent three years include the following.

On January 22, 2001, the Company signed an agreement to place up to $1.1 million
in convertible short-term debentures. Under this arrangement, the Company issued
two convertible  debentures to the debenture  holder in the principal  amount of
$550,000 each,  pursuant to Regulation S of the  Securities  Act. Each debenture
had an interest rate of 6% and was issued at an original issue discount of 9.1%.
The  Company  issued the first  debenture  on January 26, 2001 and the second on
March 13, 2001. Each debenture matured 90 days from the date of issuance,  or on
April  26,  2001  and  June  11,  2001,  respectively.  Under  the  terms of the
debentures,  the  debenture  holder could elect at any time prior to maturity to
convert the balance  outstanding on the debentures  into shares of the Company's
common  stock at a fixed  price that  represented  a 5%  discount to the average
trading  price of the shares for the 10 trading days  preceding  the issuance of
each debenture. If the Company chose not to redeem the debentures upon maturity,
as in the case of the second debenture, the conversion discount to the debenture
holder  increased to 15% of the average low bid price for the  Company's  common
stock  for any three of the 22  trading  days  prior to the date of  conversion.
Concurrent with the issuance of the first  debenture,  the Company also issued a
warrant to the debenture  holder for 6,667 shares of common stock at an exercise
price of $45. The shares  underlying the debentures and warrant were  registered
using a form S-3  Registration  Statement.  The Company  received  aggregate net
proceeds from the issuance of the two  debentures  of $925,000  during the first
quarter  of 2001.  The  Company  redeemed  the  first  debenture,  plus  accrued
interest, prior to its contractual maturity using the proceeds from the sales of
its common stock.  The Company also  redeemed a portion of the second  debenture
prior to its  contractual  maturity.  On June 12,  2001,  the  debenture  holder
converted the remaining  $168,000  balance on the second  debenture plus accrued
interest into 33,617 shares of the Company's  common stock,  in accordance  with
the  conversion  provisions of the  debenture.  On August 17, 2001,  the Company
modified the warrant that it had issued to the debenture  holder pursuant to the
terms of the warrant,  reducing its exercise  price to $4.50 per share,  and the
debenture holder exercised it for the entire 6,667 shares.  The Company received
$28,500 in net proceeds from the exercise of the warrants.

On January 24, 2001 the Company amended a common stock purchase agreement with a
private  investment fund for the issuance and purchase of its common stock.  The
initial  closing of the  transaction  took place on November 2, 2000.  The stock
purchase agreement established what is sometimes termed an equity line of credit
or an equity  draw down  facility.  The  facility  generally  operated  with the
investor  committed to purchase up to $25 million or up to 20% of the  Company's
outstanding shares of common stock over a twelve-month  period. Once during each
draw down pricing period, the Company could request a draw, subject to a formula
based on the Company's  average stock price and average  trading  volume setting
the maximum  amount of the request for any given draw.  The amount of money that
the investor provided to the Company and the number of shares the Company issued
to the  investor  in return for that money was  settled  during a 22 day trading
period  following  the draw  down  request  based on the  formula  in the  stock
purchase agreement.  The investor received a 5% discount to the market price for
the 22-day period and the Company  received the settled amount of the draw down.
By June 30, 2001, the Company had issued 169,500 shares of its common stock, the
total number  registered  for the equity line with the  Securities  and Exchange
Commission,  at an  average  price of  $12.60  per share  and had  received  net
proceeds  of   approximately   $2,014,000   after  deducting   expenses  of  the
transactions.  There are no further  funds  available to the Company  under this
equity  line.  The  terms of the 6%  convertible  debentures  discussed  earlier
required that 50% of the net proceeds of any equity sales, including sales under
the equity  draw down  facility,  be used to repay the  debentures  and  related
accrued interest.  Accordingly,  approximately $938,000 of the net proceeds from
sales under the equity draw down  facility was used to pay down the  debentures.
In conjunction  with the  agreement,  the Company issued a 3-year warrant to the
investor to purchase  up to 33,333  shares of its stock at an exercise  price of
$46.50 per  share.  On August 2 and August 8, 2001,  the  Company  modified  the
exercise  price for an aggregate  of 20,000  shares of the warrants to $6.00 per
share,  pursuant to the terms of the warrant,  and the investor exercised it for
an aggregate of 20,000  shares.  The


                                       42
<PAGE>


Company  received  $114,000 in net proceeds from the exercise of these warrants.
On August 21, 2001,  the Company  modified the exercise  price for the remaining
13,333  shares of the warrant to $4.50 per share.  The  investor  exercised  the
remaining  balance of the  warrant  and the  Company  received  net  proceeds of
$57,000  after  deducting  expenses of the  transaction.

In April 2001, the Company announced that it had concluded  negotiations to sell
its 29% minority interest in the stock of Pepgen  Corporation,  a privately held
therapeutic  company,  for $500,000.  The Company received the proceeds from the
sale in two installments in April and May 2001.

In August 2001, the Company executed a promissory note in the amount of $400,000
to LHC Corporation, the parent company of its then-largest stockholder. The note
required  interest at 8.5% per annum and principal plus accrued interest was due
no later than  September  14, 2001.  The note was  subsequently  extended  after
September  14, 2001 and in December  2001,  the parties  agreed to execute a new
note in the amount of $411,000,  representing  the unpaid  principal and accrued
but unpaid interest on the previous note. This note required interest payable at
8.5% and was due in  installments  of $200,000 on February  28, 2002 and $35,000
per month  thereafter until paid in full, plus accrued  interest.  The repayment
terms of the note were  renegotiated in February 2002. The amended note required
payments of $17,500 at the end of February and March 2002, increasing to $35,000
monthly  thereafter  unless and until the Company  raised at least $2 million in
external  financing,  not including the Bristol 12%  convertible  debentures and
warrants  discussed below. If there was a remaining  balance under the note upon
the Company's  obtaining proceeds of at least $2 million of external  financing,
the Company was  obligated to repay  $200,000 on the note and should any balance
on the note remain  thereafter,  the Company was  obligated to continue  monthly
payments  of $35,000  until the note was repaid in full.  The  Company  made the
required  $17,500  payment on February 28, 2002. On March 28, 2002,  the Company
again  renegotiated  the payment  terms of this note,  suspending  any  required
principal or interest  payments  until 30 days after the  effective  date of the
Company's  registration statement for the 12% convertible  debentures,  at which
time the Company was  required to make a $200,000  payment and to resume  making
monthly payments of $35,000. The registration  statement for the 12% convertible
debentures  became effective on February 14, 2003. No payments were made on this
note from February 2002 through February 2003. On February 28, 2003, the Company
and LHC Corporation executed a new note in the amount of $435,000,  representing
the unpaid  principal and accrued but unpaid interest on the December 2001 note.
The payment terms required monthly  principal  payments of $17,500 plus interest
from March 2003 through May 2003,  increasing to $35,000 monthly, plus interest,
thereafter,  unless  and  until  the  Company  secured  at least  $5,000,000  in
additional  financing,  at which time the remaining  outstanding balance was due
and  payable.  The Company  made all  required  payments  under the terms of the
February  2003  renegotiated  note and it was repaid in full in  September  2003
following the securing of financing from Marr.

On August 23, 2001,  the Company and a private  investment  fund signed a common
stock  purchase  agreement  for the future  issuance  and  purchase of up to $10
million of the  Company's  common stock over a  twenty-four  month  period.  The
initial  closing of the  transaction  occurred on October 19,  2001.  Under this
arrangement,  the  Company,  at its sole  discretion,  could  draw  down on this
facility, sometimes termed an equity line, from time to time, and the investment
fund was  obligated  to purchase  shares of the  Company's  common  stock.  This
facility  operated  similarly  to the  previous  equity line  facility  employed
earlier in 2001.  The purchase price of the common stock  purchased  pursuant to
any draw down under this facility was equal to 88% of the daily volume  weighted
average  price  of the  Company's  common  stock  on  the  applicable  date.  In
conjunction  with the signing of the stock  purchase  agreement,  on October 19,
2001,  the  Company  issued a 7-year  warrant  pursuant to  Regulation  S to the
investment  fund to purchase up to 139,742 shares of common stock at an exercise
price of $8.229  per share and 3,833  shares of its common  stock as  additional
fees  to the  investment  fund.  On  October  26,  2001,  the  Company  filed  a
Registration  Statement on Form S-2 with the Securities and Exchange  Commission
to register for resale  1,000,000  shares of common stock that it might issue in
conjunction with the equity line facility,  the warrant and the fee shares. From
the time the  Registration  Statement  became effective in November 2001 through
the  expiration of the facility in October 2003,  the Company  issued a total of
855,776  shares of its common  stock at an average  price of $3.93 per share and
received net proceeds of approximately  $3.2 million after deducting expenses of
the  transactions.  At the time  the  facility  expired  633  registered  shares
remained available for sale.

In  November  2001,  the  Company  sold  52,528  shares  of common  stock  under
Regulation D of the Securities Act to various  investors in a private  placement
at $5.70 per share,  receiving net proceeds of $295,000.  The private  placement
did not  include  registration  rights.  Therefore,  pursuant to Rule 144 of the
Securities  Act, the transfer


                                       43
<PAGE>


of the  securities  purchased by the investors was  restricted for twelve months
from the date of  purchase.  Three  former  members  of the  Company's  Board of
Directors,  Nancy Katz, Mark Novitch, and David Collins,  purchased an aggregate
of 24,038  shares of this  offering.  The proceeds of this offering were used to
fund  the  Company's  current  operations.  The  purchase  transactions  by  the
Company's  Board members were on a fair and  reasonable  basis and on terms more
favorable  to the  Company  than could have been  obtained  with  non-affiliated
parties as a result of the tenuous  financial  condition  of the Company at that
time.

On November  28,  2001,  Calypte  announced  that it intended to offer up to $10
million of shares of its common  stock to  international  investors  pursuant to
Regulation  S of the  Securities  Act.  There was no  investor  interest  in the
proposed offering, and consequently, the Company elected not to proceed with it.

Subsequently,  beginning in 2002, the Company  negotiated several new financings
from which, through March 22, 2004, it has raised approximately $21.6 million in
gross  proceeds.  The  following  table  summarizes  these  financings  by major
category and the subsequent table provides the details of these financings.


            SUMMARY OF FINANCINGS - JANUARY 1, 2002 TO MARCH 22, 2004

<TABLE>
<CAPTION>
                                                                 TOTAL
                                              GROSS     NET      SHARES      RESTRICTED
        FINANCING SOURCE                    PROCEEDS  PROCEEDS  ISSUED (1)   SHARES (2)
                                            -------   --------  ----------   ----------
<S>                                         <C>       <C>       <C>          <C>
        Bristol 12% Convertible             $   562   $    505     1,476.1          --
           Debentures and Warrants
        8% Convertible Notes                  3,232      2,594    46,084.3     3,492.6
        Other Restart Financings                750        730     2,720.3      1051.3
        Mercator 12% and 10% Debentures       4,550      3,650    34,153.4    11,643.8
        Marr Private Placements              12,500     11,900    28,333.3    28,333.3
                                            -------   --------   ---------    --------
                                            $21,594   $ 19,379   112,767.4    44,521.0
                                            =======   ========   =========    ========
</TABLE>


     (1) At March 22, 2004,  the holders have  converted  all but  approximately
         $958,000 of principal of the  convertible  notes and debentures  issued
         since February 2002. Based on current market prices,  the Company would
         be required to issue approximately 2.5 to 3.0 million additional shares
         of its common  stock if the holders  elected to convert  the  remaining
         principal and accrued interest of their debentures at this time.

     (2) Based upon  ownership  information  supplied by the Company's  transfer
         agent as of March 11, 2004. Certain of these shares may be eligible for
         resale  under Rule 144 now or at  various  times in the  future.  As of
         March 22, 2003,  approximately 34% of the Company's outstanding shares,
         or approximately 47.1 million shares,  were restricted.  In addition to
         the amounts  summarized here,  certain  vendors,  consultants and other
         parties who have agreed to accept our common stock in lieu of cash hold
         an additional 2.6 million restricted shares.




                                       44
<PAGE>



            DETAIL OF FINANCINGS - JANUARY 1, 2002 TO MARCH 22, 2004

<TABLE>
<CAPTION>
                                                                                               CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS           NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS       PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------       --------        ----          -----       ---------------
<S>                                 <C>            <C>            <C>           <C>            <C>          <C>
12% CONVERTIBLE DEBENTURE AND          Lesser of      $425                       2/11/02          $7.50       1,019.4/ $525
WARRANTS                              (i) 60% of       100                       5/10/02          $0.90
Bristol Investment Fund, Ltd.        the average      ----          $468
                                     of 3 lowest      $525
                                     closing bid
                                      prices for
                                         22 days
                                       preceding
                                      conversion
                                    or (ii)$1.50



Class A Warrant                        Lesser of        $4            $4        2/11/02          $7.50            56.7/ N/A
                                      (i) 70% of
                                     the average
                                     of lowest 3
                                         trading
                                      prices for
                                         20 days
                                       preceding
                                      conversion
                                    or (ii)$3.45

Class B Warrant                        Lesser of      $ 33          $ 33        2/11/02         $ 7.50             400/ N/A
                                      (i) 70% of      ----          ----                                           --------
                                     the average
                                     of lowest 3
                                         trading
                                     pricing for
                                         20 days
                                       preceding
                                      conversion
                                         or (ii)
                                          $6.45.

     Total Bristol                                    $562          $505                                      1,476.1/ $525
                                                      ====          ====                                      =============
</TABLE>

                                       45
<PAGE>
<TABLE>
<CAPTION>
                                                                                               CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS           NET       TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS       PROCEEDS       DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------       --------       ----          -----       ---------------
<S>                                 <C>            <C>            <C>           <C>            <C>          <C>
8% CONVERTIBLE NOTES                   Lesser of
Alpha Capital Aktiengesellshaft     (i) $3.00 or      $500                      5/24/02      $   3.60         7,260.7/ $500
Stonestreet Limited Partnership      (ii) 70% of      $500                      5/24/02        $ 3.60         7,075.7/ $500
Filter International Ltd.         the average of      $150                      5/24/02        $ 3.60         2,452.4/ $150
Camden International Ltd.           the 3 lowest      $350                      5/24/02        $ 3.60         5,279.1/ $350
Domino International Ltd.          trades for 30      $150                      5/24/02        $ 3.60         1,767.4/ $150
Thunderbird Global Corporation              days      $ 75                      5/24/02        $ 3.60         1,083.1/ $ 75
BNC Bach International Ltd.            preceding      $200                      5/24/02        $ 3.60         2,463.8/ $200
Excalibur Limited Partnership         conversion      $200                      5/24/02        $ 3.60         1,678.9/ $200
Standard Resources Ltd.                               $100                      5/24/02        $ 3.60         1,542.5/ $150
SDS Capital International Ltd.                        $300                      7/10/02       $ 10.20         4,189.8/ $300
Camden International Ltd.                             $100                      7/10/02       $ 10.20         1,707.9/ $100
Excalibur Limited Partnership                         $250                      7/24/02        $ 6.60         4,238.3/ $250
Stonestreet Limited Partnership                       $250                      8/21/02        $ 3.90         4,042.2/ $250
Alpha Capital Aktiengesellshaft                       $107                       5/9/03        $ 0.63         1,302.5/ $107
                                                      ----                                                    -------------

   Total 8% Convertible Notes                       $3,232        $2,594                                   46,084.3/ $3,232
                                                    ======        ======                                   ================

OTHER RESTART FINANCINGS:

10% CONVERTIBLE NOTE
BNC Bach International Ltd.           50% of the    $  150        $  150        5/14/02           $4.20       2,217.8/ $150
   (Note: on 7/14/02 the            average of 3                                              $10.80 on
   maturity date was extended             lowest                                               7/14/02;
   until 12/31/02; on December       closing bid                                               $1.92 on
   27, 2002, the maturity date        prices for                                              12/27/02;
   was extended until January            22 days                                               $1.80 on
   15, 2003; on January 15,            preceding                                               1/15/03;
   2003 the maturity date was         conversion                                               $1.50 on
   extended until March 17,                                                                    3/17/03;
   2003, on March 17, 2003 the                                                                 $0.99 on
   maturity date was extended                                                                    4/2/03
   until April 4, 2003; on                                                                     $0.75 on
   April 2, 2003, the maturity                                                                  4/30/03
   date was  extended until May
   5, 2003; on April 30, 2003,
   the maturity date was
   subsequently extended until
   May 10, 2004)(5)

8% CONVERTIBLE DEBENTURES
Su So                                 80% of the     $ 100          $ 90        6/17/02         $4.20        36.7 (4)/ $100
                                    lower of the
                                         average
                                     closing bid
                                        or trade
                                       price for
                                      the 5 days
                                       preceding
                                     conversion,
                                    but not less
                                      than $3.00
</TABLE>


                                       46
<PAGE>
<TABLE>
<CAPTION>
                                                                                               CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS           NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS       PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------       --------        ----          -----       ---------------
<S>                                 <C>            <C>            <C>           <C>            <C>          <C>
Jason Arasheben                       70% of the     $ 100          $ 90        7/03/02         $8.10        15.8 (4)/ $100
                                    lower of the
                                         average
                                     closing bid
                                        or trade
                                       price for
                                      the 5 days
                                       preceding
                                     conversion,
                                    but not less
                                      than $3.00

PIPE AT $1.50 PER SHARE
Careen Ltd.                            $1.50 per     $ 200         $ 200      8/28/02          $ 4.80          225.0/ N/A
Caledonia Corporate Group                  Share     $ 200         $ 200      8/28/02          $ 4.80          225.0/ N/A
                                                     -----         -----                                       ----------
    Limited

    Total Other Restart
      Financings                                     $ 750         $ 730                                      2,720.3/ $350
                                                     =====         =====                                      =============


Mercator 12% and 10% Debentures

12% CONVERTIBLE DEBENTURES
Mercator Momentum Fund, L.P.           85% of the    $ 550      $345 (6)        9/12/02         $3.00           4,866.1(4)/
($2,000 total commitment)              average of                                                                      $550
                                    the 3 lowest
Mercator assigned its rights to:         trading
   Alpha Capital AG                   prices for       250           250        7/24/03        $0.115         2,673.8/ $250
   Gamma Opportunity Capital              the 20       250           250        7/24/03        $0.115         2,685.6/ $250
     Partners, LP                   trading days
   Goldplate Investment Partners       preceding       250           250        7/24/03        $0.115        2,673.8/ $ 250
   Marr Technologies, B.V. (11)       conversion       570           570         9/1/03        $0.820         5,181.8/ $570
                                             (8)  --------    ----------
                                                     1,870         1,665
   Dr. Khalid Ahmed                                     50            50        10/2/03        $1.310            84.6/ $ 50
   Roger Suyama                                         20            20        10/2/03        $1.310             33.8/ $20
   Logisticorp, Inc.                                    20            20   10/2/03 (12)        $1.310                     -
   Southwest Resource                                   40            40   10/2/03 (12)        $1.310                     -
                                                  --------    ----------                                   ----------------
     Preservation Inc.                              $2,000        $1,795                                   18,199.5/ $1,940
                                                  --------    ----------                                   ----------------


Mercator Momentum Fund, L.P.          80% of the      $300          $260       10/22/02         $3.90          0/$300 (7)
                                      average of
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not less
                                      than $1.50
</TABLE>


                                       47
<PAGE>
<TABLE>
<CAPTION>
                                                                                               CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS           NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS       PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------       --------        ----          -----       ---------------
<S>                                 <C>            <C>            <C>           <C>            <C>          <C>
Mercator Momentum Fund L.P.  (10)     70% of the      $300          $245        4/29/03        $0.825       3,455.5/ $294
                                      average of
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $1.20

Mercator warrant                       $3.00 per        $0            $0       10/22/02         $3.90                   0
                                           share
10% CONVERTIBLE DEBENTURES
Mercator Focus Fund, L.P. (10)        80% of the    $1,000          $510        1/14/03         $1.92       5,831.8/ $422
                                      average of                     (6)
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $3.00

Mercator   Momentum  Fund,   L.P.     80% of the      $450          $440        1/30/03         $1.86       2,592.6/ $358
(10)                                  average of
                                    the 3 lowest
                                         trading
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $3.00
Mercator Focus Fund, L.P. (10)                        $400                      3/13/03         $1.47       2,437.7/ $178
Mercator Momentum Fund III, L.P.      65% of the       100                                                  1,636.3/ $100
                                      average of      ----          ----
                                    the 3 lowest      $500          $400
                                         trading      ----          ----
                                      prices for
                                          the 20
                                    trading days
                                       preceding
                                     conversion,
                                    but not more
                                      than $2.10
   Total Mercator Debentures                        $4,550        $3,650                                 34,153.4/ $3,592
                                                    ======        ======                                 ================
</TABLE>


                                       48
<PAGE>

<TABLE>
<CAPTION>
                                                                                               CALYPTE           SHARES
FINANCING TYPE AND                  CONVERSION      GROSS           NET        TRANSACTION     CLOSING         ISSUED/ $
INVESTOR (1)                          FEATURE      PROCEEDS       PROCEEDS        DATE          PRICE       REDEEMED (2)(3)
------------                          -------      --------       --------        ----          -----       ---------------
<S>                                 <C>            <C>            <C>           <C>            <C>          <C>
MARR PRIVATE PLACEMENTS

PIPE AT $0.30 PER SHARE
Marr Technologies B.V. (9)(11)        $0.30 per       $2,500     $2,300        8/1/03          $0.152             8,333.3
                                          share

PIPE AT $0.50 PER SHARE
Marr Technologies B.V. (9)(11)        $0.50 per      $10,000     $9,600        9/1/03          $0.820            20,000.0
                                                     -------     ------                                          --------
                                          share
 Total Marr Private Placements                       $12,500    $11,900                                          28,333.3
                                                     =======    =======                                          ========
</TABLE>

      (1) The Bristol  Debentures and Warrants,  the 8% Convertible  Notes,  the
Other Restart  Financings,  the Mercator 12% and 10% Debentures and warrants and
the Marr  Technologies  B.V.  PIPE's were issued  under  exemptions  provided by
Regulation  S. The  Company  could  issue no shares  under the equity  line with
Townsbury  until it had completed an effective  registration  for the underlying
shares.  With the exception of Marr Technologies  B.V., which is an affiliate of
the Company  based on its August and  September  2003  investments,  none of the
entities  listed above is or has been an  affiliate  of the Company.  Other than
Marr  Technologies  B.V., all of the listed  investors were subject to ownership
limitations  restricting  their ownership of the Company's stock to a maximum of
4.9% or 9.9%, depending on the specific agreement.

       (2) At March 22, 2004, the holders have  converted all but  approximately
$958,000 of  principal  of the  convertible  notes and  debentures  issued since
February 2002. Based on current market prices,  the Company would be required to
issue  approximately 2.5 to 3.0 million additional shares of its common stock if
the holders elected to convert the remaining  principal and accrued  interest of
their debentures at this time.

       (3) On  February  14,  2003 the  registration  statement  for the  shares
underlying the $525,000 of the Bristol Debentures became effective.  On July 18,
2003,  the  registration  statement for 52,500,000  shares  underlying the Other
Recent Financings became effective. As a result of a decline in the market price
of the  Company's  stock  subsequent  to the  effective  date of the  July  2003
registration  statement,  the number of shares  registered was  insufficient  to
permit the  complete  conversion  of the notes and  debentures  into  registered
shares. The shares underlying certain of the convertible  securities have become
eligible  for  resale  under  Rule  144,  and  certain  investors  have  availed
themselves of that eligibility to convert  restricted  shares issued pursuant to
conversions into free-trading shares. As of March 22, 2004, approximately 34% of
the Company's  outstanding  common stock, or approximately  47.1 million shares,
are  unregistered.   Of  this  amount,  Marr  Technologies  holds  33.5  million
restricted  shares  issued  pursuant  to  their  two PIPE  transactions  and the
conversion of their  investment in $570,000  principal  value of 12% convertible
notes.   Other   investors  in  our   convertible   notes  and  debentures  hold
approximately   11.0  million   restricted   shares  issued  pursuant  to  their
conversions.  The Company has agreed to register the shares of common stock on a
cost-free basis to the holders of said shares of common stock.

       (4) Includes fee shares.

       (5) On April 30, 2003,  when the market price of Calypte common stock was
$0.75,  the Company and BNC Bach  amended the  conversion  price to  eliminate a
conversion  price  ceiling  of $1.50  per  share and to  increase  the  discount
applicable  to the  conversion  price  from  40% to  50%.  In  return  for  this
modification of the conversion  price, BNC Bach agreed to extend the maturity of
the note until May 10, 2004.  BNC Bach  subsequently  converted the  outstanding
principal and accrued interest into shares of the Company's common stock.

       (6)  Reflects  a 10%  cash  commitment  fee  on  the  entire  $2  million
commitment paid to The Mercator Group less  additional fees and expenses.  As of
September  30,  2003,  an  additional  $130,000  remained  available  under this
commitment.  The Company issued the remaining $130,000 of additional  debentures
pursuant  to this  commitment  on  October 2, 2003,  of which  $70,000  has been
converted into approximately 118,000 shares of its common stock. The Company has
not yet  registered  any  underlying  shares  for  the  final  $700,000  of this
commitment.

       (7) In  conjunction  with the issuance of the $1 million 10%  convertible
debenture to Mercator  Focus Fund,  L.P., the Company used the proceeds to repay
the $0.3 million outstanding  principal balance of the 12% convertible debenture
previously  issued to Mercator  Momentum Fund, L.P. plus accrued  interest.  The
balance of costs incurred represents transactional and legal fees.


                                       49
<PAGE>


       (8) On March 31, 2003,  when the market price of Calypte Common Stock was
$0.0295,  the Company  amended the  conversion  price to  eliminate a conversion
price  floor of $0.05 per share in return for an  extension  of time in which to
register the shares of common stock underlying the various Mercator financings.

       (9) The Securities Purchase Agreements for both transactions  between the
Company and Marr  Technologies  B.V. require that the Company provide  cost-free
registration  rights to Marr;  however,  Marr is subject  to a one-year  lock-up
provision following the transaction date with respect to the shares purchased.

       (10) On January 14, 2004,  when the market price of Calypte  common stock
was $0.60,  the Company  extended the maturity date of the following  debentures
until July 14, 2004:
              o    10% Convertible Debenture dated January 14, 2003 issued to
                   Mercator Focus Fund, LP
              o    10% Convertible Debenture dated January 30, 2003 issued to
                   Mercator Momentum Fund, LP
              o    10% Convertible Debentures dated March 13, 2003 issued to
                   Mercator Momentum Fund III, LP and Mercator Focus Fund
              o    12% Convertible Debenture dated April 29, 2003 issued to
                   Mercator Momentum Fund, LP

In return for the extension of the maturity dates, the Company has agreed to pay
an additional extension fee equal to 2% of the outstanding principal balance per
month  until the  earlier  of the  extended  maturity  date or  conversion.  The
extension  fee is  payable 1% in cash and 1% in shares of the  Company's  common
stock.  Additionally,  the  Company  agreed  to  file a  registration  statement
including the shares potentially applicable to the conversion of the outstanding
debenture  balances by no later than April 29,  2004.  The shares  issuable as a
portion of the extension fee are to be included in the registration statement.

       (11) On January 23, 2004,  when the market price of Calypte  common stock
was $0.695, the Company and Marr agreed to extend the registration rights period
attributable  to  5,181,818  shares  of the  Company's  common  stock  issued in
conjunction with Marr's conversion of $570,000 principal amount of the Company's
12%  Convertible  Debentures from February 27, 2004 to April 29, 2004. In return
for the  extension,  the  Company  agreed to  include  in its next  registration
statement  an aggregate of  28,333,333  shares of its common stock  purchased by
Marr in PIPE transactions in the third quarter of 2003.

       (12) The holder claims an earlier  transaction date, which is disputed by
the Company.  This debenture has not yet been  converted by the Company  pending
resolution of the  transaction  date dispute,  which may determine the number of
shares of the Company's stock to which the holder is entitled upon conversion.


On November 13, 2003,  when the market price of the  Company's  common stock was
$0.88 per share, the Company and Marr, its largest stockholder,  entered into an
agreement  in which Marr  agreed to provide the  Company up to an  aggregate  of
$10,000,000 (the "Marr Credit  Facility")  pursuant to promissory notes issuable
to Marr on an as-needed basis by the Company (the "Notes").  Each Note will bear
interest  at the rate of 5% per annum and will have a  12-month  term.  The Marr
Credit  Facility is available  during the period  beginning on February 28, 2004
and ending on May 31, 2004. The aggregate amount available under the Marr Credit
Facility will be  proportionally  reduced by the amount of any equity  financing
obtained by the Company  during the term of the Marr Credit  Facility.  Marr has
the right of first refusal to  participate  in any such equity  financing on the
same terms as the other investors. The Marr Credit Facility provides for earlier
termination  as of March 31, 2004, if the Company fails to have its common stock
listed on an established stock exchange by that date. Moreover, upon the failure
to obtain such stock exchange  listing,  any outstanding  Notes would be due and
payable on April 30, 2004. As of March 22, 2004, no Notes have been issued under
the Marr Credit  Facility.  As consideration  for the Marr Credit Facility,  the
Company issued to Marr a warrant to purchase  375,000 shares of its common stock
at an exercise price of $0.80 per share. The warrant is immediately  exercisable
and expires two years after issuance on November 12, 2005.

On March 19,  2004,  when the market  price of the  Company's  common  stock was
$0.575 per share,  the  Company and Marr  amended  the Marr  Credit  Facility to
increase  the  aggregate  amount  available  under the Marr  Credit  Facility to
$15,000,000 and to eliminate the termination  provision upon failure to have the
common  stock listed on an  established  stock  exchange by March 31,  2004.  As
additional  consideration  for the  amendment of the Marr Credit  Facility,  the
Company issued to Marr an additional  warrant to purchase  400,000 shares of its
common  stock  at an  exercise  price  of  $0.46  per  share.  This  warrant  is
immediately exercisable and expires two years from its date of issuance on March
18, 2006.


                                       50
<PAGE>


Warrants, Options and Stock Grants

Since  January  2002,  the  Company  has  entered  into  various  contracts  and
agreements with consultants who have agreed to accept payment for their services
in the form of warrants,  options and/or stock grants.  The Company has obtained
various services under these arrangements,  including legal, financial, business
advisory,  and other services including business  introductions and arrangements
with respect to potential  domestic and international  product placement and the
development of potentially  synergistic  relationships  with appropriate  public
service or other governmental and  non-governmental  organizations.  The Company
has generally issued the warrants at a discount to the then-current market price
and has registered the shares underlying the warrants,  options and stock grants
on Form S-8 Registration  Statements for resale by the consultants.  The Company
has, since January 2002,  issued  approximately 9.6 million shares of its common
stock as a result of warrant or option  exercises  and stock  grants  related to
these consulting agreements, of which approximately 8.0 million shares have been
issued during 2003.

In May 2002,  Calypte issued warrants and options to purchase  633,333 shares of
its common stock under agreements with consultants to perform legal,  financial,
business  advisory  and  other  services  associated  with  the  restart  of its
operations.  The warrants were issued at $0.45 per share on May 9, 2002 when the
market price of our common stock was $0.90 per share.  The option was granted at
$0.90 per share on May 10,  2002,  when the market price of our common stock was
$0.90 per share. All of the warrant and option grants were  non-forfeitable  and
fully-vested  at the date of  issuance  and were  registered  for  resale by the
consultants  under Form S-8.  The  consultants  exercised  all the  warrants and
options and Calypte issued 633,333 shares and received proceeds of $292,500. All
but one of the consulting  agreements  discussed  above expired in August and we
have entered into new agreements for legal,  financial,  business advisory,  and
other  services  including   introductions  and  arrangements  with  respect  to
potential  domestic  and  international   product   development  of  synergistic
relationships with appropriate public service  organizations.  In November 2002,
Calypte issued warrants to purchase 950,000 shares of our common stock and stock
grants for 70,000  shares of our stock to  consultants  under the terms of these
new  agreements.  The Company  issued  350,000  warrants at an exercise price of
$1.50 per share on  November  1, 2002,  when the  market  price of our stock was
$4.20 per  share.  The  Company  issued an  additional  600,000  warrants  at an
exercise  price of $1.50 on  November  20,  2002,  when the market  price of our
common  stock was $2.70.  All of the  warrant  grants were  non-forfeitable  and
fully-vested  at the date of  issuance  and were  registered  for  resale by the
consultants  under Form S-8. By February 2003, the consultants had exercised all
the warrants and the Company had received  aggregate proceeds of $1.425 million.
The Company  issued 986,667 shares of its common stock pursuant to the exercises
of the November 2002 warrant and stock grants. In January and February 2003, the
Company  entered into new contracts and extended  certain other  contracts  with
existing  consultants to perform  services as described  above.  On February 14,
2003, when the market price of the Company's stock was $2.01, the Company issued
warrants  exercisable  at $1.50 per share and stock  grants for an  aggregate of
975,216  shares of its common  stock as  compensation  for these  services.  The
warrants were  non-cancelable  and fully-vested at the date of issuance.  By May
31, 2003, the consultants  had exercised  warrants to purchase all of the shares
granted to them and the Company had received proceeds of $0.8 million.

During  March 2003,  when the market  price of the  Company's  stock ranged from
$1.32 to $1.50 per share,  the Company issued warrants  exercisable at $0.75 per
share and stock  grants  for an  aggregate  of  1,350,400  as  compensation  for
services under new or extended  contracts.  The warrants were non-cancelable and
fully-vested  at the date of issuance.  By May 31,  2003,  the  consultants  had
exercised warrants to purchase all of the shares granted to them and the Company
had received proceeds of approximately $0.9 million.

In April 2003, when the price of the Company's stock ranged from $0.81 to $0.885
per share,  the Company  entered into  additional  contracts,  extended  certain
contracts,  and modified  certain other contracts with existing  consultants who
agreed to settle a portion of the  outstanding  balance due for  services  under
their  contracts in stock.  The Company  issued  warrants at $0.75 per share and
stock  grants  for an  aggregate  of  1,490,600  shares of its  common  stock as
compensation or settlement for these services.  The warrants were non-cancelable
and  fully-vested at the date of issuance.  By May 31, 2003, the consultants had
exercised warrants to purchase all of the shares granted to them and the Company
had received proceeds of approximately $0.1 million.


                                       51
<PAGE>


In May 2003,  when the price of the Company's stock ranged from $0.552 to $0.576
per share,  the Company  again  entered  into new  contracts,  extended  certain
contracts,  and modified  certain other contracts with existing  consultants who
agreed to settle a portion of the  outstanding  balance due for  services  under
their  contracts in shares of stock.  The Company  issued  warrants at $0.30 per
share and stock grants for an aggregate of 2,080,305  shares of its common stock
as   compensation   or  settlement  for  these   services.   The  warrants  were
non-cancelable and fully-vested at the date of issuance.  By September 30, 2003,
the consultants had exercised  warrants to purchase all of the shares granted to
them and the Company had received proceeds of approximately $0.5 million.

In July 2003,  when the price of the Company's  stock ranged from $0.11 to $0.30
per share, the Company extended a contract for consulting and other services and
granted the consultant a warrant to purchase  722,500 shares of its common stock
at 50% of the closing  market price on the date of any exercise as  compensation
under the  contract.  The  warrant was  granted as  fully-vested  and expired on
September  30, 2003.  By September 30, 2003,  the  consultant  had exercised the
entire  warrant at prices  ranging from $0.08 to $0.61 per share and the Company
had received proceeds of approximately $0.4 million.  Also during July 2003, the
Company issued stock grants to consultants for an aggregate of 356,344 shares of
its common stock as compensation under their contracts.

On August 20, 2003,  when the price of the Company's  stock was $0.18 per share,
the Company issued consulting contracts to two new consultants pursuant to which
it issued warrants for 100,000 shares each,  exercisable at $0.18 per share. The
warrants  were  non-cancelable  and  fully-vested  at the date of  issuance.  At
December 31, 2003, the consultants had exercised none of the warrants.

In September  2003,  when the price of the Company's  stock ranged from $0.50 to
$1.80 per share, the Company issued an aggregate of 800,000 shares of its common
stock to  consultants  and other service  providers who agreed to take shares of
stock in lieu of cash as compensation under their contracts.

In October and November 2003,  when the price of the Company's stock ranged from
$0.53 to $1.65 per share,  the Company  issued an aggregate of 125,000 shares of
its common stock to consultants  and other service  providers who agreed to take
shares of stock in lieu of cash as compensation under their contracts.

In February 2004, when the price of the Company's stock was $0.67 per share, the
Company issued 500,000 shares of its common stock to a consultant who had agreed
to accept  shares of stock as a portion of its  compensation  under a consulting
agreement.

To conserve cash and to obtain goods and  services,  the Company may continue to
issue  options and warrants at discounts to market or issue direct stock grants.
In the event that the Company  issues  additional  options and  warrants,  it is
anticipated that the securities will contain cost-free registration rights which
will be granted to holders of the  options and  warrants,  and that there may be
dilution to the Company's existing stockholders.

Restructure of Trade Debt

On February 12, 2002, the Company  completed a  restructuring  of  approximately
$1.7 million of its past due accounts  payable and certain 2002 obligations with
27  of  its  trade  creditors.  Under  the  restructuring,  the  Company  issued
approximately 47,000 shares of its common stock at various negotiated prices per
share with the trade  creditors  in  satisfaction  of the  specified  debt.  The
issuance of shares was exempt from registration  pursuant to Regulation D of the
Securities  Act.  The  shares  issued  are now  eligible  for  resale  under the
provisions of Rule 144.

Summary of Financing Activities

To  successfully  implement our business plan, we must obtain  sustainable  cash
flow and profitability.  We believe that our currently available working capital
and the  $15,000,000  available  under the amended Marr Credit  Facility will be
adequate to sustain our  operations at current  levels through at least year end
2004. If sufficient  funds are not  available  from our  operations to repay the
promissory notes when due, however, we may need to arrange additional financing,
attempt  to  extend or  otherwise  modify  the  promissory  notes or make  other
arrangements.  There can be no  assurance  that  additional  financing  would be
available,  or it if is  available,  that it


                                       52
<PAGE>


would be on acceptable terms. Our future liquidity and capital requirements will
depend on numerous factors,  including successful  completion of the development
of our new rapid tests,  acquisition  and  protection of  intellectual  property
rights,  costs of developing our new products,  ability to transfer  technology,
set up  manufacturing  and obtain  regulatory  approvals of our new rapid tests,
market  acceptance of all our products,  existence of competing  products in our
current  and  anticipated  markets,  actions by the FDA and other  international
regulatory  bodies,  and the  ability  to raise  additional  capital in a timely
manner.

Our  longer-term  liquidity  and capital  requirements  are dependent on factors
similar to those  which  impact  our  current  liquidity  and  capital  resource
considerations  and which will be  critical in  validating  our  business  model
during  2004.  Consequently,  we cannot  predict  the  adequacy  of our  capital
resources on a long-term  basis.  There can be no assurance that we will achieve
or sustain  profitability  or positive  cash flows in the future.  In  addition,
there can be no  assurance  that  subsequent  additional  financings,  if and as
necessary,  would  be  available  to us on a  timely  basis,  or  that  if it is
available,  that it would be on  acceptable  terms,  if at all.  The  terms of a
additional   financing   could  involve  a  change  of  control  and/or  require
stockholder approval, or could require us to obtain waivers of certain covenants
that are  contained  in  existing  agreements.  We would or might be required to
consider strategic opportunities,  such as merger, consolidation,  sale or other
comparable transaction,  to sustain our operations. We do not currently have any
agreements  in place with  respect to any such new  strategic  opportunity,  and
there can be no assurance that any such opportunities will be available to us on
acceptable  terms, or at all. If additional  financing is not available when and
if required or is not available on acceptable terms, or we are unable to arrange
a suitable strategic  opportunity,  we will be in significant financial jeopardy
and we may be unable to continue our operations at current levels, or at all.

Operating Activities

During,  2003 and 2002, the Company used cash of $13.4 million and $8.7 million,
respectively,  in its operations.  In both periods,  the cash used in operations
was primarily for manufacturing,  promoting and marketing the Company's complete
urine-based  HIV-1 testing method,  and for research,  selling,  and general and
administrative expenses of the Company.

Newly-Adopted Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements no.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
SFAS No.  145  requires  gains  and  losses  from  extinguishment  of debt to be
classified as an extraordinary item only if the criteria in APB No. 30 have been
met.  The  Company  adopted  SFAS 145 in 2003  and as a  result,  the gain  from
settlement of debt in 2002 has been reclassified  from an extraordinary  gain to
an ordinary gain.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities."  SFAS No.  146  addresses  accounting  and
reporting for costs associated with exit and disposal  activities and supersedes
Emerging  Issues Task Force Issue No. 94-3 (EITF 94-3),  "Liability  Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the liability is incurred,  as defined by the Statement.  Under
EITF 94-3,  an exit cost was  recognized  at the date an entity  committed to an
exit plan.  Additionally,  SFAS No. 146 provides  that exit and  disposal  costs
should be  measured  at fair  value and that the  associated  liability  will be
adjusted for changes in estimated cash flows. The provisions of SFAS No. 146 are
effective for exit and disposal activities that are initiated after December 31,
2002. This standard did not have a material impact on the Company's consolidated
financial position or results of operations,  however the Company has recognized
exit costs associated with the closure of its Alameda,  California manufacturing
facility in accordance with the standard.

In May 2003,  the FASB issued FAS No.  150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with characteristics of both liabilities and equity, many
of which have been previously  classified as equity or on the  "mezzanine".  The
Company adopted this standard during the third quarter of 2003 and, accordingly,
has classified its  mandatorily  redeemable  Series A preferred  stock as a long


                                       53
<PAGE>


term  liability  for all periods  presented.  Additionally,  effective  with the
adoption and on a prospective basis, the dividend on the mandatorily  redeemable
Series A preferred  stock is  classified  as interest  expense in the  Company's
consolidated statement of operations.

Recent Accounting Pronouncements

In April  2003,  the  FASB  issued  SFAS  149,  Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities.  This  statement  amends  and
clarifies  the  financial  accounting  and  reporting   requirements,   as  were
originally  established  in SFAS 133,  for  derivative  instruments  and hedging
activities.  SFAS 149 provides greater clarification of the characteristics of a
derivative  instrument so that  contracts with similar  characteristics  will be
accounted for  consistently.  This statement is effective for contracts  entered
into or  modified  after June 30,  2003,  as well as for  hedging  relationships
designated after June 30, 2003,  excluding  certain  implementation  issues that
have been effective prior to this date under SFAS 133. The Company's adoption of
this  statement  has not had a material  impact on our results of  operations or
financial condition.

In January 2003, the FASB issued FASB Interpretation (FIN) No. 46, Consolidation
of Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51.  FIN 46  provides  guidance  on how to apply the  controlling  financial
interest criteria in ARB 51 to variable  interest  entities  ("VIE").  Given the
complexity  of FIN 46 and  implementation  issues after its  original  issuance,
particularly  with  respect to its scope and  application  of the  consolidation
model,  the FASB staff issued several FASB staff  positions  throughout  2003 to
clarify the Board's  intent on certain of the  interpretation's  provisions.  In
December 2003, the Board issued FIN 46R to address certain technical corrections
and clarify the implementation issues that had arisen.

In  general,  a VIE is subject to  consolidation  if it has (1) an  insufficient
amount of equity for the  entity to carry on its  principal  operations  without
additional  subordinated  financial support provided by any parties, (2) a group
of equity owners that are unable to make decisions about the entity's activities
or (3) equity that does not absorb the  entity's  losses or receive the entity's
benefits. Variable interest entities are to be evaluated for consolidation based
on all  contractual,  ownership or other  interests that expose their holders to
the  risks and  rewards  of the  entity.  These  interests  may  include  equity
investments,  loans,  leases,  derivatives,  guarantees,  service and management
contracts and other instruments whose values change with changes in the VIE. Any
of these interests may require its holder to consolidate the entity.  The holder
of a variable  interest that receives the majority of the potential  variability
in gains or losses of the VIE is the VIE's primary  beneficiary  and is required
to  consolidate  the VIE.  FIN 46R became  effective  immediately  for  entities
created  after  January 31, 2003. It applies in the first fiscal year or interim
period beginning after December 15, 2003, to variable interest entities in which
an  enterprise  holds a variable  interest that it acquired  before  February 1,
2003. The Company has  determined  that the adoption of the provisions of FIN 46
will not have an impact upon its financial condition or results of operations.


                                       54
<PAGE>


RISK FACTORS

Calypte has  identified  a number of risk factors  faced by the  Company.  These
factors, among others, may cause actual results, events or performance to differ
materially from those expressed in any  forward-looking  statements made in this
Form 10-KSB or in press releases or other public  disclosures.  Investors should
be aware of the existence of these factors.

     RISKS RELATED TO AN INFORMAL SECURITIES AND EXCHANGE COMMISSION INQUIRY

Our Former  Independent  Auditors Did Not  Complete  Their Review of Our Interim
Financial  Statements  Which May Result in Us Being  Viewed as  Deficient in Our
Periodic Filing Obligations

We were contacted by the San Francisco District Office of the SEC on October 28,
2003 and advised of an informal inquiry being conducted by the enforcement staff
of the SEC regarding the Company.  The staff has requested,  among other things,
documents related to certain press releases issued by the Company. While the SEC
has advised us that the inquiry  should not be construed as an indication by the
SEC or its staff that any violation of law has occurred,  we informed our former
independent  auditors  and they  advised us that they could not  complete  their
quarterly review of our interim  financial  statements in our 10-QSB or issue an
audit opinion on our 2003 annual  financial  statements in our Form 10-KSB until
such time as our Audit Committee  completed their  investigation of this matter,
the same was reviewed by our former  auditors and they were  satisfied  that, in
their  opinion,   an  adequate   investigation  was  conducted  and  appropriate
conclusions were reached and actions taken. Our interim financial statements are
required to be reviewed under Statement of Auditing Standards 100 ("SAS 100") by
an independent  public accountant  pursuant to Item 310(b) of Regulation S B and
our  annual  financial  statements  must be  audited  by an  independent  public
accountant  pursuant  to Item 310(a) of  Regulation  S B. While we have filed an
amended 10-QSB subsequent to the conclusion of the Audit Committee investigation
on which our new  independent  auditors  have  completed an SAS 100 review,  the
staff of the SEC may take the position that our Form 10-QSB is deficient because
the required review was not completed on a timely basis. That could mean that we
may be viewed as not being current in our filings under the Securities  Exchange
Act of 1934.  If we were  determined  by the  Commission  to be deficient in our
periodic  filings,  we could be  ineligible to use Forms S-2 and S-3 to register
securities until all required reports under the Securities  Exchange Act of 1934
have been timely filed for the 12 months prior to the filing of the registration
statement  for  those  securities.  As  a  result  of  the  registration  rights
agreements we entered into with respect to various  financing  arrangements,  we
may be required to utilize a Form S-1 Registration Statement for registration of
the  underlying  shares of common stock that we are required to register,  which
may  result  in  additional  costs  and  expenses  and  possible  delay  in such
registrations.  Our Audit Committee hired independent counsel to investigate the
matter  addressed in the SEC's informal  inquiry,  and counsel  determined  that
there was no evidence of management malfeasance,  however, there is no assurance
that the SEC will not continue to pursue the  inquiry,  or that the SEC will not
change it to a formal investigation, or that there will not be sanctions against
the Company or its officers or directors.

                    RISKS RELATED TO OUR FINANCIAL CONDITION

If We are Unable to Obtain  Additional Funds When and If Required We May Have to
Significantly Curtail the Scope of Our Operations and Alter Our Business Model.

We believe that our  currently  available  working  capital plus the funds which
will be available, if necessary, from the Marr Credit Facility, as amended, will
be adequate to sustain our  operations at current  levels  through at least year
end  2004.  While we  believe  that  recent  financing  agreements  and  current
resources provide adequate funding for our operations at current levels at least
through 2004,  there can be no assurance  that such  resources will be adequate.
Further,  there can be no  assurance  that we will be able to  achieve  expanded
acceptance of or realize significant  revenues from our current or potential new
products,  including  our  rapid  tests,  or that we  will  achieve  significant
improvements  in the  efficiency of our  manufacturing  processes.  In addition,
there can be no  assurance  that we will  achieve  or sustain  profitability  or
positive  cash flows in the future.  In the absence of adequate  resources  from
current working  capital and existing  financing  commitments,  we would need to
raise  additional  capital to sustain our operations.  In that case, we would or
might be required to consider strategic opportunities, including


                                       55
<PAGE>


merger,  consolidation,  sale or other  comparable  transaction,  to sustain our
operations. We do not currently have any agreements in place with respect to any
such  strategic  opportunity,  and  there  can be no  assurance  that  any  such
opportunity  will  be  available  to us on  acceptable  terms,  or  at  all.  If
additional financing is not available to us when required or is not available to
us on  acceptable  terms,  or we are  unable  to  arrange a  suitable  strategic
opportunity,  we will be in significant  financial jeopardy and we may be unable
to  continue  our  operations  at  current  levels,  or at all.  The  terms of a
subsequent  financing  may  involve a change  of  control,  require  stockholder
approval,  and/or  require us to obtain  waivers of certain  covenants  that are
contained in existing agreements.


Our Financial  Condition has  Adversely  Affected Our Ability to Pay  Suppliers,
Service  Providers  and  Licensors  on a Timely Basis Which May  Jeopardize  Our
Ability to Continue Our Operations and to Maintain  License Rights  Necessary to
Continue Shipments and Sales of Our Products.

As of December 31, 2003 our accounts payable totaled $2.2 million, of which $1.8
million  was  over  sixty  days  old.  We  currently  have  primarily  cash-only
arrangements  with suppliers and certain  arrangements  require that we pay down
certain outstanding  amounts due when we make a current payment.  These past due
payments  vary  monthly   depending  on  the  items  purchased  and  range  from
approximately  $50,000 to $200,000  per month.  As of December  31, 2003 we have
accrued an aggregate of  approximately  $582,000 in royalty  obligations  to our
patent licensors,  of which  approximately  $409,000 were past due. The licenses
attributable to past due royalty payments relate to technology  utilized in both
our urine EIA screening test and our supplemental urine and serum tests. Because
of the  interdependence  of the screening and supplemental  tests in our testing
algorithm,  the  inability  to use any one of the  patents  could  result in the
disruption of the revenue stream from all of our products. While at this time we
are current  with our payment  plans for past-due  amounts,  if we are unable to
maintain  sufficient  working capital,  our ability to make payments on past due
negotiated royalty obligations,  make timely payments to our critical suppliers,
service providers and to licensors of intellectual property used in our products
will be  jeopardized  and we may be  unable  to  obtain  critical  supplies  and
services and to maintain  licenses  necessary for us to continue to manufacture,
ship and sell our products. Additionally,  certain vendors and service providers
with whom we have not  currently  arranged  payment  plans have or may choose to
bring suit against the Company to recover amounts they deem owing.  While we may
dispute these claims,  should the creditor prevail and we be required to pay all
amounts due to the creditor,  and if working capital that will enable us to make
the required payment is not available when required,  the Company will be placed
in  significant  financial  jeopardy  and we  may  be  unable  to  continue  our
operations at current levels, or at all.

We Have Incurred Losses in the Past and We Expect to Incur Losses in the Future.

We have incurred  losses in each year since our inception.  Our net loss for the
years  ended  December  31, 2003 and 2002 was $26.5  million and $13.3  million,
respectively  and our  accumulated  deficit  at  December  31,  2003 was  $127.8
million.  We expect operating losses to continue during 2004 and perhaps beyond,
as we  complete  the  development  and begin  commercializing  our rapid  tests,
complete  our  manufacturing   restructuring  and  consolidation,   and  conduct
additional research and development for product improvements and clinical trials
on potential new products.

An Economic Downturn or Terrorist Attacks May Adversely Affect Our Business.

Changes in economic conditions could adversely affect our business. For example,
in a difficult  economic  environment,  customers  may be unwilling or unable to
invest in new  diagnostic  products,  may elect to  reduce  the  amount of their
purchases or may perform less HIV testing.  A weakening  business  climate could
also  cause  longer  sales  cycles  and slower  growth,  and could  expose us to
increased  business or credit risk in dealing with customers  adversely affected
by economic conditions.

Terrorist attacks and subsequent  governmental  responses to these attacks could
cause further  economic  instability or lead to further acts of terrorism in the
United  States and  elsewhere.  These actions could  adversely  affect  economic
conditions  outside  the  United  States  and  reduce  demand  for our  products
internationally. Terrorist attacks could also cause regulatory agencies, such as
the FDA or agencies that perform similar functions outside the United States, to
focus their  resources  on vaccines  or other  products  intended to address the


                                       56
<PAGE>


threat of  biological or chemical  warfare.  This  diversion of resources  could
delay our ability to obtain regulatory approvals required to manufacture, market
or sell our products in the United States and other countries.

                RISKS RELATED TO THE MARKET FOR OUR COMMON STOCK

The Price of Our Common Stock Has Been Highly  Volatile  Due to Several  Factors
Which Will Continue to Affect the Price of Our Stock.

Our  common  stock has traded as low as $0.11 per share and as high as $3.45 per
share in the twelve months ended  December 31, 2003. We believe that some of the
factors leading to the volatility include:

o    price and volume fluctuations in the stock market at large which do not
     relate to our operating performance;

o    fluctuations in our operating results;

o    concerns about our ability to finance our continuing operations;

o    financing arrangements which may require the issuance of a significant
     number of shares in relation to the number of shares currently outstanding;

o    announcements of technological innovations or new products which we or our
     competitors make;

o    FDA, SEC and international regulatory actions;

o    availability of reimbursement for use of our products from private health
     insurers, governmental health administration authorities and other
     third-party payors;

o    developments with respect to patents or proprietary rights;

o    public concern as to the safety of products that we or others develop;

o    changes in health care policy in the United States or abroad;

o    changes in stock market analysts' recommendations regarding Calypte, other
     medical products companies or the medical product industry generally;

o    fluctuations in market demand for and supply of our products; and

o    certain world conditions, such as SARS, an economic downturn or terrorist
     attacks.

The Company and the Price of Our Shares May Be Adversely  Affected By the Public
Sale of a Significant Number of the Shares Eligible for Future Sale.

At December  31,  2003,  approximately  89.9  million or 66% of the  outstanding
shares of our common  stock were freely  tradable.  Sales of common stock in the
public market could  materially  adversely affect the market price of our common
stock.  Such sales also may  inhibit  our  ability  to obtain  future  equity or
equity-related financing on acceptable terms.

From inception  through December 31, 2003, the Company has issued  approximately
136 million shares and raised  approximately $129 million.  At a Special Meeting
of Stockholders on February 14, 2003, our  stockholders  approved an increase in
the number of authorized  shares of the Company's  common stock from 200 million
to 800  million.  Although  the Company  has no plans to do so, at December  31,
2003, it has the ability,  without further  strockholder  approval,  to issue in
excess  of 500  million  shares  of its  common  stock  for  financing  or other
purposes.  The perceived  risk of dilution  from this amount of  authorized  but
unissued  stock may cause our existing  stockholders  and other  holders to sell
their shares of stock,  which would contribute to a decrease in our stock price.
In this regard,  significant downward pressure on the trading price of our stock
may  also  cause  investors  to  engage  in short  sales,  which  would  further
contribute to significant downward pressure on the trading price of our stock.


                                       57
<PAGE>


Our Issuance of Warrants,  Options and Stock Grants to Consultants  for Services
and the  Granting of  Registration  Rights for the  Underlying  Shares of Common
Stock May Have a Negative Effect on the Trading Price of Our Common Stock.

As we  continue  to look for ways to  minimize  our use of cash while  obtaining
required services, we have issued and may continue to issue warrants and options
at or below the current market price or make additional  stock bonus grants.  We
have, from January 1 through  December 31, 2003,  issued  warrants,  options and
stock  bonuses for nearly 19.8  million  shares,  including  approximately  10.0
million  shares from  employee  benefit plans and the 2003  Non-Qualified  Stock
Option  Plan,  in payment for  consulting  services as more fully  described  in
"Liquidity and Capital Resources".  In addition to the potential dilutive effect
of a large  number of shares  and a low  exercise  price  for the  warrants  and
options, there is the potential that a large number of the underlying shares may
be sold on the open  market  at any  given  time,  which  could  place  downward
pressure on the trading price of our common stock.

Our Planned  Registration of a Significant Amount of Our Outstanding  Restricted
Stock May Have a Negative Effect on the Trading Price of Our Stock.

At March 15, 2004, investors in our common stock hold approximately 47.1 million
shares of restricted stock, of which  approximately  33.5 million shares relates
to purchases of our common stock by Marr. and another 11.0 million shares relate
to issuances  pursuant to our convertible  notes and  debentures.  Additionally,
Calypte would be required to issue  approximately 2.5 to 3.0 million  additional
shares of its common stock if the holders of currently  outstanding  convertible
debentures  elected to convert the remaining  principal and accrued  interest of
their  debentures.  Calypte  has  committed  to  file a  registration  statement
including  essentially  all of these shares  during the second  quarter of 2004.
Although  the Marr  agreements  require  that Marr hold its  shares for one year
following  their  purchase,  essentially all of the other shares would be freely
tradable  upon the  effectiveness  of the  planned  registration  statement.  If
investors holding a significant number of freely tradable shares decided to sell
them in a short period of time  following the  effectiveness  of a  registration
statement,  such sales could contribute to significant  downward pressure on the
trading price of our stock.

Our  Common  Stock is  Subject  to the  "Penny  Stock"  Rules of the SEC and the
Trading Market In Our  Securities is Limited,  Which Makes  Transactions  in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

Shares of our common stock are "penny  stocks" as defined in the  Exchange  Act,
which are traded in the Over-The-Counter  Market on the OTC Bulletin Board. As a
result,  investors may find it more  difficult to dispose of or obtain  accurate
quotations  as to the price of the shares of the common  stock being  registered
hereby. In addition, the "penny stock" rules adopted by the Commission under the
Exchange  Act  subject  the sale of the  shares of our  common  stock to certain
regulations  which impose sales practice  requirements  on  broker/dealers.  For
example,  brokers/dealers  selling such securities  must, prior to effecting the
transaction, provide their customers with a document that discloses the risks of
investing in such securities. Included in this documents are the following:

o    the bid and offer price quotes in and for the "penny stock", and the number
     of shares to which the quoted prices apply.

o    the brokerage firm's compensation for the trade.

o    the compensation received by the brokerage firm's sales person for the
     trade.

In addition, the brokerage firm must send the investor:

o    a monthly account statement that gives an estimate of the value of each
     "penny stock" in the investor's account.

o    a written statement of the investor's financial situation and investment
     goals.

Legal remedies,  which may be available to you as an investor in "penny stocks",
are as follows:

o    if "penny stock" is sold to you in violation of your rights listed above,
     or other federal or states


                                       58
<PAGE>


     securities laws, you may be able to cancel your purchase and get your money
     back.

o    if the stocks are sold in a fraudulent manner, you may be able to sue the
     persons and firms that caused the fraud for damages.

o    if you have signed an arbitration agreement, however, you may have to
     pursue your claim through arbitration.

If the person  purchasing  the  securities  is someone  other than an accredited
investor or an established customer of the broker/dealer, the broker/dealer must
also  approve  the  potential   customer's  account  by  obtaining   information
concerning  the  customer's  financial  situation,   investment  experience  and
investment objectives.  The broker/dealer must also make a determination whether
the  transaction  is suitable  for the  customer  and whether the  customer  has
sufficient  knowledge  and  experience  in  financial  matters to be  reasonably
expected  to  be  capable  of  evaluating  the  risk  of  transactions  in  such
securities.  Accordingly,  the  Commission's  rules  may  limit  the  number  of
potential purchasers of the shares of our common stock.

Resale restrictions on transferring "penny stocks" are sometimes imposed by some
states,  which may make  transaction  in our stock more difficult and may reduce
the value of the investment.  Various state securities laws pose restrictions on
transferring  "penny stocks" and as a result,  investors in our common stock may
have the ability to sell their shares of our common stock impaired.


                          RISKS RELATED TO OUR BUSINESS

We May Be Unsuccessful in Implementing Our Restructuring and Consolidation Plans
as Anticipated.

We are in the process of consolidating our manufacturing  facilities in a single
facility at our Rockville,  Maryland  location.  If the  consolidation  does not
proceed as planned,  or if the FDA does not approve the facility  changes on the
timeline  anticipated,  the  anticipated  cost  reductions  as well as increased
efficiencies may not occur.  There can be no assurance that we will successfully
complete the  development  and  commercialization  of our rapid tests  currently
under evaluation,  or that our  international  marketing efforts with respect to
these tests will result in significant additional sales. Additionally, there can
be no assurance  that we will be able to  successfully  negotiate  government or
private-sector  contracts  for  mass-testing  applications.   Consequently,  our
current financial  resources and financing  commitments may be inadequate and we
may  have to seek  additional  financing,  which  may  not be  available  on the
timetable  required  or on  acceptable  terms,  or we may  have to  curtail  our
operations, or both.

In  conjunction  with our  manufacturing  consolidation,  we will be  unable  to
produce  our HIV-1  Urine EIA  product  for sale in the US for  approximately  9
months.  We are building  sufficient  inventories of our HIV 1 Urine EIA test in
Alameda to continue to satisfy  expected  customer  orders during the transition
period.  We have  considered  historical  sales  levels  and the  length of time
required to complete the  consolidation  and obtain FDA approval in  determining
the amount of inventory required to bridge the transition  period.  Demand could
significantly  exceed historical  levels, and consolidation of operations or FDA
approval could take longer than expected.  If one or more of these events occur,
then our transition  inventory may not be sufficient to supply  customer  orders
and we may lose business that we may find difficult, or impossible,  to recover.
Alternatively, demand could fall significantly below historical levels, in which
case we will have  built  excess  inventory  that we may have to  dispose  of at
additional cost, or at a loss.

Our Customers May Not Be Able to Satisfy Their  Contractual  Obligations  and We
May Not Be Able to Deliver Our Products as a Result of the Impact of  Conditions
Such as Severe Acute Respiratory Syndrome ("SARS") or Other Such World Events.

Our expected  first quarter 2003  shipment of urine HIV  screening  tests to our
distributor  in the  People's  Republic  Of China  was  delayed  until the third
quarter of 2003 in part as a result of the impact of the SARS  outbreak  in that
country.  Our distributor has reported that both potential  patients and medical
personnel were  reluctant to visit or report for work at hospitals,  clinics and
other sites for fear of contracting or spreading  SARS and,  consequently,  both
diagnostic   and   therapeutic   procedures   were   postponed.    Additionally,
governmentally-imposed  facility


                                       59
<PAGE>


closures and quarantine restrictions disrupted the ability of the distributor to
receive and distribute our HIV tests. This situation may recur.

Our business model and future revenue forecasts call for a significant expansion
of sales in the People's  Republic of China as well as in Russia and Africa upon
successful  completion of the rapid product evaluation and regulatory  approval.
Should conditions beyond our control, such as SARS, redirect attention more than
temporarily from the worldwide HIV/AIDS epidemic, our customers' ability to meet
their  contractual  purchase  obligations  or  our  ability  to  supply  product
internationally  for either  evaluation  or  commercial  use may prevent us from
achieving  the  revenues  we have  projected.  As a result,  we may have to seek
additional  financing  beyond  that  which we have  projected,  which may not be
available  on the  timetable  required  or on  acceptable  terms  that  are  not
substantially  dilutive  to our  stockholders,  or we may  have to  curtail  our
operations, or both.

Our Quarterly  Results May Fluctuate  Due to Certain  Regulatory,  Marketing and
Competitive Factors Over Which We Have Little or No Control.

The  factors  listed  below,  some of which we  cannot  control,  may  cause our
revenues and results of operations to fluctuate significantly:

o    actions taken by the FDA or foreign regulatory bodies relating to our
     existing products or products we are currently developing or seeking to
     develop;

o    the extent to which our current or proposed new products gain market
     acceptance;

o    the timing and size of distributor or joint venture purchases;

o    introductions of alternative means for testing for HIV by competitors; and

o    customer concerns about the stability of our business which could cause
     them to seek alternatives to our product.

Our Research, Development and Commercialization Efforts May Not Succeed or Our
Competitors May Develop and Commercialize More Effective or Successful
Diagnostic Products.

In order to remain competitive,  we must regularly commit substantial  resources
to research and development and the commercialization of new products.

The research and development  process  generally  takes a significant  amount of
time from inception to commercial  product launch.  This process is conducted in
various stages.  During each stage there is a substantial  risk that we will not
achieve  our goals on a timely  basis,  or at all,  and we may have to abandon a
product in which we have invested substantial amounts of money.

During 2003, we incurred $1.5 million in research and development  expenses.  We
expect to incur even more  significant  costs from our research and  development
activities in the future.

A primary  focus of our  efforts  has been,  and is  expected to continue to be,
rapid HIV tests,  which are still under  development.  However,  there can be no
assurance  that we will  succeed in our research  and  development  efforts with
respect to rapid tests or other technologies or products.

Successful  products require significant  development and investment,  including
testing,  to  demonstrate  their  cost-effectiveness  or other benefits prior to
commercialization. In addition, regulatory approval must be obtained before most
products may be sold.  Additional  development efforts on these products will be
required   before  any  regulatory   authority  will  review  them.   Regulatory
authorities  may not approve these  products for  commercial  sale. In addition,
even if a product is  developed  and all  applicable  regulatory  approvals  are
obtained, there may be little or no market for the product.  Accordingly,  if we
fail to develop commercially successful products, or if competitors develop more
effective products or a greater number of successful new products, customers may
decide to use products developed by our competitors. This would result in a loss
of  revenues  and  adversely  affect our results of  operations,  cash flows and
business.


                                       60
<PAGE>


We Have Limited Experience Selling and Marketing Our HIV-1 Urine ELISA Tests and
No Experience Marketing a Rapid Test.

Our urine-based products incorporate a unique method of determining the presence
of HIV  antibodies  and we have limited  experience  marketing  and selling them
either  domestically  or  internationally.  Our company's  success  depends upon
alliances with third-party international distributors and joint venture partners
and upon the ability of domestic  distribution  partners to  penetrate  expanded
markets. There can be no assurance that:

o    our international  distributors and joint ventures will successfully market
     our products;

o    our domestic selling efforts will be effective;

o    we will obtain any expanded degree of market  acceptance among  physicians,
     patients or health care payors;  or others in the medical or public  health
     community  which  are  essential  for  expanded  market  acceptance  of the
     products; or

o    if our  relationships  with  distributors  terminate,  we  will  be able to
     establish  relationships with other distributors on satisfactory  terms, if
     at all.

We have had FDA  approval  to market  our  current  urine  HIV-1  screening  and
supplemental  tests in the United States and have been marketing  these products
since 1998. We have not yet introduced  either an HIV-2 product or a rapid point
of care test, both of which are desired in many areas of the world.  Further, we
have not achieved  significant  market  penetration with our current ELISA tests
within  domestic or  international  markets.  A disruption in our  distribution,
sales or  marketing  network  could  reduce our sales  revenues  and cause us to
either cease operations or expend more resources on market  penetration  efforts
than are available to us without affecting other parts of our business.

Our  Distribution and Sales Network for U.S.  Hospitals,  and Public and Private
Health Markets Has Thus Far Failed to Yield Significant Sales and Revenues.

Domestic  health agencies are a fragmented  marketplace  with many small outlets
which  makes  achieving  market  acceptance  difficult.  Because of our  limited
financial  resources,  we are not actively  attempting to penetrate  independent
public and private health markets. We have terminated our direct sales force and
may consider  consolidating our US sales effort under a single distributor.  The
role of the new distributor would be to manage the current domestic sales of our
urine EIA screening test in the life insurance  reference  laboratory market and
the sales of our serum Western Blot supplemental  tests and, to a lesser extent,
to develop incremental business  opportunities for our current products in other
domestic  markets.   We  view  sales  in  these  other  domestic  markets  as  a
supplemental  revenue source rather than a major  contributor to our anticipated
future revenue.

We Currently  Depend Upon the Viability of Three  Primary  Products -- Our HIV-1
Urine-Based Screening Test and Our Urine and Blood Based Supplemental Tests.

Our HIV-1  urine-based  screening  test and urine and  blood-based  supplemental
tests are our current  products.  Our sales of these products for the year ended
December 31, 2003 decreased by 5% compared to the comparable  period in 2002. If
we cannot  profitably  introduce  new  products  on a timely  basis and if these
products  and our  screening  and  supplemental  tests  fail to  achieve  market
acceptance or generate significant revenues, we may have to cease operations.

We May Not be Able to Successfully  Develop and Market New Products That We Plan
to Introduce.

We plan to develop other urine-based diagnostic products including rapid HIV-1/2
screening tests, tests for other infectious  diseases or health conditions and a
serum-based rapid HIV-1/2  screening test. There are numerous  developmental and
regulatory  issues that may preclude the  introduction  of these  products  into
commercial  sale.  If we are  unable to  demonstrate  the  feasibility  of these
products,    successfully   transfer   the   technology   for   commercial-scale
manufacturing to either internal,  joint venture or outsourced  manufacturers or
meet regulatory  requirements or resolve potential patent licensing requirements
with  respect  to their  marketing,  we may have to


                                       61
<PAGE>


abandon them and alter our business  plan.  Such  modifications  to our business
plan will likely delay  achievement of sustainable  cash flow from product sales
and profitability.  As a result, we may have to seek additional financing, which
may not be available on the timetable required or on acceptable terms, or we may
have to curtail our operations, or both.

A Market for Our Products May Not Develop.

Our future  success  will depend,  in part,  on the market  acceptance,  and the
timing of such acceptance, of new products such as our developmental stage rapid
HIV tests and  other new  products  or  technologies  that may be  developed  or
acquired.  To achieve  market  acceptance,  we must make  substantial  marketing
efforts and spend significant funds to inform potential customers and the public
of the perceived benefits of these products.  We currently have limited evidence
on which to evaluate the market reaction to products that may be developed,  and
there can be no assurance  that any products will obtain market  acceptance  and
fill the market need that is perceived to exist.

Our Success Depends on Our Ability to Protect Our Proprietary Technology.

The  diagnostics  test  industry  places  considerable  importance  on obtaining
patent,  trademark,  and trade secret protection,  as well as other intellectual
property  rights,  for new  technologies,  products and  processes.  Our success
depends,  in part, on our ability to develop and maintain a strong  intellectual
property  portfolio or obtain licenses to patents for products and  technologies
both in the United States and in other countries.

As  appropriate,  we  intend  to file  patent  applications  and  obtain  patent
protection for our proprietary technology. These patent applications and patents
will cover, as applicable,  compositions of matter for our products,  methods of
making those products,  methods of using those products,  and apparatus relating
to the use or manufacture of those products. We will also rely on trade secrets,
know-how, and continuing  technological  advancements to protect our proprietary
technology.

We have entered,  and will continue to enter,  into  confidentiality  agreements
with our employees,  consultants,  advisors and  collaborators.  However,  these
parties may not honor these  agreements  and we may not be able to  successfully
protect  our  rights to  unpatented  trade  secrets  and  know-how.  Others  may
independently  develop  substantially  equivalent  proprietary  information  and
techniques or otherwise gain access to our trade secrets and know-how.

Many of our  employees,  including  scientific and  management  personnel,  were
previously employed by competing companies. Although we encourage and expect all
of  our  employees  to  abide  by any  confidentiality  agreement  with a  prior
employer,  competing  companies may allege trade secret  violations  and similar
claims against us.

We may collaborate with  universities and  governmental  research  organizations
which,  as a  result,  may  acquire  part of the  rights  to any  inventions  or
technical information derived from collaboration with them.

To facilitate  development  and  commercialization  of a proprietary  technology
base, we may need to obtain licenses to patents or other proprietary rights from
other parties.  Obtaining and maintaining  such licenses may require the payment
of substantial  amounts. In addition,  if we are unable to obtain these types of
licenses,  our product development and commercialization  efforts may be delayed
or precluded.

We may incur substantial costs and be required to expend  substantial  resources
in asserting or protecting our  intellectual  property  rights,  or in defending
suits against us related to intellectual  property  rights.  Disputes  regarding
intellectual  property rights could  substantially  delay product development or
commercialization  activities.  Disputes regarding  intellectual property rights
might  include  state,  federal or foreign  court  litigation  as well as patent
interference,  patent  reexamination,  patent reissue,  or trademark  opposition
proceedings  in the United  States Patent and  Trademark  Office.  Opposition or
revocation  proceedings  could be  instituted  in a foreign  patent  office.  An
adverse decision in any proceeding regarding  intellectual property rights could
result in the loss or  limitation  of our rights to a patent,  an  invention  or
trademark.


                                       62
<PAGE>


We are Dependent Upon Patents,  Licenses and Other Proprietary Rights From Third
Parties.

We  currently  have the right to use patent  and  proprietary  rights  which are
material to the  manufacture  and sale of our HIV-1  urine-based  screening test
under  licensing   agreements  with  New  York  University,   Cambridge  Biotech
Corporation and the Texas A&M University  System.  We also have the right to use
patent and proprietary  rights material to the manufacture and sale of our HIV-1
serum- and  urine-based  supplemental  tests  under a licensing  agreement  with
National  Institutes of Health. We will require license  agreements from certain
of these  parties or other  patent  holders for  technologies  used in our rapid
tests and other  potential new products.  As of December 31, 2003 we had accrued
an aggregate of  approximately  $409,000 in past due royalty  obligations to our
patent licensors.  In the event our financial  condition inhibits our ability to
pay royalty payments due under our license  agreements,  our rights to use those
licenses could be jeopardized in the event of a default in payment of royalties.
Specifically,  during the 2002 and 2003 calendar years,  revenues subject to the
New York  University,  Cambridge  Biotech and Texas A&M license  agreements were
$1.5  million  and $2.0  million,  respectively,  and  revenues  subject  to the
National  Institutes of Health  agreement  were $2.0 million and $1.3 million in
calendar 2002 and 2003, respectively.  The loss of any of the foregoing licenses
could have a materially adverse effect on our ability to continue to produce our
products since the license agreements provide necessary proprietary processes or
components for the manufacture of our products.

The Sales  Potential for Our Rapid Test Products Will be Affected by Our Ability
to Obtain Certain Licenses.

There are two primary  factors that will affect the specific  countries in which
we will be able to sell our  rapid HIV tests and  therefore  the  overall  sales
potential  of the tests.  One factor is whether we can arrange a  sublicense  or
distribution  agreement  related to patents for  detection  of the HIV-2  virus.
HIV-2 is a type of the HIV virus  estimated to represent a small fraction of the
known HIV cases worldwide.  Nevertheless, HIV-2 is considered to be an important
component in the testing  regimen for HIV in many  markets.  Access to a license
for one or more HIV-2  patents may be necessary to sell HIV-2 tests in countries
where such  patents are in force,  or to  manufacture  in  countries  where such
patents are in force and then sell into non-patent markets.

Another  factor that may affect the specific  countries in which we will be able
to sell  our  rapid  HIV-1 or HIV-2  tests,  and  therefore  the  overall  sales
potential,  concerns  whether  we  can  arrange  a  sublicense  or  distribution
agreement  related to any patents  which claim  lateral  flow assay  methods and
devices covering the our rapid HIV tests or their use. Our  developmental  stage
tests are lateral flow assay devices that test for specific  antibodies or other
substances.  There are numerous patents in the United States and other countries
which claim  lateral flow assay  methods and devices.  Some of these patents may
broadly cover the technology used in our rapid test products and are in force in
the United  States and other  countries.  We may not be able to make or sell our
rapid test products in countries where these patents are in force.

In the event  that it is  determined  that a license is  required  and it is not
possible to negotiate a license agreement under a necessary patent,  our ability
to manufacture  and sell our rapid  products could be limited.  In such case, we
may be able  to  modify  our  rapid  tests  such  that a  license  would  not be
necessary.  However,  this alternative  could delay or limit our ability to sell
our rapid test products, which would adversely affect our results of operations,
cash flows and business.

                                       63
<PAGE>


We Rely on Sole  Source  Suppliers  that We Cannot  Quickly  Replace for Certain
Components Critical to the Manufacture of Our Products.

Among the critical items we purchase from  qualified  sole source  suppliers are
various conjugates,  fetal bovine serum, and HIV-positive and HIV-negative urine
samples.  Any delay or  interruption in the supply of these or other sole source
components could have a material adverse effect on us by significantly impairing
our ability to manufacture products in sufficient quantities, particularly as we
increase  our  manufacturing  activities  in support  of  commercial  sales.  In
addition,  if our  financial  condition  reduces our ability to pay for critical
components on a timely basis,  our suppliers may delay or cease selling critical
components  to us,  which  could also  impair our  ability  to  manufacture.  We
typically do not have long-term supply agreements with these suppliers,  instead
using  purchase  orders to  arrange  for our  purchases  of  materials,  so that
suppliers  could delay or decline to ship  components  until  payment is made in
advance or on a COD basis.

We Have Limited  Experience in Manufacturing  Our Products and Little Experience
in Manufacturing Our Products In Commercial Quantities.

Our lack of working capital and turnover among our manufacturing  personnel as a
result  of our  wind-down  and  restart  has  resulted  in  material  production
difficulties in the past including problems involving:

o    scaling up production of new products;

o    developing market acceptance for new product;

o    production yields;

o    quality control and assurance;

o    raw material supply; and

o    shortages of qualified personnel.

These  difficulties that we have  experienced,  and may experience in the future
could affect our ability to meet  increases in demand  should our products  gain
market acceptance and could impede the growth of our sales revenues.

In an Effort  to Scale Up Our  Manufacturing  Capacity  Quickly,  We May  Engage
Contract  Manufacturers  to Produce Some of Our  Products,  Including  Our Rapid
Tests Currently Under Development.

Outsourcing some of our  manufacturing  processes to contract  manufacturers may
permit us to expand our  manufacturing  capacity more  quickly,  but it may also
subject us to problems in such areas as:


o    lack of technical knowledge regarding regulated procedures;

o    uncertain or unreliable production yields;

o    maintaining quality control and assurance;

o    regulatory  compliance,  since most rapid test manufacturers do not produce
     products that are as stringently controlled as HIV diagnostics; and

o    misappropriation   of  intellectual   property,   particularly  in  foreign
     countries where patent  protection is less stringent,  and depending on the
     extent of manufacturing processes that are outsourced.

The  Success  of Our Plans to Enter  International  Markets  May Be  Limited  or
Disrupted  Due to Risks  Related to  International  Trade and  Marketing and the
Capabilities of Our Distributors, Manufacturers and Joint Venture Partners.

Following the completion of the  development  of our rapid tests,  we anticipate
that sales to international  distributors  and/or joint ventures will generate a
significant  portion of our revenues for the next several years. We believe that
our urine-based tests can provide significant  benefits in countries that do not
have the  facilities

                                       64
<PAGE>


or  personnel to safely and  effectively  collect and test blood or other bodily
fluid samples.  However, sales to international  customers accounted for only 4%
of our  revenue in our fiscal  year ended  December  31, 2002 and only 5% of our
revenue  during 2003. A majority of the  companies  with which we compete in the
sale of HIV screening tests actively market their diagnostic products outside of
the U.S. In addition, as regulatory requirements for HIV screening tests outside
the United States are less  demanding than those of the FDA, we compete with our
EIA  products  against a much  wider  range of  competitors  that may not be FDA
approved. Manufacturers from Japan, Canada, Europe, and Australia offer a number
of HIV screening tests in those markets including HIV-1/2 tests, rapid tests and
other non-EIA format tests,  which are not approved for sale in the U.S. market.
There can be no assurance  that our products  will compete  effectively  against
these products in foreign  markets,  or that these  competing  products will not
achieve FDA approval. The following risks may limit or disrupt our international
sales:

o    the imposition of government controls (regulatory approval);

o    export license requirements;

o    political instability;

o    trade restrictions;

o    changes in tariffs;

o    difficulties   in  managing   international   operations   (difficulty   in
     establishing  a  relationship  with a foreign  distributor,  joint  venture
     partner, or contract manufacturer with the financial and logistical ability
     to maintain quality control of product);

o    the ability to secure licenses for intellectual property or technology that
     are  necessary  to  manufacture  or  sell  our  products  in  the  selected
     countries;

o    fluctuations in foreign currency exchanges rates;

o    the financial stability of our distributors;

o    the  financial  capabilities  of potential  customers  in  lesser-developed
     countries or, alternatively,  our inability to obtain approvals which would
     enable such countries access to outside financing, such as the World Bank;

o    the ability of our distributors to successfully sell into their contractual
     market territory or to successfully cover their entire territory;

o    the  possibility   that  a  distributor  may  be  unable  to  meet  minimum
     contractual commitments;

o    establishing market awareness; and

o    external  conditions such as regional  conflicts or health crises resulting
     from SARS.

Some of our distributors have limited international marketing experience.  There
can be no assurance that these distributors will be able to successfully  market
our  products in foreign  markets.  Any such  failure  will delay or disrupt our
plans to expand the Company's business.

We Face Intense  Competition in the Medical Diagnostic Products Market and Rapid
Technological Advances by Competitors.

Competition  in our  diagnostic  market is intense and we expect it to increase.
The marketplace  where we sell our products is divided into two categories:  (i)
screening,  and  (ii)  supplemental  testing.  Within  the  United  States,  our
competitors   for  screening   tests   include  a  number  of   well-established
manufacturers of HIV tests using blood samples, plus at least one system for the
detection  of HIV  antibodies  using oral  fluid  samples.  In the  supplemental
testing category of the market, we offer the only FDA approved  urine-based test
as  well as a  blood-based  test.  One  other  company  offers  an FDA  approved
supplemental  blood test. In addition to our urine and blood-based  confirmation
test, there is also an oral mucosal transidate  (saliva) based supplemental test
to complement  the  oral-fluid  screening  test.  Many of our  competitors  have
significantly  greater financial,  marketing and distribution  resources than we
do. Our  competitors  may succeed in  developing or marketing

                                       65
<PAGE>


technologies and products that are more effective than ours,  including  several
recently-FDA  approved  rapid  blood  tests.  In  addition,  as the  anticipated
acceptance for urine testing grows, we may experience competition from companies
in areas where  intellectual  property  rights may not be as stringent as in the
US. These  developments  could render our  technologies or products  obsolete or
noncompetitive  or  otherwise  affect our ability to  increase  or maintain  our
products' market share.

Our Research and  Development  of HIV Urine Tests Involves the Controlled Use of
Hazardous Materials.

There can be no assurance that the Company's safety  procedures for handling and
disposing  of  hazardous  materials  such as azide will comply  with  applicable
regulations.  For example,  azide, when present in high  concentrations  and not
diluted with water, can have an explosive reaction.  Azide is a chemical used as
a  preservative  in our  kits.  In  addition,  we cannot  eliminate  the risk of
accidental  contamination or injury from these materials.  We may be held liable
for  damages  from such an  accident  and that  liability  could have a material
adverse effect on the Company.

We May Not Be Able to Retain Our Key  Executives  and Research  and  Development
Personnel.

As a small  company,  our success  depends on the  services of key  employees in
executive and research and  development  positions.  The loss of the services of
one or more of such employees could have a material adverse effect on us.

As a Small  Manufacturer  of  Medical  Diagnostic  Products,  We Are  Exposed to
Product  Liability and Recall Risks For Which  Insurance  Coverage is Expensive,
Limited and Potentially Inadequate.

We  manufacture  medical  diagnostic  products,  which  subjects  us to risks of
product liability claims or product recalls,  particularly in the event of false
positive or false negative  reports.  A product  recall or a successful  product
liability  claim or claims  that  exceed  our  insurance  coverage  could have a
material  adverse effect on us. We maintain a $10,000,000  claims made policy of
product liability insurance.  However, product liability insurance is expensive.
In the future we may not be able to obtain  coverage on acceptable  terms, if at
all.  Moreover,  our  insurance  coverage  may not  adequately  protect  us from
liability  that we incur in  connection  with  clinical  trials  or sales of our
products.

Our Charter Documents May Inhibit a Takeover.

Certain provisions of our Certificate of Incorporation and Bylaws could:

o    discourage potential  acquisition  proposals (i.e.  shareholder rights plan
     also known as a "poison pill");

o    delay or prevent a change in control of Calypte;

o    diminish  stockholders'  opportunities  to participate in tender offers for
     our common stock,  including tender offers at prices above the then-current
     market price;

o    inhibit increases in the market price of our common stock that could result
     from takeover attempts; or

o    grant to the  Board  of  Directors  the  discretionary  right to  designate
     specific  rights and  preferences of preferred  stock greater than those of
     our common stock.

We Have  Adopted  a  Stockholder  Rights  Plan  That Has  Certain  Anti-takeover
Effects.

On December  15, 1998,  the Board of  Directors  of Calypte  declared a dividend
distribution   of  one  preferred   share  purchase  right  ("Right")  for  each
outstanding  share of common stock of the  Company.  The dividend was payable to
the  stockholders  of record on  January  5, 1999 with  respect to each share of
common stock issued thereafter until a subsequent "distribution date" defined in
a Rights  Agreement  and, in certain  circumstances,  with  respect to shares of
common stock issued after the Distribution Date.

The Rights have certain anti-takeover effects. The Rights will cause substantial
dilution  to a person or group that  attempts  to acquire  the  Company  without
conditioning  the offer on the Rights being redeemed or a substantial

                                       66
<PAGE>


number of Rights being acquired.  However,  the Rights should not interfere with
any tender offer, or merger, which is approved by the Company because the Rights
do not become exercisable in the event of an offer or other acquisition exempted
by Calypte's Board of Directors.

Our Board of  Directors  has Certain  Discretionary  Rights With  Respect to Our
Preferred   Shares  That  May   Adversely   Effect  the  Rights  of  our  Common
Stockholders.

Our Board may, without shareholder  approval,  designate and issue our preferred
stock in one or more series.  Additionally,  our Board may  designate the rights
and  preferences  of each series of preferred  stock it designates  which may be
greater  than the rights of our common  stock.  Potential  effects on our common
stock may include among other things:

o    restricting dividends;

o    dilution of voting power;

o    impairment of liquidation rights; and

o    delay or preventing a change in control of the Company.

Additionally,  following  the 1:30 reverse split of our common stock that became
effective in May 2003, we currently have over 500 million shares of common stock
that could be issued without further stockholder approval. Although there are no
current  plans to issue such a large number of shares,  the  dilution  resulting
from such issuance could also adversely  affect the rights of our current common
stockholders.


              RISKS RELATED TO REGULATORY APPROVALS AND CLEARANCES

The Time  Needed to Obtain  Regulatory  Approvals  and  Respond  to  Changes  in
Regulatory Requirements Could Adversely Affect Our Business.

Many of our proposed and existing  products are subject to regulation by the FDA
and other governmental or public health agencies. In particular,  we are subject
to strict  governmental  controls  on the  development,  manufacture,  labeling,
distribution and marketing of our products.  In addition,  we are often required
to obtain approval or registration with foreign governments or regulatory bodies
before we can import and sell our products in foreign countries.

The process of obtaining  required  approvals or clearances from governmental or
public  health  agencies can involve  lengthy and detailed  laboratory  testing,
human clinical  trials,  sampling  activities  and other costly,  time-consuming
procedures.  The  submission of an  application  to the FDA or other  regulatory
authority  does not guarantee  that an approval or clearance to market a product
will be received.  Each authority may impose its own  requirements  and delay or
refuse to grant  approval or clearance,  even though a product has been approved
in another country or by another agency.

Moreover, the approval or clearance process for a new product can be complex and
lengthy.  This time span  increases our costs to develop new products as well as
the risk that we will not succeed in  introducing  or selling them in the United
States or other countries.

Newly  promulgated  or  changed  regulations  could  also  require us to undergo
additional trials or procedures,  or could make it impractical or impossible for
us to market our products for certain uses, in certain markets, or at all.

                                       67
<PAGE>


Failure to Comply With FDA or Similar  International  Regulatory Bodies or Other
Requirements  May Require Us to Suspend  Production of Our Products  Which Could
Result in a Loss of Revenues.

We can manufacture and sell products, both in the United States and abroad, only
if we comply with  regulations  of government  agencies such as the FDA. We have
implemented quality assurance and other systems that are intended to comply with
applicable regulations in the United States.

Although  we  believe  that  we have  adequate  processes  in  place  to  ensure
compliance with these requirements, the FDA could force us to stop manufacturing
our  products if it  concludes  that we are out of  compliance  with  applicable
regulations.  The FDA could  also  require us to recall  products  if we fail to
comply with applicable  regulations,  which could force us to stop manufacturing
such  products.  We will face similar risks when we establish our  international
manufacturing  operations.  See the Section entitled,  "Government Regulations,"
for a further discussion of applicable regulatory requirements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2003,  we face exposure to changes in the price of our common
stock as it  relates  to the  conversion  price of the  remaining  aggregate  of
$892,000 principal of 10% convertible debentures issued during the first quarter
2003; the remaining  $6,000  principal of a 12% convertible  debenture issued in
April 2003, and the remaining  $60,000  principal of 12% convertible  debentures
issued in October 2003.

The two  10%  convertible  debentures  with  aggregate  remaining  principal  of
$670,000 issued during January 2003 are convertible into shares of the Company's
common  stock at 80% of the  average of the 3 lowest  trading  prices for the 20
trading days preceding conversion,  but not more than $3.00. The 10% convertible
debenture  with a remaining  principal of $222,000  issued  during March 2003 is
convertible  into shares of the Company's  common stock at 65% of the average of
the 3 lowest trading prices for the 20 trading days  preceding  conversion,  but
not more than $2.10.

The remaining $6,000 principal of the 12% convertible  debenture issued in April
2003 is  convertible  into shares of the  Company's  common  stock at 70% of the
average of the three lowest trades for the 20 days preceding conversion, but not
more than  $1.20.  The  remaining  aggregate  of  $60,000  principal  of the 12%
convertible  debentures issued in October 2003 is convertible into shares of the
Company's  common stock at 85% of the average of the three lowest trades for the
20 days preceding conversion.

Based on current  market prices for its stock as of March 22, 2004,  the Company
would be required to issue approximately 2.5 to 3.0 million shares of its common
stock if the holders  elected to convert  the  remaining  principal  and accrued
interest of their debentures at this time.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  Company's  Consolidated  Financial  Statements  are  included  on pages F-1
through F-36 of this Annual Report on Form 10-KSB.

The  following  table  presents  summarized   historical  quarterly  results  of
operations for each of the fiscal  quarters in the Company's  fiscal years ended
December 31, 2003 and 2002. These quarterly  results are unaudited,  but, in the
opinion of  management,  have been  prepared on the same basis as the  Company's
audited  financial  information and include all adjustments  (consisting only of
normal  recurring   adjustments)  necessary  for  a  fair  presentation  of  the
information set forth therein.  The data should be read in conjunction  with the
Financial  Statements  and related  notes  included on pages F-1 through F-36 of
this Annual Report on Form 10-KSB.

The Company  expects that its revenues and results of  operations  may fluctuate
significantly  from  quarter to quarter  and will depend on a number of factors,
many of which are outside the Company's  control.  These factors include actions
relating to regulatory matters,  the extent to which the Company's products gain
market acceptance, the timing and size of distributor purchases, introduction of
alternative means for testing for HIV,  competition,  the timing and cost of new
product introductions, and general economic conditions.

                                       68
<PAGE>


                   HISTORICAL QUARTERLY RESULTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    FIRST           SECOND         THIRD           FOURTH
YEAR ENDED DECEMBER 31, 2003                                       QUARTER         QUARTER        QUARTER         QUARTER
==============================================================     ========        ========       ========        ========
<S>                                                                <C>             <C>            <C>             <C>
Total revenue                                                      $    784        $    749       $    897        $  1,037
Products costs                                                        1,415           1,550          1,750           1,406
                                                                      -----           -----          -----           -----
Gross profit (loss)                                                    (631)           (801)          (853)           (369)
Operating expenses                                                    4,323           5,944          3,058           3,736
Interest income (expense), minority interest and other income        (1,388)         (1,179)        (3,342)           (788)
Income taxes                                                             (2)           --             --              --
Dividend on mandatorily redeemable Series A preferred stock             (30)            (30)          --              --
                                                                   ========        ========       ========        ========
Net loss attributable to common stockholders                       $ (6,374)       $ (7,954)      $ (7,253)       $ (4,893)
                                                                   ========        ========       ========        ========
Net loss per share attributable to common stockholders*            $  (1.11)       $  (0.72)      $  (0.11)       $  (0.04)
                                                                   ========        ========       ========        ========


                                                                    FIRST           SECOND         THIRD           FOURTH
YEAR ENDED DECEMBER 31, 2002                                       QUARTER         QUARTER        QUARTER         QUARTER
==============================================================     ========        ========       ========        ========
Total revenue                                                      $  1,159        $  1,209       $    493        $    809
Products costs                                                        1,630           1,397          1,542           1,593
                                                                      -----           -----          -----           -----
Gross profit (loss)                                                    (471)           (188)        (1,049)           (784)
Operating expenses                                                    1,456           2,267          1,784           4,428
Interest income (expense) and other income                              (38)         (2,477)         1,338          (1,010)
Gain on settlement of debt                                            1,319            --             --              --
Income taxes                                                             (2)           --             --              --
Dividend on mandatorily redeemable Series A preferred stock             (30)            (30)           (30)            (30)
                                                                   ========        ========       ========        ========
Net loss attributable to common stockholders                       $   (678)       $ (4,962)      $ (1,525)       $ (6,252)
                                                                   ========        ========       ========        ========
Net loss per share attributable to common stockholders*            $  (0.50)       $  (2.55)      $  (0.51)       $  (1.54)
                                                                   ========        ========       ========        ========
</TABLE>

--------------
* The sum of earnings per share for the four quarters is different from the full
year amount as a result of computing  the quarterly and full year amounts on the
weighted average number of common shares outstanding in the respective periods.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL  DISCLOSURE

Calypte was contacted by the San Francisco District Office of the Securities and
Exchange  Commission  ("Commission")  on  October  28,  2003 and  advised  of an
informal  inquiry being  conducted by the  enforcement  staff of the  Commission
regarding the Company.  The staff has requested,  among other things,  documents
and  information  related to certain press releases  issued by the Company.  The
Commission  has advised the Company that the inquiry  should not be construed as
an  indication  by the  Commission  or its staff that any  violation  of law has
occurred.  The Company has voluntarily  provided the  information  sought by the
Commission  and is  cooperating  with  the  Commission  in  connection  with its
informal inquiry. Independently,  the Company's Audit Committee has investigated
the matter and has retained  outside counsel to assist in its  investigation  by
reviewing  the press  releases  and  related  information  that were the subject
matter of the  Commission's  informal  inquiry  letter.  The Audit Committee has
completed its  investigation  and reported the results of its  investigation and
associated  recommendations  to the Board of  Directors.  Counsel  for the Audit
Committee  advised  the  Audit  Committee  and the Board of  Directors  that the
results of their  investigation,  interviews and review of documents provided in
response to the  Commission's  informal  inquiry letter indicated no evidence of
management  malfeasance with respect to its inquiry. The Audit Committee,  based
upon its counsel's recommendations,

                                       69
<PAGE>


proposed that the Company implement  certain  practices and procedures,  some of
which  represent a  continuation  or  formalization  of present  practices.  The
recommendations  and proposals of the Audit  Committee that were approved by the
Board of Directors  include certain  improvements in the Company's press release
issuance process and investor relations and regulatory recordkeeping procedures.
Additionally,  the Board of Directors  has directed  management to implement the
American  Stock  Exchange  corporate  governance   standards   (SR-AMEX-2003-65)
approved by the Commission on December 1, 2003. The Company is in the process of
implementing  the  directives  of its  Board of  Directors  regarding  Corporate
Governance and has submitted to the Board,  and the Board has approved,  certain
policies and guidelines  related to press  releases and investor  relations that
reflect the recommendations of the Audit Committee.

The interim financial  statements  contained in a Form 10-QSB are required to be
reviewed  under  Statement  of  Auditing  Standards  No.  100 ("SAS  100") by an
independent  public  accountant  pursuant  to Item  310(b)  of the  Commission's
Regulation  S-B.  Calypte's  former  independent  auditors,  KPMG LLP  ("KPMG"),
informed the Company that they could not complete their quarterly  review of the
Company's  interim  financial  statements  contained in the Company's  Quarterly
Report on Form 10-QSB for the quarterly period ended September 30, 2003 or audit
the Company's  financial  statements for its fiscal year ended December 31, 2003
until such time as the Company's Audit Committee had completed the investigation
related to the Commission's  informal  inquiry letter,  the same was reviewed by
KPMG, and KPMG was satisfied that, in its opinion, an adequate investigation was
conducted  and  appropriate  conclusions  were  reached  and actions  taken.  On
December 23, 2003, the Company  dismissed  KPMG as independent  auditors for the
Company, effective immediately.  The decision to dismiss KPMG was recommended by
the  Audit  Committee  of the  Board  of  Directors.  As of the  date of  KPMG's
dismissal,  KPMG had advised the Company that, in KPMG's opinion, the conditions
necessary  for KPMG to complete  its review had not yet been  satisfied.  At the
time of KPMG's dismissal,  the Audit Committee had completed its  investigation,
had reported the results of its investigation and associated  recommendations to
the  Board  of  Directors,   and  the  Board  of  Directors  had  approved  such
recommendations.  In addition, at such time, counsel for the Audit Committee had
advised  the  Company  that it had  commenced  to  provide  information  to KPMG
concerning the investigation  conducted, the conclusions reached and the actions
taken by the Company.

On December  24,  2003,  upon  approval of the Audit  Committee  of the Board of
Directors,  the Company engaged Odenberg Ullakko  Muranishi & Co. LLP ("OUM") to
audit the consolidated  financial  statements of the Company for the years ended
December 31, 2003 and 2002 and to review the interim financial statements of the
Company  contained  in its  Quarterly  Report on Form  10-QSB/A  (No. 1) for the
quarterly  period ended  September  30, 2003.  OUM  completed its SAS 100 review
associated with the Form 10-QSB/A (No.1) and the Company filed it on January 29,
2004.  OUM has audited the Company's  financial  statements  for the years ended
December 31, 2003 and 2002 contained in this Annual Report on Form 10-KSB.


ITEM 8A.  CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

Under the supervision and with the  participation  of our management,  including
our Executive Chairman,  Chief Executive Officer and Chief Financial Officer, we
have evaluated the  effectiveness  of the design and operation of our disclosure
controls and procedures within 90 days of the filing date of this annual report,
and based on their evaluation,  our Executive Chairman,  Chief Executive Officer
and Chief Financial  Officer have concluded that these  disclosure  controls and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to the Company  required to be included in the  Company's  periodic SEC
filings.  There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.

Disclosure  controls and procedures are the controls and other  procedures  that
are  designed to ensure that  information  required to be disclosed by us in the
reports  we file or  submit  under  the  Exchange  Act is  recorded,  processed,
summarized,  and reported,  within the time periods  specified in the Securities
and Exchange  Commission's rules and forms.  Disclosure  controls and procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed by us in the reports that we file under the

                                       70
<PAGE>


Exchange Act is accumulated and  communicated  to our management,  including our
Executive  Chairman,  Chief Executive  Officer and Chief Financial  Officer,  as
appropriate, to allow timely decisions regarding required disclosure.

(b)  Changes in internal controls.

Not applicable.

                                       71
<PAGE>


                                    PART III

ITEM 9. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

Following is a list of our Officers and Directors as of March 22, 2004

<TABLE>
<CAPTION>
                                                                                               Director
Name                     Age                    Principal Occupation                            Since
----                     ---                   ----------------------                          --------
<S>                       <C>   <C>                                                              <C>
Anthony J. Cataldo        53    Executive Chairman, Calypte Biomedical Corporation               5/02

Richard D. Brounstein     54    Executive Vice President and Chief Financial Officer, Calypte       -
                                  Biomedical Corporation

John J. DiPietro          45    Chief Financial Officer, Chronix Biomedical, Inc.               10/99

Paul Freiman              69    President and Chief Executive Officer, Neurobiological          12/97
                                  Technologies, Inc.

J. Richard George         62    President and Chief Executive Officer, Calypte Biomedical           -
                                  Corporation

Julius R. Krevans, M.D.   79    Retired Chancellor Emeritus, Director of International Medical   3/95
                                  Services University of California, San Francisco

Zafar Randawa, Ph.D.      56    Director of the New Technology Evaluation Division, Otsuka      12/96
                                  America Pharmaceutical
</TABLE>


For  additional   information  about  the  officers  and  directors  of  Calypte
Biomedical  Corporation,  see the  section  captioned  "Executive  Officers  and
Directors of the  Registrant"  in the  Company's  Proxy  Statement  for the 2004
Annual Meeting of Stockholders which the Company will file by April 29, 2004.

ITEM 10. EXECUTIVE COMPENSATION

DIRECTOR COMPENSATION

See  the  section  captioned  "Director  Compensation"  in the  Company's  Proxy
Statement  for the 2004 Annual  Meeting of  Stockholders  which the Company will
file by April 29, 2004.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See the section captioned  "Security  Ownership of Certain Beneficial Owners and
Management"  in the Company's  Proxy  Statement  for the 2004 Annual  Meeting of
Stockholders which the Company will file by April 29, 2004.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See the section captioned  "Certain  Relationships and Related  Transactions" in
the Company's Proxy Statement for the 2004 Annual Meeting of Stockholders  which
the Company will file by April 29, 2004.

                                       72
<PAGE>


                                    PART IV

ITEM 13. EXHIBITS , AND REPORTS ON FORM 8-K

(a)  Certain Documents Filed as Part of the Form 10-KSB

       1.  The Company's Consolidated Financial Statements are included on pages
           F-1 through F-36 of this Annual Report on Form 10-KSB.


       2.  Exhibits



2.1      Asset Purchase Agreement, dated as of November 18, 1998, between
         Calypte and Cambridge; incorporated by reference from an exhibit filed
         with the Company's Report on Form 8-K dated December 16, 1998.

3.1      Bylaws of the Registrant, as amended on January 19, 2004. incorporated
         by reference from an exhibit filed with the Company's Quarterly report
         on Form 10-QSB/A (No. 1) dated January 29, 2004.

3.2      Restated Certificate of Incorporation of Calypte Biomedical
         Corporation, a Delaware corporation, filed July 31, 1996; incorporated
         by reference from an exhibit filed with the Company's Report on Form
         10-K dated March 28, 1997.

3.3      Certificate of Amendment of the Amended and Restated Certificate of
         Incorporation of Calypte Biomedical Corporation effective as of
         February 14, 2003 incorporated by reference from an exhibit filed with
         the Company's Report on Form 10-K dated March 26, 2003.

3.4      Certificate of Amendment of the Amended and Restated Certificate of
         Incorporation of Calypte Biomedical Corporation, effective as of May
         27, 2003.

3.5      Certificate of Correction of Calypte Biomedical Corporation, effective
         as of May 28, 2003.

4.1      Rights Agreement between the Registrant and Chase Mellon Shareholders
         L.L.C. as Rights Agents dated December 15, 1998; incorporated by
         reference from an exhibit filed with the Company's Report on Form 8-K
         dated December 16, 1998.

10.1     Form of Indemnification Agreement between the Company and each of its
         directors and officers, as amended January 19, 2004.

10.2     1991 Incentive Stock Plan; incorporated by reference from exhibits
         filed with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

10.3     1995 Director Option Plan, as amended effective May 20, 2003;
         incorporated by reference from an exhibit filed with the Company's
         Registration Statement on Form S-8 (File No. 333-106389) dated June 23,
         2003.

10.4     1995 Employee Stock Purchase Plan, amended as of May 20, 2003;
         incorporated by reference from an exhibit filed with the Company's
         Registration Statement on Form S-8 (File No. 333-106389) dated June 23,
         2003.

10.5     Lease Agreement between the Registrant and Charles A. Grant and Mark
         Greenberg, dated as of November 30, 1990; incorporated by reference
         from exhibits filed with the Company's Registration Statement on Form
         S-1 (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.6     Second Lease Extension Agreement between Registrant and Charles A.
         Grant and Mark Greenberg, dated as of May 14, 1991; incorporated by
         reference from exhibits filed with the

                                       73
<PAGE>


         Company's Registration Statement on Form S-1 (File No. 333-04105) filed
         on May 20, 1996, as amended to June 25, 1996, July 15, 1996 and July
         26, 1996.

10.7     Lease Extension Agreement between Registrant and Charles A. Grant and
         Mark Greenberg, dated as of February 5, 1992; incorporated by reference
         from exhibits filed with the Company's Registration Statement on Form
         S-1 (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.8     Lease Extension Agreement between Registrant and Charles A. Grant and
         Mark Greenberg, dated as of April 15, 1993; incorporated by reference
         from exhibits filed with the Company's Registration Statement on Form
         S-1 (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.9     Standard Form Lease 1255-1275 Harbor Bay Parkway Harbor Bay Business
         Park between Commercial Center Bank and the Registrant, dated as of
         August 22, 1992; incorporated by reference from exhibits filed with the
         Company's Registration Statement on Form S-1 (File No. 333-04105) filed
         on May 20, 1996, as amended to June 25, 1996, July 15, 1996 and July
         26, 1996.

10.12    Employment Agreement between the Registrant and Howard B. Urnovitz,
         dated as of January 25, 1995; incorporated by reference from exhibits
         filed with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

10.15    License Agreement between the Registrant and New York University, dated
         as of August 13, 1993; incorporated by reference from exhibits filed
         with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

10.16    First Amendment to License Agreement between the Registrant and New
         York University, dated as of January 11, 1995; incorporated by
         reference from exhibits filed with the Company's Registration Statement
         on Form S-1 (File No. 333-04105) filed on May 20, 1996, as amended to
         June 25, 1996, July 15, 1996 and July 26, 1996.

10.17    Second Amendment to License Agreement between the Registrant and New
         York University, dated as of October 15, 1995; incorporated by
         reference from exhibits filed with the Company's Registration Statement
         on Form S-1 (File No. 333-04105) filed on May 20, 1996, as amended to
         June 25, 1996, July 15, 1996 and July 26, 1996.

10.18    Third Amendment to License Agreement between the Registrant and New
         York University, dated as of January 31, 1996; incorporated by
         reference from exhibits filed with the Company's Registration Statement
         on Form S-1 (File No. 333-04105) filed on May 20, 1996, as amended to
         June 25, 1996, July 15, 1996 and July 26, 1996.

10.19    Research Agreement between the Registrant and New York University,
         dated August 12, 1993; incorporated by reference from exhibits filed
         with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

10.20    First Amendment to Research Agreement between the Registrant and New
         York University, dated as of January 11, 1995; incorporated by
         reference from exhibits filed with the Company's Registration Statement
         on Form S-1 (File No. 333-04105) filed on May 20, 1996, as amended to
         June 25, 1996, July 15, 1996 and July 26, 1996.

10.21    Sublicense Agreement between the Registrant and Cambridge Biotech
         Corporation, dated as of March 31, 1992; incorporated by reference from
         exhibits filed with the Company's Registration Statement on Form S-1
         (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.22    Master Agreement between the Registrant and Cambridge Biotech
         Corporation, dated as of April 12, 1996; incorporated by reference from
         exhibits filed with the Company's Registration Statement on Form S-1
         (File No. 333-04105) filed on May 20, 1996, as

                                       74
<PAGE>


         amended to June 25, 1996, July 15, 1996 and July 26, 1996.

10.23    Sub-License Agreement between the Registrant and Cambridge Biotech
         Corporation, dated as of April 12, 1996; incorporated by reference from
         exhibits filed with the Company's Registration Statement on Form S-1
         (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.24    Agreement between the Registrant and Repligen Corporation, dated as of
         March 8, 1993; incorporated by reference from exhibits filed with the
         Company's Registration Statement on Form S-1 (File No. 333-04105) filed
         on May 20, 1996, as amended to June 25, 1996, July 15, 1996 and July
         26, 1996.

10.25    Non-Exclusive License Agreement between the Registrant and The Texas
         A&M University System, dated as of September 12, 1993; incorporated by
         reference from exhibits filed with the Company's Registration Statement
         on Form S-1 (File No. 333-04105) filed on May 20, 1996, as amended to
         June 25, 1996, July 15, 1996 and July 26, 1996.

10.27    Distribution Agreement between the Registrant and Otsuka Pharmaceutical
         Co., Ltd., dated as of August 7, 1994; incorporated by reference from
         exhibits filed with the Company's Registration Statement on Form S-1
         (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.29    Distribution Agreement between the Registrant and Travenol Laboratories
         (Israel), Ltd., dated as of December 31, 1994; incorporated by
         reference from exhibits filed with the Company's Registration Statement
         on Form S-1 (File No. 333-04105) filed on May 20, 1996, as amended to
         June 25, 1996, July 15, 1996 and July 26, 1996.

10.33    Form of Option Agreement for Stockholders of Pepgen Corporation, dated
         as of October 12, 1995; incorporated by reference from exhibits filed
         with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

10.35    Equipment Lease Agreement between the Registrant and Phoenix Leasing,
         dated as of August 20, 1993; incorporated by reference from exhibits
         filed with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

10.36    Equipment Lease Agreement between the Registrant and Meier
         Mitchell/GATX, dated as of August 20, 1993; incorporated by reference
         from exhibits filed with the Company's Registration Statement on Form
         S-1 (File No. 333-04105) filed on May 20, 1996, as amended to June 25,
         1996, July 15, 1996 and July 26, 1996.

10.37    Lease Extension Agreement between the Registrant and Charles A. Grant
         and Mark Greenberg, dated as of February 3, 1997; incorporated by
         reference from exhibits filed with the Company's Report on Form 10-K
         dated March 28, 1997.

10.39    Equipment Lease Agreement between the Registrant and MMC/GATX, dated
         September 30, 1996; incorporated by reference from exhibits filed with
         the Company's Report on Form 10-K dated March 28, 1997.

10.40    Joint Venture Agreement between the Registrant and Trinity Biotech
         plc.; incorporated by reference from exhibits filed with the Company's
         Report on Form 10-K dated March 28, 1997.

10.41    Second Addendum to Lease between the Registrant and Commercial Center
         Bank dated as of July 21, 1997; incorporated by reference from exhibits
         filed with the Company's Report on Form 10-K dated March 25, 1998.

10.42    Lease extension agreement between the Registrant and Charles A. Grant
         and Mark Greenberg,

                                       75
<PAGE>


         dated December 9, 1997; incorporated by reference from exhibits filed
         with the Company's Report on Form 10-K dated March 25, 1998.

10.45    Lease extension agreement between the Registrant and Charles A. Grant
         and Mark Greenberg, dated April 25, 1998; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-Q dated
         August 12, 1998.

10.46    Employment Agreement between the Registrant and William A. Boeger dated
         as of October 28, 1998; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 25, 1999.

10.47    Employment Agreement between the Registrant and John J. DiPietro dated
         as of October 28, 1998; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 25, 1999.

10.48    Guaranty made by Chih Ping Liu for the benefit of the Registrant dated
         September 30, 1998; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 25, 1999.

10.49    Loan and Security Agreement between the Registrant and Silicon Valley
         Bank, dated December 21, 1998; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-Q dated May 15,
         1999.

10.50    Lease Extension Agreement between the Registrant and Charles A. Grant
         and Mark Greenberg, dated February 26, 1999; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-Q dated May
         15, 1999.

10.51    Non-Exclusive Patent and License Agreement between the Registrant and
         Public Health Service, dated June 30, 1999; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-Q dated
         November 15, 1999.

10.52    Distribution Agreement between the Registrant and Carter-Wallace, Inc.,
         dated as of September 9,1999; incorporated by reference from an exhibit
         filed with the Company's Report on Form 10-Q dated November 15, 1999.

10.53    Letter Agreement between the Registrant and John J. DiPietro, dated as
         of September 17, 1999; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-Q dated November 15, 1999.

10.54    Consulting Agreement between the Registrant and John J. DiPietro, dated
         as of September 17, 1999; incorporated by reference from an exhibit
         filed with the Company's Report on Form 10-Q dated November 15, 1999.

10.55    Master Lease Agreement between Aquila Biopharmaceuticals, Inc.,
         Landlord, and Biomerieux Vitek, Inc., Tenant, dated as of October 22,
         1996; incorporated by reference from an exhibit filed with the
         Company's Report on Form 10-K dated March 30, 2000.

10.56    First Amendment to Lease between Aquila Biopharmaceuticals, Inc.
         Landlord, and Biomerieux Vitek, Inc., Tenant, dated October 2, 1997;
         incorporated by reference from an exhibit filed with the Company's
         Report on Form 10-K dated March 30, 2000.

10.57    Sublease Agreement between Registrant and Cambridge Biotech
         Corporation, assignee of Biomerieux, Inc. dated as of December 17,
         1998; incorporated by reference from an exhibit filed with the
         Company's Report on Form 10-K dated March 30, 2000.

10.58    Sublease Agreement between Registrant and Cambridge Biotech
         Corporation, sub-lessee of DynCorp, dated as of December 17, 1998;
         incorporated by reference from an exhibit filed with the Company's
         Report on Form 10-K dated March 30, 2000.

10.59    Lease Extension Agreement between the Registrant and Charles A. Grant
         and Mark Greenberg, dated October 12, 1999; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-K dated
         March 30, 2000.

10.60    Consulting Agreement between the Registrant and William A. Boeger dated
         as of October 18, 1999;

                                       76
<PAGE>


         incorporated by reference from an exhibit filed with the Company's
         Report on Form 10-K dated March 30, 2000.

10.61    Consulting Agreement between the Registrant and David Collins dated as
         of October 18, 1999; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 30, 2000.

10.62    Employment Agreement between the Registrant and Nancy E. Katz, dated as
         of October 18, 1999; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 30, 2000.

10.63    Letter of Intent re Modification of Distribution Agreement between
         Registrant and Otsuka Pharmaceutical Co., Ltd. dated as of December 10,
         1998; incorporated by reference from an exhibit filed with the
         Company's Report on Form 10-K dated March 30, 2000.

10.64    Loan Modification Agreement between Registrant and Silicon Valley Bank
         dated as of November 15, 1999; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-Q dated May 12,
         2000.

10.65    Loan Modification Agreement between Registrant and Silicon Valley Bank
         dated as of January 30, 2000; incorporated by reference from an exhibit
         filed with the Company's Report on Form 10-Q dated May 12, 2000.

10.66    Restated Technology Rights Agreement between Registrant and Howard B.
         Urnovitz, Ph.D. dated as of March 1, 2000; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-Q dated May
         12, 2000.

10.67    Technology Rights Agreement between Registrant and Chronix Biomedical
         dated as of March 1, 2000; incorporated by reference from an exhibit
         filed with the Company's Report on Form 10-Q dated May 12, 2000.

10.68    Exclusive Independent Contractor Agreement for Project Sentinel between
         Clinical Reference Laboratory, Inc. and Registrant dated as of January
         21, 2000; incorporated by reference from an exhibit filed with the
         Company's Report on Form 10-Q dated May 12, 2000.

10.69    Distribution Agreement between the Registrant and American Edge
         Medical, dated as of May 1, 2000; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-Q dated August 10,
         2000.

10.70    Distribution Agreement between the Registrant and Biobras S.A., dated
         as of May 11, 2000; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-Q dated August 10, 2000.

10.71^   Distribution Agreement between the Registrant and Beijing Hua Ai
         Science and Technology Development Co. Ltd, dated as of May 16, 2000;
         incorporated by reference from an exhibit filed with the Company's
         Report on Form 10-Q dated August 10, 2000.

10.72    Loan Modification Agreement between the Registrant and Silicon Valley
         Bank, dated as of May 24, 2000; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-Q dated August 10,
         2000.

10.73^   Fourth Amendment to the License Agreement between the Registrant and
         New York University, dated as of June 1, 2000; incorporated by
         reference from an exhibit filed with the Company's Report on Form 10-Q
         dated August 10, 2000.

10.74    2000 Equity Incentive Plan, amended as of May 20, 2003; incorporated by
         reference from an exhibit filed with the Company's Registration
         Statement on Form S-8 (File No. 333-106389) dated June 23, 2003.

10.75    Lease Extension Agreement between the Registrant and Charles A. Grant
         and Mark Greenberg, dated June 26, 2000; incorporated by reference from
         an exhibit filed with the Company's Report on Form 10-Q dated August
         10, 2000.

10.76    Secured Promissory Note between the Registrant and Howard B. Urnovitz,
         dated June 30, 2000; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-Q dated August 10, 2000.

10.77    Temporary Distribution Agreement between the Registrant and American
         Edge Medical

                                       77
<PAGE>


         Company effective August 1, 2000; incorporated by reference from an
         exhibit filed with the Company's Report on 10-Q dated November 7, 2000.

10.78    Extension of Consulting Agreement between Registrant and John DiPietro
         effective as of September 17, 2000; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-Q dated November 7,
         2000.

10.79    Convertible Debentures and Warrants Purchase Agreement between the
         Registrant and AMRO International, S.A. dated January 22, 2001;
         incorporated by reference from an exhibit filed with the Company's
         Registration Statement on Form S-3 (File No. 333-58960) filed on April
         13, 2001.

10.80    Extension of Consulting Agreement between the Registrant and William A.
         Boeger dated as of October 19, 2000; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-K dated March 5,
         2001.

10.81    Second Amendment to Employment Agreement between the Registrant and
         Howard B. Urnovitz dated October 31, 2000; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-K dated
         March 5, 2001.

10.82    Consulting Agreement between the Registrant and David Collins dated as
         of October 19, 2000; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 5, 2001.

10.83^   Agreement between the Registrant and Carter-Wallace, Inc. dated
         December 12, 2000; incorporated by reference from an exhibit filed with
         the Company's Report on Form 10-K dated March 5, 2001.

10.84    Stock Purchase Warrant to purchase common stock dated January 24, 2001
         issued to Townsbury Investments Limited; incorporated by reference from
         an exhibit filed with the Company's Registration Statement on Form S-2
         (File No. 333-54316) filed on January 25, 2001, as amended on February
         9, 2001.

10.85    Common Stock Purchase Agreement between Calypte and Townsbury
         Investments Limited dated November 2, 2000; incorporated by reference
         from an exhibit filed with the Company's Registration Statement on Form
         S-2 (File No. 333-54316) filed on January 25, 2001, as amended on
         February 9, 2001.

10.86    Registration Rights Agreement between Calypte and Townsbury Investments
         Limited dated November 2, 2000; incorporated by reference from an
         exhibit filed with the Company's Registration Statement on Form S-2
         (File No. 333-54316) filed on January 25, 2001, as amended on February
         9, 2001.

10.87    Escrow Agreement among Calypte, Townsbury Investments Limited and
         Epstein, Becker & Green, P.C. dated November 2, 2000; incorporated by
         reference from an exhibit filed with the Company's Registration
         Statement on Form S-2 (File No. 333-54316) filed on January 25, 2001,
         as amended on February 9, 2001.

10.88    Amendment to Common Stock Purchase Agreement between Calypte and
         Townsbury Investments Limited dated January 24, 2001; incorporated by
         reference from an exhibit filed with the Company's Registration
         Statement on Form S-2 (File No. 333-54316) filed on January 25, 2001,
         as amended on February 9, 2001.

10.89    Agreement for Purchase and Sale of Preferred Stock of Pepgen
         Corporation between Registrant and Biotechnology Development Fund, L.P.
         and Biotechnology Fund II, L.P. dated April 17, 2001; incorporated by
         reference from an exhibit filed with the Company's Report on Form 10-Q
         dated August 14, 2001.

10.90    Consulting Agreement between the Registrant and David Collins dated as
         of October 19, 2001; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-K dated March 11, 2002.

10.91    Third Addendum to Lease between the Registrant and Gee-Aspora LLC dated
         as of October 31,

                                       78
<PAGE>


         2001; incorporated by reference from an exhibit filed with the
         Company's Report on Form 10-K dated March 11, 2002.

10.92    Registration Rights Agreement between the Registrant and AMRO
         International, S.A. dated January 22, 2001; incorporated by reference
         from an exhibit filed with the Company's Registration Statement on Form
         S-3 (File No. 333-58960) filed on April 13, 2001.

10.93    Escrow Agreement between the Registrant and AMRO International, S.A.
         dated January 22, 2001; incorporated by reference from an exhibit filed
         with the Company's Registration Statement on Form S-3 (File No.
         333-58960) filed on April 13, 2001.

10.94    Stock Purchase Warrant to purchase common stock issued to AMRO
         International, S.A. on January 24, 2001; incorporated by reference from
         an exhibit filed with the Company's Registration Statement on Form S-3
         (File No. 333-58960) filed on April 13, 2001.

10.95    6% Convertible Debenture in the principal amount of $550,000, due April
         26, 2001, issued to AMRO International, S.A. ; incorporated by
         reference from an exhibit filed with the Company's Registration
         Statement on Form S-3 (File No. 333-58960) filed on April 13, 2001

10.96    6% Convertible Debenture in the principal amount of $550,000, due June
         11, 2001, issued to AMRO International, S.A. ; incorporated by
         reference from an exhibit filed with the Company's Registration
         Statement on Form S-3 (File No. 333-58960) filed on April 13, 2001

10.97    Common Stock Purchase Agreement between Calypte and Townsbury
         Investments Limited dated August 23, 2001; incorporated by reference
         from an exhibit filed with the Company's Registration Statement on Form
         S-2 (File No. 333-72268) filed on October 26, 2001.

10.98    Registration Rights Agreement between Calypte and Townsbury Investments
         Limited dated August 23, 2001; incorporated by reference from an
         exhibit filed with the Company's Registration Statement on Form S-2
         (File No. 333-72268) filed on October 26, 2001.

10.99    Escrow Agreement among Calypte, Townsbury Investments Limited and New
         York Escrow Services, LLC dated August 23, 2001; incorporated by
         reference from an exhibit filed with the Company's Registration
         Statement on Form S-2 (File No. 333-72268) filed on October 26, 2001.

10.100   Stock Purchase Warrant to purchase Common Stock dated October 19, 2001
         issued to Townsbury Investments Limited; incorporated by reference from
         an exhibit filed with the Company's Registration Statement on Form S-2
         (File No. 333-72268) filed on October 26, 2001.

10.101   Securities Purchase Agreement between the Registrant and Bristol
         Investment Fund, Ltd. dated as of February 11, 2002; incorporated by
         reference from an exhibit filed with the Company's Report on Form 8-K
         dated February 15, 2002.

10.102   Registration Rights Agreement between the Registrant and Bristol
         Investment Fund, Ltd. dated as of February 11, 2002; incorporated by
         reference from an exhibit filed with the Company's Report on Form 8-K
         dated February 15, 2002.

10.103   Security Agreement between the Registrant and Bristol Investment Fund,
         Ltd. dated as of February 11, 2002; incorporated by reference from an
         exhibit filed with the Company's Report on Form 8-K dated February 15,
         2002.

10.104   Form of Secured Convertible Debenture Securities Purchase Agreement
         between the Registrant and Bristol Investment Fund, Ltd. dated as of
         February 11, 2002; incorporated by reference from an exhibit filed with
         the Company's Report on Form 8-K dated February 15, 2002.

10.105   Class A Stock Purchase Warrant for 56,667 shares of Common Stock issued
         to Bristol Investment Fund, Ltd.; incorporated by reference from an
         exhibit filed with the Company's Report on Form 8-K dated February 15,
         2002.

                                       79
<PAGE>


10.106   Class B Stock Purchase Warrant for 400,000 shares of Common Stock
         issued to Bristol Investment Fund, Ltd.; incorporated by reference from
         an exhibit filed with the Company's Report on Form 8-K dated February
         15, 2002.

10.107   Stock Purchase Warrant for 283 shares of Common Stock issued to
         Alexander Dunham Capital Group, Inc.; incorporated by reference from an
         exhibit filed with the Company's Report on Form 8-K dated February 15,
         2002.

10.108   Stock Purchase Warrant for 2,550 shares of Common Stock issued to
         Bristol Capital, LLC. ; incorporated by reference from an exhibit filed
         with the Company's Report on Form 8-K dated February 15, 2002.

10.109   Form of Common Stock Purchase Agreement between the Registrant and
         certain Purchasers dated November 13, 2001; incorporated by reference
         from an exhibit filed with the Company's Report on Form 10-K dated
         March 11, 2002.

10.110   Form of Common Stock Purchase Agreement with certain trade creditors
         issued pursuant to a private placement completed on February 12, 2002;
         incorporated by reference from an exhibit filed with the Company's
         Report on Form 10-K dated March 11, 2002.

10.111   Form of Subscription Agreement and 8% Convertible Note; incorporated by
         reference from an exhibit filed with the Company's Report on Form 8-K
         dated June 3, 2002.

10.112   Form of Subscription Agreement and 8% Convertible Note Issued July 17,
         2002 by Registrant; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-Q dated August 14, 2002.

10.113   Employment Agreement between the Registrant and Anthony J. Cataldo
         dated May 10, 2002; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-Q dated August 14, 2002.

10.114   Amendment to Non-Exclusive Patent and License Agreement between
         Registrant and Public Health Service, dated April 5, 2002; incorporated
         by reference from an exhibit filed with the Company's Report on Form
         10-Q dated August 14, 2002.

10.115   Investment Commitment Arrangement with Cataldo Investment Group;
         incorporated by reference from an exhibit filed with the Company's
         Report on Form 8-K dated November 12, 2002.

10.116   Term Sheet for Mercator Momentum Fund LP and Form of Registration
         Rights Agreement; incorporated by reference from an exhibit filed with
         the Company's Report on Form 8-K dated November 12, 2002.

10.117   Form of Subscription Agreement under Regulation S for Caledonia
         Corporate Group Ltd. and Careen Ltd.; incorporated by reference from an
         exhibit filed with the Company's Report on Form 8-K dated November 12,
         2002

10.118   Bi-Coastal Consulting, Inc. Agreements; incorporated by reference from
         an exhibit filed with the Company's Report on Form 8-K dated November
         12, 2002.

10.119   Employment Agreement between the Registrant and Nancy E. Katz, dated
         October 31, 2002; incorporated by reference from an exhibit filed with
         the Company's Report on Form 10-Q dated November 14, 2002.

10.120   12% Convertible Debenture Agreement and related Warrant and
         Registration Rights Agreement dated as of October 22, 2002 between
         Registrant and Mercator Momentum Fund, L.P.; incorporated by reference
         from an exhibit filed with the Company's Report on Form 8-K dated
         December 10, 2002.

10.121   Distribution Agreement between the Registrant and Zhong Yang Pute Co.
         dated as of October 10, 2002; incorporated by reference from an exhibit
         filed with the Company's Report on Form 10-Q/A (No.3) dated February 4,
         2003.

                                       80
<PAGE>


10.122   Amendment to Agreement with Mercator Momentum Fund dated as of December
         23, 2002; incorporated by reference from an exhibit filed with the
         Company's Report on Form 8-K/A dated January 21, 2003.

10.123   10% convertible Debenture and related Registration Rights Agreement
         dated as of January 14, 2003 between Registrant and Mercator Focus
         Fund, L.P.; incorporated by reference from an exhibit filed with the
         Company's Report on Form 8-K dated January 21, 2003.

10.124   Distribution and Usage Memorandum of Understanding between Registrant
         and Safe Blood for Africa Foundation, dated as of December 10, 2002;
         incorporated by reference from an exhibit filed with the Company's
         Registration Statement on Form S-2/A (No. 5) (File No. 333-84660) dated
         February 4, 2003.

10.125   Employment Agreement between Registrant and Richard D. Brounstein dated
         as of January 1, 2003; incorporated by reference from an exhibit filed
         with the Company's Annual Report on Form 10-K dated March 26, 2003.

10.126   Letter Agreement between Registrant and Nancy E. Katz dated February
         14, 2003; incorporated by reference from an exhibit filed with the
         Company's Annual Report on Form 10-K dated March 26, 2003.

10.127   Letter Agreement between Registrant and Bristol Investment Fund, Ltd.
         dated February 28, 2003; incorporated by reference from an exhibit
         filed with the Company's Annual Report on Form 10-K dated March 26,
         2003.

10.128   2003 Non-Qualified Stock Option Plan; incorporated by reference from an
         exhibit filed with the Company's Registration Statement on Form S-8
         (File No. 333-106387) dated June 23, 2003.

10.129   Consulting Agreement between Registrant and Junebug Enterprises
         effective as of April 23, 2003; incorporated by reference from an
         exhibit filed with the Company's Report on Form 10-QSB dated August 14,
         2003.

10.130   Employment Agreement between Registrant and Jay Oyakawa, dated as of
         August 12, 2003; incorporated by reference from an exhibit filed with
         the Company's Report on Form 10-QSB dated August 14, 2003.

10.131   Separation Agreement, Mutual Release and Waiver of Claims between
         Registrant and Nancy E. Katz, effective as of June 27, 2003;
         incorporated by reference from an exhibit filed with the Company's
         Report on Form 10-QSB dated August 14, 2003.

10.132   Subscription Agreement between Registrant and Marr Technologies B.V.
         dated as of August 1, 2003 incorporated by reference from an exhibit
         filed with the Company's Report on Form 10-QSB dated August 14, 2003.

10.133   Subscription Agreement between the Company and Marr Technologies B.V.
         for 20,000,000 shares of Registrant's Common Stock dated August 28,
         2003; incorporated by reference from an exhibit filed with the
         Company's Report on Form 8-K dated September 12, 2003.

10.134   Agreement for Commitment to Purchase Aggregate of $10,000,000 of 5%
         Promissory Notes between the Company and Marr Technologies B.V. dated
         November 13, 2003; incorporated by reference from an exhibit filed with
         the Company's Report on Form 10-QSB dated November 14, 2003.

10.135   Separation Agreement and Release between the Company and Jay Oyakawa
         dated January 19, 2004; incorporated by reference from an exhibit filed
         with the Company's Report on Form 10-QSB/A (No. 1) dated January 29,
         2004.

10.136   Employment Agreement between the Company and J. Richard George
         effective as of January 20, 2004.

10.137   Lease Agreement between the Company and ARE-1500 East Gude LLC dated as
         of March 1, 2004

                                       81
<PAGE>


10.138   Amendment No. 1 to Agreement for Commitment to Purchase Aggregate of
         $10,000,000 of 5% Promissory Notes between the Company and Marr
         Technologies B.V. dated March 19, 2004 filed as an exhibit with the
         Company's Report on Form 8-K dated March 19, 2004.

10.139   Common Stock Purchase Warrant to Purchase 400,000 Shares of Common
         Stock between the Company and Boodle Hatfield dated March 19, 2004
         filed as an exhibit with the Company's Report on Form 8-K dated March
         19, 2004

16.1     Letter From KPMG to SEC regarding Registrant's change in accountants;
         incorporated by reference from an exhibit filed on the Company's Report
         on Form 8-K dated January 2, 2004 and amended January 9, 2004.

21.1     Subsidiaries of the Registrant; incorporated by reference from exhibits
         filed with the Company's Registration Statement on Form S-1 (File No.
         333-04105) filed on May 20, 1996, as amended to June 25, 1996, July 15,
         1996 and July 26, 1996.

23.1     Consent of Odenberg Ullakko Muranishi & Co. LLP, Independent Registered
         Public Accounting Firm.

24.1     Power of Attorney (see page S-1).

31.1     Certification of Executive Chairman pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002

31.3     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002

32.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002

-----------

^        Confidential treatment has been granted as to certain portions of this
         exhibit.

  (b)   Reports on Form 8-K
            Form 8-K regarding Other Material  Events,  filed November 5, 2003 -
            Supplementing its October 17, 2003 press release regarding  approval
            of its urine  based HIV ELISA tests in the  Republic of Kenya,  with
            documents provided as attachments:
               o    Company  Press  Release  dated  October 17,  2003  regarding
                    approval of the Company's urine ELISA tests in Kenya
               o    Letter of Intent from World Vision  Africa  dated  September
                    16, 2003
               o    Letter of Approval from Kenyan  Ministry of Health  National
                    Public Health Laboratory dated October 17, 2003
               o    Company Press Release dated November 3, 2003  announcing the
                    filing of the 8-K and related documents and stating that the
                    Company had no  knowledge of any events or  conditions  that
                    would  account  for the  volatility  in its  stock  price on
                    November 3, 2003.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

See the  section  captioned  "Principal  Accountant  Fees and  Services"  in the
Company's Proxy Statement for the 2004 Annual Meeting of Stockholders  which the
Company will file by April 29, 2004.

                                       82
<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm                     F-2

Consolidated Balance Sheets                                                 F-3

Consolidated Statements of Operations                                       F-4

Consolidated Statements of Stockholders' Equity (Deficit)                   F-5

Consolidated Statements of Cash Flows                                       F-7

Notes to Consolidated Financial Statements                                  F-9









                                      F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Calypte Biomedical Corporation:

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Calypte
Biomedical  Corporation  and its  subsidiaries as of December 31, 2003 and 2002,
and the related  consolidated  statements of  operations,  stockholders'  equity
(deficit), and cash flows for the years then ended. These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board. Those standards require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the  consolidated  financial  statements  audited by us present
fairly, in all material  respects,  the financial position of Calypte Biomedical
Corporation and its  subsidiaries at December 31, 2003 and 2002, and the results
of their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company has
adopted Statement of Financial  Accounting Standards No. 145, Rescission of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections.  As a  result,  the gain from  settlement  of debt in 2002 has been
reclassified from an extraordinary to an ordinary gain.

As described in Notes 1, 6 and 18, a financing agreement between the Company and
its largest  stockholder has been amended subsequent to December 31, 2003. Under
the  amended  agreement  the  Company  may borrow up to $15  million for general
corporate  purposes  until May 31,  2004,  in exchange for 5%  promissory  notes
maturing one year after issuance.


/s/ Odenberg Ullakko Muranishi & Co. LLP

San Francisco, California
March 19, 2004

                                      F-2
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                           ---------------------------
                                                                                               2003           2002
                                                                                           ------------   ------------
                                         ASSETS
Current assets:
      <S>                                                                                     <C>            <C>
      Cash and cash equivalents                                                               $  5,084       $    147
      Accounts receivable, net of allowance of $36 and $32 at December 31, 2003 and                369            327
         2002, respectively
      Inventory                                                                                  2,153            963
      Prepaid expenses                                                                             872            163
      Deferred offering costs, net of accumulated amortization of $333 and $213 at
         December 31, 2003 and 2002, respectively                                                   14            662
      Other current assets                                                                          63             15
                                                                                            ----------     ----------

            Total current assets                                                                 8,555          2,277

Property and equipment, net                                                                        727            917
Other assets                                                                                       235            103
                                                                                            ----------     ----------

                                                                                              $  9,517       $  3,297
                                                                                            ==========     ==========
                     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
      Accounts payable and accrued expenses                                                   $  4,322       $  5,145
      Notes and debentures payable, net of $90 and $2,638 discount at December 31, 2003
         and 2002, respectively                                                                    868          2,181
      Deferred revenue                                                                             500            500
                                                                                            ----------     ----------

            Total current liabilities                                                            5,690          7,826

Warrant liability                                                                                    -            356
Other long term liabilities                                                                        157             33

Mandatorily  redeemable  Series A preferred  stock,  $0.001 par value; no shares
   authorized  at  December  31,  2003  and  2002;  100,000  shares  issued  and
   outstanding at December 31,
   2003 and 2002; aggregate redemption and liquidation value of $1,000 plus cumulative           2,696          2,576
   dividends

Minority interest in consolidated joint venture                                                     57              -
                                                                                            ----------     ----------

            Total liabilities                                                                    8,600         10,791
                                                                                            ----------     ----------


Commitments and contingencies

Stockholders' equity (deficit):
      Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued               -              -
         or outstanding
      Common  stock,  $0.03  par  value;   800,000,000  and  200,000,000  shares
         authorized  at December 31, 2003 and 2002;  136,300,885  and  5,058,484
         shares issued and
         outstanding as of December 31, 2003 and 2002, respectively                              4,089            152
      Additional paid-in capital                                                               124,699         93,804
      Deferred compensation                                                                         (7)             -
      Accumulated deficit                                                                     (127,864)      (101,450)
                                                                                            ----------     ----------

            Total stockholders' equity (deficit)                                                   917         (7,494)
                                                                                            ----------     ----------

                                                                                              $  9,517       $  3,297
                                                                                            ==========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>


                CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                                           ---------------------------
                                                                                               2003           2002
                                                                                           ------------   ------------
Revenues:
<S>                                                                                           <C>            <C>
   Product sales                                                                              $  3,467       $  3,670
                                                                                            ----------     ----------

Operating expenses:
   Product costs                                                                                 6,121          6,162
   Research and development costs                                                                1,544            929
   Selling, general and administrative costs (non-cash of $6,648 and $3,243 in 2003
     and 2002, respectively)                                                                    15,517          9,006
                                                                                            ----------     ----------

     Total operating expenses                                                                   23,182         16,097
                                                                                            ----------     ----------

       Loss from operations                                                                    (19,715)       (12,427)
Interest expense, net (non-cash of $6,559 and $1,874 in 2003 and 2002, respectively)            (6,969)        (2,203)
Gain on settlement of trade debt                                                                     -          1,319
Minority interest in joint venture                                                                  90              -
Other income, net                                                                                  182             16
                                                                                            ----------     ----------

       Loss before income taxes                                                                (26,412)       (13,295)

Income taxes                                                                                         2              2
                                                                                            ----------     ----------

       Net loss                                                                                (26,414)       (13,297)

Less dividends on mandatorily redeemable Series A preferred stock                                  (60)          (120)
                                                                                            ----------     ----------

Net loss attributable to common stockholders                                                  $(26,474)      $(13,417)
                                                                                            ==========     ==========

Net loss per share attributable to common stockholders (basic and diluted)                    $  (0.47)      $  (5.18)
                                                                                            ==========     ==========

Weighted average shares used to compute net loss per share attributable to common
   stockholders (basic and diluted)                                                             55,903          2,591
                                                                                            ==========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>


                CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                     YEARS ENDED DECEMBER 31, 2002 AND 2003

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                                         Total
                                         Number of         Common      Additional       Deferred      Accumulated    Stockholders'
                                       Common Shares       Stock     Paid-in Capital  Compensation      Deficit     Equity (Deficit)
                                       -------------       -----     ---------------  ------------      -------     ----------------
<S>                                       <C>              <C>         <C>             <C>            <C>              <C>
Balances at December 31, 2001             1,259,738        $  38       $  82,623       $      (8)     $ (88,153)       $  (5,500)
Shares issued under the Employee
   Stock Purchase Plan                        3,437            -               5               -              -                5
Stock issued in lieu of cash to
   employees, vendors and
   consultants                              450,494           13           1,320               -              -            1,333
Shares issued under Equity Line
   agreements (including warrant
   exercise)                                922,801           28           2,964               -              -            2,992
Cost of issuance of common stock
   under Equity Line agreement                    -            -            (280)              -              -             (280)
Shares issued through private
   placement                                266,667            8             392               -              -              400
Costs for issuance of private
   placement                                 16,666            -            (109)              -              -             (109)
Shares issued upon conversion of
   debentures, accrued interest and
   delayed registration penalties           489,540           15             389               -              -              404
Shares issued upon exercise of
   warrants and options                   1,649,141           50           1,865               -              -            1,915
Fair value of warrants and
   beneficial conversion feature
   granted in conjunction with
   issuance of convertible
   debentures                                     -            -           3,626               -              -            3,626
Amortization of deferred offering
   costs associated with
   convertible notes and
   debentures and equity line                     -            -            (953)              -              -             (953)
Write off of deferred offering costs
   upon conversion of notes and
   debentures                                     -            -            (224)              -              -             (224)
Dividend requirements of
   mandatorily redeemable Series
   A preferred stock                              -            -            (120)              -              -             (120)
Compensation related to stock
   option grants                                  -            -           2,306             (75)             -            2,231
Amortization of deferred
   compensation                                   -            -               -              83              -               83
Net loss                                          -            -               -               -        (13,297)         (13,297)
                                         ----------    ---------     -----------      ----------     ----------       ----------

Balances at December 31, 2002             5,058,484      $   152        $ 93,804      $        -     $ (101,450)     $    (7,494)
                                          =========      =======        ========      ==========     ===========     ============
</TABLE>

                                  (Continued)

                                      F-5
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2002 AND 2003

                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                                         Total
                                         Number of         Common      Additional       Deferred      Accumulated    Stockholders'
                                       Common Shares       Stock     Paid-in Capital  Compensation      Deficit     Equity (Deficit)
                                       -------------       -----     ---------------  ------------      -------     ----------------
<S>                                       <C>              <C>         <C>             <C>            <C>              <C>
Balances at December 31, 2002             5,058,484       $  152       $  93,804     $         -     $ (101,450)       $  (7,494)
Shares issued under the Employee
   Stock Purchase Plan                       18,192            -               4               -              -                4
Stock issued in lieu of cash to
   employees, vendors and
   consultants                            6,374,523          183           3,716               -              -            3,899
Shares issued through private
   placement                             28,333,333          850          11,650               -              -           12,500
Shares issued upon conversion of
   debentures, accrued interest and
   delayed registration penalties        83,067,064        2,492           5,902               -              -            8,394
Shares issued upon exercise of
   warrants and options                  13,418,738          411           4,029               -              -            4,440
Costs for issuance of stock                       -            -            (677)              -              -             (677)
Fair value of warrants and
   beneficial conversion feature
   granted in conjunction with
   issuance of convertible
   debentures                                     -            -           2,287               -              -            2,287
Repurchase of beneficial
   conversion feature                             -            -            (128)              -              -             (128)
Dividend requirements of mandatorily
   redeemable Series
   A preferred stock                              -            -             (60)              -              -              (60)
Compensation related to stock
   option grants                                  -            -           4,136             (10)             -            4,126
Amortization of deferred
   compensation                                   -            -               -               3              -                3
Shares issued to acquire
   intellectual property                     30,561            1              36               -              -               37
Net loss                                          -            -               -               -        (26,414)         (26,414)
                                         ----------    ---------     -----------      ----------     ----------       ----------

Balances at December 31, 2003           136,300,885    $   4,089       $ 124,699     $       ( 7)    $ (127,864)      $      917
                                        ===========    =========       =========     ============    ==========       ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                    Year Ended
                                                                                                   December 31,
                                                                                           ---------------------------
                                                                                               2003           2002
                                                                                           ------------   ------------
Cash flows from operating activities:
<S>                                                                                        <C>          <C>
Net loss                                                                                      $(26,414)      $(13,297)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization                                                                   567           512
   Amortization of deferred compensation                                                             3            83
   Non-cash interest expense attributable to:
     Amortization of debenture discounts and charge for beneficial conversion feature            4,835         1,187
     Amortization of deferred offering costs                                                       997           214
     Liquidated damages due to delayed registration of stock underlying convertible
     debentures                                                                                    540           546
     Dividends on mandatorily redeemable Series A preferred stock                                   60             -
   Non-cash loss (gain) on settlement of trade debt                                                 54        (1,319)
   Fair market value of common stock warrants, options and bonuses granted                       7,082         2,952
   Gain on repurchase of beneficial conversion feature                                            (128)            -
   Warrant liability adjustment                                                                   (275)          (69)
   Loss on sale of equipment                                                                        55             -
   Minority interest in joint venture                                                               57
   Changes in operating assets and liabilities:
     Accounts receivable                                                                           (41)           (2)
     Inventory                                                                                  (1,190)          166
     Prepaid expenses and other current assets                                                    (299)          127
     Deferred offering costs and other assets                                                       19            25
     Accounts payable and accrued expenses                                                         502           238
     Other long-term liabilities                                                                   129           (28)
                                                                                            ----------     ----------

       Net cash used in operating activities                                                   (13,447)       (8,665)
                                                                                            ----------     ----------

Cash flows from investing activities:
   Acquisition of intellectual property                                                           (113)            -
   Purchase of equipment                                                                          (433)         (242)
                                                                                            ----------     ----------

       Net cash used in investing activities                                                      (546)         (242)
                                                                                            ----------     ----------

Cash flows from financing activities:
   Proceeds from sale of stock                                                                  16,994         5,311
   Expenses related to sale of stock                                                              (678)         (444)
   Net proceeds from issuance of notes and debentures                                            3,353         3,980
   Repayment of notes and debentures                                                              (735)          (42)
   Principal payments on capital lease obligations                                                  (4)          (38)
                                                                                            ----------     ----------

       Net cash provided by financing activities                                                18,930         8,767
                                                                                            ----------     ----------

Net increase (decrease) in cash and cash equivalents                                             4,937          (140)

Cash and cash equivalents at beginning of period                                                   147           287
                                                                                            ----------     ----------

Cash and cash equivalents at end of period                                                    $  5,084       $   147
                                                                                            ==========     ==========
</TABLE>

                                  (Continued)

                                      F-7

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                           <C>            <C>
                                                                                                     Year Ended
                                                                                                    December 31,
                                                                                              ----------------------
                                                                                                2003           2002
                                                                                              --------       -------
Supplemental disclosure of cash flow activities:
   Cash paid for interest                                                                     $     37       $    73
   Cash paid for income taxes                                                                        2             2

Supplemental disclosure of non-cash activities:
   Dividend on mandatorily redeemable Series A preferred stock                                      60           120
   Common stock grants                                                                             435           612
   Conversion of notes and debentures payable and accrued interest to common stock               8,488           408
   Fair market value of warrants issued in conjunction with debenture                               81           900
   Beneficial conversion feature, net of write off upon conversion                               2,287         3,452
   Accrued interest converted to note payable                                                      148             -
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002


(1)  THE COMPANY

Calypte  Biomedical  Corporation  (the  "Company")  develops,  manufactures  and
markets  urine-based  screening  and  supplemental  tests for the  detection  of
antibodies to the Human Immunodeficiency  Virus, Type-1 ("HIV-1"),  the cause of
Acquired  Immunodeficiency  Syndrome  ("AIDS").  The Company's tests include its
screening enzyme immunoassay (EIA) and supplemental Western Blot tests, the only
two  FDA-licensed  HIV-1 antibody  tests that can be used on urine samples.  The
Company believes that accurate, non-invasive urine-based testing methods for HIV
and other chronic  diseases  make  important  contributions  to public health by
helping  to  foster  an  environment  in  which  testing  may  be  done  safely,
economically,  and  painlessly.  The Company  also  manufactures  and markets an
FDA-licensed  serum-based  supplemental  test for detecting HIV-1  antibodies in
serum. In December 1998,  Calypte  acquired from Cambridge  Biotech  Corporation
certain  assets  primarily  relating to the  manufacture  of its HIV-1 urine and
serum Western Blot products. The Company's revenues are currently generated from
the sale of its EIA and its urine- and  serum-based  Western  Blot  supplemental
tests,  together  referred  to  as  its  "ELISA  tests".  The  ELISA  tests  are
manufactured  in  a  format  that  makes  them  most  suitable  for  high-volume
laboratory  settings.  In November  2003,  the Company filed an  Investigational
Device  Exemption  ("IDE") with the FDA announcing its intent to develop a rapid
serum-based  screening  test that  provides  a test  result in less than  twenty
minutes and which is more suitable for point-of care applications,  particularly
in  international  venues.  The Company is currently  developing both serum- and
urine-based rapid screening tests and anticipates that the primary source of its
future revenues will be from sales of its rapid products,  both  internationally
and domestically.

Calypte  commenced  operations  in  1989  and  was  incorporated  as a  Delaware
corporation in June 1996,  concurrent  with the initial  public  offering of its
stock. On June 1, 1998, the Company ceased being a development  stage enterprise
when it announced  that the FDA had approved its urine HIV-1  Western Blot test.
That test is used on samples that are repeatedly reactive in the Company's HIV-1
urine  antibody  screening  test.  The  supplemental  test  completed  the  only
available  urine-based  HIV-1 test method.  Calypte is headquartered in Alameda,
California  and  manufactures  its  HIV-1  screening  test  there.  The  Company
manufactures  its urine and serum HIV-1 Western Blot  supplemental  tests at its
facilities in Rockville,  Maryland.  At December 31, 2003,  both the Alameda and
Rockville manufacturing facilities were FDA approved.

Calypte  and its  distributors  market its ELISA tests in  approximately  half a
dozen  countries   worldwide.   The  Company's  marketing  strategy  is  to  use
distributors,  focused direct selling and  joint-venture  marketing  partners to
penetrate targeted domestic and international  markets. We are currently selling
internationally primarily in the People's Republic of China and Brazil.

The Company  incurred net losses  attributable  to common  stockholders of $26.5
million  and $13.4  million  in 2003 and  2002,  respectively.  The  accumulated
deficit at December 31, 2003 was $127.8 million. As described more completely in
Note  18,  since  December  31,  2003,  the  Company  has  amended  a  financing
arrangement  that  management  believes will provide  adequate  funds to sustain
operations  at expected  levels at least  through  2004.  To the extent that the
Company issues notes under this financing  arrangement,  however,  it must repay
those notes at their  maturity  dates during the first half of 2005. The Company
must achieve  profitability and sustainable cash flows for its business model to
succeed. If sufficient funds are not available from the Company's  operations to
repay the promissory  notes when due,  however,  the Company may need to arrange
additional financing, attempt to extend or otherwise modify the promissory notes
or make other arrangements.  There can be no assurance that additional financing
would be available, or it if is available, that it would be on acceptable terms.
The Company's future liquidity and capital  requirements will depend on numerous
factors,  including  successful  completion of the  development of its new rapid
tests,  acquisition and protection of  intellectual  property  rights,  costs of
developing   its  new  products,   ability  to  transfer   technology,   set  up
manufacturing  and obtain  regulatory  approvals of its new rapid tests,  market
acceptance of all its products,  existence of competing  products in its current
and anticipated markets,  actions by the FDA and other international  regulatory
bodies,  and its  ability  to  raise  additional  capital  in a  timely  manner.
Management expects to be able to raise additional capital;  however, the Company
may not be able to obtain additional financing on acceptable terms, or at all.


STOCK SPLIT

On May 20, 2003, the Company's shareholders approved a 1:30 reverse stock split,
which  became  effective  on May 28,  2003.  The  stated par value of the common
shares  was  changed to $0.03 from  $0.001 per share.  The number of  authorized
shares of common stock remained at 800 million.  All share and per share amounts
presented reflect the stock split.

                                      F-9
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

(2)  SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The  accompanying  consolidated  financial  statements  include  the  results of
operations of the Company, its wholly-owned  subsidiary,  Calypte,  Inc. and its
51% owned joint venture in China, Beijing Calypte Biomedical Technology Ltd. All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

Cash and Cash Equivalents

Cash equivalents consist of investments in money market accounts.

Allowance for Doubtful Accounts

The  Company  provides  an  allowance  for  doubtful   accounts  on  a  specific
identification  basis  when,  due to passage of time or receipt of  information,
there is  appropriate  evidence of a  customer's  inability to make the required
payments.

Inventories

Inventories are stated at the lower of cost or market with cost determined using
the first-in, first-out method.

Property and Equipment

Property and equipment are stated at cost.  Machinery and  equipment,  furniture
and fixtures,  and computer  equipment are  depreciated  using the straight line
method over the estimated useful lives of the assets, generally as follows:

Computer equipment                                                3 years
Machinery and equipment                                           5 years
Furniture and fixtures                                            5 years
Leasehold improvements                                            3-7 years

Leasehold  improvements  and  equipment  under  capital  leases are amortized or
depreciated  over the shorter of the remaining  lease term or the useful life of
the equipment or improvement.

Long-Lived Assets

Long-lived assets are comprised of property and equipment and intangible assets.
Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that  the  carrying  amount  of the  asset  may  not be
recoverable.  An estimate  of  undiscounted  future  cash flows  produced by the
asset,  or by the  appropriate  grouping of assets,  is compared to the carrying
value to determine  whether  impairment  exists. If an asset is determined to be
impaired,  the loss is measured based on quoted market prices in active markets,
if available.  If quoted market prices are not  available,  the estimate of fair
value is based on various valuation techniques,  including a discounted value of
estimated  future cash flow and  fundamental  analysis.  The Company  reports an
asset to be disposed of at the lower of its carrying  value or its estimated net
realizable value.

Fair Value of Financial Instruments

Financial  assets  and  short-term  liabilities,   with  the  exception  of  the
convertible  notes and debentures,  have carrying values which approximate their
fair values for all periods presented.  The carrying amounts of cash equivalents
approximate  fair value  because of their  short-term  nature and  because  such
amounts are invested in accounts  earning  market  rates of  interest.  The face
amount of the convertible  notes and debentures  approximate  fair value and are
offset by the calculated value of the beneficial  conversion feature embedded in
the respective notes or debentures.

                                      F-10
<PAGE>

                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

Revenue Recognition

The Company  records  revenues only upon the  occurrence of all of the following
conditions:

     o   The Company has received a binding purchase order or similar commitment
         from  the  customer  or  distributor  authorized  by  a  representative
         empowered to commit the purchaser (evidence of a sale).

     o   The purchase  price has been fixed,  based on the terms of the purchase
         order.

     o   The Company has  delivered  the product  from one of its  manufacturing
         plants to a common carrier  acceptable to the purchaser.  The Company's
         customary  shipping terms are FOB shipping  point.  Because of the need
         for controlled  conditions during shipment,  the Company suggests,  but
         leaves to the purchaser's discretion, acquiring insurance for the value
         of the shipment.  If the purchaser  elects to insure the shipment,  the
         insurance is at the purchaser's expense.

     o   The Company deems the collection of the amount invoiced  probable.  The
         Company   currently  deals  with  a  limited  number  of  customers  or
         distributors,  with most of whom it has had a relationship for a number
         of years. To eliminate the credit risk  associated  with  international
         distributors with whom the Company has had little or no experience, the
         Company  requires  prepayment of the order or a letter of credit before
         shipment.

The Company does not permit  product  returns.  The  Company's  products must be
maintained under rigidly controlled  conditions that it cannot control after the
product has been shipped to the customer.

The Company  provides no price  protection.  With the  exception of sales to one
distributor  through October 2003, the Company  recognizes revenue upon shipment
of product. In the case of that distributor,  the distributor held the Company's
inventory on  consignment  and reported  monthly its usage of the products.  The
Company recorded revenue on sales to this distributor based on the distributor's
reported usage. In October,  2003, this  distributor  purchased from the Company
the  inventory  on hand and  switched  to a standard  contractual  relationship;
thereafter, the Company recognized revenue upon shipment.

Deferred Revenue

Pursuant to a 1991 License and Supply Agreement,  a Japanese  distributor made a
payment of  $500,000  to Calypte  representing  an  advance  creditable  against
royalties and other payments to be paid by the  distributor to Calypte under the
terms of the Agreement. In a 1994 Distribution Agreement between Calypte and the
distributor,  the  distributor  agreed to waive  its  right to have the  advance
payment  credited to subsequent  payments it might owe Calypte under the License
and Supply Agreement or the Distribution  Agreement in return for a 50% discount
on  products  supplied  by  Calypte to the  distributor,  until such time as the
distributor has received  cumulative  discounts totaling  $500,000.  Pursuant to
that agreement,  Calypte  recorded the $500,000 payment as deferred revenue that
was to be recognized as product was sold at the stipulated  50% discount.  As of
this date, Calypte has sold no product to the distributor under the terms of the
Distribution Agreement and the deferred revenue balance remains unchanged.

The Company's  current  sales  practices do not require the deferral of revenues
and no  entries  to record  deferred  revenue  have been made  during the period
included in the accompanying consolidated financial statements.

Income Taxes

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards (SFAS) No. 109,  Accounting for Income Taxes. SFAS No. 109 requires an
asset and liability approach for the financial  reporting of income taxes. Under
SFAS No. 109,  deferred tax assets and liabilities are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit  carryforwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered or settled.  Under SFAS No. 109, the effect on deferred tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

Stock-Based Compensation

Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation - Transition  and  Disclosure,  establishes a fair-value  method of
accounting  for stock options and similar  equity  instruments.  The  fair-value
method requires that  compensation cost be measured on the

                                      F-11
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

value of the award at the grant date,  and recognized  over the service  period.
SFAS No. 123 as amended  allows  companies  to either  account  for  stock-based
compensation  to employees  under the  provisions  of SFAS No. 123 as amended or
under the provisions of Accounting Principles Board (APB) Opinion No. 25 and its
related  interpretations.  The Company accounts for its stock-based compensation
to employees in accordance with the provisions of APB Opinion No. 25.

The Company has  recorded  deferred  compensation  for the  difference,  if any,
between the exercise  price and the deemed fair market value of the common stock
for  financial  reporting  purposes of stock options  granted to employees.  The
compensation expense related to such grants is amortized over the vesting period
of the related stock options on a straight-line basis.

The  Company  accounts  for  equity   instruments  issued  to  non-employees  in
accordance with the provisions of SFAS No. 123, as amended,  and Emerging Issues
Task Force (EITF) Issue No. 96-18  Accounting  for Equity  Instruments  that Are
Issued to Other than  Employees for Acquiring,  or in Conjunction  with Selling,
Goods or Services.

Had the  Company  determined  compensation  cost  based on the fair value at the
grant date for its employee  stock  options and  purchase  rights under SFAS No.
123, the Company's  net loss would have been  increased to the pro forma amounts
indicated below for the years ended December 31:

<TABLE>
<CAPTION>
                                                                                         2003                     2002
                                                                                  ===================      ===================

                                                                                    (in thousands)           (in thousands)

<S>                                                                               <C>                      <C>
Net loss attributable to common stockholders, as reported                         $           (26,474)     $           (13,417)
Add: Stock-based employee compensation expense included in reported net loss,
   net of related tax effects                                                                   1,082                      131
Less: Stock-based employee compensation expense determined under fair value
   based method for all awards, net of related tax effects                                     (2,794)                    (355)
                                                                                              -------                  -------
Pro forma net loss attributable to common stockholders                            $           (28,186)     $           (13,641)
                                                                                              =======                  =======
Net loss per share attributable to common stockholders:
    As reported                                                                   $             (0.47)     $             (5.18)
    Pro forma                                                                     $             (0.50)     $             (5.26)
</TABLE>

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share is computed by dividing net loss attributable to common
stockholders  by  the  weighted   average  number  of  shares  of  common  stock
outstanding  during the year.  The  computation  of diluted  earnings per common
share is similar to the computation of basic net loss per share  attributable to
common  stockholders,  except that the  denominator is increased for the assumed
conversion of convertible securities and the exercise of options and warrants to
the extent they are  dilutive  using the  treasury  stock  method.  The weighted
average  shares  used  in  computing  basic  and  diluted  net  loss  per  share
attributable  to  common  stockholders  were the same  for the two  years  ended
December 31, 2003 and 2002.  Options and warrants for 707,783 shares and 717,970
shares were excluded from the computation of loss per share at December 31, 2003
and 2002, respectively, as their effect is anti-dilutive. The difference between
net loss and net loss  attributable  to common  stockholders  relates to accrued
dividends  on the  Company's  mandatorily  redeemable  Series A preferred  stock
discussed in Note 10.

Concentrations of Credit Risk

Financial  instruments,  which potentially subject the Company to concentrations
of credit  risk,  consist  principally  of cash and cash  equivalents  and trade
accounts receivable.  The Company has investment policies that limit investments
to short-term,  low-risk investments.  Concentration of credit risk with respect
to trade accounts  receivable are limited due to the fact that the Company sells
its products primarily to established distributors and laboratories and requires
prepayment for certain orders where the relationship  between the parties is not
well-established.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities,  the  disclosure  of
contingent assets and liabilities at the date of the financial  statements,  and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

                                      F-12
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

Risks and Uncertainties

Calypte purchases certain raw materials and components used in manufacturing its
products  from a number of suppliers,  but relies on single  sources for certain
other components. Establishment of additional or replacement suppliers for these
components  cannot be  accomplished  quickly.  Any delay or  interruption in the
supply of these  components  could have a material adverse effect on the Company
by  significantly  impairing its ability to  manufacture  products in sufficient
quantities  to meet  commercial  sales  demand.  Additionally,  if the Company's
financial  condition  reduces its ability to pay for critical  components  or to
make royalty payments under its license agreements, suppliers may delay or cease
selling critical  components to it or its rights to use license agreements could
be jeopardized, both of which could also impair its ability to manufacture.

Comprehensive Loss

The Company has no  components  of other  comprehensive  loss other than its net
loss, and, accordingly, its comprehensive loss is equivalent to its net loss for
all periods presented.

Segment and Geographic Information

SFAS  No.  131  "Disclosures   about  Segments  of  an  Enterprise  and  Related
Information"  requires an enterprise to report segment  information based on how
management  internally evaluates the operating performance of its business units
(segments). The Company's operations are currently confined to a single business
segment: the development and sale of HIV diagnostics.

Substantially all of the Company's sales through 2003 have been to United States
customers.  Sales  to  international  customers  accounted  for 5% and 4% of the
Company's revenues in 2003 and 2002, respectively.

Sales to two major domestic  customers  accounted for approximately 50% of total
net  sales  for the year  ended  December  31,  2003.  Sales to those  customers
accounted for  approximately 36% and 14% of the Company's 2003 net sales and 24%
and 11%,  respectively,  of the Company's net sales in 2002. The Company made no
sales in 2003 to a customer who had accounted for  approximately  17% of its net
sales in 2002.

Reclassifications

Certain  previously-reported  amounts  in the  financial  statements  have  been
reclassified to conform to the current year presentation.

Newly-Adopted Accounting Pronouncements

In April  2002,  the  Financial  Accounting  Standards  Board,  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 145,  "Rescission of
FASB  Statements  No. 4, 44, and 64,  Amendment  of FASB  Statement  No. 13, and
Technical   Corrections."   SFAS  No.  145   requires   gains  and  losses  from
extinguishment  of debt to be  classified as an  extraordinary  item only if the
criteria in APB No. 30 have been met.  The Company  adopted SFAS 145 in 2003 and
as a result, the gain from settlement of debt in 2002 has been reclassified from
an extraordinary gain to an ordinary gain.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities."  SFAS No.  146  addresses  accounting  and
reporting for costs associated with exit and disposal  activities and supersedes
Emerging  Issues Task Force Issue No. 94-3 (EITF 94-3),  "Liability  Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the liability is incurred,  as defined by the Statement.  Under
EITF 94-3,  an exit cost was  recognized  at the date an entity  committed to an
exit plan.  Additionally,  SFAS No. 146 provides  that exit and  disposal  costs
should be  measured  at fair  value and that the  associated  liability  will be
adjusted for changes in estimated cash flows. The provisions of SFAS No. 146 are
effective for exit and disposal activities that are initiated after December 31,
2002. This standard did not have a material impact on the Company's consolidated
financial position or results of operations,  however the Company has recognized
exit costs associated with the closure of its Alameda,  California manufacturing
facility in accordance with the standard.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with characteristics of both liabilities and equity, many
of which have been previously  classified as equity or on the  "mezzanine".  The
Company adopted this standard during the third quarter of 2003 and, accordingly,
has classified its  mandatorily  redeemable  Series A preferred  stock as a long
term liability for all periods presented. Additionally, effective with

                                      F-13
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

the  adoption  and on a  prospective  basis,  the  dividend  on the  mandatorily
redeemable  Series A preferred  stock is classified  as interest  expense in the
consolidated statement of operations.

Recent Accounting Pronouncements

In April  2003,  the  FASB  issued  SFAS  149,  Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities.  This  statement  amends  and
clarifies  the  financial  accounting  and  reporting   requirements,   as  were
originally  established  in SFAS 133,  for  derivative  instruments  and hedging
activities.  SFAS 149 provides greater clarification of the characteristics of a
derivative  instrument so that  contracts with similar  characteristics  will be
accounted for  consistently.  This statement is effective for contracts  entered
into or  modified  after June 30,  2003,  as well as for  hedging  relationships
designated after June 30, 2003,  excluding  certain  implementation  issues that
have been effective prior to this date under SFAS 133. The Company's adoption of
this  statement  has not had a material  impact on our results of  operations or
financial condition.

In January 2003, the FASB issued FASB Interpretation (FIN) No. 46, Consolidation
of Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51.  FIN 46  provides  guidance  on how to apply the  controlling  financial
interest criteria in ARB 51 to variable  interest  entities  ("VIE").  Given the
complexity  of FIN 46 and  implementation  issues after its  original  issuance,
particularly  with  respect to its scope and  application  of the  consolidation
model,  the FASB staff issued several FASB staff  positions  throughout  2003 to
clarify the Board's  intent on certain of the  interpretation's  provisions.  In
December 2003, the Board issued FIN 46R to address certain technical corrections
and clarify the implementation issues that had arisen.

In  general,  a VIE is subject to  consolidation  if it has (1) an  insufficient
amount of equity for the  entity to carry on its  principal  operations  without
additional  subordinated  financial support provided by any parties, (2) a group
of equity owners that are unable to make decisions about the entity's activities
or (3) equity that does not absorb the  entity's  losses or receive the entity's
benefits. Variable interest entities are to be evaluated for consolidation based
on all  contractual,  ownership or other  interests that expose their holders to
the  risks and  rewards  of the  entity.  These  interests  may  include  equity
investments,  loans,  leases,  derivatives,  guarantees,  service and management
contracts and other instruments whose values change with changes in the VIE. Any
of these interests may require its holder to consolidate the entity.  The holder
of a variable  interest that receives the majority of the potential  variability
in gains or losses of the VIE is the VIE's primary  beneficiary  and is required
to  consolidate  the VIE.  FIN 46R became  effective  immediately  for  entities
created  after  January 31, 2003. It applies in the first fiscal year or interim
period beginning after December 15, 2003, to variable interest entities in which
an  enterprise  holds a variable  interest that it acquired  before  February 1,
2003. The Company has  determined  that the adoption of the provisions of FIN 46
will not have an impact upon its financial condition or results of operations.

(3)    INVENTORY

Inventory  as of  December  31, 2003 and 2002  consisted  of the  following  (in
thousands):

                                                       2003             2002
                                                       ----             ----

Raw materials                                       $   708          $   197
Work-in-process                                         962              443
Finished goods (including consigned inventory
  of $101 at December 31, 2002)                         483              323
                                                    -------          -------

Total Inventory                                     $ 2,153          $   963
                                                    =======          =======

                                      F-14
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

(4)  PROPERTY AND EQUIPMENT

Property  and  equipment  as of  December  31,  2003 and 2002  consisted  of the
following (in thousands):

                                                           2003            2002
                                                           ----            ----

Computer equipment                                    $     424       $     766
Machinery and equipment                                   3,582           3,344
Furniture and fixtures                                      289             276
Leasehold improvements                                    1,227           1,132
                                                       --------       ---------

                                                          5,522           5,518
Accumulated depreciation and amortization                (4,795)         (4,601)
                                                      ---------       ---------

Property and equipment, net                           $     727       $     917
                                                      =========       =========

The Company  recognized  depreciation  expense of $527,000  and $512,000 for the
years  ended  December  2003  and  2002,  respectively.  Included  in  leasehold
improvements is approximately  $90,000 related to improvements in the Rockville,
Maryland  facility.  The  Company  has  committed  approximately  an  additional
$400,000 in 2004 to complete leasehold improvements at this facility.

(5)  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of December 31, 2003 and 2002 consisted
of the following (in thousands):

                                                           2003            2002
                                                           ----            ----

Trade accounts payable                                 $  2,189        $  3,462
Accrued royalties                                           582             338
Accrued salary and vacation pay                             125             240
Accrued interest (including non-cash liquidated
  damages related to delayed registration of stock
  underlying convertible and other securities of $271
  and $546 in 2003 and 2002, respectively)                  308             789
Other                                                     1,118             316
                                                       --------        --------

Total accounts payable and accrued expenses            $  4,322        $  5,145
                                                       ========        ========

(6)  NOTES AND DEBENTURES PAYABLE

The table below summarizes  notes and debentures  payable activity for the years
ended December 31, 2003 and 2002 (in thousands).

<TABLE>
<CAPTION>
                                                                                                   Discount      Net
                                   Balance                                             Balance        at      Balance at
                                  12/31/02    Additions     Payments    Conversions    12/31/03    12/31/03    12/31/03
                                  --------    ---------     --------    -----------    --------    --------    --------
<S>                               <C>          <C>          <C>         <C>            <C>            <C>         <C>
8% Convertible Notes              $  2,985     $    107     $     -     $  (3,092)     $      -      $    -       $    -
8.5% Note - LHC Corporation            393           42        (435)            -             -           -            -
10% Convertible Note - BNC
  Bach                                 126            -           -          (126)            -           -            -
10% Convertible Debentures -
   Mercator                              -        1,950           -        (1,058)          892         (36)         856
12% Convertible Debenture -
   Bristol Investment Fund,            465            -           -          (465)            -           -            -
   Ltd.
12% Convertible Debenture -
   Mercator                            850        1,750        (300)       (2,234)           66         (54)          12
                                  --------     --------     -------     ---------      --------      ------       ------

Total                             $  4,819     $  3,849     $  (735)    $  (6,975)     $    958      $  (90)      $  868
                                  ========     ========     =======     =========      ========      ======       ======
</TABLE>

                                      F-15
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                   Discount       Net
                                   Balance                                            Balance         at      Balance at
                                  12/31/01    Additions     Payments    Conversions   12/31/02     12/31/02    12/31/02
                                  --------    ---------     --------    -----------   --------     --------    --------
<S>                               <C>          <C>          <C>         <C>            <C>         <C>          <C>
8% Convertible Notes              $      -     $  3,125     $     -     $    (140)     $  2,985    $ (2,052)    $    933
8% Convertible Debentures                -          200           -          (200)            -           -            -

8.5% Note - LHC Corporation            411            -         (18)    $       -           393           -          393
10% Convertible Note - BNC Bach          -          150         (24)            -           126           -          126
12% Convertible Debenture -
   Bristol Investment Fund, Ltd.         -          525           -           (60)          465        (273)         192
12% Convertible Debenture -
   Mercator Group, LLP                   -          850           -               -         850        (313)         537
                                  --------     --------     -------     ---------      --------    --------    ---------

Total current notes payable       $    411     $  4,850     $   (42)    $   (400)      $  4,819    $ (2,638)   $  2,181
                                  ========     ========     =======     =========      ========    ========    =========
</TABLE>


8% Convertible Notes
Pursuant to Regulation S, Calypte has issued a series of 8% convertible notes in
the  aggregate  principal  amount of $3.125  million  in 2002 and an  additional
$107,000  in 2003.  These  notes have a 24 month term and are  convertible  into
shares  of the  Company's  common  stock  at the  lesser  of $3.00 or 70% of the
average of the three lowest trades during the 30 day period preceding conversion
and are  convertible  at any  time  prior  to  maturity.  Calypte  has  received
approximately $2.6 million in proceeds after deducting fees and costs associated
with these notes. The note issued during 2003  represented  accrued interest due
on one of the previous notes.

During 2003,  various holders of the 8% convertible  notes converted  $3,092,000
face value plus accrued interest and liquidated  damages  resulting from delayed
registration  of the  underlying  common stock into  approximately  45.7 million
shares of the Company's common stock at conversion prices ranging from $1.014 to
$0.077 per share.  During  2002,  various  holders of the 8%  convertible  notes
converted  $140,000  face value plus accrued  interest  into  approximately  0.3
million shares of the Company's  common stock at a conversion price of $0.49 per
share.

The  Company  was  required  to file a  registration  statement  for the  shares
underlying the convertible notes within 30 days of the closing date. The Company
did not file a registration  statement for those shares until July 8, 2003. As a
result of the delayed registration,  the Company was required to pay, in cash or
stock, at the subscribers'  option,  liquidated damages in an amount equal to 2%
of the note  principal  for each month of delay.  Between July 2002 and December
31, 2003,  the Company  recognized  an aggregate  of  approximately  $768,000 as
liquidated damages  attributable to these notes,  substantially all of which was
recorded as non-cash  interest  expense.  The shares underlying these agreements
were  included in the Company's S-2  registration  statement  filed with the SEC
that became effective on July 18, 2003.

                                      F-16
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

The following table sets forth the investors who subscribed to the 8%
convertible notes in 2003 and 2002:

<TABLE>
<CAPTION>
                                                                Transaction        Calypte           Shares
    Investor                                    Amount             Date         Closing Price   Issued (000) (1)
    --------                                    ------           ---------      -------------   ----------------

    8% CONVERTIBLE NOTES
    2003
    ----
<S>                                              <C>               <C>                <C>              <C>
    Alpha Capital Aktiengesellshaft             $  107,000         5/9/03             $ 0.63           1,302.5
                                                ==========                                            ========

    2002
    ----
    Alpha Capital Aktiengesellshaft             $  500,000        5/24/02             $ 3.60           7,260.7
    Stonestreet Limited Partnership                500,000        5/24/02             $ 3.60           7,075.7
    Filter International Ltd.                      150,000        5/24/02             $ 3.60           2,452.4
    Camden International Ltd.                      350,000        5/24/02             $ 3.60           5,279.1
    Domino International Ltd.                      150,000        5/24/02             $ 3.60           1,767.4
    Thunderbird Global Corporation                  75,000        5/24/02             $ 3.60           1,083.1
    BNC Bach International Ltd.                    200,000        5/24/02             $ 3.60           2,463.8
    Excalibur Limited Partnership                  200,000        5/24/02             $ 3.60           1,678.9
    Standard Resources Ltd.                        100,000        5/24/02             $ 3.60           1,542.5
    SDS Capital International Ltd.                 300,000        7/10/02            $ 10.20           4,062.1
    Camden International Ltd.                      100,000        7/10/02            $ 10.20           1,707.9
    Excalibur Limited Partnership                  250,000        7/24/02             $ 6.60           4,238.3
    Stonestreet Limited Partnership                250,000        8/21/02             $ 3.90           4,042.2
                                                ----------                                            --------

                                                $3,125,000                                            44,654.1
                                                ==========                                            ========
</TABLE>

     (1) includes shares issued for accrued  interest and liquidated  damages as
         of December 31, 2003

8% Convertible Debentures
In 2002, Calypte issued two (2) 8% convertible  debentures in the aggregate face
amount  of  $200,000  pursuant  to  Regulation  S. One of these  debentures  was
convertible  into shares of the Company's  common stock at a 20% discount to the
average  closing price for the five trading days prior to conversion,  the other
at a 30% discount,  and each had a conversion floor of $3.00 per share.  Both of
these  debentures  have been  converted  into shares of Calypte's  common stock.
Calypte  received cash of $180,000,  net of fees, from the issuance of these two
debentures. The Company agreed to use its best efforts to register the shares of
common  stock  and  provided  cost  free  piggyback  registration  rights to the
debenture  holders.  There were no defined  penalties  and/or time  requirements
imposed on Calypte with respect to filing and achieving the  effectiveness  of a
registration  statement for the underlying  shares.  The shares underlying these
agreements were included in the Company's S-2 registration  statement filed with
the SEC that became effective on July 18, 2003.

The following table lists the individual investors and transaction dates related
to the issuance of the 8% convertible debentures:

<TABLE>
<CAPTION>
                                                                                      Calypte
                                                                 Transaction          Closing         Shares
    8% CONVERTIBLE DEBENTURES                     Amount             Date              Price        Issued (1)
    -------------------------                     ------             ----              -----        ----------
<S>                                               <C>             <C>                  <C>              <C>
    Su So                                         $100,000        6/17/02              $4.20            36,667
    Jason Arasheben                               $100,000        7/03/02              $8.10            15,826
</TABLE>

     (1) includes fee shares

The Company  determined  that the above 8% convertible  notes and 8% convertible
debentures  were issued with  beneficial  conversion  features.  The  beneficial
conversion  features  were  recognized  by  allocating  an  amount  equal to the
intrinsic  value of each feature to note or  debenture  discount to be amortized
over the life of the note or  debenture,  subject  to a  limitation  of the face
amount  of the  respective  note or  debenture.  Upon  earlier  conversion,  the
proportionate share of unamortized discount was charged to interest expense. The
intrinsic  value was calculated at the date of issue as the  difference  between
the  conversion  price  of the  note or  debenture  and the  fair  value  of the
Company's  common  stock  into  which  the note or  debenture  was  convertible,
multiplied  by the  number  of  common  shares  into  which  the  debenture  was
convertible.  In the case of the 8% convertible notes, the beneficial conversion
feature was  generally  limited by the face amount of the note.  The  beneficial
conversion  feature for each of the 8% convertible  debentures was less than the
face amount of the debenture, however, both debentures were converted soon after
issuance.

                                      F-17
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

8.5% Note
In August 2001, the Company executed a promissory note in the amount of $400,000
to the  parent  company  of its  then-largest  stockholder.  The  note  required
interest at 8.5% per annum and principal plus accrued  interest was due no later
than  September 14, 2001. In December  2001, the parties agreed to execute a new
note in the amount of $411,000,  representing  the unpaid  principal and accrued
but unpaid interest on the previous note. The note required interest at 8.5% per
annum and principal  payments  were due beginning in February  2002. In February
2002, the Company  renegotiated  the payment terms to require monthly  principal
payments of $17,500 in February and March 2002, increasing to $35,000 thereafter
unless  and  until  the  Company  secured  at least  $2  million  in  additional
financing,  excluding the $850,000 of 12%  convertible  debentures  and warrants
discussed below, at which time a $200,000  principal  payment would be required.
The Company made the payment  required on February 28, 2002. In March 2002,  the
Company further  renegotiated  the repayment terms of this note,  suspending any
required  principal  or  interest  payments  until 30 days  after the  Company's
registration  statement for the 12% convertible  debentures  described below, at
which time the  Company was  required  to make a $200,000  payment and to resume
making monthly payments of $35,000 until the principal and accrued interest were
repaid in full.  On February 28, 2003,  the Company and the investor  executed a
new note in the  amount of  $435,000,  representing  the  unpaid  principal  and
accrued but unpaid  interest on the December 2001 note between the parties.  The
Company  renegotiated  the  terms  of the  December  2001  note due to a lack of
available  funds and to avoid a  default.  The terms of the  February  2003 note
required  monthly  principal  payments of $17,500 plus  interest from March 2003
through May 2003,  increasing to $35,000  monthly,  plus  interest,  thereafter,
until the Company secured at least $5,000,000 in additional financing,  at which
time the remaining  outstanding  balance  became due and payable.  The remaining
balance of the note was repaid in  September  2003  following  the  securing  of
financing.

10% Convertible Note
On May 14, 2002,  the Company  issued,  pursuant to Regulation S, a $150,000 10%
convertible  promissory  note to BNC Bach  International  Ltd.  ("BNC Bach"),  a
private  investment fund that is a related party to Townsbury  Investments  Ltd.
("Townsbury"), the investor in a prior investment that provided the Company with
financing pursuant to an equity line. The closing price for Calypte common stock
on May 14, 2002 was $4.20.  This note was originally  convertible into shares of
the Company's common stock at $1.50 per share and was due on the earlier of July
14, 2002 or the  settlement  date of Calypte's  next  drawdown  under the equity
line. On July 14, 2002,  Calypte and BNC Bach agreed to extend the maturity date
of the note from July 14,  2002 to  December  31,  2002.  The  market  price for
Calypte common stock was $10.80 on July 14, 2002. In return for the extension of
the maturity date, Calypte agreed to amend the conversion price of the note from
$1.50  per share to the  lesser of (a) $1.50 per share or (b) 60% of the  lowest
three  closing bid prices of Calypte's  common stock during the 22 business days
prior to the date BNC Bach notifies Calypte of its election to convert the note.
No  accounting  adjustments  were  required as a result of the  extension of the
note's maturity or the amendment of the conversion  price. In December 2002, the
Company repaid approximately  $24,000 of the outstanding  principal plus accrued
interest from the proceeds of a draw down under its equity line with Townsbury.

On January 15, 2003, the Company and BNC Bach agreed to extend the maturity date
of the Note to March 17,  2003.  On March 17,  2003,  the  Company  and BNC Bach
agreed to further  extend the maturity  date to April 4, 2003. On April 2, 2003,
the Company and BNC Bach agreed to extend the  maturity  date of the Note to May
5, 2003.  On April 30,  2003,  the Company and BNC Bach  amended the  conversion
price to eliminate a conversion price ceiling of $1.50 per share and to increase
the discount  applicable to the conversion  price from 40% to 50%. In return for
this  modification  of the  conversion  price,  BNC Bach  agreed to  extend  the
maturity of the note until May 10, 2004. No accounting adjustments were required
as a result of any of the extensions of the note's maturity.  In September 2003,
BNC Bach converted the remaining  $126,000 face value plus accrued interest into
approximately  2.2 million shares of the Company's  common stock at a conversion
price of $0.0612 per share.

10%  Convertible  Debentures-Mercator  Focus Fund,  Mercator  Momentum  Fund and
Mercator Momentum Fund III

On January 14, 2003, when the market price of the Company's stock was $1.92, the
Company  issued a $1,000,000 10%  convertible  debenture to Mercator Focus Fund,
L.P.  ("Focus  Fund")  pursuant to  Regulation  S and  received  net proceeds of
$818,000  net of fees and  expenses.  $308,000 of the proceeds was used to repay
the $300,000 October 2002 12% convertible  debenture and accrued interest issued
to Mercator  Momentum Fund L.P.  ("MMF").  The debenture is convertible into the
Company's  common stock at 80% of the average of the three lowest trades for the
20 days preceding  conversion,  but not more than $3.00.  Under the terms of the
debenture agreement, the Company agreed to file a registration statement for the
shares of common stock  underlying  the debenture  within 30 days of the closing
date and use its reasonable  best commercial  efforts to cause the  registration
statement  to be  declared  effective  within 120 days of the closing  date.  On
February 14, 2003, when the price of the Company's  common stock was $2.01,  the
Company and Focus Fund agreed to extend the  registration  period until April 4,
2003.  On March 31, 2003,  when the market  price of Calypte's  common stock was
$0.885, Focus Fund granted the Company an additional 30-day extension, until May
5,  2003,  in which to  register  the  shares of common  stock  underlying  this
financing.  On May 1, 2003, when the market price of Calypte's  common stock was
$0.711, the Company received a further extension until July 1, 2003. On June 26,
2003, when the trading price for the Company's stock was $0.36 per share,  Focus
Fund agreed to extend the period for filing the registration  statement  through
July 15,  2003.  The shares  underlying  this  agreement

                                      F-18
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

were included in the Company's S-2  registration  statement  that was filed with
the SEC on July 8, 2003 and which became effective on July 18, 2003.  During the
third  quarter of 2003,  Focus Fund  converted  $422,000 face value plus accrued
interest  and $43,000 of  liquidated  damages due to delayed  registration  into
approximately  5.8 million  shares of the  Company's  common stock at conversion
prices  ranging  from  $0.07 to $0.09  per  share.  See Note 18 for  information
regarding the extension of the maturity of this note.

On January 30, 2003, when the market price of the Company's stock was $1.86, the
Company  issued  a  $450,000  10%  convertible  debenture  to  MMF  pursuant  to
Regulation S and received  net proceeds of $440,000,  net of fees and  expenses.
The  debenture  is  convertible  into the  Company's  common stock at 80% of the
average of the three lowest trades for the 20 days preceding conversion, but not
more than $3.00. Under the terms of the debenture agreement,  the Company agreed
to file a registration  statement for the shares of common stock  underlying the
debenture  within  30 days of the  closing  date  and  use its  reasonable  best
commercial efforts to cause the registration  statement to be declared effective
within 120 days of the closing date. On February 14, 2003, when the price of the
Company's  common  stock was  $2.01,  the  Company  and MMF agreed to extend the
registration   period  of  the  underlying  common  stock  as  required  in  the
Registration  Rights  Agreement until April 4, 2003. On March 31, 2003, when the
market  price of Calypte's  common stock was $0.885,  MMF granted the Company an
additional  extension,  until May 5, 2003,  in which to  register  the shares of
common stock underlying this financing. On May 1, 2003, when the market price of
Calypte's  common  stock was $0.711,  the Company  received a further  extension
until July 1, 2003.  On June 26, 2003,  when the trading price for the Company's
stock was $0.36 per  share,  MMF  agreed to extend  the  period  for  filing the
registration  statement  through  July 15,  2003.  The  shares  underlying  this
agreement  were included in the Company's S-2  registration  statement  that was
filed with the SEC on July 8, 2003 and which became  effective on July 18, 2003.
During the third and fourth quarters of 2003, MMF converted  $358,000 face value
plus  accrued  interest  and  $29,000  of  liquidated  damages  due  to  delayed
registration into approximately 2.6 million shares of the Company's common stock
at  conversion  prices  ranging  from $0.11 to $0.14 per share.  See Note 18 for
information regarding the extension of the maturity of this note.

On March 13, 2003, when the market price of the Company's  stock was $1.50,  the
Company issued a $400,000 10% convertible debenture to Focus Fund and a $100,000
10% convertible  debenture to Mercator  Momentum Fund III, L.P.  ("Momentum Fund
III"),  each pursuant to  Regulation  S, and received  aggregate net proceeds of
$400,000,  net of fees and  expenses.  Each  debenture is  convertible  into the
Company's  common stock at 65% of the average of the three lowest trades for the
20 days preceding  conversion,  but not more than $2.10.  Under the terms of the
debenture  agreements,  Calypte agreed to file a registration  statement for the
shares of common stock  underlying the debentures  within 30 days of the closing
date and use its reasonable  best commercial  efforts to cause the  registration
statement to be declared effective within 120 days of the closing date. On April
11,  2003,  when the market  price of  Calypte's  common  stock was $0.735,  the
Company  received an extension until May 5, 2003 in which to register the shares
of common stock underlying this financing. On May 1, 2003, when the market price
of Calypte's  common stock was $0.711,  the Company  received an extension until
July 1, 2003. On June 26, 2003,  when the trading price for the Company's  stock
was $0.36 per  share,  Focus  Fund and  Momentum  Fund III  agreed to extend the
period for filing the registration  statement  through July 15, 2003. The shares
underlying  this  agreement  were  included in the  Company's  S-2  registration
statement that was filed with the SEC on July 8, 2003 and which became effective
on July 18, 2003. During the third quarter of 2003, Focus Fund and Momentum Fund
III  converted  an aggregate  of $278,000  face value plus accrued  interest and
$50,000 of liquidated damages due to delayed registration into approximately 4.1
million shares of the Company's  common stock at conversion  prices ranging from
$0.07 to $0.10 per share. See Note 18 for information regarding the extension of
the maturity of this note.

The Company  determined that each of the 10%  convertible  debentures was issued
with a beneficial  conversion feature. The intrinsic value was calculated at the
date of issue as the difference  between the  conversion  price of the debenture
and the fair value of the  Company's  common stock into which the  debenture was
convertible,  multiplied by the number of common shares into which the debenture
was  convertible,  limited by the face amount of the debenture.  The Company has
treated the beneficial  conversion  features as a discount to the face amount of
the  debentures  and  is  amortizing  them  over  the  term  of  the  respective
debentures.  Upon  conversion  of  all  or  a  portion  of  the  debenture,  the
proportionate  share of  unamortized  discount  has  been  charged  to  interest
expense.

12% Convertible Debentures
On February 11, 2002, the Company signed a securities  purchase agreement with a
private investment fund, Bristol Investment Fund, Ltd.  ("Bristol")  pursuant to
which Bristol agreed to purchase two 12% secured  convertible  debentures for an
aggregate of $850,000,  each of which matures two years after its issuance.  The
first debenture,  in the amount of $425,000,  was purchased by Bristol, under an
exemption  provided  by  Regulation  S, on  February  11,  2002 and the  Company
received  net  proceeds  of  $368,000.  The closing  price for Calypte  stock on
February 11, 2002 was $7.50.  On May 10, 2002,  Calypte issued a second $100,000
12%  convertible  debenture  to  Bristol,  also under an  exemption  provided by
Regulation S, and received net proceeds of $90,000.  This debenture has the same
terms as those of the initial  debenture  and reduced the  remaining  commitment
under the agreement to $325,000.  The closing price for Calypte stock on May 10,
2002 was $0.90.  The outstanding  debentures bear interest at the annual rate of
12%, payable  quarterly in common stock or cash at Bristol's  option.  Under the
terms of the  debentures,  Bristol  could elect at any time prior to maturity to
convert the balance  outstanding on the debentures  into shares of

                                      F-19
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

the Company's common stock. The conversion price, as modified, for any debenture
issued  pursuant to this  agreement is equal to the lesser of (i) the average of
the lowest three closing bid prices during the 20 trading days immediately prior
to the  conversion  date  discounted  by 40% and (ii) $1.50,  subject to certain
anti-dilution provisions.

During May 2002,  Bristol converted a principal amount of approximately  $60,000
plus accrued interest into 148,747 shares of the Company's common stock at $0.42
per  share.   Subsequent  to  the  February  14,  2003  effective  date  of  the
registration  statement on Form S-2/A (No. 6) which registered  shares of common
stock  underlying the 12% Convertible  Debentures in the amount of $525,000 that
we issued to Bristol Investment Fund, Ltd. ("Bristol") in February 2002, Bristol
converted  its  remaining  balance due under the  debentures,  an  aggregate  of
$465,000 face value,  plus accrued  interest and $122,000 of liquidated  damages
due to  delayed  registration,  into  approximately  0.9  million  shares of the
Company's  common stock at conversion  prices  ranging from $0.525 to $0.966 per
share during the first half of 2003.  The debenture  discounts  were  eliminated
concurrent with the conversions.

In conjunction  with this  transaction,  the Company issued a Class A warrant to
purchase  up to  56,667  shares of its  common  stock.  The Class A warrant  was
exercisable  for a period of seven  years  after  issuance  at a price per share
equal to the lesser of (i) the average of the lowest three trading prices during
the 20 trading days immediately prior to the exercise date discounted by 30% and
(ii) $3.45. Bristol exercised the warrant in September 2003 at a price of $0.077
per share. The warrant was valued on the date of issue at $6.30 per share using
the Black-Scholes option-pricing model with the following assumptions:  expected
dividend yield of 0.0%; risk free interest rate of 4.7%, the contractual life of
7 years,  and volatility of 80%. As additional  fees for this  transaction,  the
Company also issued a warrant to purchase 2,833 shares of its common stock.  The
warrant to purchase the 2,833 shares has the same terms and the same fair market
value as the Class A warrant and has not yet been exercised.

The  Company  also issued  Bristol a Class B warrant to  purchase an  additional
400,000  shares of its  common  stock.  Upon the  effectiveness  of the  related
registration  statement for the shares  underlying the Class B warrant,  Bristol
was required to exercise the Class B warrant in  conjunction  with the mandatory
monthly  conversion of its debentures so that each month the Company would issue
to Bristol, pursuant to the Class B warrant, a number of shares equal to 150% of
the  shares  issued  to the  fund  pursuant  to the  monthly  conversion  of the
debentures.  The Class B warrant was  exercisable  at a price per share equal to
the lesser of (i) the average of the lowest three  trading  prices during the 20
trading days  immediately  prior to the exercise date discounted by 30% and (ii)
$6.45.  The  Company was not  permitted  to include  the shares  underlying  the
400,000 share Class B warrant in its registration statement, and Bristol was not
obligated  to begin  exercising  the warrant  until such time as the  underlying
shares  were  registered,  however  Bristol  exercised  it in  its  entirety  in
September  2003 at a price of $0.0825  per share.  The warrant was valued on the
date of issue at $4.20 per share using the  Black-Scholes  option-pricing  model
with the  following  assumptions:  expected  dividend  yield of 0.0%;  risk free
interest rate of 2.2%, the contractual life of 1 year, and volatility of 80%.

In accordance with EITF 00-19,  "Accounting for Derivative Financial Instruments
Indexed To, and Potentially Settled In, a Company's Own Stock," and the terms of
the Class A and Class B warrants  issued to Bristol in conjunction  with the 12%
debentures in February 2002, the fair value of the warrants was accounted for as
a liability,  with an  offsetting  discount to the  carrying  value of the first
$425,000  debenture,  which was to be amortized as interest  expense over the 24
month term of the debenture. The combined fair values of the Class A and Class B
warrants treated as a discount to the debenture  exceeded the $425,000 amount of
the debenture.  Accordingly,  the aggregate amount of the warrant  liability and
the offsetting debenture discount recorded attributable to the Class A and Class
B warrants was limited to $425,000 at the time of issuance.  In September  2003,
Bristol  exercised  both the Class A and Class B warrants.  The  Company  issued
456,667  shares of its  common  stock and  received  proceeds  of  approximately
$38,000. The Company reclassified the warrant liability to equity at the time of
the exercise of the warrants.  Until the warrants were exercised,  the liability
was marked to market  through  earnings.  The  Company  recorded a net  non-cash
interest  expense  reduction  of  approximately  $275,000  attributable  to  the
re-measurement  of the warrant  liability for the year ended  December 31, 2003.
Non-cash  interest  income in 2002  attributable  to the  re-measurement  of the
warrant liability was approximately  $70,000. This is recorded as a reduction of
non-cash interest expense in the financial statements.

The  Company did not receive  any  additional  consideration  over and above the
negotiated price for the debentures in connection with the issuance of the Class
A and B warrants.  The Class A and B warrants were contemplated and considered a
part of the negotiated  transaction  for the debentures  issued to Bristol.  The
Class A and Class B  warrants  were  intended  to act as  consideration  for the
investment  by Bristol and also  provided the Company with  immediate  cash upon
their  exercise.  The Class B warrants were intended to provide the Company with
cash over a one year period  following  the effective  date of the  registration
statement for the shares  underlying  the  debentures  and warrants.  Management
believed  that  the  terms of the  financing  were on the  best  possible  terms
available as a result of the Company's tenuous  financial  condition at the time
of the arrangement.

The Company determined that both of the debentures issued to Bristol were issued
with a  beneficial  conversion  feature.  Upon  conversion  of a portion  of the
debenture,  the Company charged the proportionate share of unamortized  discount
to interest expense.  The intrinsic value was calculated at the date of issue as
the difference  between the conversion price of the debenture

                                      F-20
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

and the fair value of the  Company's  common stock into which the  debenture was
convertible,  multiplied by the number of common shares into which the debenture
was  convertible.  Because the Company also issued warrants in conjunction  with
the  first  $425,000  debenture, as described above, the value of the beneficial
conversion  feature was not accorded  treatment as a discount to the  debenture,
since the valuation of the accompanying  warrants had reduced the carrying value
of the  debenture to zero at the time of  issuance.  The  beneficial  conversion
feature attributable to the second $100,000 debenture was limited to $100,000 by
the face amount of the  debenture and recorded as a discount to the debenture to
be amortized to interest expense over the life of the debenture.

12% Convertible Debentures
On September 12, 2002, the Company issued a $550,000 12%  convertible  debenture
to MMF. The debenture was convertible  into the Company's common stock at 85% of
the average of the three  lowest  trades for the 20 days  preceding  conversion.
This  debenture was the first tranche of a $2.0 million  commitment  that was to
become available upon the filing and effectiveness of a registration  statement.
Under  the  terms of the  debenture  agreement,  the  Company  agreed  to file a
registration  statement for the shares of common stock  underlying the debenture
within 45 days of the closing date and use its best commercial  efforts to cause
the  registration  statement  to be  declared  effective  within 135 days of the
closing date. At December 31, 2002, the Company had obtained an extension of the
registration  period through  February 18, 2003. On February 14, 2003,  when the
price of the  Company's  common  stock was $2.01,  the Company and MMF agreed to
extend the registration  period until April 4, 2003. On March 31, 2003, when the
market  price of Calypte  common  stock was  $0.885,  the  Company  amended  the
conversion  price to  eliminate a  conversion  price floor of $1.50 per share in
return for an  extension  until May 5, 2003 in which to  register  the shares of
common stock underlying this and certain other Mercator-group financings. On May
1, 2003, when the market price of Calypte's common stock was $0.711, the Company
received a further  extension  until July 1, 2003.  On June 26,  2003,  when the
trading price for the Company's stock was $0.36 per share, MMF agreed to further
extend the period for filing the registration  statement  through July 15, 2003.
The  shares  underlying  this  agreement  were  included  in the  Company's  S-2
registration  statement  that was  filed  with the SEC on July 8,  2003 and that
became effective on July 18, 2003.  During the third quarter 2003, MMF converted
$550,000 face value plus accrued interest into  approximately 4.8 million shares
of the Company's  common stock at conversion  prices ranging from $0.09 to $0.22
per share.

On October 22, 2002, the Company issued a $300,000 12% convertible  debenture to
MMF. The debenture and related  accrued  interest was repaid on January 13, 2003
in conjunction  with the issuance of a $1,000,000 10%  convertible  debenture to
Focus Fund. Upon the repayment,  the Company  charged the remaining  unamortized
amount  of the  beneficial  conversion  feature  of  approximately  $271,000  to
non-cash interest expense.  Additionally, the repayment of this note resulted in
the Company  effectively  repurchasing  a portion of the  beneficial  conversion
feature.  In  situations  in  which a debt  instrument  containing  an  embedded
beneficial conversion feature is extinguished prior to conversion,  a portion of
the debt payment is allocated to the  beneficial  conversion  feature  using the
intrinsic  value of that  conversion  feature at the  extinguishment  date.  Any
residual amount is then allocated to the  convertible  security with the Company
recognizing a gain or loss to remove the remaining liability.  The repurchase of
the beneficial  conversion feature upon repayment of the debenture resulted in a
non-cash gain of $128,000, recorded as other income, during the first quarter of
2003.

On April 29, 2003, when the price of the Company's  common stock was $0.82,  the
Company  issued a $300,000  12%  convertible  debenture  to MMF and recorded net
proceeds of $245,000.  The debenture is  convertible  into the Company's  common
stock at 70% of the average of the three lowest trades for the 20 days preceding
conversion, but not more than $1.20. Under the terms of the debenture agreement,
Calypte agreed to file a  registration  statement for the shares of common stock
underlying  the  debenture  within  30  days  of the  closing  date  and use its
reasonable best  commercial  efforts to cause the  registration  statement to be
declared effective within 120 days of the closing date. On May 1, 2003, when the
market  price of  Calypte's  common  stock was $0.711,  the Company  received an
extension  until July 1, 2003 in which to file a registration  statement for the
underlying  shares.  On June 26, 2003,  when the trading price for the Company's
stock was $0.36 per  share,  MMF  agreed to extend  the  period  for  filing the
registration  statement  through  July 15,  2003.  The  shares  underlying  this
agreement  were included in the Company's S-2  registration  statement  that was
filed with the SEC on July 8, 2003 and which became  effective on July 18, 2003.
During the third  quarter 2003,  MMF converted  $294,000 face value plus accrued
interest  and  $11,000  liquidated  damages  due  to  delayed  registration  was
converted into approximately 3.5 million shares of the Company's common stock at
prices  ranging  from  $0.077 to $0.12 per  share.  See Note 18 for  information
regarding the extension of the maturity of this note.

Pursuant to the Registration  Statement filed on July 8, 2003 and effective July
18, 2003, the Company  registered shares underlying a 12% convertible  debenture
for  $250,000  which  was to be  funded  upon  the  filing  of the  Registration
Statement  and another for $500,000 to be funded by July 25, 2003 as portions of
the  September  2002 $2 million  commitment  by MMF. On July 24, 2003,  when the
market price for the Company's  common stock was $0.115,  the Company issued 12%
convertible debentures in the principal amount of $250,000 each to Alpha Capital
AG, Gamma Opportunity Capital Partners,  LP and Goldplate  Investment  Partners,
assignees under the MMF $2 million commitment agreement mentioned above covering
these two  commitments.  The Company had  prepaid  $75,000 in fees and  received
gross  proceeds  of  $750,000.  A portion of the  proceeds  were used to repay a
$400,000  MMF  advance  from June 6,  2003,  along  with a fee of  $12,000.  The
debentures  were  convertible

                                      F-21
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

into the Company's common stock at 85% of the average of the three lowest trades
for the 20 days  preceding  conversion.  During  the  third  quarter  2003,  the
investors converted $750,000 face value plus accrued interest into approximately
8.0  million  shares of the  Company's  common  stock at  conversion  pricees of
approximately $0.09 per share.

On September 1, 2003,  when the market price for the Company's  common stock was
$0.498 per share,  the Company  issued a $570,000 12%  convertible  debenture to
Marr  Technologies  BV, an  additional  assignee  from MMF under the $2  million
September 2002 commitment,  and received net proceeds of $570,000. The debenture
was  convertible  into the  Company's  common stock at 85% of the average of the
three lowest trades for the 20 days preceding conversion but not less than $0.11
per share. On September 1, 2003, this note was converted into  approximately 5.2
million shares of the Company's  common stock at a conversion price of $0.11 per
share.

On October 2, 2003,  when the market price for the Company's stock was $1.31 per
share,  the Company issued the final $130,000 of debentures to four assignees of
MMF under the $2 million  September 2002 12% convertible  debenture  commitment,
and  received  net  proceeds of  $130,000.  During  October  2003,  two of these
investors converted $70,000 of principal of these debentures at a price of $0.59
per share and the  Company  issued  approximately  118,400  shares of its common
stock.

The Company determined that the MMF 12% convertible debentures,  including those
issued to MMF assignees,  were each issued with a beneficial conversion feature.
The  intrinsic  value  was  calculated  at the date of  issue as the  difference
between  the  conversion  price  of the  debenture  and the  fair  value  of the
Company's common stock into which the debenture was  convertible,  multiplied by
the number of common shares into which the debenture was convertible, limited by
the face amount of the debenture.  The Company treated the beneficial conversion
feature as a discount to the face amount of the  debenture and amortized it over
the respective  term. Upon conversion of all or a portion of the debenture,  the
proportionate share of unamortized discount is charged to interest expense.

The table below  summarizes the components of net interest  expense  reported in
the consolidated statements of operations (in thousands).

<TABLE>
<CAPTION>
                                                                                    2003              2002
                                                                                    ----              ----

<S>                                                                              <C>                   <C>
Accrued interest on debt instruments                                             $   425               332

Non-cash interest expense composed of:
   Amortization and proportional write-off upon conversion of note and
     debenture discounts                                                           4,835             1,188
   Liquidated damages due to delayed registration of shares underlying
     convertible and other securities                                                620               546
   Amortization and proportional write-off upon conversion of deferred
     offering costs                                                                  997               210
   Expense attributable to warrants issued in conjunction with the Marr
     $10 million Promissory Note Agreement                                           322                 -
   Warrant liability mark-to-market adjustment attributable to Bristol
     Class A and Class B warrants                                                   (275)              (70)
   Expense attributable to dividends on mandatorily redeemable Series A
     preferred stock                                                                  60                 -
                                                                                 -------           -------
Total interest expense                                                             6,984             2,206

Interest income                                                                      (15)               (3)
                                                                                 -------           -------

Net interest expense                                                             $ 6,969           $ 2,203
                                                                                 =======           =======
</TABLE>

5% Note Purchase Agreement

On November 13, 2003,  when the market price of the  Company's  common stock was
$0.88 per share, the Company and Marr, its largest stockholder,  entered into an
agreement  in which Marr  agreed to provide the  Company up to an  aggregate  of
$10,000,000 (the "Marr Credit  Facility")  pursuant to promissory notes issuable
to Marr on an as-needed basis by the Company (the "Notes").  Each Note will bear
interest  at the rate of 5% per annum and will have a  12-month  term.  The Marr
Credit  Facility is available  during the period  beginning on February 28, 2004
and ending on May 31, 2004. The aggregate amount available under the Marr Credit
Facility will be  proportionally  reduced by the amount of any equity  financing
obtained by the Company  during the term of the Marr Credit  Facility.  Marr has
the right of first refusal to  participate  in any such equity  financing on the
same terms as the

                                      F-22
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

other investors. The Marr Credit Facility provides for earlier termination as of
March 31,  2004,  if the  Company  fails to have its common  stock  listed on an
established  stock exchange by that date.  Moreover,  upon the failure to obtain
such stock exchange  listing,  any outstanding Notes would be due and payable on
April 30, 2004.  As of March 19, 2004,  no Notes have been issued under the Marr
Credit  Facility.  As consideration  for the Marr Credit  Facility,  the Company
issued to Marr a warrant to purchase  375,000  shares of its common  stock at an
exercise price of $0.80 per share.  The warrant is immediately  exercisable  and
expires two years after issuance on November 12, 2005. The warrant was valued at
$0.859 per share on the date of grant  using the  Black-Scholes  option  pricing
model with the following assumptions: risk-free interest rate of 1.93%; expected
dividend rate of 0.00%; volatility of 316.42%; and expected term of 2 years. The
calculated value of the warrant was charged to interest  expense.  Refer to Note
18 for information regarding an amendment to this agreement in the first quarter
of 2004.


(7)  GAIN ON SETTLEMENT OF TRADE DEBT

On February 12, 2002, the Company  completed a  restructuring  of  approximately
$1.7 million of its past due accounts payable and certain other obligations with
27  of  its  trade  creditors.  Under  the  restructuring,  the  Company  issued
approximately 47,000 restricted shares of its common stock at various negotiated
prices per share to trade  creditors  in  satisfaction  of specified  debt.  The
issuance of the shares was pursuant to Regulation D of the  Securities  Act. The
shares issued are now eligible for resale under the  provisions of Rule 144. The
creditors accepted the shares plus deferred cash payments ranging from 0% to 25%
of the outstanding  balance in  satisfaction of $1,699,000 of indebtedness  plus
certain  patent  rights  for  2002.  On the date the  shares  were  issued,  the
aggregate value of the Company's  common stock issued to the trade creditors was
$248,000  and the  aggregate  deferred  cash payment yet to be made to the trade
creditors totaled  $132,000.  During the third quarter of 2002, the Company made
cash  payments  to the  various  creditors  totaling  10% of the  deferred  cash
balance,  or approximately  $13,000,  leaving  $119,000  remaining to be paid at
December 31, 2003 and 2002. The Company  recognized a gain of $1,319,000  during
the first quarter of 2002 as a result of restructuring this indebtedness.


(8)  LEASE COMMITMENTS

Capital Leases

The Company has acquired  equipment  under  capital  lease  agreements  that are
collateralized  by the related  equipment.  The lease agreements carry effective
interest rates of approximately  18% per annum.  During 1993, the Company issued
stock warrants for the purchase of 1,172 shares of the Company's common stock at
exercise   prices   ranging  from  $150.00  to  $225.00  per  share  as  partial
consideration for obtaining two of the lease agreements.  These warrants expired
in 2003. In 2000,  the Company  exercised its option to renew one of the capital
leases  for an  additional  three  year  term.  In 2001,  the  Company  acquired
laboratory  equipment  under a  capital  lease  having a  four-year  term and an
effective  interest rate of approximately  17.5% per annum. In 2002, the Company
settled its  liability  under one of these leases by issuing 9,804 shares of its
common stock.

Equipment acquired under capital leases included in property and equipment as of
December 31, 2003 and 2002 consisted of the following (in thousands):

                                                         2003             2002
                                                         ----             ----

  Machinery and equipment                            $  1,729         $  1,763
  Other                                                    92               92
                                                     --------         --------

                                                        1,821            1,855
  Accumulated depreciation and amortization            (1,802)          (1,790)
                                                     --------         --------

                                                     $     19         $     65
                                                     ========         ========

                                      F-23
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

Future minimum lease payments under capital leases as of December 31, 2003 were
(in thousands):

Year ended December 31,
2004                                                                        12
2005                                                                         8
                                                                       -------

                                                                            20
Less amount representing interest                                           (2)
                                                                       -------

Present value of capital lease obligation                                   18
Capital lease obligations - current portion                                (12)
                                                                       -------

Capital lease obligations - long-term portion                          $     6
                                                                       =======


Operating Leases

The Company leases office and manufacturing space in Alameda,  California, under
a  noncancelable  operating  lease which expires in June 2004.  The Company also
leases manufacturing space in Rockville, Maryland under two operating subleases.
Total rent  expense  under these  leases was $836,000 and $867,000 for the years
ended December 2003 and 2002, respectively. Future minimum rental payments under
all noncancelable operating leases as of December 31, 2003 were (in thousands):

Year ended December 31,
2004                                                                   $   584
2005                                                                       385
2006                                                                       321
Thereafter                                                                   -
                                                                       -------

Total                                                                  $ 1,290
                                                                       =======

Refer to Note 18 for  information  regarding  an  extension of the lease for the
Company's Rockville, Maryland facilities.


(9)  MANDATORILY REDEEMABLE PREFERRED STOCK

At the time of its original incorporation,  the Company issued both common stock
and $1,000,000 of mandatorily  redeemable  Series A preferred stock. The Company
is required to redeem all shares of  mandatorily  redeemable  Series A preferred
stock  within  60 days of any  fiscal  year-end  in which  the  Company  attains
$3,000,000  in  retained  earnings,  and funds are legally  available.  Based on
losses accumulated through December 31, 2003, the Company must achieve in excess
of  $130,800,000  in future  earnings  before any  repayment  is  required.  The
mandatorily  redeemable  Series A preferred  stock is  nonvoting  and holders of
these shares are entitled to receive  cumulative  dividends at the rate of $1.20
per share per annum.  Through  June 30,  2003,  cumulative  preferred  dividends
totaling  $1,636,000  have been  charged to  stockholders'  equity  (deficit) to
accrete for the mandatorily redeemable Series A preferred stock redemption value
with  a  corresponding  increase  in the  recorded  amount  of  the  mandatorily
redeemable  Series A preferred  stock.  Since the  Company's  third quarter 2003
adoption of SFAS No. 150, as described in Note 2, cumulative preferred dividends
totaling  $60,000  have been  charged to  interest  expense  to accrete  for the
mandatorily  redeemable  Series  A  preferred  stock  redemption  value  with  a
corresponding  increase in the  recorded  amount of the  mandatorily  redeemable
Series A preferred stock.


In  anticipation  of using a portion of the  proceeds  from its  Initial  Public
Offering to redeem the Series A preferred  stock,  the  Company  eliminated  the
Series A preferred stock from its articles of incorporation upon reincorporation
of the Company in Delaware in June 1996. However,  management subsequently chose
not to redeem  the  Series A  preferred  stock and as of  December  31,  2003 it
remains outstanding. The holders of such shares maintain the same rights as held
before the reincorporation.

(10) STOCKHOLDERS' EQUITY (DEFICIT)

Increase in Authorized Shares

On February 14, 2003, the Company filed an Amendment to its Amended and Restated
Certificate  of  Incorporation  with the  Secretary  of State of  Delaware  that
increased  the number of shares of  authorized  common stock from 200 million to
800  million.  The  Company's   stockholders   approved  the  Amendment  to  the
Certificate of  Incorporation  at the Special  Meeting of  Stockholders  held on
February 14, 2003. A principal purpose for authorizing the additional shares was
for  issuance  pursuant  to  arrangements  to finance the  Company's  continuing
operations.

                                      F-24
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

Private Placements

As detailed in the Consolidated  Statements of Stockholders'  Equity  (Deficit),
the  Company  raised net  proceeds  $0.4  million  and $12.5  million in private
placement  transactions  with  accredited  investors who  purchased  266,667 and
28,333,333 shares during 2002 and 2003, respectively.

Under the terms of the August 2002 private  placement,  Calypte agreed to file a
registration  statement  for the shares of common  stock and use its  reasonable
best  commercial  efforts to cause the  registration  statement  to be  declared
effective  within  ninety  days of the  closing  date.  Under  the  terms of the
agreement,  the Company was  required to issue,  as  liquidated  damages,  8,333
shares of its common  stock for each ten days of delay past  November  27, 2002.
The  shares  underlying  this  agreement  were  included  in the  Company's  S-2
registration  statement  that was  filed  with the SEC on July 8, 2003 and which
became  effective  on  July  18,  2003.   Through  the  effective  date  of  the
Registration Statement, the Company charged an aggregate of $225,000 to interest
expense representing the value of 183,333 shares issuable as liquidated damages.
On April 1, 2003, when the price of the Company's  common stock was $0.849,  the
Company  issued  100,000 shares of its common stock in settlement of accumulated
liquidated  damages  through  March  27,  2003,  pursuant  to the  terms  of the
agreement.  On September 19, 2003, when the price of the Company's  common stock
was $1.43, the Company issued an additional 83,333 shares of its common stock in
final settlement of liquidated damages under this agreement.

On July 31,  2003,  when the market price of the  Company's  stock was $0.18 the
Company  announced  that it had  entered  into a financing  agreement  with Marr
Technologies B.V. ("Marr") in which the Company would issue 8,333,333 restricted
shares of its common stock priced at $0.30 for an aggregate of $2.5 million. The
Company's  stock  just  prior to the  announcement  had been  trading in a range
between  $0.11 and $0.12 per share.  The  agreement  contains a 12 month lock-up
(holding period)  provision.  In conjunction  with the investment,  Marr has the
right to nominate two  mutually-agreeable  individuals  for  appointment  to the
Calypte  Board  of  Directors  at a  mutually-agreeable  future  date.  The  two
companies  also signed a  Memorandum  of  Understanding  and have formed a joint
venture in China,  with the intent of  creating  a platform  for  manufacturing,
distribution  and  sale of  Calypte's  products  in  China.  Calypte's  existing
distribution agreement has been assigned to the joint venture under the terms of
this  agreement.  On September 2, 2003,  when the market price of the  Company's
stock was $0.82,  the Company  announced  that it had entered into an additional
$10 million  equity  financing  agreement  with Marr in which the Company  would
issue 20  million  restricted  shares of its  common  stock  priced at $0.50 per
share. This agreement also contains a 12 month lock-up provision.

Equity Line of Credit

In August 2001, the Company and Townsbury  Investments,  Ltd.  ("Townsbury"),  a
private investment fund, signed a common stock purchase agreement for the future
issuance and purchase of up to $10 million of the Company's  common stock over a
twenty-four  month period.  The initial closing of the  transaction  occurred in
October 2001. Under this arrangement, the Company, at its sole discretion, could
draw down on this facility,  sometimes termed an equity line, from time to time,
and the investment fund was obligated to purchase shares of the Company's common
stock.  The purchase  price of the common stock  purchased  pursuant to any draw
down  was  equal  to 88% of the  daily  volume  weighted  average  price  of the
Company's  common stock on the applicable  date. In conjunction with the signing
of the stock  purchase  agreement,  in October 2001, the Company issued a 7-year
fully-vested  warrant to Townsbury to purchase  approximately  140,000 shares of
common stock at an exercise  price of $8.229 per share and issued  approximately
3,800 shares of its common stock as a fee to  Townsbury.  In October  2001,  the
Company  filed a  Registration  Statement  on Form S-2 with the  Securities  and
Exchange Commission to register for resale 1,000,000 shares of common stock that
it might issue in conjunction with the equity line facility, the warrant and the
fee shares.  During November and December 2001, the Company issued two draw down
requests  under this facility in the aggregate  amount of $430,000.  The Company
issued 72,738 shares of its common stock and received  aggregate net proceeds of
$406,000  after  deducting  fees and expenses in settling  these two draw downs.
During 2002,  the Company issued 783,038 shares of its common stock and received
aggregate net proceeds of  approximately  $2.7 million after  deducting fees and
expenses  in  settling  these  fourteen  draw downs.  At the  expiration  of the
facility  in October  2003,  the Company  had issued all but  approximately  633
shares of the registered stock.

The  warrant  issued to  Townsbury  was valued on the date of issue at $6.60 per
share  using  the   Black-Scholes   option-pricing   model  with  the  following
assumptions:  expected  dividend yield of 0.0%; risk free interest rate of 4.3%,
the  contractual  life of 7  years,  and  volatility  of 80%.  The  warrant  was
accounted for as a deferred  offering  cost and was  recognized as a cost of the
financing in proportion  to the amount of each  draw-down in relation to the $10
million nominal commitment  amount. The unamortized  balanced was written off as
interest expense at the termination of the facility.

In  conjunction  with  the  issuance  of the 10%  convertible  note to BNC  Bach
described  in Note 6, on May 10,  2002 when the  market  price of the  Company's
common stock was $0.90,  Calypte  repriced from $8.23 to $0.45 the 140,000 share
warrant  issued to Townsbury  pursuant to the equity  line,  as permitted by the
warrant's originally  negotiated terms.  Townsbury exercised the warrant for the
entire 140,000 shares and Calypte received $63,000 in proceeds.  In light of the
Company's  precarious  financial

                                      F-25
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

condition and its being in danger of ceasing operations,  the exercise price was
modified to serve as an inducement for the investor to exercise the warrant. The
Company  viewed the  modification  of the exercise  price as fair and reasonable
under the circumstances. Townsbury was and is viewed as an unaffiliated party of
the  Company.  The fair value of the warrant had  originally  been  treated as a
deferred  offering cost  associated  with the equity line. The fair value of the
repriced  warrant was less than that of the  original  warrant and  therefore no
accounting  adjustment  attributable  to the repricing  was  required.  Upon the
exercise of the  warrant,  the Company  reclassified  the  $807,000  unamortized
balance of the deferred offering cost to additional paid-in capital.

Warrants, options and stock grants

During  2002,  the  Company  looked for ways to  minimize  its use of cash while
obtaining  required  services.  It issued  warrants  and  options to purchase an
aggregate  of  1,583,333  shares  of its  common  stock  under  agreements  with
consultants to perform legal,  financial,  business  advisory and other services
associated  with the  restart  of its  operations  including  introductions  and
arrangements  with  respect to  potential  domestic  and  international  product
distribution  agreements,  assistance  with  international  product  trials  and
regulatory  qualifications.  At December 31, 2002, the consultants had exercised
options and warrants to purchase  1,550,000 shares of the Company's common stock
and they exercised the balance in 2003. The Company received  approximately $1.7
million  in  proceeds  in 2002 and 2003.  The  warrant  and option  grants  were
non-forfeitable  and  fully-vested at the date of issuance and were valued using
the Black-Scholes option pricing model using the following range of assumptions.

                                                           Low           High
                                                           ---           ----

Exercise price per share                                   $0.45         $1.50
Market price of Calypte's stock on date of issuance        $0.90         $4.20
Assumptions:
   Expected dividend yield                                  0.0%          0.0%
   Risk free rate of return                                1.25%         5.16%
   Contractual life                                     3 months      10 years
   Volatility                                                80%           80%
Fair Market Value                                         $0.465         $7.59

Pursuant to the requirements of FASB Statement No. 123 and EITFs 96-18 and 00-18
related to  accounting  for  stock-based  compensation,  the Company  recognized
non-cash  selling,  general  and  administrative  expense  in the amount of $2.1
million attributable to these warrants at the date of grant in 2002.

In addition to the above  warrants and options,  the Company issued stock grants
for approximately  103,000 shares of its common stock to certain consultants and
other vendors under various  agreements and recorded non-cash  selling,  general
and administrative expense of $364,000 based on the intrinsic value of the stock
on the date granted during 2002.

During 2003, the Company  entered into new contracts and extended  certain other
contracts with existing consultants to perform various legal, business advisory,
marketing and distribution  functions similar to those entered into during 2002.
The Company issued warrants to purchase an aggregate of 4,463,834  shares of its
common stock as compensation  for these  services.  During 2003, the consultants
exercised  warrants to purchase  4,263,834  shares of the Company's common stock
and  the  Company   received   proceeds  of   $2,707,000.   The  warrants   were
non-forfeitable  and  fully-vested at the date of issuance and were valued using
the Black-Scholes option pricing model using the following range of assumptions:

                                                         Low           High
                                                         ---           ----

Exercise price per share                                  $0.080         $1.50
Market price of Calypte's stock on date of issuance        $0.18         $2.01
Assumptions:
   Expected dividend yield                                  0.0%          0.0%
   Risk free rate of return                                0.92%         1.86%
   Contractual life                                     3 months     24 months
   Volatility                                            131.35%       411.50%
Fair Market Value                                          $0.11         $1.46

Pursuant to the requirements of FASB Statement No. 123 and EITFs 96-18 and 00-18
related to  accounting  for  stock-based  compensation,  the Company  recognized
non-cash  selling,  general  and  administrative  expense  in the amount of $2.8
million attributable to these warrants at the date of grant in 2003.

                                      F-26
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

In addition to the  warrants  and options  described  above,  during  2003,  the
Company  also issued  stock  grants for  approximately  3,637,000  shares of its
common stock to certain  consultants and other vendors under various  agreements
and recorded non-cash selling,  general and administrative expense of $2,712,000
based on the intrinsic value of the stock on the date of grant.

Change of Control Provisions

Certain provisions of the Company's  Certificate of Incorporation and Bylaws may
have the  effect of  preventing,  discouraging  or  delaying  any  change in the
control of the Company and may maintain the incumbency of the Board of Directors
and  management.  The  authorization  of  undesignated  preferred stock makes it
possible  for the Board of  Directors  to issue  preferred  stock with voting or
other  rights or  preferences  that could  impede the  success of any attempt to
change  control of the Company.  Additionally,  in December  1998, the Company's
Board of  Directors  declared a dividend  distribution  of one  preferred  share
purchase  right (a Right)  for each  outstanding  share of  common  stock of the
Company.  The dividend was payable to the  stockholders  of record on January 5,
1999.  The Rights  have  certain  anti-takeover  effects.  The Rights will cause
substantial  dilution to a person or group that  attempts to acquire the Company
without  conditioning  the offer on the Rights being  redeemed or a  substantial
number of Rights being acquired.  However,  the Rights should not interfere with
any tender  offer or merger  approved by the  Company  because the Rights do not
become  exercisable  in the  event of a  permitted  offer  or other  acquisition
exempted by the Board.

(11) INCENTIVE STOCK AND STOCK OPTIONS PLANS

Stock option  grants to employees are  generally  issued with an exercise  price
equal to the market price at the grant date. To the extent that the market price
of the  common  stock  exceeds  the  exercise  price  of the  options,  deferred
compensation is recognized for the intrinsic value in accordance with APB 25 and
FIN 44. This deferred  compensation would be amortized on a straight-line  basis
over the vesting period of the option.

Option  grants  to  non-employees  are  valued  at the date of grant  using  the
Black-Scholes  option-pricing  model in accordance  with FAS 123.  Option grants
that do not include sufficient  disincentive for  non-performance  are accounted
for in accordance with EITFs 96-18 and 00-18.  In such  instances,  the deferred
compensation  is amortized  over the term of the  agreement  on a  straight-line
basis. Until the awards are fully vested or a measurement date is achieved,  the
Company records an adjustment to deferred compensation and consultant expense to
reflect the impact of the fair  value,  as  remeasured  at  quarter-end,  of the
options based on changes to the Company's stock price.

Stock  bonuses and awards  reflect  shares of Calypte  common  stock  granted to
employees  and  consultants.  Compensation  expense is recognized at the time of
grant,  and is determined  based on the number of shares awarded and the closing
market price at the date of the award, in accordance with APB 25.

2000 Equity Incentive Plan

In June 2000,  the Company's  Board of Directors and  stockholders  approved the
adoption of the Company's 2000 Equity Incentive Plan (the "2000 Incentive Plan")
to replace the Company's 1991 Incentive Stock Plan, which expired in April 2001.
At the Annual Meeting of  Stockholders  in May 2003, the Company's  stockholders
approved  an  increase  to  10,000,000  shares  in the  number  of shares of the
Company's common stock authorized for issuance under this plan. The Compensation
Committee of the Company's Board of Directors administers the Plan. The Board of
Directors  may  amend or modify  the 2000  Incentive  Plan at any time.  It will
expire in June 2010, unless terminated earlier by the Board of Directors.

Under  the  terms  of the  2000  Incentive  Plan,  nonstatutory  stock  options,
restricted  stock and stock  bonuses  may be  granted  to  employees,  including
directors who are employees, non-employee directors, and consultants.  Incentive
stock options may be granted only to employees.

Nonstatutory  stock  options may be granted under the 2000  Incentive  Plan at a
price less than the fair market value of the common stock on the date the option
is granted.  Prior to the amendment of the 2000  Incentive  Plan approved by the
Company's   stockholders  at  the  May  2003  Annual  Meeting  of  Stockholders,
nonstatutory  stock options could not be granted at a price less than 85% of the
common stock on the grant date.  Incentive  stock  options may be not be granted
under the 2000 Incentive Plan at a price less than 100% of the fair market value
of the common stock on the date the option is granted.

Incentive  stock  options  granted to employees  who, on the date of grant,  own
stock  representing more than 10% of the voting power of all classes of stock of
the  Company  are  granted at an  exercise  price not less than 110% of the fair
market value of the common stock.  Options  granted to employees  under the 2000
Incentive Plan generally vest monthly over periods of

                                      F-27
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

up to  three  years,  as  specified  in  the  option  agreements.  The  term  of
nonstatutory  and incentive  stock options  granted is 10 years or less from the
date of the grant, as provided in the option agreements.

Restricted  stock awards may be granted to purchase stock either in addition to,
or in tandem with,  other awards under the 2000 Incentive Plan, under conditions
determined by the  Compensation  Committee.  The purchase  price for such awards
must be no less than 85% of the fair market value of the Company's  Common Stock
on the date of the grant. The Compensation  Committee may also grant stock bonus
awards to employees or consultants  for services  rendered to the Company.  Such
awards may also be  granted  either in  addition  to, or in tandem  with,  other
awards  under  the 2000  Incentive  Plan,  under  conditions  determined  by the
Compensation Committee.

Deferred  compensation is recorded  related to options granted to  non-employees
and  options  granted to  employees  when the  exercise  price is below the fair
market  value of the  underlying  common  stock,  if any.  For the  years  ended
December  31,  2003 and 2002,  the Company  recorded  deferred  compensation  of
$10,000,  and $75,000,  respectively,  for certain of the Company's common stock
options granted under the Stock Plan. This amount is amortized over the relevant
period of  service.  The  amortized  compensation  expense  for the years  ended
December 31, 2003 and  December  31, 2002 was $3,000 and $83,000,  respectively.
The Company recorded compensation expense of $94,000 and $721,000, respectively,
attributable  to stock bonus  awards of 48,667  shares of common  stock  granted
during 2003 and 300,974 shares of common stock granted during 2002. Compensation
expense  attributable  to stock bonuses is determined by multiplying the closing
market price of the Company's common stock on the date of grant by the number of
shares granted. The weighted average price of shares issued as stock bonuses was
$1.92 in 2003 and $2.40 in 2002.

In December 2002, at the Company's request, employees agreed to the cancellation
of an aggregate of approximately 440,000 options (including approximately 88,000
options granted to officers) to purchase the Company's  common stock  previously
issued  from this Plan and from the 1991  Incentive  Stock Plan.  The  cancelled
options had exercise  prices above the  then-current  market price.  The Company
agreed to reissue these  options on a fully vested basis with an exercise  price
of the  lesser of (i)  $1.92  per  share or (ii)  market at the date of the 2003
Annual Stockholders' Meeting,  subject to stockholder approval at the meeting of
an amendment  to the 2000  Incentive  Plan to increase the number of  authorized
shares  for the 2000  Incentive  Plan  and to  increase  the  number  of  shares
permitted to be granted annually to a plan participant from 900,000 to 2,500,000
shares. The Company's  stockholders  approved the amendment and the options were
issued on May 29, 2003 at the market price of $0.32.

The following  table  summarizes  option grant activity under the 2000 Incentive
Plan:
                                                                  WEIGHTED
                                                                   AVERAGE
                                              OPTIONS           EXERCISE PRICE
                                             ==========        ================

Outstanding as of December 31, 2001             292,418        $          13.34
Granted                                         317,860                    3.03
Exercised                                       (99,140)                   2.60
Cancelled                                      (453,727)                   9.70
                                              ---------

Outstanding as of December 31, 2002              57,411        $           3.74
Granted                                       8,528,626                    0.33
Exercised                                    (1,426,510)                   0.38
Cancelled                                      (562,778)                   0.36
                                              ---------

Outstanding as of December 31, 2003           6,596,749        $           0.35
                                              =========

Exercisable as of December 31, 2002              38,710        $           3.68

Exercisable as of December 31, 2003           2,431,636        $           0.34

                                      F-28
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

As of December 31, 2003,  1,579,884  shares of common stock were  available  for
grant under the 2000  Incentive  Plan.  The following  table  summarizes the per
share weighted-average fair value of stock options granted during 2003 and 2002,
on the date of grant  using  the  Black-Scholes  option-pricing  model  with the
indicated weighted-average assumptions:

                                                    2003             2002
                                                =============    =============
Per share weighted average fair value
  of options granted                                   $0.336           $1.389
Expected dividend yield                                 0.00%            0.00%
Risk-free interest rate                                 3.44%            3.55%
Volatility                                             226.1%            80.0%
Expected life                                       8.0 years        4.9 years


1991 Incentive Stock Plan

In April 1991,  the  Company's  Board of Directors  approved the adoption of the
Company's  Incentive  Stock Plan (the Stock Plan).  A total of 141,366 shares of
common stock were reserved for issuance under the Stock Plan. Since the adoption
of the 2000 Equity  Incentive Plan in June 2000, no additional  shares have been
granted  from the Stock  Plan.  All of the  shares  reserved  but not  issued or
subject to options  granted under the Stock Plan,  including  shares  subject to
cancelled  options,  are available for grant under the 2000  Incentive  Plan. At
December 31,  2003,  there were no shares of common  stock  available  for grant
under the Stock Plan.

The following table summarizes activity under the Stock Plan:

                                                             WEIGHTED AVERAGE
                                        OPTIONS               EXERCISE PRICE
                                      ============         ===================

Outstanding as of December 31, 2001         40,386         $             50.45
Cancelled                                  (33,630)                      38.23
                                           -------

Outstanding as of December 31, 2002          6,756         $            111.31
Cancelled                                     (500)                     210.00
                                           -------

Outstanding as of December 31, 2003          6,256         $            103.42
                                           -------

Exercisable as of December 31, 2002          6,756         $            111.31

Exercisable as of December 31, 2003          6,256         $            103.42


1995 Director Option Plan

In December 1995, the Company's  Board of Directors  approved the Company's 1995
Director  Option  Plan (the  Director  Option  Plan).  At the Annual  Meeting of
Stockholders  in May 2003,  the Company's  stockholders  approved an increase to
2,000,000  shares  in the  number  of  shares  of  the  Company's  common  stock
authorized  for issuance  under this plan.  Under the Director  Option Plan, the
Company's  Board of Directors  determines  the number of shares of the Company's
stock that will be granted each year to newly-elected and re-elected  directors.
Options may be granted under this plan to non-employee directors or, pursuant to
an agreement  between the Company and another  person,  entity or affiliate with
whom a  non-employee  director is  associated,  that other  person,  entity,  or
affiliate.  Each option granted under the Director Option Plan is exercisable at
100% of the fair  market  value of the  Company's  common  stock on the date the
option was  granted.  Each grant  under the plan vests  monthly  over the twelve
month period  commencing  with the director's  date of election or  re-election,
provided that the option will become vested and fully exercisable on the date of
the next annual  meeting of  stockholders  if such meeting  occurs less than one
year after the date of the grant.  The plan will expire in December  2005 unless
terminated earlier in accordance with certain provisions of the Plan.

The Company has not recorded any deferred  compensation for the Company's common
stock options granted under the Director Option Plan.

                                      F-29
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

The following table summarizes activity under the Director Option Plan:

                                                             WEIGHTED AVERAGE
                                        OPTIONS               EXERCISE PRICE
                                      ============         ===================

Outstanding as of December 31, 2001         21,930         $             37.65
Granted                                      6,667                        4.80
Cancelled                                   (7,916)                       4.99
                                          --------

Outstanding as of December 31, 2002         20,681         $             39.56
Granted                                    631,667                        0.33
Exercised                                   (8,333)                       0.32
Cancelled                                 (206,335)                       0.87
                                          --------

Outstanding as of December 31, 2003        437,680         $              1.93
                                          ========

Exercisable as of December 31, 2002         20,681         $             39.56

Exercisable as of December 31, 2003        271,004         $              2.93


As of December 31, 2003,  1,553,962  shares of common stock were  available  for
grant under the Director  Option Plan.  The following  table  summarizes the per
share weighted-average fair value of stock options granted during 2003 and 2002,
on the date of grant  using  the  Black-Scholes  option-pricing  model  with the
indicated weighted-average assumptions:

                                                    2003             2002
                                                =============    =============
Per share weighted-average fair value
  of options granted                                   $0.332           $1.760
Expected dividend yield                                 0.00%            0.00%
Risk-free interest rate                                 3.57%            5.16%
Volatility                                             217.1%            80.0%
Expected life                                      10.0 years        1.3 years


2003 Non-Qualified Stock Option Plan

In June 2003,  the  Company's  Board of  Directors  authorized  and the  Company
registered  a total of  10,000,000  shares of its common  stock under a Form S-8
Registration Statement for issuance under the Company's 2003 Non-Qualified Stock
Option Plan (the "2003  Plan").  Under the 2003 Plan,  at the  discretion of the
Board of Directors,  shares may be awarded in consideration of services rendered
to the  Company.  Options  or  awards  may be  granted  under  this plan only to
non-officer employees and consultants.  The plan will expire in June 2013 unless
terminated earlier in accordance with certain provisions of the plan.

The following table summarizes 2003 option activity for the 2003 Plan:

                                                             WEIGHTED AVERAGE
                                        OPTIONS               EXERCISE PRICE
                                      ============         ===================

Granted                                  7,227,500         $              0.16
Exercised                               (7,227,500)                       0.16
                                        ----------

Outstanding as of December 31, 2003              -
                                        ==========

Exercisable as of December 31, 2003              -         $                 -


                                      F-30
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

The following  table  summarizes  the per share  weighted-average  fair value of
stock options granted during 2003, on the date of grant using the  Black-Scholes
option-pricing model with the indicated weighted-average assumptions:

                                                                     2003
                                                                ==============
Per share weighted-average fair value of options granted              $0.114
Expected dividend yield                                                0.00%
Risk-free interest rate                                               0.918%
Volatility                                                            156.1%
Expected life                                                     0.22 years

The Company  also  granted  stock  awards from the 2003 Plan for an aggregate of
2,689,552  shares of its common  stock  during  2003 and  recorded  compensation
expense  of  $788,000.  Compensation  expense  attributable  to stock  awards is
determined by multiplying the closing market price of the Company's common stock
on the date of grant by the number of shares granted. The weighted average price
of shares  issued as stock  awards was $0.36 in 2003.  At December  31,  2003, a
total of 82,978  shares of common stock were  available  for grant as options or
other awards under the 2003 Plan.


The following table summarizes  information  about stock options  outstanding at
December 31, 2003 under the 2000 Equity Incentive Plan, the 1991 Incentive Stock
Plan, and the 1995 Director Option Plan

<TABLE>
<CAPTION>

                                                 Options Outstanding                             Options Exercisable
                           ===========================================================  ====================================

                                                        Weighted
                                Number                  Average            Weighted          Number            Weighted
                            Outstanding at          Remaining Years        Average       Exercisable at    Average Exercise
 Range of Exercise Prices     12/31/03              to Expiration      Exercise Price       12/31/03            Price
========================== ======================  =================  ================  ================  ==================

<C>                                     <C>                     <C>   <C>                      <C>        <C>
$0.010 -   $0.123                         359,564               9.42  $          0.014           345,564  $            0.010
$0.126 -   $0.180                         819,000               3.78  $          0.127            10,000  $            1.126
$0.320 -   $0.320                       5,169,592               8.25  $          0.320         2,281,151  $            0.320
$0.610 -   $1.405                         646,900               9.29  $          0.762            30,000  $            0.900
$3.000 -  $210.00                          45,629               7.35  $         33.318            42,181  $           35.571

                           ======================                                       ================

$0.010 - $210.00                        7,040,685               7.88  $          0.536       2,708,896    $            0.835

                           ======================                                       ================
</TABLE>

1995 Employee Stock Purchase Plan

In December  1995,  the  Company's  Board of Directors  approved  the  Company's
Employee Stock Purchase Plan (the Purchase `Plan). The Purchase Plan is intended
to qualify  under  Section 423 of the Internal  Revenue Code (the Code).  At the
Annual Meeting of Stockholders in May 2003, the Company's  stockholders approved
an increase to 1,000,000  shares in the number of shares of the Company's common
stock  authorized  for issuance  under this plan.  Under the Purchase  Plan,  an
eligible  employee may purchase  shares of common stock from the Company through
payroll deductions of up to 10% of his or her compensation, at a price per share
equal to 85% of the lower of (i) the fair market value of the  Company's  common
stock on the first day of an offering period under the Purchase Plan or (ii) the
fair market value of the common stock on the last day of the six month  purchase
period during the offering  period.  Each offering  period lasts for twenty four
months;  prior to 2002,  stock purchases  occurred on April 30 and October 31 of
each year. The purchase period  beginning  November 1, 2001 and ending April 30,
2002 was  terminated  due to the wind-down of the Company's  operations  and all
payroll deductions withheld from employees were returned.  A new purchase period
began on July 1, 2002 and was  completed on December 31,  2002,  when  employees
purchased  3,437 shares of the  Company's  common  stock.  During the year ended
December 31, 2003,  employees purchased 18,192,  shares under the Purchase Plan.
Cumulative  purchases under the Purchase Plan through  December 31, 2003 totaled
28,380 shares, leaving 971,620 shares reserved for future purchases.

                                      F-31
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

(12) SECTION 401(K) PLAN

Effective  January  1,  1995,  the  Company  adopted a  Retirement  Savings  and
Investment  Plan (the 401(k) Plan)  covering the Company's  full-time  employees
located in the United  States.  The 401(k)  Plan is  intended  to qualify  under
Section 401(k) of the Internal Revenue Code. Under the terms of the 401(k) Plan,
employees  may  elect  to  reduce  their  current  compensation  by  up  to  the
statutorily  prescribed  annual  limit and to have the amount of such  reduction
contributed to the 401(k) Plan. The Company matched participant's  contributions
up to the first $2,000 during 2003, for approximately  $98,000;  no such Company
contribution was made in 2002.

(13) INCOME TAXES

The  provision  for income taxes for all periods  presented in the  consolidated
statements of operations  represents minimum California  franchise taxes. Income
tax expense  differed  from the amounts  computed by applying  the U.S.  federal
income tax rate of 34% to pretax losses as a result of the following:

                                                               2003        2002
                                                               ----        ----

Computed expected tax expense                                (8,960)   $ (4,520)
Losses and credits for which no benefits have been
  recognized                                                  8,950       4,514
Meals and entertainment expenses, and officers life
  insurance not deductible for income tax purposes               11           7
State tax expense, net of federal income tax benefit              1           1
                                                             ------    --------

                                                             $    2    $      2
                                                             ======    ========



The tax effect of temporary  differences that give rise to significant  portions
of the deferred tax asset is presented below:

                                                                  December 31,
                                                                  ------------
                                                               2003        2002
                                                               ----        ----

Deferred tax assets:
    Employee benefit reserves, including accrued
      vacation and bonuses                                  $    46      $   50
    Start-up and other capitalization                           556         673
    Fixed assets, due to differences in depreciation            300         173
    Deferred rent and revenue                                   199         210
    Net operating loss carryovers                            44,070      33,544
    Research and development credits                          1,576       1,596
    Other                                                       622         704
                                                            -------     -------

Total gross deferred tax assets                              47,369      36,950
Valuation allowance                                         (47,369)    (36,950)
                                                            -------     -------

Net deferred tax asset                                            -           -
                                                            =======     =======


The net change in the valuation  allowance for the years ended December 2003 and
2002 was an increase of $10,419,000 and $4,623,000,  respectively. Because there
is  uncertainty  regarding  the  Company's  ability to realize its  deferred tax
assets,  a  100%  valuation  allowance  has  been  established.  When  realized,
approximately  $171,000 of deferred tax assets will be  creditable to additional
paid-in capital.

As of  December  31,  2003,  the Company  had  federal  tax net  operating  loss
carryforwards of approximately $122,977,000, which will expire in the years 2004
through  2023.  The Company  also has federal  research and  development  credit
carryforwards  as of December 31, 2003 of approximately  $1,156,000,  which will
expire in the years 2005 through 2022.

State tax net operating loss carryforwards  were  approximately  $38,700,000 and
state research and development credit carryforwards were $619,000 as of December
31, 2003.  The state net operating loss  carryforwards  will expire in the years
2004  through  2013  and  the  state  research  and  development   credits  will
carryforward indefinitely.

                                      F-32
<PAGE>

                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

The  Company's  ability to  utilize  its net  operating  loss and  research  and
development  tax  credit  carryforwards  may be  limited  in the future if it is
determined  that the Company  experienced  an  ownership  change,  as defined in
Section 382 of the Internal Revenue Code.

(14) ROYALTY, LICENSE, AND RESEARCH AGREEMENTS

Royalty and License Agreements

The Company has entered into arrangements with various  organizations to receive
the right to utilize  certain  patents and  proprietary  rights under  licensing
agreements in exchange for the Company making certain royalty  payments based on
sales of certain products and services.  The royalty  obligations are based on a
percentage of net sales of licensed  products and include minimum annual royalty
payments under some  agreements.  The Company pays royalties to five entities on
its  urine-based  screening test and to one entity on its serum- and urine-based
Western Blot  supplemental  tests.  The patents  underlying the royalties expire
between  2004 and 2009.  There are minimum  payments  required by certain of the
agreements that apply  regardless of the amount of actual sales. The Company did
not make all of the required minimum and sales-based payments for 2003 or 2002.

At December 31, 2003,  the Company is  approximately  $409,000 in arrears on the
payment of royalties under certain of its licensing agreements. Under certain of
the Company's  licensing  agreements,  the patent  holder or other  organization
granting  rights  to the  Company  has the  right  to  revoke  the  license  for
non-payment   of  royalties.   Should  the  patent  holder  or  other   granting
organization  take that step,  the Company could find it necessary to modify its
manufacturing  practices or change its business  plan.  During 2002, the Company
settled  approximately  $1 million of its past due  royalties by issuing  25,000
shares  of  its  common  stock.   This  transaction  was  a  part  of  the  debt
restructuring discussed in Note 7. In September 2003, the Company issued 500,000
shares of its  common  stock  valued at the date of  issuance  at  approximately
$610,000 to maintain its exclusivity  under certain  license  agreements for the
years 2003 and 2004.  The  portion  applicable  to  exclusivity  during  2004 is
recorded as a prepaid expense at December 31, 2003.

(15) EMPLOYMENT AND CONSULTING AGREEMENTS

In October 2001,  the Company  renewed an agreement  with a former member of the
Board of Directors  to serve as Chairman of the Board of Directors  for a twelve
month term.  The director was granted  options to purchase  10,000 shares of the
Company's stock at an exercise price of $6.60.  The options were to vest ratably
over the  twelve-month  term of the  agreement.  The Board  member  resigned  as
Chairman and as a member of the Board in May 2002. All options not vested at the
time of his resignation were cancelled.

In May 2002, in conjunction with the financing  proposal enabling the restart of
operations,  the independent members of the Company's Board of Directors entered
into an employment  agreement  with the Company's  new Executive  Chairman.  The
employment  agreement  specifies  an annual  salary of  $400,000  and allows for
annual  increases  based  on  the  Company's  performance  and  approval  of the
Compensation  Committee  of  the  Board  of  Directors.   The  Company  deferred
approximately  30% of the Executive  Chairman's cash  compensation  during 2002,
which the  Company  accrued.  The  Company  continued  to defer and accrue  this
compensation  until it was paid during the third  quarter of 2003.  In the event
the Company terminates the Executive Chairman's employment other than for cause,
he is entitled to receive his base salary for at least twelve months. On May 10,
2002,  when the market price of the Company's  common stock was $0.90 per share,
the  Executive  Chairman  was granted  fully-vested  options to purchase  65,556
shares of the Company's  common stock at $0.45 per share and options to purchase
200,000 shares of the Company's common stock at $0.90 per share, with the option
to purchase  100,000  shares vested  immediately  and the option to purchase the
remainder  vested on the one-year  anniversary of the option grant.  The options
have a five-year  term. In the fourth quarter of 2002, the Company  renegotiated
the terms of the option grant contained in the Executive  Chairman's  Employment
Agreement,  canceling  all but  30,000 of the  options  granted  at  $0.90.  The
Executive Chairman was granted 235,556 fully-vested options at an exercise price
of $0.32 per share,  the market price of the Company's stock on the May 29, 2003
grant  date,  following   stockholder  approval  at  the  May  20,  2003  Annual
Stockholders' Meeting of amendments to the Company's 2000 Equity Incentive Plan.
Additionally,  on  May  29,  2003,  the  Executive  Chairman  was  also  granted
fully-exercisable  options to purchase  256,785 shares of the Company's stock at
$0.01 per share, in recognition of an additional  salary  deferral  arrangement,
and options to purchase  2,000,000  shares of the  Company's  stock at $0.32 per
share.  The latter  options were  exercisable  50% upon grant and 50% on the one
year anniversary of the grant.

In October  2002,  the Company  entered into a new  five-year  agreement  with a
former officer and director that included an annual salary of $300,000,  subject
to annual  review.  The previous  agreement,  which  commenced in October  1999,
provided for an initial annual salary of $220,000,  subject to annual increases.
In  conjunction  with the new  agreement,  the Company  also granted the officer
options to purchase  146,667  shares of common  stock,  at an exercise  price of
$2.40,  subject to stockholder approval of

                                      F-33
<PAGE>

                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

amendments at the 2003 Annual  Meeting of  Stockholders  to the  Company's  2000
Equity  Incentive Plan. These options were to be fully vested on the grant date.
In February 2003, the exercise price of this option was reduced to the lesser of
$1.50 per share or the market price on the grant date. In the fourth  quarter of
2002, the officer agreed to cancel all outstanding  options  previously  granted
under the 1991  Incentive  Stock Plan and the 2000  Equity  Incentive  Plan,  an
aggregate of 62,573 options. The officer was granted 62,573 fully-vested options
at an exercise price of $0.32 per share, the market price of the Company's stock
on the May 29, 2003 grant date,  following  stockholder  approval at the May 20,
2003 Annual  Stockholders'  Meeting of amendments  to the Company's  2000 Equity
Incentive Plan. The options granted conditionally under the Employment Agreement
were  also  granted  as  fully  vested  at  $0.32  per  share  on May 29,  2003.
Additionally,  on May 29, 2003,  the officer was also granted  fully-exercisable
options to purchase  85,236 shares of the Company's stock at $0.01 per share, in
recognition of a salary deferral arrangement,  and options to purchase 1,250,000
shares of the  Company's  stock at $0.32 per  share.  The  latter  options  were
exercisable  50% upon  grant and 50% on the one year  anniversary  of the grant.
Under the terms of a Separation Agreement,  Mutual Release and Waiver of Claims,
the officer resigned effective June 2, 2003 as the Company's President and Chief
Executive Officer and effective June 27, 2003 as a member of the Company's Board
of Directors. Under the terms of the Separation Agreement, the Company agreed to
pay  approximately  $313,000  over a  period  of up to one  year  and to  permit
previously issued options to vest in accordance with the terms of their grants.

On  January  1,  2003,  the  Company  entered  into a  twelve  month  employment
agreement,  with automatic renewal options,  with an officer of the Company that
included a base salary of $200,000,  and the grant of options to purchase 83,333
shares of the  Company's  common stock at an exercise  price of $1.50 per share,
subject to  stockholder  approval of  amendments  at the 2003 Annual  Meeting of
Stockholders to the Company's 2000 Equity  Incentive Plan. These options were to
be fully  vested on the grant  date.  The officer had  previously  been  granted
options to purchase an aggregate of 25,000 shares of the Company's  common stock
in 2001 and 2002,  pursuant  to an earlier  consulting  contract.  In the fourth
quarter of 2002, the officer agreed to cancel all outstanding options previously
granted to him.  The  officer  was  granted  25,000  fully-vested  options at an
exercise  price of $0.32 per share,  the market price of the Company's  stock on
the May 29, 2003 grant date, following  stockholder approval at the May 20, 2003
Annual  Stockholders'  Meeting  of  amendments  to  the  Company's  2000  Equity
Incentive Plan. The options granted conditionally under the Employment Agreement
were  also  granted  as  fully  vested  at  $0.32  per  share  on May 29,  2003.
Additionally,  on May 29, 2003,  the officer was also granted  fully-exercisable
options to purchase  24,038 shares of the Company's stock at $0.01 per share, in
recognition of a salary deferral  arrangement,  and options to purchase  625,000
shares of the  Company's  stock at $0.32 per  share.  The  latter  options  were
exercisable 50% upon grant and 50% on the one year anniversary of the grant.

In June 2003, the Company entered into a five year  employment  agreement with a
director  and  officer of the  Company  that  included a base  annual  salary of
$350,000. Refer to Note 18 regarding management changes.

In April 2003, the Company  entered into a three-year  consulting  agreement for
advisory and other services  related to the marketing,  distribution and sale of
its  products.  The  agreement  obligates  the Company to pay the  consultant an
aggregate of $3,000,000 in cash as follows: $750,000 in 2003, $1,000,000 in both
2004 and 2005,  and $250,000 in 2006. At December 31, 2003, the Company had paid
an aggregate of $675,000  pursuant to the contract and had accrued the remaining
liability for the balance due in 2003. Additionally,  the agreement requires the
Company to issue 66,667  shares of its common stock  annually as directed by the
consultant in 2003, 2004 and 2005.

(16) RELATED PARTY TRANSACTIONS

As described in Note 6, in September  2001,  the Company  issued a $400,000 8.5%
Promissory  Note to the parent  company  of its  then-largest  stockholder.  The
Company  renegotiated  the note during 2001, 2002 and subsequently in 2003. This
note was repaid in 2003.

In connection with the aggregate $12.5 million  investments by Marr Technologies
BV during 2003,  the Company  signed a Memorandum Of  Understanding  to create a
joint  venture in China to market the  Company's  current  and future  products.
Additionally,  the  Nominating  Committee  of the  Company's  Board of Directors
agreed to grant Marr the right to appoint two mutually-agreeable representatives
to the Company's Board of Directors at a mutually-agreeable future date.

In November 2003, the joint venture, Beijing Calypte Biomedical Technology Ltd.,
was formed, with the Company owning 51% of its stock.

(17) CONTINGENCIES

On January 27, 2003, an action was filed in San Francisco  County Superior Court
against the Company by Heller  Ehrman White &  McAuliffe,  LLP  ("Heller"),  the
Company's former attorneys.  On April 30, 2003, the Company and Heller reached a

                                      F-34
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

settlement  agreement  whereby the Company  agreed to pay a total of $463,000 to
settle this  claim,  after  which the suit will be  dismissed.  As a part of the
settlement,  the Company waived all of its defenses to Heller's claims,  as well
as its  counterclaims,  should it default on this payment plan. The Company made
the final required payment to Heller in February 2004 and Heller filed a request
for dismissal of the suit with prejudice.

On January 24, 2003,  the Company was informed  that one if its former  vendors,
Validation Systems, Inc. ("Validation"),  had commenced an action in Santa Clara
County Superior Court on an open book account in the amount of $79,614, incurred
between  April 1999 and July 2002 and which the Company  accrued,  concurrently,
plus $20,156 in interest, at the rate of 10% per annum until payment, wherein it
has claimed that it rendered  services  related to the  validation of biomedical
equipment and processes at the Company's  facilities.  The Company has contested
the claim as the alleged  services claimed by Validation were not performed in a
timely  fashion and were unable to be used by the Company.  On September 9, 2003
the Court dismissed  Validation's lawsuit against the Company due to the failure
of Validation's counsel to appear at a mediation status review and to respond to
an order to show cause  regarding the failure to appear.  Validation has filed a
motion to vacate this dismissal on grounds of  inadvertence,  mistake,  surprise
and excusable  neglect.  The Court vacated the dismissal and reinstated the case
at a hearing  on  December  2, 2003 in return for  Validation's  payment of fees
incurred  by the  Company in  connection  with  Validation's  failure to appear.
Additonally,  the Court ordered the parties to mediation. The parties are in the
process  of  scheduling  the  mediation.   The  Company  believes  that  it  has
meritorious defenses to the action.


On May 22, 2003,  the Company was informed  that a former  vendor,  Professional
Maintenance Management LLC ("PMM"), had instituted an action against the Company
in the  Montgomery  County Circuit Court of Maryland for the sum of $64,925 plus
post-judgment  interest.  The Company  agreed to resolve the matter by making an
initial payment in the amount of $10,000 and subsequent  monthly payments in the
amount of $7,500 toward the outstanding amount claimed by PMM. All payments have
been made and  plaintiff's  counsel has filed a dismissal of the action with the
Court.

In  September  of 2003,  the  Company  was served a lawsuit  filed in the United
States  District  Court  for  the  Northern  District  of  California  by  three
individuals,  Michael Serro,  Michael Caland and Assad Ali Assad, seeking shares
of the  Company  to which  they  claim  they are  entitled  based on  consulting
services they claim to have provided pursuant to consulting  agreements they had
with the Company.  The Company  disputed the liability and contended  that these
three  individuals  did not provide the consulting  services to the Company upon
which their claims are based.  A  Stipulation  of  Dismissal  was filed with the
Court in February 2004 and the matter is now closed.

The Company was contacted by the San Francisco District Office of the Securities
and Exchange  Commission  ("SEC") on October 28, 2003 and advised of an informal
inquiry  being  conducted  by the  enforcement  staff of the SEC  regarding  the
Company. The staff has requested,  among other things, documents and information
related to certain press releases issued by the Company. The SEC has advised the
Company that the inquiry  should not be construed as an indication by the SEC or
its staff that any  violation of law has occurred.  The Company has  voluntarily
provided the  information  sought by the SEC and is cooperating  with the SEC in
connection  with  its  informal  inquiry.  Independently,  the  Company's  Audit
Committee has investigated the matter and has retained outside counsel to assist
in its  investigation  by reviewing the press  releases and related  information
that were the subject matter of the SEC's  informal  inquiry  letter.  The Audit
Committee  has  completed  its  investigation  and  reported  the results of its
investigation and associated recommendations to the Board of Directors.  Counsel
for the Audit  Committee  advised the Audit Committee and the Board of Directors
that the  results of their  investigation,  interviews  and review of  documents
provided in response to the SEC's informal  inquiry letter indicated no evidence
of  management  malfeasance  with respect to its inquiry.  The Audit  Committee,
based upon its counsel's  recommendations,  proposed that the Company  implement
certain  practices and  procedures,  some of which  represent a continuation  or
formalization of present  practices.  The  recommendations  and proposals of the
Audit  Committee  that were approved by the Board of Directors  include  certain
improvements  in the  Company's  press  release  issuance  process and  investor
relations and regulatory recordkeeping  procedures.  Additionally,  the Board of
Directors  has directed  management  to implement  the American  Stock  Exchange
corporate governance standards (SR-AMEX-2003-65) approved by the SEC on December
1, 2003.  The Company is in the process of  implementing  the  directives of its
Board of  Directors  regarding  Corporate  Governance  and has  submitted to the
Board, and the Board has approved,  certain  policies and guidelines  related to
press releases and investor  relations that reflect the  recommendations  of the
Audit Committee.

                                      F-35
<PAGE>


                 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002

(18) SUBSEQUENT EVENTS

Extension of Mercator Debentures

On January 14, 2004,  the Company  extended the maturity  date of the  following
debentures  until July 14, 2004:
     o   10%  Convertible  Debenture  dated  January 14, 2003 issued to Mercator
         Focus Fund, LP
     o   10%  Convertible  Debenture  dated  January 30, 2003 issued to Mercator
         Momentum Fund, LP
     o   10%  Convertible  Debentures  dated  March 13,  2003 issued to Mercator
         Momentum Fund III, LP and Mercator Focus Fund, LP
     o   12%  Convertible  Debenture  dated  April 29,  2003  issued to Mercator
         Momentum Fund, LP

In return for the extension of the maturity dates, the Company has agreed to pay
an additional extension fee equal to 2% of the outstanding principal balance per
month  until the  earlier  of the  extended  maturity  date or  conversion.  The
extension fee is payable 1% in cash and 1% in stock.  Additionally,  the Company
agreed  to  file a  registration  statement  including  the  shares  potentially
applicable to the conversion of the outstanding  debenture  balances by no later
than April 29, 2004.  The shares  issuable as a portion of the extension fee are
to be included in the registration statement.

Extension of Registration Rights

On January 23,  2004,  the  Company  and Marr agreed to extend the  registration
rights period  attributable  to 5,181,818  shares of the Company's  common stock
issued in conjunction with Marr's conversion of $570,000 principal amount of the
Company's 12%  Convertible  Debentures from February 27, 2004 to April 29, 2004.
In  return  for the  extension,  the  Company  agreed  to  include  in its  next
registration  statement an aggregate  of  28,333,333  shares of its common stock
purchased by Marr in PIPE transactions in the third quarter of 2003.

Amendment of Marr Credit Facility

On March 19,  2004,  when the market  price of the  Company's  common  stock was
$0.575 per share,  the  Company and Marr  amended  the Marr  Credit  Facility to
increase  the  aggregate  amount  available  under the Marr  Credit  Facility to
$15,000,000 and to eliminate the termination  provision upon failure to have the
common  stock listed on an  established  stock  exchange by March 31,  2004.  As
additional  consideration  for the  amendment of the Marr Credit  Facility,  the
Company issued to Marr an additional  warrant to purchase  400,000 shares of its
common  stock  at an  exercise  price  of  $0.46  per  share.  This  warrant  is
immediately exercisable and expires two years from its date of issuance on March
18, 2006.

Management Changes

On January 24, 2004, the Company announced the appointment of J. Richard George,
Ph.D. as its new President and Chief Executive Officer and Richard Van Maanen as
its new Vice  President  of  Operations.  The Company  also  announced  that Jay
Oyakawa had resigned from his position as President, Chief Operating Officer and
as a member of the  Company's  Board of  Directors.  The Company  entered into a
Separation  Agreement  and Release  with Mr.  Oyakawa  wherein he will be paid a
severance  of one year's  salary of $350,000  over a twelve month period and was
vested in options to  purchase  750,000  shares of the  Company's  common  stock
exercisable at $0.32 granted to him in accordance with the Company's 2000 Equity
Incentive  Plan.  Dr. George has been the Company's Vice President of Government
Affairs  since  January 2003 and Mr. Van Maanen has been employed by the Company
since 1993 as Director of  Marketing  and  Director  of  International  Business
Development.

Operating Lease Extension

In March 2004, the Company  entered into a new lease  agreement with the primary
landlord of its manufacturing facility in Rockville, Maryland. The new agreement
extends the lease of the premises through February 28, 2009, or 28 months beyond
the expiration of the curent sublease.  Additionally, the new lease provides for
tenant improvements to be made in connection with the Company's consolidation of
its  manufacturing  operations at this  facility in the amount of  approximately
$250,000. The base rent for the tenant improvements will be approximately $5,500
per month from March 2004 through October 2006.  Following the expiration of the
Company's  current  sublease,  the base rent from November 2006 through February
2009 will be approximately $40,000 per month.

                                      F-36
<PAGE>

 PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.

                          CALYPTE BIOMEDICAL CORPORATION
                                  (Registrant)

                              /s/ J. Richard George
                    By:
                       -------------------------------------
                                J. RICHARD GEORGE
                      PRESIDENT AND CHIEF EXECUTIVE OFFICER

Date: March 29, 2004

                                POWER OF ATTORNEY

Each Director of the Registrant whose signature  appears below,  hereby appoints
J. Richard George and Richard D. Brounstein as his  attorney-in-fact  to sign in
his name and on his behalf as a Director of the Registrant, and to file with the
Securities and Exchange Commission any and all Amendments to this report on Form
10-KSB to the same extent and with the same effect as if done personally.

Pursuant to the  requirement of the  Securities  and Exchange Act of 1934,  this
report  has been  signed  below,  by the  following  persons  on  behalf  of the
Registrant and in the capacities indicated.

<TABLE>
<CAPTION>

                 SIGNATURE                                             TITLE                                   DATE
===========================================    =======================================================   ================

<S>                                            <C>                                                        <C>
          /s/ Anthony J. Cataldo               Executive Chairman of the Board of Directors               March 29, 2004
===========================================

            ANTHONY J. CATALDO

          /s/ J. Richard George                President, Chief Executive Officer                         March 29, 2004
===========================================

             J. RICHARD GEORGE P

         /s/ Richard D. Brounstein             Executive Vice President and Chief Financial Officer       March 29, 2004
===========================================    (Principal Financial and Accounting Officer)

           RICHARD D. BROUNSTEIN

           /s/ John J. DiPietro                Director                                                   March 29, 2004
===========================================

             JOHN J. DIPIETRO

             /s/ Paul Freiman                  Director                                                   March 29, 2004
===========================================

               PAUL FREIMAN

        /s/ Julius R. Krevans, M.D.            Director                                                   March 29, 2004
===========================================

          JULIUS R. KREVANS, M.D.

        /s/ Zafar I. Randawa, Ph.D.            Director                                                   March 29, 2004
===========================================

          ZAFAR I. RANDAWA, PH.D.
</TABLE>

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