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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2003


                        COMMISSION FILE NUMBER 001-14257


                                  XTRANA, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                               58-1729436
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)

590 BURBANK STREET, SUITE 205, BROOMFIELD, COLORADO                 80020
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)

       Registrant's telephone number (including area code) (303) 466-4424


        Securities registered pursuant to section 12(b) of the Act: None

           Securities registered pursuant to section 12(g) of the Act:

                               TITLE OF EACH CLASS

                     Common Stock, par value $.01 per share
                          Common Stock Purchase Rights


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. [X] Yes [ ] No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  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]

State Issuer's revenues for its most recent fiscal year: $1,191,000.

The aggregate market value of Xtrana, Inc. Common Stock, $.01 par value, held by
non  affiliates,  computed  by  reference  to the average of the closing bid and
asked prices as reported by OTCBB on December 31, 2003, was $1,938,992.

Number of shares of Common  Stock of Xtrana,  Inc.,  $.01 par value,  issued and
outstanding as of February 8, 2004: 16,533,269.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Definitive  Proxy  Statement  for the 2004 Annual
Meeting are incorporated by reference into Part III of this Form 10-KSB.

Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X]

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                             INDEX TO ANNUAL REPORT

                                 ON FORM 10-KSB


PART I                                                                      PAGE

Item 1.       Business.........................................................3
Item 2.       Properties.......................................................9
Item 3.       Legal Proceedings...............................................10
Item 4.       Submission of Matters to a Vote of Security-Holders.............10

PART II

Item 5.       Market for the Registrant's Common Equity and
                Related Stockholder Matters...................................10
Item 6.       Management's Discussion and Analysis of Financial
                Condition and Results of Operations...........................11
Item 7.       Financial Statements and Supplementary Data.....................23
Item 8.       Changes In and Disagreements with Accountants on
                Accounting and Financial Disclosure...........................23
Item 8A.      Controls and Procedures.........................................23

PART III

Item 9.       Directors and Executive Officers................................24
Item 10.      Executive Compensation..........................................24
Item 11.      Security Ownership of Certain Beneficial Owners
                and Management................................................24
Item 12.      Certain Relationships and Related Transactions..................24
Item 13.      Exhibits, Financial Statement Schedules and Reports
                on Form 8-K...................................................24
Item 14.      Principal Accountant and Fees...................................25

SIGNATURES....................................................................26


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            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         This  2003  Annual  Report on Form  10-KSB  contains  statements  which
constitute  forward-looking  statements within the meaning of Section 27A of the
Securities Act of 1933, as amended,  and Section 21E of the Securities  Exchange
Act of 1934,  as amended.  Those  statements  include  statements  regarding the
intent,  belief or  current  expectations  of the  Company  and its  management.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future  performance and involve risks and  uncertainties,  and
that  actual  results  may  differ   materially  from  those  projected  in  the
forward-looking  statements.  Such risks and uncertainties  include, among other
things, whether the closing of the proposed sale of our intellectual property to
Applera  will occur in a timely  manner,  if at all;  our  ability to settle our
remaining  obligations  following  the sale of our  intellectual  property;  our
ability to find a merger  partner;  our ability to continue as a going  concern;
and other  risks and  uncertainties  that may be detailed  herein.  See "Item 6,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations - Risk Factors."


                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

         Xtrana,  Inc.  ("we,"  "us,"  "Xtrana" or the  "Company")  develops and
commercializes  technologies  to simplify  the  analysis of DNA and RNA, so that
nucleic   acid-based   detection  systems  can  be  utilized  in  point-of-care,
point-of-service  applications.  The proprietary  assays developed by Xtrana are
designed to be easy to use outside of a traditional molecular biology laboratory
at a cost per test that is competitive  with existing  rapid test  technologies.
These  diagnostic  tests are  intended for use in drug  discovery,  detection of
environmental and food contaminants,  forensics and identity testing,  human and
animal diseases,  genetic  predisposition  to disease,  and other  applications.
However,  subsequent  to year end,  we  entered  into an  agreement  to sell our
intellectual property (see below).

         We were  initially  incorporated  in Delaware in 1987.  The name of the
Company was changed from Biopool  International,  Inc., to Xtrana, Inc., in June
of 2001. Our corporate headquarters is located in Broomfield, Colorado, where we
conduct manufacturing operations as well as research and development activities.

         On August 10, 2000, we completed a merger with the former Xtrana, Inc.,
a company based in Denver, Colorado, and primarily engaged in the development of
new proprietary nucleic acid (DNA/RNA) testing technology.

         On December 21, 2001, we completed our strategy of divesting  ourselves
of our Hemostasis business segment by selling substantially all of the assets of
that  business  to  Trinity  Biotech  plc,  an  Irish  corporation,   for  total
consideration of US$6,250,000  plus the assumption of certain of our liabilities
associated with that business. The assets sold included the operations of Xtrana
located in Ventura,  California, and a wholly owned Swedish subsidiary,  Biopool
AB.  The total  consideration  of  US$6,250,000  consisted  of cash and notes as
follows:  (a)  US$3,658,500  in cash which was paid on December 21, 2001;  (b) a
note in the  amount of  US$855,200  due on  December  21,  2002,  which was paid
subsequent to December 31, 2002; (c) a note in the amount of US$1,166,200 due on
December 21, 2003;  and (d) a note in the amount of US$570,100  due December 21,
2004. The notes carry  interest at a rate of 5% per annum,  and are secured by a
second position on  substantially  all of the assets of Trinity Biotech plc that
are located in the United States. As a result of a settlement  agreement in 2003
all notes were paid, net of a $225,000 discount.

RECENT DEVELOPMENTS

         On January 26,  2004,  we entered  into an  Assignment  Agreement  with
Applera  Corporation  through  its  Applied  Biosystems  Group.  Pursuant to the
Assignment  Agreement,  we agreed to sell  substantially all of our intellectual
property,  including all patents and know-how,  but excluding our trademarks and
trade names, to Applera for total consideration of US$4,000,000. In exchange for
our  intellectual  property,  Applera agreed to


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pay and deliver to us total cash  consideration  of  $4,000,000 in the following
manner:  $3,600,000  in cash at  closing  ($100,000  of which has  already  been
received in the form of a non-refundable  deposit);  and $400,000 in cash ninety
(90) days after closing subject to our providing certain consulting  services as
provided in the Assignment  Agreement.  Completion of the transaction is subject
to a number of closing  conditions,  including approval of our stockholders.  We
have  scheduled a special  meeting of our  stockholders  for March 24, 2004,  at
which  the  stockholders  will be asked to vote on the sale of our  intellectual
property to Applera.

         The  sale  of our  intellectual  property  pursuant  to the  Assignment
Agreement  will  result  in  the  receipt  of  net  proceeds  of   approximately
$3,600,000,  after payment of all expenses  associated with the transaction.  We
could  distribute  that  cash  as a  dividend  to our  stockholders  as  part of
liquidation,  after  satisfaction  of all of our  liabilities and payment of all
costs  associated  with the  liquidation.  If we were to make a distribution  to
stockholders before the expiration of certain  representations and warranties we
made under the  Assignment  Agreement  (18 months from the date of closing),  we
would be required to reserve and hold back $1,000,000 for possible settlement of
potential claims by Applera against us for our breaches of those representations
and warranties.

         Alternatively,  the Board of Directors  believes  that we could attract
interest from other businesses that might benefit from access to those funds, as
well as our status as a public  company  with a clean  reporting  history.  Such
interest  could  result in us  merging or  otherwise  joining  together  with an
existing  business that could create much greater  long-term  stockholder  value
than simply  liquidating  the Company.  After closing the  contemplated  Sale of
Assets and  complying  with the  requirements  of the  Assignment  Agreement  to
provide  consulting  services,  we anticipate that we would terminate all of our
remaining  employees  and  terminate  our  existing  lease  pursuant to an early
termination  agreement  (see Item 2 - Properties).  Consequently,  following the
transaction,  after payment of employee severance and lease terminations  costs,
we would have limited overhead costs of operation,  but would remain a reporting
company  under  the  rules  and  regulations  of  the  Securities  and  Exchange
Commission.  It is the intention of the Board of Directors to spend a reasonable
period of time exploring  opportunities to find a merger candidate and, if it is
unable to  conclude a  transaction  that it  believes  would  provide  long-term
stockholder  value, to propose that the stockholders  approve a liquidation.  In
either  event,  the Board of  Directors  does not  anticipate  taking any action
without further stockholder approval.

NUCLEIC ACID (DNA/RNA) TESTING INDUSTRY

         The  growing  understanding  of  genetics  and  the  genetic  basis  of
biological  activity is driving  renewed  growth in the research and  commercial
testing markets.  Genomic  research is being applied to identify  specific genes
and to use the  identity of the gene to identify  its source,  as in  forensics,
paternity and pathogen testing,  or to reveal possible linkages between the gene
and biologic  activity and disease,  as in diagnostic  testing.  Highly specific
detection tests and, where applicable, precisely targeted therapeutic approaches
are being  designed to address  not only human  disorders  but also  veterinary,
environmental,  food safety, forensics, and other applications.  These new tests
and approaches  require  specialized  research  reagents,  supplies,  tools, and
instruments.   Currently,  demand  for  these  reagents,  supplies,  tools,  and
instruments  arise  from  both  academic  and  industrial  researchers  and from
commercial testing applications,  such as forensics,  paternity,  and diagnostic
testing.

         In order to  capitalize  on  increasing  demand  generated  by both the
research  and  commercial  markets,  the  Company,  along  with  other  industry
participants,  are  developing a wide range of products and services,  including
genomic information,  diagnostic tests and assays,  testing services,  drugs and
gene therapies, and environmental services. We are already participating in both
the  commercial  and research  segments of the  genetics  market.  Further,  one
segment of the commercial  market--human diagnostic  testing--offers  particular
opportunities  due to the size of the  market  and the  limited  development  of
nucleic acid-based testing products to date.

         Historically,  the analysis of nucleic  acid has been a very  expensive
and time-consuming process,  requiring extensive and well-equipped  microbiology
laboratories  and highly  trained  personnel.  The process can be segmented into
three  independent  steps.  First,  the DNA or RNA  must be  extracted  from the
sample,  which could be blood,  tissue,  urine, food products,  or other organic
materials,  and isolated from contaminants.  This process is also referred to as
sample preparation.  Second, the specific gene sequence related to the


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target to be analyzed is amplified,  making  thousands of copies of the sequence
if it is present in the sample.  Lastly,  the gene sequence must be detected and
analyzed. We have developed  proprietary  technologies in sample preparation and
detection, and are pursuing the license of an amplification technology.  Each of
the technologies, once commercialized, could be marketed as standalone products.
When  combined,   the  technologies  could  permit  the  development  of  rapid,
easy-to-use,  and  cost-effective  nucleic  acid  testing  devices  that  can be
employed either in a laboratory  setting or at the point of sample collection in
place of the current complex and time-consuming laboratory-based procedures.

STRATEGY

         Since the  acquisition  of the nucleic acid  technologies  in August of
2000, we have worked to continue the development of these  technologies with the
ultimate goal of moving them into commercial products.

         The  first  of  these  products  were the  Xtra  Amp(TM)  nucleic  acid
extraction  kits.  These  reagent kits were  marketed  primarily to the research
laboratory  marketplace  through a distributor  network.  The market for nucleic
acid extraction kits is a fairly mature market,  and is dominated by a few large
firms.  The  majority of the  customers  in this market  operate  under  tightly
regulated  quality  systems,  which  require  them  to  go  through  a  rigorous
validation  of all new  products.  This  validation  process  can be quite  time
consuming  and costly.  Even though  customers  who  evaluated  the Xtra Amp(TM)
product  liked its ease of use, it was not enough to  convince  them to make the
investment  in the  validation  process and change over to Xtra Amp(TM) from the
products they were currently using. As a result, our sales of these products did
not meet expectations.

         The primary  product  that we were focused on  developing  was our SCIP
diagnostic  platform.  This device would reduce DNA testing to a  simple-to-use,
sample-in,  result-out  device  that  could  be used  outside  of a  traditional
laboratory.  Although  our SCIP  product  and our  technologies  had been funded
primarily through  government  research grants, we needed additional  funding to
complete  development  and move  into the  commercial  market.  As our cash flow
received  from the Xtra Amp(TM)  products was much lower than  anticipated,  the
Board of Directors  made the decision to seek outside  capital to fund continued
operations and development of our SCIP  technology.  Our cash flow problems were
exacerbated when we were sued by Trinity Biotech, plc. In December 2002, Trinity
filed  suit  against  us  alleging  breach of  contract,  breach of the  implied
covenant of good faith and fair  dealing,  fraud,  negligent  misrepresentation,
unjust  enrichment,  and  violation  of  the  Delaware  Consumer  Fraud  Act  in
conjunction  with the  sale of our  Hemostasis  business  to  Trinity.  The suit
alleged  that we  misrepresented  the  status of a single  product  that was the
subject of the Instrumentation Laboratory patent infringement suit settled by us
in January  2002,  and Trinity  sought $1.2 million in damages and $3 million in
punitive  damages.  We filed a counter  suit  against  Trinity  in  response  to
Trinity's suit seeking $27 million in actual damages and $30 million in punitive
damages for tortious interference with prospective economic advantage, breach of
contract,  and breach of the  covenant of good faith and fair  dealing.  We also
sought a declaratory  judgment that  Trinity's  suit was an improper  attempt to
avoid its  contractual  obligations  to us  because  Trinity  merely  instituted
litigation to force us to  renegotiate  the terms of the sale of our  Hemostasis
business. We settled this litigation in June 2003, but the cost of defending the
litigation  forced  us  to  radically  reduce  the  investment  in  our  product
development.

         Based on these  factors,  and advice from our  financial  advisor,  the
Board of Directors  determined that the best way to maximize  stockholder  value
was to examine  other  alternatives,  including  the sale of the  Company or our
assets.   Working  with  our  financial  advisor,   we  conducted  an  extensive
solicitation  process  to  obtain  proposals  for  transactions  ranging  from a
financing to the sale of our Company or our assets.  This process resulted in us
entering into the Assignment Agreement with Applera, as previously discussed.

TECHNOLOGIES

         Xtra Bind(TM) is a family of nucleic acid  extraction  matrices that we
have developed,  representing  the foundation  technologies  for our current and
potential commercial products.  These matrices capture and stabilize DNA and RNA
and allow for  enzymatic  manipulation  of the  nucleic  acid,  resulting  in an
extremely rapid and efficient extraction protocol.

         The Xtra  Bind(TM)  matrices  are unique in that they not only serve to
selectively  bind DNA and RNA, but also  interface  with multiple  amplification
technologies and downstream  applications.  For example, DNA can


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be amplified  by  Polymerase  chain  reaction  (PCR),  and RNA can be copied and
amplified by a similar process known as RT-PCR,  directly off of the solid phase
bound  nucleic acid without  elution.  This permits the use of our Xtra Bind(TM)
material to create an extremely  rapid  extraction  protocol and  eliminates the
need for the vacuum filtration,  centrifugation, or hazardous chemicals commonly
associated with other extraction methods. The protocol merely requires pipetting
or liquid  handling  steps for the addition of the sample,  lysis buffer,  and a
wash buffer - thus making it ideally  suited for  automated  platforms  and high
throughput  screening or sample  processing.  Nucleic acid is highly stable when
bound to the Xtra  Bind(TM)  matrix  and can be stored at room  temperature  for
extended periods rather than using valuable freezer space.

         Additionally,    Xtra   Bind(TM)    provides    both    multiplex   and
re-amplification   capabilities.  The  multiplex  protocol  requires  no  primer
optimization  and can be used to amplify up to 25 targets in a single  reaction.
The Xtra Bind(TM) material also acts as an archival platform,  allowing the user
to re-amplify either the same target or different targets from the original Xtra
Amp(TM)  tube.  This ability to re-amplify  when  combined  with Xtra  Amp(TM)'s
multiplex capability provides researchers with a powerful and efficient tool.

         The Xtra Bind(TM) matrix can be coated on many different surfaces. This
capability,  combined with the simple and efficient extraction  protocol,  makes
this  material  ideal  for  incorporating  sample  preparation  onto  diagnostic
platforms.

         We also have several detection technologies that we have developed. Our
primary  detection  methodology  is  a  lateral  flow  strip  for  nucleic  acid
detection.  This patented  method is similar in function to the detection  strip
utilized in home pregnancy  tests. The sample is added to the lateral flow strip
post-amplification  and, in less than one minute, a blue line will appear on the
strip if the sample is present.  This qualitative  detection method is much more
rapid than  traditional  agarose gel methods and,  when used with Xtra  Bind(TM)
extraction, can provide higher levels of sensitivity.

         SCIP(TM)  (Self-Contained  Integrated  Particle) is a strategy  that we
have   developed  to  combine  all  three  aspects  of  nucleic  acid  analysis,
extraction,  amplification, and detection, into a self-contained,  point-of-care
device. We have several device patents surrounding the SCIP(TM) concept,  and it
is  envisioned  that SCIP(TM)  will be a family of  diagnostic  platforms,  each
specific to the  requirements  of various  applications.  We have numerous other
technologies in various areas of nucleic acid analysis.

PRODUCTS

         Our initial  commercial  product,  the Xtra Amp(TM)  Extraction System,
utilizes our proprietary  Xtra Bind(TM)  material,  and provides the user with a
rapid and  easy-to-use  extraction  kit. The Xtra Amp(TM) System is sold for use
with amplification and detection products and processes  currently  available in
the  marketplace.  This system  enables the extraction of nucleic acid with only
three minutes of hands-on time and the  elimination  of  centrifugation,  vacuum
filtration,  product  transfer,  or elution  steps,  all of which are  currently
necessary with competing  technologies.  This saves valuable laboratory time and
minimizes  the  risks  of  cross-contamination,  as the  entire  extraction  and
amplification  process  takes  place in the same  tube.  Additionally,  the Xtra
Amp(TM) kits provide for  long-term  dry storage of the nucleic acid sample that
can be used later for tracking or follow-up testing.

         Xtra Amp(TM) Extraction Kits are sold in 8x12 PCR tubes,  96-well plate
and  384-well  plate  formats.  The  kits  come  in  three  series  for  various
applications:

         o        SERIES I - For the  extraction and isolation of DNA from whole
                  blood, buccal swab, buffy coat fraction, and E. coli cells.

         o        SERIES  II - For the  extraction  and  isolation  of RNA  from
                  tissue culture cells.

         o        SERIES  III - For the  extraction  and  isolation  of DNA from
                  whole  tissues,  tissue culture  cells,  rodent tails,  yeast,
                  blood stains and plant.


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CUSTOMERS

         Because  of the  limited  nature  of our  sales of  nucleic  acid-based
products to date, none of our current customers account for more than 10% of our
revenue.

RESEARCH AND DEVELOPMENT

         All of our  research  and  development  activities  are  focused on the
development  of  technologies  that  can be  brought  to  market  in the form of
commercialized  products.  These research and  development  activities have been
funded by internal capital as well as by various  government  grants.  The major
projects under development in 2003 were:

         o        Additional  Xtra Amp(TM)  applications,  including DNA and RNA
                  from viruses, thus continuing to broaden the product line.

         o        SCIP(TM)for  infectious  disease -  Intended  to be a point of
                  care  diagnostic  device for the doctor's  office.  Provides a
                  highly  simple  device:  sample in,  result  out.  The test is
                  processed  during the patient  visit,  thus  allowing for more
                  effective  treatment.  Device  design  is  a  base  unit  with
                  disposable  cartridges.  The first cartridge under development
                  is a test  for  chlamydia/gonorrhea.  Additionally,  work  has
                  begun  on  the  development  of  assay   chemistries  for  the
                  detection of respiratory  viruses,  which will also run on the
                  platform.  During the first quarter of 2003, we completed work
                  on a functional SCIP prototype.  This prototype  automates the
                  extraction,  amplification  and  detection  of  chlamydia  and
                  gonorrhea  from clinical  urine  samples.  This  prototype has
                  demonstrated  the ability to detect  targets  down to a single
                  copy (single cell) of the target organism.

         On November 8, 2000,  we were issued U.S.  patent  6,153,425,  entitled
"Self-Contained Device Integrating Nucleic Acid Extraction,  Amplification,  and
Detection."  This  patent is a  continuation,  in part,  of an  earlier  patent,
expanding  upon our  development  strategy  for a  self-contained  nucleic  acid
detection  system to include a modular  design that will interface with multiple
amplification technologies.

         On September 18, 2001, we were issued U.S.  patent  6,291,166  entitled
"Nucleic Acid Archiving." This patent covers the Xtra Bind(TM) family of nucleic
acid  extraction  matrices  representing  the  foundation  technologies  for the
Company's  current and future  commercial  products.  These matrices capture and
stabilize DNA and RNA and allow for enzymatic  manipulation of the nucleic acid,
resulting in an extremely rapid and efficient extraction protocol.

         On August 12,  2003,  we were issued U.S.  Patent  6,605,451,  entitled
"Methods  and Devices for  Multiplexing  Amplification  Reactions."  This patent
covers our Xtra  Plex(TM)  method,  which is a multiplex  protocol  requiring no
primer  optimization  that can be used to  amplify  up to 25 targets in a single
reaction.

         On November 18, 2003, we were issued U.S.  patent  6,649,378,  entitled
"Self-Contained Device Integrating Nucleic Acid Extraction,  Amplification,  and
Detection."  This  patent is a  continuation,  in part,  of an  earlier  patent,
expanding  upon our  development  strategy  for a  self-contained  nucleic  acid
detection  system to  include  the method for solid  phase  capture,  isothermal
amplification and lateral flow detection in an integrated device.

         In 2002,  we spent  $1,794,000  on research and  development.  In 2003,
research and development expenses decreased  approximately $535,000, or 30% from
2002  levels,  to  $1,259,000.  Due to the  proposed  sale  of our  intellectual
property to Applera,  all research and  development  spending will be eliminated
after closing.

         In nucleic acid detection, we utilize the expertise of advisors. Two of
these are Michael P. Doyle,  Ph.D.,  and James Mahony,  Ph.D.  Dr. Doyle is well
known in the food microbiology industry and provides consultation  regarding our
food  pathogen   detection   assays,   including  E.  COLI   0157:H7,   LISTERIA
MONOCYTOGENES,  SALMONELLA,  Coliforms, and Campylobacter.  He received his B.S.
degree in  Bacteriology  in 1973, an M.S. in Food  Microbiology  in 1975,  and a
Ph.D.   in  Food   Microbiology   in   1977,   all  from   the   University   of
Wisconsin-Madison.  After working for the Ralston  Purina Co. from  1977-80,  he
accepted an Assistant  Professor  position at the Food Research Institute at the
University of Wisconsin-


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Madison  in  1980.  He  remained  there,  advancing  to  full  Professor  in the
Department  of Food Science,  until 1991.  In 1991,  Dr. Doyle moved to Griffin,
Georgia,  where he  remains as  Professor  and  Director  of the Center for Food
Safety  and  Quality  Enhancement,  and Head,  Department  of Food  Science  and
Technology, University of Georgia. Dr. Mahony is well known in clinical virology
and  chlamydiology.  He is consulting and  collaborating on the development of a
SCIP(TM)-based  assay for urine  detection of  chlamydia  and  gonorrhea.  He is
Professor  and  Director  at  McMaster  University  Virology  and  Chlamydiology
Laboratory, Hamilton, Ontario, Canada. Dr. Mahony has authored 104 publications,
most of which deal with either chlamydia or gonorrhea.  He has also published 25
articles  in books,  all  discussing  STD's and  chlamydia.  His lab  frequently
conducts  and  publishes  validation  studies of new  methods for  detection  of
sexually  transmitted  disease  infectious  agents.  In August 2002,  Dr. Mahony
became a Director of the Company.

MANUFACTURING AND QUALITY CONTROL

         During  2002,  we  completed  the  transfer  of  Xtra  Amp(TM)  product
manufacturing to our Broomfield, Colorado facility.

         All  of  our  products  are   manufactured   in  accordance  with  Good
Manufacturing Practices for Medical Devices as promulgated by the FDA.

SALES AND MARKETING

         During  2003  the  sales  of  our  nucleic  acid-based   products  were
worldwide.  The U.S.  typically  accounts  for  approximately  35% of the  total
worldwide diagnostics market, Europe approximately 35%, Japan  approximately10%,
and approximately 20% for the rest of the world.

         As a result of the proposed sale of the Company's intellectual property
to Applera, the Company is no longer actively marketing its commercial products.

COMPETITION

         We compete on a worldwide basis against a number of companies,  some of
which are  subsidiaries of large  pharmaceutical,  chemical,  and  biotechnology
firms whose  financial  resources and research and  development  facilities  are
substantially  greater  than ours.  Specifically,  in the area of  nucleic  acid
extraction, we compete with, among others, Applied Biosystems,  Qiagen, Promega,
and Aclara Biosciences.

         Competition  is  based  upon a number  of  factors,  including  product
quality, customer service, price, continuous availability of product, breadth of
product  range,  and the strength and  effectiveness  of the sales and marketing
organization.  We  believe  our test kits and  reagents  compete on the basis of
relative ease of use, quality, accuracy, and precision.

SUPPLIERS

         We  obtain  raw  materials  from  numerous  outside  vendors.  Key  raw
materials include PCR tubes,  microtiter plates, and enzymes.  We generally have
more  than  one  source  for our  key raw  materials.  We  continually  evaluate
additional suppliers and are not dependent on any single vendor.

PATENTS, TRADEMARKS, AND PROPRIETARY INFORMATION

         We consider  the  protection  of  discoveries  in  connection  with our
research and development on test kits important to our business.  We seek patent
protection for technology when deemed appropriate and, to date, have been issued
six patents in the United States and foreign  jurisdictions  specific to nucleic
acid  diagnostics.  We also have five  patents  pending for  additional  nucleic
acid-related technologies.

         We are also reliant on trade secrets,  unpatented proprietary know-how,
and continuing  technological innovation to develop our competitive position. We
require that all of our employees and consultants enter into


                                       8
<PAGE>


confidentiality  agreements and agree to assign to us any inventions relating to
our  business  made by them while in our  employ,  or in the course of  services
performed on our behalf.  We perform an ongoing  assessment  of the value of our
intangible assets.

         We have  established  rights in the  trademarks  "XTRANA,"  "Xtra Amp,"
"Xtra Bind," and "SCIP."

GOVERNMENT REGULATIONS

         The  manufacture  and  sale  of  diagnostic  products  are  subject  to
regulation by the FDA in the United States and by comparable regulatory agencies
in certain foreign countries in which our diagnostic  products are sold. The FDA
has  established  guidelines  and safety  standards  that are  applicable to the
pre-clinical  evaluation and clinical  investigation of diagnostic  products and
regulations  that govern the manufacture and sale of such products.  The FDA and
similar agencies in foreign countries have substantial regulations that apply to
the testing,  marketing  (including export), and manufacturing of products to be
used for the  diagnosis  of  disease.  In the  United  States,  many  diagnostic
products  may be accepted by the FDA  pursuant to a 510(k)  notification,  which
must  contain  information  that  establishes  that the  product in  question is
"substantially  equivalent" to similar  diagnostic  products  already in general
use.

         Our  manufacturing  facility,  as well as any additional  manufacturing
operations  that may be  established  within or outside the United  States,  are
subject to compliance with the FDA's Good Manufacturing  Practices  regulations.
We are  registered  as a  medical  device  manufacturer  with  the  FDA and as a
manufacturer  with  the U.S.  Drug  Enforcement  Administration.  We may also be
subject  to  regulation  under the  Occupational  Safety  and  Health  Act,  the
Environmental  Protection Act, the Toxic  Substance  Control Act, Export Control
Act, and other present and future laws of general application.

         We  believe  that  the  manufacture  and  use of our  products  have no
material adverse environmental impact.

         Except as we indicated above, we are not subject to direct governmental
regulation  other  than  the  laws  and  regulations   generally  applicable  to
businesses in the  jurisdictions in which we operate,  including those governing
the handling and disposal of hazardous wastes and other  environmental  matters.
Our research and  development  activities  involve the  controlled  use of small
amounts of hazardous materials and chemical compounds.  Although we believe that
our safety  procedures for handling and disposing of such materials  comply with
applicable  regulations,  the risk of  accidental  contamination  or injury from
these  materials  cannot  be  completely  eliminated.  In the  event  of such an
accident,  we could be held liable for resulting  damages.  This liability could
have a material adverse effect on us.

EMPLOYEES

         As of December 31,  2003,  we had 8 regular  employees,  of whom 7 were
full-time and 1 was part-time.

ITEM 2.  PROPERTIES

         The Company leases a 14,671 square-foot corporate office,  research and
development,  and  manufacturing  facility in  Broomfield,  Colorado.  The lease
commenced  in  April  2001  and has a term of five  years.  Base  rent  for this
facility is $214,894 per year, increasing 3% per year. On November 11, 2003, the
Company  entered into an early  termination  agreement  with the  landlord.  The
agreement provides for rent abatement and an early termination option. The gross
rent is reduced by $5,000 per month for the period of December  2003 through May
2004. The abated gross rent carries an accrued  interest charge at 6% per annum.
The early termination  agreement stipulates that the Company will pay 50% of the
remaining  base rent plus the abetted  gross rent plus any unpaid  interest.  We
believe that our facilities  are in good  condition,  are adequately  covered by
insurance,  and will be adequate  for our  occupancy  needs for the  foreseeable
future.


                                       9
<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

         From time to time, we are involved in various routine legal proceedings
incidental to the conduct of our business.  Management does not believe that any
of these legal  proceedings will have a material adverse impact on our business,
financial  condition or results of  operations,  either due to the nature of the
claims,  or because  management  believes that such claims should not exceed the
limits of our insurance coverage.

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

         There were no matters submitted during the fourth quarter of the fiscal
year covered by this Report to a vote of stockholders,  through the solicitation
of proxies, or otherwise.


                                     PART II

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

         Our common stock currently trades on the OTC Bulletin  Board(R) (OTCBB)
under the symbol XTRN.  The  following  sets forth the high and low trade prices
for our common  stock for the periods  indicated  as reported by the OTCBB.  The
quotations  provided by the OTCBB reflect  inter-dealer  prices,  without retail
mark-up,  markdown or commission and may not represent actual  transactions.  We
have not paid any dividends since our inception and do not  contemplate  payment
of dividends in the foreseeable future.

                                        2003                       2002
                                HIGH           LOW          HIGH           LOW
                                ----           ---          ----           ---

         First quarter        $ 0.210       $ 0.100       $ 0.800       $ 0.400

         Second quarter         0.300         0.090         0.610         0.270

         Third quarter          0.220         0.100         0.450         0.170

         Fourth quarter         0.180         0.090         0.360         0.140

(a)      On March 16,  2004,  the closing  trade price of our common  stock,  as
         reported by the OTCBB, was $0.12.

(b)      As of March 16, 2004, we had 229 holders of record of our common stock.
         A  large  number  of  shares  are  held in  nominee  name.  Based  upon
         information provided by our transfer agent, American Stock Transfer and
         Trust Company,  we had approximately  2,056 beneficial  stockholders on
         the same date.


                                       10
<PAGE>


EQUITY COMPENSATION PLAN INFORMATION

         The following table sets forth certain information regarding our equity
compensation plans as of December 31, 2003.

<TABLE>
<CAPTION>
                           -----------------------    -------------------------    ----------------------------
                           NUMBER OF SECURITIES TO    WEIGHTED-AVERAGE EXERCISE        NUMBER OF SECURITIES
                           BE ISSUED UPON EXERCISE       PRICE OF OUTSTANDING         REMAINING AVAILABLE FOR
                           OF OUTSTANDING OPTIONS,      OPTIONS, WARRANTS AND      FUTURE ISSUANCE UNDER EQUITY
                             WARRANTS AND RIGHTS                RIGHTS                  COMPENSATION PLANS
-----------------------    -----------------------    -------------------------    ----------------------------
<S>                               <C>                           <C>                          <C>
Equity compensation
plans approved by
security holders.......           1,689,047                     $0.82                        2,257,587
Equity compensation
plans not approved by
security holders.......             684,755                     $0.91                           --
Total..................           2,373,802                     $0.85                        2,257,587
-----------------------    -----------------------    -------------------------    ----------------------------
</TABLE>

         As of December 31, 2003,  the Company had 684,755  warrants to purchase
common  stock  outstanding,  which  are  shown  in the  table  above  as  equity
compensation  plans  not  approved  by  security  holders.  These  warrants  are
exercisable  for prices  ranging  from $0.01 to $1.875  with a weighted  average
exercise price of $0.9105 per share. The weighted average remaining  contractual
life of these warrants at December 31, 2003, was 3.9 years.  These warrants have
expiration dates ranging from 2004 to 2011.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         We  develop  and  market  nucleic  acid-based  tests  for  use in  drug
discovery,  detection of  environmental  and food  contaminants,  forensics  and
identity testing, human and animal diseases,  genetic predisposition to disease,
and other applications.

         On January 26,  2004,  we entered  into an  Assignment  Agreement  with
Applera  Corporation  through  its  Applied  Biosystems  Group.  Pursuant to the
Assignment  Agreement,  we  will  sell  substantially  all of  our  intellectual
property,  including all patents and know-how,  but excluding our trademarks and
trade names, to Applera for total  consideration of  US$4,000,000.  Applera will
pay and deliver to us total cash  consideration  of  $4,000,000 in the following
manner:  $3,600,000  in cash at  closing  ($100,000  of which has  already  been
received in the form of a non-refundable  deposit);  and $400,000 in cash ninety
(90) days after closing subject to our providing certain consulting  services as
provided in the Assignment  Agreement.  Completion of the transaction is subject
to a number of closing conditions, including approval by our stockholders.

         Our financial  statements have been prepared  assuming the Company will
continue as a going concern. For the year ended December 31, 2003, we incurred a
loss from continuing operations of approximately $2.8 million, which included an
asset  impairment  charge of $0.5  million,  expenses  relating  to the  Trinity
litigation of approximately $0.6 million, and sustained negative cash flows from
operations of approximately $2.4 million. The negative cash flow from operations
is a result of continuing our development of our nucleic acid testing  business.
The Company is currently  consuming cash to fund its operations and the research
and development of its nucleic acid diagnostic  technologies.  The proposed sale
of our  intellectual  property  to  Applera  will  result in the  receipt of net
proceeds of approximately  $3,600,000,  after payment of all expenses associated
with  the  transaction.  After  closing  the  contemplated  Sale of  Assets  and
complying  with  the  requirements  of  the  Assignment   Agreement  to  provide
consulting services,  we anticipate that we would terminate all of our remaining
employees  and  terminate our existing  lease  pursuant to an early  termination
agreement.  Consequently,  following the transaction,  after payment of employee
severance and lease terminations  costs, we would have limited overhead costs of
operation.  Completion  of the  transaction  is  subject  to a number of closing
conditions, including stockholder approval. There can be no assurance that these
conditions will be met. We have scheduled a special meeting of stockholders  for
March 24, 2004, at which the  stockholders  will be asked to vote on the sale of
our intellectual property to Applera.

         The  following  discussion  should  be read  in  conjunction  with  our
financial  statements  provided  under Part II, Item 8, of this annual report on
Form 10-KSB. Certain statements contained herein may constitute


                                       11
<PAGE>


forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act of 1995.  These  statements  involve  a number of risks,
uncertainties,  and other  factors  that could  cause  actual  results to differ
materially, as discussed more fully herein.

         The forward-looking information set forth in this annual report on Form
10-KSB  is as of  March  19,  2004,  and we  undertake  no duty to  update  this
information.  Should  events occur  subsequent  to March 19, 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
Securities and Exchange Commission 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 Securities and Exchange  Commission's  website at  www.sec.gov.
More  information  about  potential  factors  that could affect our business and
financial  results is included in the section entitled "Risk Factors"  beginning
on page 16 of this Form 10-KSB.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our discussion  and analysis of our financial  condition and results of
operations are based upon our financial statements,  which have been prepared in
accordance with accounting  principles  generally accepted in the United States.
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.  We base our estimates on historical
experience and on various other  assumptions  that are believed 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.

         Specifically, management must make estimates in the following areas.

         ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The  Company  has  $7,000 in gross  grant  accounts  receivable  on the
balance  sheet at December  31,  2003.  A review of our  allowance  for doubtful
accounts is done timely and consistently throughout the year. As of December 31,
2003, we believe our allowance for doubtful  accounts is fairly  stated.  If the
financial  condition  of our  customers  were to  deteriorate,  resulting  in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required.

         INVENTORY ADJUSTMENTS

         We review  the  components  of our  inventory  on a  regular  basis for
excess,  obsolete and  impaired  inventory  based on estimated  future usage and
sales.  Additionally,  material  write-downs  in  our  inventory  can  occur  if
competitive  conditions or new product introductions by our customers or us vary
from our current  expectations.  Inventories were valued at $35,000 at September
2003.  During  the fourth  quarter of 2003,  inventory  values  were  reduced by
approximately  $35,000 due to the proposed sale of our intellectual  property to
Applera  whereby the inventory on hand at December 31, 2003, was deemed impaired
and, therefore, devalued to $0.00.

         INCOME TAXES

         Deferred income taxes are recognized for the expected tax  consequences
in the  future  years for the  differences  between  the tax bases of assets and
liabilities and their financial  reporting amounts,  based upon enacted tax laws
and statutory tax rates  applicable to the periods in which the  differences are
expected to affect taxable income. Our significant deferred tax asset is related
primarily to our net operating loss  carryforwards  and foreign tax credits.  We
have had net  losses  in  fiscal  2003 and 2002  and  received  a going  concern
explanatory  paragraph  in the  Independent  Auditors  Report  of our  financial
statements  for the year ended  December 31, 2003. We have  concluded that it is
more likely than not that our  deferred  tax assets will not be  realized.  As a
result, we have provided a valuation allowance for the total of our net deferred
tax asset at December 31,  2003.  The  estimates  for deferred tax asset and the
corresponding  valuation  allowance require complex  judgments.  We periodically
review those estimates for reasonableness. However, because


                                       12
<PAGE>


the  recoverability of the deferred tax assets is directly dependent upon future
operating  results,  actual  recoverability  of  deferred  tax assets may differ
materially form our estimates.

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

         REVENUE RECOGNITION

         Product  revenues are recorded on the day products are shipped from the
Company's  facilities.  The  products  are  warranted;   however,  to  date,  no
significant  returns have  occurred.  Grant  revenues are recorded  when earned,
pursuant to the respective grant agreements.  Shipping costs are included in the
cost of sales. Grant revenues and profit on long-term  contracts are recorded as
the contract progresses using the percentage of completion method of accounting,
which  relies on  estimates  of total  expected  contract  revenues  and  costs.
Revisions  in profit  estimates  are  reflected in the period in which the facts
that give rise to the revision become known.  Accordingly,  favorable changes in
estimates result in additional profit  recognition,  and unfavorable  changes in
estimates result in the reversal of previously  recognized  revenue and profits.
When estimates indicate a loss under a contract, cost of revenue is charged with
a provision for such loss. As work  progresses  under a loss  contract,  revenue
continues to be recognized, and a portion of the contract costs incurred in each
period is charged to the contract loss reserve.  We historically  have been able
to estimate its percentage of completion on contracts  reliably.  The Securities
and  Exchange   Commission's   Staff  Accounting   Bulletin  No.  101,  "Revenue
Recognition,"  ("SAB 101")  provides  guidance on the  application  of generally
accepted  accounting  principles  to selected  revenue  recognition  issues.  We
believe that our revenue recognition policy is consistent with this guidance and
in  accordance  with  generally  accepted  accounting  principles.   We  do  not
anticipate any changes to our revenue  recognition and shipping  policies in the
future.

         LONG-LIVED ASSETS

         In October 2001,  the Financial  Accounting  Standards  Board  ("FASB")
issued Statement on Financial Accounting Standards ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived  Assets," which addresses financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
While SFAS No. 144  supersedes  SFAS No.121,  "Accounting  for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to be Disposed Of," it retains many
of the fundamental  provisions of that statement.  The standard is effective for
fiscal years beginning after December 15, 2001. It is our policy, and consistent
with SFAS No. 144, to account for long-lived assets,  including intangibles,  at
amortized  cost. As part of an ongoing review of the valuation and  amortization
of long-lived assets,  management  assesses the carrying value of such assets if
facts and  circumstances  suggest  that  they may be  impaired.  If this  review
indicates that  long-lived  assets will not be  recoverable,  as determined by a
non-discounted  cash flow analysis over the remaining  amortization  period, the
carrying  value of the  Company's  long-lived  assets  would be  reduced  to its
estimated fair value based on discounted cash flows.  Long-lived  assets consist
primarily of leasehold improvements,  computer equipment,  office furniture, and
equipment.  As part of its review of its third  quarter  financial  results  and
entering into an agreement to sell all its  intellectual  property,  the Company
performed an impairment  assessment of fixed assets.  The impairment  assessment
was  performed to  determine  whether any  impairment  existed.  The  impairment
indicators included, but were not limited to, the decline in the Company's stock
price,  the net book value of the assets,  and the overall decline in forecasted
growth  rates  which  have  negatively   impacted  the  Company's  revenues  and
forecasted  revenue growth rates, and the impact of the sale of the intellectual
property.  As a result,  the Company  recorded a $493,000  impairment  charge to
reduce fixed assets to reflect their current  estimated fair market value.  Fair
market value was determined  based on the estimated fair value of the equipment.
The estimates and assumptions  used under our assessment may change in the short
term resulting in the need to further write-down other long-lived assets.

         GOODWILL

         In June 2001, the Financial  Accounting Standards Board ("FASB") issued
Statements  of  Financial   Accounting  Standards  ("SFAS")  No.  141,  Business
Combinations,  and SFAS No. 142, Goodwill and Other Intangible Assets.  SFAS No.
141 requires  that the purchase  method of  accounting  be used for all business
combinations  initiated after June 30, 2001. SFAS No. 141 also includes guidance
on the initial  recognition  and  measurement  of goodwill and other  intangible
assets arising from business combinations completed after


                                       13
<PAGE>


June 30,  2001.  SFAS  No.  142  prohibits  the  amortization  of  goodwill  and
intangible assets with indefinite useful lives. SFAS No. 142 requires that these
assets be reviewed for  impairment  at least  annually.  Intangible  assets with
finite lives will continue to be amortized  over their  estimated  useful lives.
These  statements  are required to be adopted by the Company on January 1, 2002,
and for any  acquisitions  entered into after July 1, 2001. The Company  adopted
Statement  142 on  January 1,  2002.  The  Company  completed  the  transitional
goodwill  impairment  test  utilizing  the  present  value of future  cash flows
approach  at a 25%  discount  rate and  concluded  that no  goodwill  impairment
existed at January 1, 2002. Due to the liquidity issues currently facing us, the
methodology for the impairment test at December 31, 2002 was changed to a market
approach.  Based on that analysis (Note 1), the Company wrote off the entire net
goodwill balance of $8.5 million.

RESULTS OF OPERATIONS

         REVENUE

         Revenue from continuing  operations was $1.2 million for the year ended
December 31,  2003,  compared  with $1.4  million for the year ended 2002.  This
represents a decrease in revenue equal to $0.2 million, or 14%. The decrease was
the  result of a $0.1  million  decrease  in grant  revenue  and a $0.1  million
decrease in the sales of Xtra Amp(TM).

         As a  result  of the  proposed  sale of our  intellectual  property  to
Applera, we do not anticipate  recognizing any material revenue over the next 12
months.

         COSTS AND EXPENSES

         Cost of sales, from continuing  operations,  decreased by $0.1 million,
or 10%,  to $1.0  million  in 2003,  as a result of reduced  revenue  during the
period. As a percentage of sales, cost of goods sold from continuing  operations
was 80% in 2003 compared with 74% in 2002. This increase in cost as a percentage
of sales was the result of research and development  grants,  a portion of which
was funded on a cost reimbursement basis by various government grants.

         Selling,  general and administrative  expenses of continuing operations
decreased  by $0.1  million,  or 3%, to $2.3  million in 2003 as compared to the
prior year.  The decline of $0.1  million was due to a reduction  in expenses of
$0.7 million during the period resulting from the reduction in force implemented
on December 31, 2002,  and other overhead  reductions we implemented  during the
period.  This  reduction was partially  offset by $0.6 million in costs incurred
relating to the Trinity litigation.

         Research and development  expenses of continuing  operations  decreased
$0.5 million in fiscal 2003, or 64%, from 2002 levels.  This decrease was due to
the decrease in grant  revenues,  combined with the reduction of internal funded
product development

         INCOME TAXES

         The  difference  between  our  effective  tax rate for 2002 and the 34%
federal  statutory  tax rate was  primarily  due to the effects of state  income
taxes,  non-deductible  goodwill  amortization,  and impairment,  as well as the
provision  for a  full  valuation  allowance  on all  net  deferred  tax  assets
available to us.

LIQUIDITY AND CAPITAL RESOURCES

         As of  December  31,  2003,  we had cash and cash  equivalents  of $0.9
million. As of December 31, 2003, our working capital position was $0.6 million,
with a current ratio of 2.2 to 1.0.

         The Company  used cash of $0.5 million from  continuing  operations  in
2003 compared to $2.7 million in 2002. Net cash used in operating  activities is
primarily the result of loss form continuing  operations,  net of  depreciation,
amortization and impairment charges.

         In December  2002,  Trinity  Biotech plc filed suit against us alleging
breach  of  contract,  breach of the  implied  covenant  of good  faith and fair
dealing, fraud, negligent misrepresentation, unjust enrichment, and


                                       14
<PAGE>


violation of the Delaware Consumer Fraud Act in conjunction with the sale of our
Hemostasis  business  to Trinity in  December  2001.  The suit  alleged  that we
misrepresented  the  status  of a single  product  that was the  subject  of the
Instrumentation  Laboratory  patent  infringement  suit settled by us in January
2002,  and  Trinity  sought  $1.2  million in damages and $3 million in punitive
damages.  We filed a counter suit against  Trinity in response to Trinity's suit
seeking  $27 million in actual  damages and $30 million in punitive  damages for
tortious  interference with prospective economic advantage,  breach of contract,
and breach of the  covenant  of good faith and fair  dealing.  We also  sought a
declaratory  judgment that Trinity's  suit was an improper  attempt to avoid its
contractual  obligations to us because Trinity merely  instituted  litigation to
force us to  renegotiate  the terms of the sale of our Hemostasis  business.  We
settled this  litigation in June 2003,  but the cost of defending the litigation
forced us to radically reduce the investment in our product development.

         The proposed sale of our  intellectual  property to Applera will result
in the receipt of net proceeds of approximately $3,600,000, after payment of all
expenses associated with the transaction. After closing the contemplated Sale of
Assets and  complying  with the  requirements  of the  Assignment  Agreement  to
provide  consulting  services,  we anticipate that we would terminate all of our
remaining  employees  and  terminate  our  existing  lease  pursuant to an early
termination agreement. Consequently, following the transaction, after payment of
employee severance and lease terminations  costs, we would have limited overhead
costs of  operation.  Completion  of the  transaction  is subject to a number of
closing conditions,  including shareholder  approval.  There can be no assurance
that  these  conditions  will be met.  We have  scheduled  a special  meeting of
stockholders for March 24, 2004, at which the stockholders will be asked to vote
on the sale of our intellectual property to Applera.

         Following closing of the sale our intellectual  property to Applera, we
could distribute our net cash proceeds as a dividend to our stockholders as part
of liquidation,  after satisfaction of all of our liabilities and payment of all
costs  associated  with the  liquidation.  If we were to make a distribution  to
stockholders before the expiration of certain  representations and warranties we
made under the  Assignment  Agreement  (18 months from the date of closing),  we
would be required to reserve and hold back $1,000,000 for possible settlement of
potential claims by Applera against us for our breaches of those representations
and warranties.

         Alternatively,  the Board of Directors  believes  that we could attract
interest from other businesses that might benefit from access to those funds, as
well as our status as a public  company  with a clean  reporting  history.  Such
interest  could  result in us  merging or  otherwise  joining  together  with an
existing  business that could create much greater  long-term  stockholder  value
than  simply  liquidating  the  Company.  It is the  intention  of the  Board of
Directors to spend a reasonable period of time exploring opportunities to find a
merger candidate and, if it is unable to conclude a transaction that it believes
would provide  long-term  stockholder  value,  to propose that the  stockholders
approve a liquidation.

         In August 2001, we entered into an executive  employment agreement with
Timothy J. Dahltorp. Pursuant to this agreement, Mr. Dahltorp agreed to serve as
our Chief Executive Officer and Chief Financial Officer for a period of 3 years.
The  agreement  provides  for a base  salary of $200,000  per year,  plus annual
incentive  compensation as determined by the Compensation Committee of the Board
of Directors. The agreement also provides for severance of up to one year's base
salary if the agreement is  terminated  by us without  cause or by Mr.  Dahltorp
upon a change in control.  Pursuant to the  employment  agreement,  our entering
into the  Assignment  Agreement  with Applera  constituted a "change of control"
and, in accordance with the terms of the Agreement, Mr. Dahltorp has notified us
that he will terminate the employment  agreement effective as of March 19, 2004.
As a result,  we will be obligated  to continue to pay Mr.  Dahltorp his current
base salary of $200,000 for a period of 12 months following such termination.

         The Company has never paid  dividends  on common stock and has no plans
to do so in fiscal 2004. Our earnings will be retained for  reinvestment  in the
business.


                                       15
<PAGE>


         The  following  table  summarizes  our  contractual  obligations  as of
December 31, 2003:


   CONTRACTUAL OBLIGATIONS                 PAYMENTS DUE BY PERIOD (in thousands)
   -----------------------                 -------------------------------------

                                           2004            2005            2006
                                           ----            ----            ----

Operating Leases .....................     $235            $242            $61
Contractual Cash Obligations .........     $47             $14              --


         On November 11, 2003,  we entered into an early  termination  agreement
with the  landlord  from  which we lease or  executive  offices  in  Broomfield,
Colorado.  This  agreement  provides for rent  abatement  and grants us an early
termination  option.  The gross  rent was  reduced  by $5,000  per month for the
period of December  2003  through  May 2004.  The abated  gross rent  carries an
accrued  interest charge at 6% per annum.  If we exercise the early  termination
agreement,  this  agreement  provides that we will pay 50% of the remaining base
rent plus the abated gross rent plus any unpaid interest.

         We are currently consuming cash to fund our operations and the research
and development of our nucleic acid diagnostic technologies.  Due to the cost of
defending the Trinity  litigation and the slower than anticipated growth in Xtra
Amp(TM) sales, we may not have the ability to sustain our operations through the
next 12 months. To address these capital pressures,  we have undertaken steps to
significantly  reduce our operating  costs and have entered into the  Assignment
Agreement with Applera.  If the sale of our assets to Applera is not approved by
our  stockholders  or fails to close for any other  reason,  we intend to pursue
alternatives, which could include a financing, a co-development arrangement, the
license of our technologies, or the sale of the Company or our assets. There can
be no guarantee that these activities will be successful.

OFF-BALANCE SHEET ARRANGEMENTS

         We do not have any off-balance sheet arrangements.

RECENTLY ISSUED ACCOUNTING STANDARDS

        RECENT  PRONOUNCEMENTS - SFAS No. 150,  ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH  CHARACTERISTICS  OF BOTH LIABILITIES AND EQUITY, was issued in
May 2003 and  requires  issuers to  classify as  liabilities  (or assets in some
circumstances) three classes of freestanding  financial  instruments that embody
obligations for the issuer. SFAS No. 150 is effective for financial  instruments
entered into or modified  after May 31, 2003 and is  otherwise  effective at the
beginning of the first interim period beginning after June 15, 2003.  Management
believes  the  adoption  of SFAS No.  150 will have no  immediate  impact on its
financial position or results of operations.

        The FASB issued Interpretation ("FIN") No.45, Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness  of  Others  in  November  2002 and FIN No.  46,  Consolidation  of
Variable  Interest  Entries,  in January  2003.  FIN No. 45 is  applicable  on a
prospective  basis  for  initial  recognition  and  measurement   provisions  to
guarantees  issued after December 2002;  however,  disclosure  requirements  are
effective  immediately.  FIN No. 45 requires a guarantor  to  recognize,  at the
inception  of a  guarantee,  a liability  for the fair value of the  obligations
undertaken in issuing the guarantee and expands the required  disclosures  to be
made by the guarantor about its obligation under certain  guarantees that it has
issued.  The  adoption  of FIN No.  45 did not  have a  material  impact  on the
Company's financial position or results of operations.  FIN No. 46 requires that
a company  that  controls  another  entity  through  interest  other than voting
interest  should  consolidate  such  controlled  entity in all cases for interim
periods beginning after June 15, 2003.  Management does not believe the adoption
of FIN No. 46 will have a material  impact on its financial  position or results
of operations.


                                       16
<PAGE>


RISK FACTORS

         You should carefully  consider the following risk factors and all other
information  contained  in this report  before  purchasing  shares of our common
stock.  Investing in our common stock  involves a high degree of risk. If any of
the  following  events or outcomes  actually  occurs,  our  business,  operating
results,  and financial  condition would likely suffer. As a result, the trading
price of our common  stock  could  decline,  and you may lose all or part of the
money you paid to purchase our common stock.

RISKS RELATED TO OUR BUSINESS

         GOING  CONCERN AND  LIQUIDITY  PROBLEMS.  Our auditors have included an
explanatory  paragraph  in their audit  opinion  with  respect to our  financial
statements  as of December 31, 2003.  The  paragraph  states that our  recurring
losses from operations raise substantial doubts about our ability to continue as
a going concern. The proposed sale of our intellectual  property to Applera will
result in the receipt of net proceeds of approximately $3,600,000, after payment
of all expenses associated with the transaction.  After closing the contemplated
sale of our  intellectual  property and complying with the  requirements  of the
Assignment Agreement to provide consulting services, we anticipate that we would
terminate  all of our  remaining  employees  and  terminate  our existing  lease
pursuant  to  an  early  termination  agreement.  Consequently,   following  the
transaction,  after payment of employee severance and lease terminations  costs,
we would have limited overhead costs of operation. Completion of the transaction
is subject to a number of closing conditions,  including  stockholder  approval.
There can be no assurance that these conditions will be met.

         We may not have  sufficient  working capital to sustain our operations.
We have been unable to generate  sufficient  revenues to sustain our operations.
We will  have to obtain  funds to meet our cash  requirements  through  business
alliances,  such as  strategic  or financial  transactions  with third  parties,
increase  our  revenue  and/or,  the  sale  of  securities  or  other  financing
arrangements,  or we may be required to curtail our  operations or seek a merger
partner.  Any of the  foregoing  may be on terms that are  unfavorable  to us or
disadvantageous to existing stockholders. In addition, no assurance may be given
that the Company will be successful in raising additional funds or entering into
business alliances.

         FAILURE TO  CONCLUDE  THE  PROPOSED  SALE OF OUR ASSETS TO APPLERA  MAY
ADVERSELY  EFFECT ON OUR  LIQUIDITY.  The  closing of the  proposed  sale of our
intellectual property to Applera is subject to a number of conditions, or waiver
of those conditions, including without limitation:

         o        approval  by  our  stockholders  at  the  special  meeting  of
                  stockholders currently scheduled for March 24, 2004;

         o        neither  party  shall  be  subject  to any  order,  decree  or
                  injunction  of a court  that  would  delay  or  prevent  total
                  completion of the transaction;

         o        the truth of the  representations and warranties of each party
                  contained in the Assignment Agreement;

         o        termination by us of certain  license  agreements  relating to
                  our intellectual property; and

         o        no material adverse change in our intellectual property.

         There can no assurance  that these  conditions  will be  satisfied.  In
addition,  the  Assignment  Agreement  may be  terminated,  and the  transaction
abandoned, at any time prior to the closing:

         o        by  Applera  if we  should  fail to  satisfy  certain  closing
                  conditions,   including  obtaining  stockholder  approval  and
                  terminating our license agreements related to the intellectual
                  property;

         o        by us if  Applera  should  fail  to  satisfy  certain  closing
                  conditions or if we fail to obtain stockholder approval;


                                       17
<PAGE>


         o        by either us or Applera if the closing has not  occurred on or
                  prior to April 13, 2004,  and the party  electing to terminate
                  the  Assignment  Agreement  has not caused  the  closing to be
                  delayed due to breach of its obligations thereunder; or

         o        automatically  if  the  transaction  is  not  approved  by our
                  stockholders at the special meeting.

         There can be no guarantee that the sale of our intellectual property to
Applera  will close.  If the  transaction  with  Applera  does not close for any
reason  and  is  abandoned,   we  would  seek  to  identify  another   potential
transaction.  There can be no  assurance  that we will be able to  identify  any
other  buyer for the  Company  or its  assets.  If  another  potential  buyer is
identified,  there is no guarantee that the terms of such a transaction would be
as advantageous to the Company and our stockholders as the Applera transaction.

         OUR  ABILITY TO RAISE THE CAPITAL  NECESSARY  TO MAINTAIN OR EXPAND OUR
BUSINESS IS UNCERTAIN.  In the future,  in order to expand our business  through
internal  development  or  acquisitions,   we  may  need  to  raise  substantial
additional  funds through equity or debt  financings,  research and  development
financings, or collaborative relationships. However, this additional funding may
not be available  or, if  available,  it may not be  available  on  economically
reasonable terms. In addition,  any additional funding may result in significant
dilution to existing stockholders.  If adequate funds are not available,  we may
be required to curtail our  operations  or obtain  funds  through  collaborative
partners that may require us to release material rights to our products.

         WE HAVE  LIMITED  REVENUE.  We had  revenues  of $1.4  million and $1.2
million in fiscal 2002 and 2003, respectively.  Because of our limited revenues,
we are  dependent  upon our current  capital  resources to fund our overhead and
operations.  Should sales of our nucleic acid products and  government  research
grants not  materialize,  it may  become  necessary  for us to raise  additional
capital to fund its operations.

         REDUCTION  OR  DELAYS  IN  RESEARCH  AND  DEVELOPMENT  BUDGETS  AND  IN
GOVERNMENT  FUNDING  MAY  NEGATIVELY  IMPACT OUR SALES.  Our  customers  include
researchers   at   pharmaceutical   and   biotechnology   companies,    academic
institutions,  and  government  and private  laboratories.  Fluctuations  in the
research and development  budgets of these  researchers and their  organizations
could have a  significant  effect on the demand for our  products.  Research and
development  budgets  fluctuate  due to  numerous  factors  that are outside our
control and are difficult to predict,  including changes in available resources,
spending priorities and institutional  budgetary policies. Our business could be
seriously  damaged by any  significant  decrease in life  sciences  research and
development expenditures by pharmaceutical and biotechnology companies, academic
institutions, or government and private laboratories.

         A   significant   portion  of  our  sales  has  been  to   researchers,
universities,  government laboratories, and private foundations whose funding is
dependent upon grants from  government  agencies such as the U.S.  Department of
Defense  and  similar  domestic  and  international  agencies.  In  addition,  a
significant  portion of our own revenue and our  anticipated  future  revenue is
from such grants.  Although the level of research  funding has increased  during
the past  several  years,  we cannot  assure you that this trend will  continue.
Government  funding of  research  and  development  is subject to the  political
process,  which is  inherently  fluid and  unpredictable.  Our  revenues  may be
adversely  affected  if we fail to receive a material  portion of the grants for
which we have  applied,  or if our  customers  delay  purchases  as a result  of
uncertainties  surrounding the approval of government  budget  proposals.  Also,
government  proposals to reduce or eliminate  budgetary  deficits have sometimes
included  reduced  allocations to the Department of Defense and other government
agencies  that  fund  research  and  development  activities.   A  reduction  in
government  funding for the Department of Defense or other  government  research
agencies could seriously damage our business.

         Many of our customers  receive funds from approved grants at particular
times of the year, as determined by the federal government.  Grants have, in the
past, been frozen for extended periods or have otherwise  become  unavailable to
various  institutions without advance notice. The timing of the receipt of grant
funds  affects  the timing of  purchase  decisions  by our  customers  and, as a
result, can cause fluctuations in our sales and operating results.

         OUR  OPERATING  RESULTS  MAY  FLUCTUATE  SIGNIFICANTLY.  Our  operating
results have fluctuated in the past and are likely to do so in the future. These
fluctuations could cause our stock price to decline. Some of the


                                       18
<PAGE>


factors  that could  cause our  operating  results  to  fluctuate  include:  (1)
expiration or termination of research contracts with collaborators or government
research  grants,  which may not be  renewed  or  replaced;  (2) the  timing and
willingness of  collaborators  to  commercialize  our products;  (3) the timing,
release,   and   competitiveness   of  our   products;   and  (4)   general  and
industry-specific economic conditions,  which may affect our customers' research
and development  expenditures and use of our products.  If revenue declines in a
quarter,  whether due to a delay in recognizing  expected  revenue or otherwise,
our earnings will decline  because many of our expenses are relatively  fixed in
the short  term.  In  particular,  research  and  development  and  general  and
administrative  expenses are not affected directly by variations in revenue. Due
to  fluctuations  in  our  revenue  and  operating  expenses,  we  believe  that
period-to-period  comparisons  of  our  results  of  operations  are  not a good
indication of our future performance. It is possible that in some future quarter
or quarters,  our operating results will be below the expectations of securities
analysts  or  investors.   In  that  case,  our  stock  price  could   fluctuate
significantly or decline.

         WE MAY NOT BE ABLE TO  IDENTIFY  AND  EVALUATE  A  POTENTIAL  MERGER OR
REORGANIZATION  PARTNER IN A TIMELY MANNER,  WHICH MAY HAVE AN ADVERSE EFFECT ON
OUR BUSINESS.  While we have not identified any specific  business  opportunity,
once we do identify a  particular  entity as a potential  acquisition  target or
merger  candidate,  management will seek to determine whether the acquisition or
merger  is  warranted  or  whether  further  investigation  is  necessary.  Such
determination  will generally be based on management's  knowledge and experience
or, with the  assistance of outside  advisors and  consultants,  evaluating  the
preliminary  information made available to them.  Management may elect to engage
outside  independent  consultants  to perform  analyses  of  potential  business
opportunities.

         In evaluating such potential business opportunities,  we will consider,
to the extent relevant to the specific  opportunity,  several factors including:
potential benefits to the Company and its stockholders;  similarity of business,
such as a business also involved in  biotechnology;  working capital;  financial
requirements and availability of additional financing;  history of operation, if
any;  nature of present and  expected  competition;  quality and  experience  of
management; need for further research, development or exploration; potential for
growth and expansion;  potential for profits;  and other factors deemed relevant
to the specific opportunity being analyzed.

         Because  we have  not  located  or  identified  any  specific  business
opportunity as of the date of this report,  there are certain unidentified risks
that cannot be adequately  appreciated or quantified prior to the identification
of a  specific  business  opportunity.  There  can  be  no  assurance  following
consummation of any acquisition or merger that the business venture will develop
into a going  concern  or, if the  business is already  operating,  that it will
continue to operate successfully.  Many of the potential business  opportunities
available for  acquisition may involve new and untested  products,  processes or
market strategies that may not ultimately prove successful.

         OUR  STOCKHOLDER  MAY  EXPERIENCE  SUBSTANTIAL  DILUTION IN A POTENTIAL
ACQUISITION,  MERGER OR REORGANIZATION.  Presently, we cannot predict the manner
in which we might  participate in a prospective new business  opportunity.  Each
separate  potential  opportunity  will be reviewed  and,  upon the basis of that
review,  a suitable legal structure or method of  participation  will be chosen.
The particular manner in which we participate in a specific business opportunity
will  depend  upon the  nature of that  opportunity,  the  respective  needs and
desires of the Company  and  management  of the  opportunity,  and the  relative
negotiating strength of the parties involved. Actual participation in a business
venture may take the form of an asset purchase,  lease, joint venture,  license,
partnership, stock purchase, reorganization, merger or consolidation. We may act
directly  or  indirectly  through an  interest  in a  partnership,  corporation,
limited liability company or other form of organization.

         In the event we do  successfully  acquire  or merge  with an  operating
business opportunity, it is likely that our present stockholders will experience
substantial  dilution;  and, in such event,  there will be a probable  change in
control of the Company. Most likely, the owners of the business opportunity will
acquire control of the Company  following such  transaction.  Management has not
established  any  guidelines  as to the  amount  of  control  it will  offer  to
prospective business opportunities,  rather management will attempt to negotiate
the best possible agreement for the benefit of our stockholders.


                                       19
<PAGE>


         FAILURE TO MANAGE OUR GROWTH AND  EXPANSION  COULD IMPAIR OUR BUSINESS.
Our sales and profitability  will increase  primarily through the acquisition or
internal  development  of new  product  lines,  additional  customers,  and  new
businesses.  We expect that future  acquisitions,  if successfully  consummated,
will create increased working capital requirements, which will likely precede by
several  months any material  contribution  of an acquisition to our net income.
Our  ability  to  achieve  our  expansion  objectives  and to manage  our growth
effectively and profitably depends upon a variety of factors, including: (1) our
ability to internally  develop new products;  (2) our ability to make profitable
acquisitions;  (3) integration of new facilities into existing  operations;  (4)
hiring, training, and retention of qualified personnel; (5) establishment of new
relationships  or  expansion  of  existing   relationships  with  customers  and
suppliers; and (6) availability of capital. In addition, the implementation of a
growth  strategy  could  place   significant   strain  on  our   administrative,
operational  and  financial  resources  and  increased  demands on our financial
systems and controls. Our ability to manage our growth successfully will require
us to continue to improve and expand these resources,  systems and controls.  If
our  management is unable to manage growth  effectively,  our operating  results
could be adversely  affected.  Moreover,  there can be no assurance that we will
continue  to  successfully  expand or that  growth or  expansion  will result in
profitability.

         FAILURE  TO  ATTRACT  AND  RETAIN  QUALIFIED  PERSONNEL  OR LOSS OF KEY
MANAGEMENT OR KEY  PERSONNEL  COULD HURT OUR  BUSINESS.  Our  continued  success
depends to a significant  extent on the members of our management team.  Because
the  industry  in which we  compete  is very  competitive,  we face  significant
challenges attracting and retaining members of our management team and personnel
base.  Although  we believe we have been and will be able to attract  and retain
these members of management  and  personnel,  there can be no assurance  that we
will be able to continue to successfully attract such qualified individuals.  In
addition,  we do not  maintain  insurance on the lives of anyone at the Company.
The loss of services of any key employee  could have a material  adverse  effect
upon our business.

         INTELLECTUAL  PROPERTY  OR OTHER  LITIGATION  COULD HARM OUR  BUSINESS.
Litigation regarding patents and other intellectual property rights is extensive
in the biotechnology  industry.  We are aware that patents have been applied for
and, in some cases,  issued to others,  claiming  technologies  that are closely
related to ours. In the event of an  intellectual  property  dispute,  we may be
forced to litigate.  This litigation could involve  proceedings  declared by the
U.S. Patent and Trademark Office or the International Trade Commission,  as well
as proceedings brought directly by affected third parties. Intellectual property
litigation  can be  extremely  expensive,  and  these  expenses,  as well as the
consequences should we not prevail, could seriously harm our business.

         If a third party claimed an  intellectual  property right to technology
we use, we might need to discontinue an important product or product line, alter
our products and  processes,  pay license fees,  or cease our affected  business
activities.  Although  we might under  these  circumstances  attempt to obtain a
license to this intellectual  property, we may not be able to do so on favorable
terms, or at all.

         In addition to intellectual  property  litigation,  other  substantial,
complex,  or extended  litigation  could result in large  expenditures by us and
distraction of our management. For example, lawsuits by employees, stockholders,
collaborators,  or distributors  could be very costly and substantially  disrupt
our business.  Disputes from time to time with companies or individuals  are not
uncommon in our  industry,  and we cannot assure you that we will always be able
to resolve them out of court.

         We regard our  trademarks,  trade  secrets,  and  similar  intellectual
property as important to our success.  We rely on trademark law and trade secret
protection  and  confidentiality   and/or  license  agreements  with  employees,
customers,  partners,  and others to protect  our  proprietary  rights.  We have
pursued the  registration  of our  trademarks  in the U.S. and  internationally.
Effective  trademark and trade secret  protection  may not be available in every
country in which our products are  available.  We cannot be certain that we have
taken adequate steps to protect our proprietary rights,  especially in countries
where the laws may not protect our rights as fully as in the United  States.  In
addition,  third parties may infringe or misappropriate our proprietary  rights,
and we could be required to incur significant expenses in preserving them.

         Our success  will depend in part on our ability to obtain and  maintain
meaningful patent protection for our products,  both in the United States and in
other countries. We rely on patents to protect some of our intellectual property
and  our  competitive  position.  We  own  issued  patents  and  pending  patent
applications,


                                       20
<PAGE>


including both domestic and foreign patents and patent  applications.  We cannot
assure you that any of the presently pending or future patent  applications will
issue as  patents,  or that any  patents  issued  to us will not be  challenged,
invalidated, held unenforceable, or circumvented.  Further, we cannot assure you
that claims in patents that have been issued, or that may be issued to us in the
future,  will be  sufficiently  broad to prevent  third  parties from  producing
competing  products  similar in design to our  products.  In  addition,  laws of
foreign  countries may not protect our intellectual  property to the same extent
as would laws in the United States. Failure to obtain adequate patent protection
for our  proprietary  technology  could  have a material  adverse  effect on our
business, operating results, financial condition, and future growth prospects.

         POTENTIAL  PRODUCT  LIABILITY  CLAIMS  COULD  AFFECT OUR  EARNINGS  AND
FINANCIAL  CONDITION.  Despite  product testing prior to sale, our products have
from time to time experienced  performance problems discovered after we sold the
products. If a customer experiences performance problems,  errors in shipment or
product defects, it could result in:

         o        injuries to persons;
         o        loss of sales;
         o        delays in or elimination of market acceptance;
         o        damage to our brand or reputation; and
         o        product returns.

         Although our distributors and manufacturers have return policies, if we
accept a product  returned by a customer,  but it is not  accepted for return by
the distributor,  we will incur the cost. Because we depend on third parties for
certain of the  components of our products,  if those  components are defective,
the performance of our products would be reduced or undermined.  Any increase in
the rate of returns would affect our financial condition,  operating results and
cash flows.

         ACCIDENTS  RELATED TO HAZARDOUS  MATERIALS COULD  ADVERSELY  AFFECT OUR
BUSINESS. Portions of our operations require the controlled use of hazardous and
radioactive materials. Although we believe our safety procedures comply with the
standards prescribed by federal, state, local, and foreign regulations, the risk
of  accidental  contamination  of property or injury to  individuals  from these
materials cannot be completely eliminated. In the event of an accident, we could
be liable for any damages that result, which could seriously damage our business
and results of operations.

RISKS ASSOCIATED WITH OUR INDUSTRY

         WE ARE  ENGAGED  IN A  COMPETITIVE  INDUSTRY,  AND WE MAY BE  UNABLE TO
CONTINUE TO COMPETE  EFFECTIVELY IN THIS INDUSTRY IN THE FUTURE.  We are engaged
in a  segment  of the  human  health  care  products  industry  that  is  highly
competitive.  Many of our competitors,  both in the United States and elsewhere,
are major pharmaceutical,  chemical,  and biotechnology  companies,  and many of
them  have  substantially  greater  capital  resources,   marketing  experience,
research  and  development  staffs,  and  facilities  than we do.  Any of  these
companies could succeed in developing  products that are more effective than the
products that we have or may develop and may also be more  successful than us in
producing and marketing their products.  Not only do we face intense competition
in the marketplace against our competitors,  but we also must compete with these
same  companies for the services of  personnel.  We expect this  competition  to
continue and intensify in the future.

         Our industry has also seen  substantial  consolidation in recent years,
which  has  led to the  creation  of  competitors  with  greater  financial  and
intellectual  property  resources  than us. In  addition,  we  believe  that the
success that others have had in our industry will attract new competitors.  Some
of our current  and future  competitors  also may  cooperate  to better  compete
against us. We may not be able to compete  effectively  against these current or
future competitors.  Increased  competition could result in price reductions for
our products,  reduced  margins,  and loss of market  share,  any of which could
adversely impact our business, financial condition, and results of operations.

         WE ARE  SUBJECT TO  EXTENSIVE  GOVERNMENT  REGULATION.  We operate in a
highly  regulated  industry.  Our  business is  currently  subject to  extensive
regulation, supervision, and licensing by federal, state, and local governmental
authorities.  Also,  from time to time we must expend  resources  to comply with
newly adopted


                                       21
<PAGE>


regulations,  as well as changes in existing  regulations.  If we fail to comply
with  these  regulations,  we  could  be  subject  to  disciplinary  actions  or
administrative  enforcement  actions.  These  actions could result in penalties,
including fines.

RISKS ASSOCIATED WITH OUR COMMON STOCK

         OUR PRINCIPAL  STOCKHOLDERS AND MANAGEMENT OWN A SIGNIFICANT PERCENTAGE
OF OUR CAPITAL STOCK AND WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER OUR
AFFAIRS.  Our executive  officers,  directors,  and principal  stockholders will
continue to beneficially own 43% of our outstanding common stock, based upon the
beneficial ownership of our common stock as of March 1, 2004. In addition, these
same persons also hold options to acquire additional shares of our common stock,
which may increase their percentage ownership of the common stock further in the
future.  Accordingly,  these  stockholders:  (1)  will be able to  significantly
influence  the  composition  of our board of directors;  (2) will  significantly
influence  all  matters  requiring  stockholder  approval,  including  change of
control  transactions;  and (3) will continue to have significant influence over
our affairs.  This concentration of ownership of our common stock could have the
effect  of  delaying  or  preventing  a change  of  control  of us or  otherwise
discouraging a potential acquirer from attempting to obtain control of us. This,
in turn,  could have a negative  effect on the market price of our common stock.
It could also prevent our stockholders  from realizing a premium over the market
prices for their shares of common stock.

         OUR STOCK PRICE HAS BEEN  VOLATILE.  Our common  stock is quoted on the
OTC Bulletin  Board(R),  and there can be  substantial  volatility in the market
price of our common stock.  The trading price of our common stock has been,  and
is likely to  continue  to be,  subject  to  significant  fluctuations  due to a
variety  of  factors,  including:  (1)  variations  in our  quarterly  operating
results;  (2) the  gain  or  loss  of  significant  contracts;  (3)  changes  in
management; (4) announcements of technological innovations or new products by us
or our competitors; (5) legislative or regulatory changes; (6) general trends in
the  industry;   (7)  recommendations  by  securities  industry  analysts;   (8)
biological or medical  discoveries;  (9)  developments  concerning  intellectual
property,  including patents and litigation  matters;  (10) public concern as to
the safety of new  technologies;  (11)  developments in our  relationships  with
current or future customers and suppliers; and (12) general economic conditions,
both in the United States and abroad.

         In addition,  the stock market in general has experienced extreme price
and volume fluctuations that have affected the market price of our common stock,
as well as the stock of many biotechnology companies.  Often, price fluctuations
are unrelated to operating  performance of the specific companies whose stock is
affected.  In the past, following periods of volatility in the market price of a
company's  stock,  securities  class action  litigation has occurred against the
issuing company. If we were subject to this type of litigation in the future, we
could incur substantial costs and a diversion of our management's  attention and
resources, each of which could have a material adverse effect on our revenue and
earnings.  Any  adverse  determination  in this type of  litigation  could  also
subject us to significant liabilities.

         ANTI-TAKEOVER   PROVISIONS  IN  OUR   GOVERNING   DOCUMENTS  AND  UNDER
APPLICABLE  LAW  COULD  IMPAIR  THE  ABILITY  OF A THIRD  PARTY TO TAKE OVER OUR
COMPANY.  We are subject to various legal and  contractual  provisions  that may
impede a change in our control, including our adoption of a stockholders' rights
plan,  which  could  result in the  significant  dilution  of the  proportionate
ownership of any person that engages in an unsolicited  attempt to take over our
Company.  These  provisions,  as well as other  provisions in our certificate of
incorporation  and bylaws and under the Delaware General  Corporations  Law, may
make it more  difficult  for a third party to acquire our  Company,  even if the
acquisition  attempt was at a premium  over the market value of our common stock
at that time.

         ABSENCE OF  DIVIDENDS  COULD  REDUCE OUR  ATTRACTIVENESS  TO YOU.  Some
investors favor companies that pay dividends,  particularly in general downturns
in the stock  market.  We have not  declared or paid any cash  dividends  on our
common  stock.  We  currently  intend to retain any future  earnings for funding
growth,  and we do not currently  anticipate paying cash dividends on our common
stock in the foreseeable future.  Because we may not pay dividends,  your return
on this investment likely depends on your selling our stock at a profit.


                                       22
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following financial  statements of Xtrana, Inc. are included in the
report on the following pages:

                                                                        PAGE NO.

         Reports of independent auditors................................   28

         Balance sheet as of December 31, 2003..........................   29

         Statements of operations for the years ended
         December 31, 2003 and 2002.....................................   31

         Statements of stockholders' equity for the years
         ended December 31, 2003 and 2002...............................   32

         Statements of cash flows for the years ended
         December 31, 2003 and 2002.....................................   33

         Notes to financial statements..................................   34

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

         On January  8, 2003,  the  Company  dismissed  Ernst & Young LLP as the
Company's  principal   accountant.   The  decision  to  change  accountants  was
recommended by the Audit Committee of the Board of Directors.

         The  report of Ernst & Young  LLP on the  financial  statements  of the
Company for the year ended December 31, 2001, did not contain an adverse opinion
or  disclaimer of opinion,  nor was it qualified or modified as to  uncertainty,
audit scope or  accounting  principals.  The Company does not believe that there
were any  disagreements  with  Ernst & Young  LLP on any  matter  of  accounting
principals or practices,  financial statement  disclosure,  or auditing scope or
procedure  during the year ended  December  31,  2001 and during the  subsequent
interim period through January 8, 2003,  which, if not resolved to Ernst & Young
LLP's satisfaction, would have caused Ernst & Young LLP to make reference to the
subject matter of the disagreement(s) in connection with its reports.

         The  Company  engaged  Hein  &  Associates  LLP as  its  new  principal
independent accountant as of January 8, 2003.

ITEM 8A. CONTROLS AND PROCEDURES

         As of December 31, 2003,  the end of the period covered by this report,
our Chief Executive Officer and Chief Financial Officer,  with the participation
of our  management,  carried  out an  evaluation  of  the  effectiveness  of our
disclosure  controls and  procedures  pursuant to Exchange  Act Rule  13a-15(b).
Based upon that  evaluation,  the Chief  Executive  Officer and Chief  Financial
Officer believes that, as of the date of the evaluation, our disclosure controls
and  procedures  are  effective  in making  known to them  material  information
relating to us required to be included in this report.

         Disclosure  controls and  procedures,  no matter how well  designed and
implemented,  can provide  only  reasonable  assurance  of achieving an entity's
disclosure  objectives.  The likelihood of achieving such objectives is affected
by limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision-making can be faulty and that breakdowns in
internal  control can occur  because of human  failures such as simple errors or
mistakes or intentional circumvention of the established process.


                                       23
<PAGE>


         There were no significant  changes in our internal controls or in other
factors that could  significantly  affect internal controls,  known to the Chief
Executive  Officer and Chief  Financial  Officer,  subsequent to the date of the
evaluation.


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS;  COMPLIANCE WITH SECTION 16(A) OF THE
         EXCHANGE ACT

         Incorporated by reference to the Company's  definitive  Proxy Statement
to be filed with the Securities  and Exchange  Commission on or before April 29,
2004.

ITEM 10. EXECUTIVE COMPENSATION

         Incorporated by reference to the Company's  definitive  Proxy Statement
to be filed with the Securities  and Exchange  Commission on or before April 29,
2004.

ITEM 11. SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         Incorporated by reference to the Company's  definitive  Proxy Statement
to be filed with the Securities  and Exchange  Commission on or before April 29,
2004.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Incorporated by reference to the Company's  definitive  Proxy Statement
to be filed with the Securities  and Exchange  Commission on or before April 29,
2004.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Listing of Exhibits

                  EXHIBIT
                  NO.
                  -------
                  2.1      Assignment  Agreement  dated January 24, 2004 between
                           the  Company  and  Applera  Corporation,  though  its
                           Applied Biosystems Group
                  3.1      Certificate of Incorporation (1)
                  3.2      By Laws (1)
                  4.1      Shareholder Rights Plan (3)
                  10.1     Executive  Employment  Agreement  of Michael D. Bick,
                           Ph.D. (4)
                  10.2     1993 Stock Incentive Plan (2)
                  10.3     2000 Stock Incentive Plan (5)
                  10.4     Lease Agreement - Broomfield, Colorado (6)
                  10.4.1   Lease Addendum Two for Modification of Rent and Early
                           Termination  of Lease dated November 11, 2003 between
                           the Company and James M. Roswell  d/b/a  Burbank East
                           Business Park.
                  10.4.2   Lease  Addendum  Three for  Modification  of Rent and
                           Early  Termination  of Lease dated  February 12, 2004
                           between  the  Company  and  James  M.  Roswell  d/b/a
                           Burbank East Business Park.
                  23.1     Consent of Independent Auditors
                  24.1     Power of Attorney (included on signature page)
                  31.1     Certificate of our Chief Executive  Officer and Chief
                           Financial Officer pursuant to Rule 13a-14(a).
                  32.1     Certificate of our Chief Executive  Officer and Chief
                           Financial Officer pursuant to Rule 13a-14(b).


                                       24
<PAGE>


                  (1)      Incorporated   by  reference   to  the   Registrant's
                           Registration   Statement   on  Form  S-1   (File  No.
                           33-20584).
                  (2)      Incorporated by reference to the Registrant's  Annual
                           Report  on  Form  10-K  for  the  fiscal  year  ended
                           December 31, 1994.
                  (3)      Incorporated  by reference to  Registrant's  Form 8-A
                           filed June 26, 1998.
                  (4)      Incorporated by reference to the Registrant's  Annual
                           Report  on Form  10-KSB  for the  fiscal  year  ended
                           December 31, 1999.
                  (5)      Incorporated by reference to Registrant's  Definitive
                           Proxy Statement filed on June 23, 2000.
                  (6)      Incorporated  by reference to  Registrant's  Form 8-K
                           filed January 25, 2001.

         (b)      Reports on Form 8-K filed  during the fourth  quarter of 2003:
                  None

ITEM 14. PRINCIPAL ACCOUNTANT AND FEES

AUDIT FEES

         The  aggregate  fees billed by Hein & Associates  LLP for  professional
services rendered for the audit of our annual financial statements and review of
financial statements included in our Form 10-QBS's or services that are normally
provided in connection  with statutory and  regulatory  filings were $25,970 for
fiscal year 2002 and $25,562 for fiscal year 2003.

AUDIT-RELATED FEES

         Hein & Associates LLP did not bill us for any for professional services
rendered  for  assurance  and  related  services   reasonably   related  to  the
performance of the audit or review of our financial statements (other than those
reported above) for fiscal years 2002 and 2003.

TAX FEES

         The  aggregate  fees billed by Hein & Associates  LLP for  professional
services  rendered for tax  compliance,  tax advice and tax planning were $3,800
for fiscal year 2002 and $5,150 for fiscal year 2003.

ALL OTHER FEES

         In fiscal years 2002 and 2003,  Hein &  Associates  LLP did not bill us
for any other services performed for us during the periods.


                                       25
<PAGE>


                                   SIGNATURES


         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                        Xtrana, Inc.


Date:    March 19, 2004                 BY:  /S/ TIMOTHY J. DAHLTORP
                                        -----------------------------------
                                        Timothy J. Dahltorp
                                        Chief Executive Officer &
                                        Chief Financial Officer

         Each person whose  signature  appears  below  constitutes  and appoints
James H. Chamberlain and Michael Bick,  Ph.D., and each of them, as his true and
lawful   attorney-in-fact   and  agent  with  full  power  of  substitution  and
re-substitution,  for  him  and  his  name,  place  and  stead,  in any  and all
capacities to sign this Form 10-KSB and to file any amendments  hereto under the
Securities  and  Exchange  Act of 1934 and to file the same,  with all  exhibits
thereto,  and other documents in connection  therewith,  with the Securities and
Exchange  Commission,  granting unto said  attorney-in-fact and agent full power
and  authority  to do and  perform  each and every act and thing  requisite  and
necessary  to be done in and about the  foregoing,  as fully to all  intents and
purposes as he might or could do in person,  hereby ratifying and confirming all
that said  attorney-in-fact  and agent or their substitutes,  may lawfully do or
cause to be done by virtue hereof.

         In accordance with Section 13 or 15(d) of the Exchange Act, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


/S/ MICHAEL D. BICK                 Chairman of the Board         March 19, 2004
--------------------------
Michael D. Bick, Ph.D.


/S/ TIMOTHY J. DAHLTORP             Chief Executive Officer,      March 19, 2004
--------------------------          Chief Financial
Timothy J. Dahltorp                 Officer and Director



/S/ DOUGLAS L. AYER                 Director                      March 19, 2004
--------------------------
Douglas L. Ayer


/S/ N. PRICE PASCHALL               Director                      March 19, 2004
--------------------------
Price Paschall


/S/ JAMES H. CHAMBERLAIN            Director                      March 19, 2004
--------------------------
James H. Chamberlain


/S/ JAMES MAHONY                    Director                      March 19, 2004
--------------------------
James Mahony, Ph.D.


                                       26
<PAGE>






                          ANNUAL REPORT ON FORM 10-KSB

                              ITEM 13(A)(1) AND (2)

              LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
                                    SCHEDULES

                          YEAR ENDED DECEMBER 31, 2003

                                  XTRANA, INC.

                              BROOMFIELD, COLORADO




                                       27
<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


Board of Directors and Stockholders
Xtrana, Inc.
Broomfield, CO


We have audited the  accompanying  balance sheet of Xtrana,  Inc. as of December
31, 2003, and the related  statements of operations,  stockholders'  equity, and
cash flows for the years  ended  December  31,  2003 and 2002.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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 financial  statements  referred to above present fairly, in
all material respects, the financial position of Xtrana, Inc. as of December 31,
2003 and the  results of its  operations  and its cash flows for the years ended
December 31, 2003 and 2002 in conformity  with accounting  principles  generally
accepted in the United States of America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements,  the Company has suffered significant losses from operations for the
years ended  December  31, 2003 and 2002.  Management's  plans to address  these
matters  are  also  included  in  Note  2 to  the  financial  statements.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.



HEIN & ASSOCIATES LLP

Denver, Colorado
February 11, 2004


                                       28
<PAGE>


                                  XTRANA, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2003
                                 (in thousands)


ASSETS

CURRENT ASSETS
     Cash and cash equivalents ...................................        $  948
     Grant receivable ............................................             7
     Prepaid expenses ............................................            19
     OTHER CURRENT ASSETS ........................................            35

TOTAL CURRENT ASSETS .............................................         1,009

RESTRICTED CASH ..................................................           138

FURNITURE AND FIXTURES, NET OF $83 OF DEPRECIATION ...............            60


PATENTS, NET OF AMORTIZATION OF $29 ..............................           283
                                                                          ------

TOTAL ASSETS .....................................................        $1,490
                                                                          ======


See accompanying notes to financial statements.


                                       29
<PAGE>


                                  XTRANA, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2003
                        (in thousands except share data)
                                   (continued)


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable .............................................    $    163
     Notes payable Short Term .....................................          14
     Accrued payroll and payroll taxes ............................          82
     OTHER ACCRUED LIABILITIES ....................................         194

TOTAL CURRENT LIABILITIES .........................................         453


COMMITMENTS AND CONTINGENCIES (see notes 2, 6 and 11)

STOCKHOLDERS' EQUITY:
     Common stock, $.01 par value, 50,000,000 shares authorized;
        16,533,269 shares issued and outstanding ..................         165
     Additional paid-in capital ...................................      19,446
     ACCUMULATED DEFICIT ..........................................     (18,574)
                                                                       --------

TOTAL STOCKHOLDERS' EQUITY ........................................       1,037


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................    $  1,490
                                                                       ========


See accompanying notes to financial statements.


                                       30
<PAGE>


                                  XTRANA, INC.

                            STATEMENTS OF OPERATIONS

                                                         YEAR ENDED DECEMBER 31,
                                                              2003        2002
--------------------------------------------------------------------------------
                                            (in thousands except per share data)
REVENUE:
Grant revenue ..........................................   $  1,159    $  1,268
Nucleic acid (DNA/RNA) testing kits ....................         32         141
                                                           --------    --------
Total revenue ..........................................      1,191       1,409

COST OF SALES:
Grant Cost of Sales ....................................        949         945
Nucleic acid (DNA/RNA) testing kits ....................          4         102
                                                           --------    --------
TOTAL COST OF SALES ....................................        953       1,047
                                                           --------    --------

GROSS PROFIT ...........................................        238         362
Operating expenses:
     Selling, general and administrative ...............      2,300       2,361
     Research and development ..........................        308         850
     Goodwill and fixed asset impairment charges .......        493       8,516
                                                           --------    --------

TOTAL OPERATING EXPENSES ...............................      3,101      11,727
                                                           --------    --------

OTHER INCOME, NET ......................................         51         165
                                                           --------    --------

LOSS FROM CONTINUING OPERATIONS ........................     (2,812)    (11,200)

DISCONTINUED OPERATIONS:
     Income (loss) from discontinued operations - net of
         income tax effect .............................       --           (50)
     Gain on disposal - net of income tax ..............       --          --
                                                           --------    --------


NET LOSS ...............................................   $ (2,812)   $(11,250)
                                                           ========    ========


WEIGHTED AVERAGE SHARES OUTSTANDING
     Basic .............................................     16,533      17,322
     Effect of dilutive shares .........................       --          --
                                                           --------    --------

     Diluted ...........................................     16,533      17,322
                                                           ========    ========

BASIC AND DILUTED EARNINGS PER SHARE
     Continuing operations .............................   $  (0.17)   $  (0.65)
     Discontinued operations ...........................       0.00        0.00
                                                           --------    --------

     Net loss ..........................................   $  (0.17)   $  (0.65)
                                                           ========    ========


See accompanying notes to financial statements.


                                       31
<PAGE>


<TABLE>
                                  XTRANA, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                        (in thousands except share data)

<CAPTION>
                                                                     ADDITIONAL
                                              COMMON STOCK              PAID-IN        ACCUMULATED
                                          SHARES       AMOUNT           CAPITAL            DEFICIT              TOTAL
                                      ----------       ------        ----------        -----------             -------
<S>                                   <C>               <C>          <C>                 <C>                   <C>
BALANCE AT JANUARY 1, 2002 .....      17,323,498        $ 173        $   19,407          $  (4,512)            $15,068

    Net loss ...................              --           --                --            (11,250)            (11,250)

    Options issued to non-
       employees ...............              --           --                23                 --                  23

    Shares issued for
       exercise of warrants ....         146,717            1                (1)                --                  --

    Shares canceled related
       to acquisition ..........        (936,946)          (9)                9                 --                  --
                                      ----------        -----        ----------          ---------             -------

BALANCE AT DECEMBER 31, 2002 ...      16,533,269        $ 165        $   19,438          $ (15,762)            $ 3,841

    Net loss ...................              --           --                --             (2,812)             (2,812)

    Options issued to non-
       employees ...............              --           --                 8                 --                   8
                                      ----------        ------       ----------          ---------             -------

BALANCE AT DECEMBER 31, 2003 ...      16,533,269        $ 165        $   19,446          $(18,574)             $ 1,037
                                      ==========        =====        ==========          ========              =======
</TABLE>


See accompanying notes to financial statements.


                                       32
<PAGE>


                                  XTRANA, INC.

                            STATEMENTS OF CASH FLOWS

                                                         YEAR ENDED DECEMBER 31,
                                                              2003        2002
--------------------------------------------------------------------------------
                                                               (in thousands)

OPERATING ACTIVITIES
   Loss from continuing operations .....................   $ (2,812)   $(11,200)
   Adjustments to reconcile loss from continuing
   operations to net cash used in by continuing
   operating activities:
      Options issued to non-employees ..................          8          23
      Depreciation and Amortization ....................        245         236
      Fixed Asset impairment charge ....................        493
      Goodwill impairment charge .......................       --         8,516
      Inventory valuation allowance ....................         35        --
   Changes in operating assets and liabilities:
      Notes receivable - discount ......................       (225)       --
      Accounts and grants receivable ...................         65         (25)
      Inventories ......................................       --            31
      Prepaid expenses and other current assets ........         46         (77)
      Accounts payable and accrued expenses ............       (217)       (176)
                                                           --------    --------

   Net cash used in continuing operating activities ....     (2,362)     (2,672)

   Net cash used in discontinued operating activities ..       --           (50)
                                                           --------    --------

NET CASH USED IN OPERATING ACTIVITIES ..................     (2,362)     (2,722)

INVESTING ACTIVITIES
   Additions to property and equipment .................       --          (241)
   Receipts on note receivable .........................      2,848        --
   Additions to deferred patent cost ...................        (78)        (85)
                                                           --------    --------

NET CASH PROVIDED IN CONTINUING INVESTING ACTIVITIES ...      2,770        (326)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...        408      (3,048)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ...........        678       3,726
                                                           --------    --------

CASH AND CASH EQUIVALENTS, END OF YEAR .................   $  1,086    $    678
                                                           ========    ========


See accompanying notes to financial statements.


                                       33
<PAGE>


                                  XTRANA, INC.

                          NOTES TO FINANCIAL STATEMENTS


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

         Xtrana,  Inc.  ("Xtrana" or the  "Company"),  formerly known as Biopool
International,  Inc.,  was  incorporated  in 1987 in the state of Delaware.  The
Company develops and markets nucleic acid-based tests for use in drug discovery,
detection  of  environmental  and  food  contaminants,  forensics  and  identity
testing, human and animal diseases, genetic predisposition to disease, and other
applications.

BASIS OF PRESENTATION

         Our financial  statements have been prepared  assuming the Company will
continue as a going concern. For the year ended December 31, 2003, we incurred a
loss from  continuing  operations  of  approximately  $2.8 million and sustained
negative cash flows from operations of approximately  $2.4 million.  This is the
result of continuing our  development of our nucleic acid testing  business.  As
described  more fully in Notes 2 and 3 to the financial  statements,  during the
latter  part of 2001 and in 2002,  the  Company  transitioned  its core  line of
business  from  Hemostasis  to nucleic acid  testing.  In  connection  with this
transition,  revenues from our  continuing  operations  have been  substantially
reduced.  The Company is currently consuming cash to fund its operations and the
research and development of its nucleic acid diagnostic technologies. Due to the
cost of defending the  litigation  with Trinity  Biotech plc,  combined with the
slower than  anticipated  growth in Xtra Amp(TM) sales, the Company may not have
the ability to sustain  its  operations  through the next 12 months.  To address
these  capital  pressures,  the Company has  undertaken  steps to  significantly
reduce its  operating  costs and has  retained  an  investment  banker to pursue
strategic  alternatives  for the Company.  These  alternatives  could  include a
financing,   a  co-development   arrangement,   the  license  of  the  Company's
technologies,  or the sale of the Company or its assets.  The Company  currently
has a letter of intent for the sale of certain  assets (see Note 11).  There can
be no guarantee that these activities will be successful.

DISCONTINUED OPERATIONS

         The  financial  information  presented  in the  notes to the  financial
statements excludes discontinued operations, except where noted.

REVENUES

         Product  revenues are recorded on the day products are shipped from the
Company's facilities.  Grant revenues are recorded when earned,  pursuant to the
respective grant agreements. Shipping costs are included in the cost of sales.

         Grant  revenues and profit on long-term  contracts  are recorded as the
contract  progresses  using the  percentage of completion  method of accounting,
which  relies on  estimates  of total  expected  contract  revenues  and  costs.
Revisions  in profit  estimates  are  reflected in the period in which the facts
that give rise to the revision become known.  Accordingly,  favorable changes in
estimates result in additional profit  recognition,  and unfavorable  changes in
estimates result in the reversal of previously  recognized  revenue and profits.
When estimates indicate a loss under a contract, cost of revenue is charged with
a provision for such loss.

         As work  progresses  under a loss  contract,  revenue  continues  to be
recognized,  and a portion of the  contract  costs  incurred  in each  period is
charged to the contract loss reserve.


                                       34
<PAGE>


USE OF ESTIMATES

         The  preparation of financial  statements in conformity with accounting
principles  generally accepted in the United States requires  management to make
estimates and assumptions that affect the reported  amounts and  classifications
of assets and liabilities and 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 and the change could be material to the financial statements.

CASH AND CASH EQUIVALENTS

         Cash and cash equivalents  represent highly liquid  investments,  which
mature within three months of date of purchase.

         Restricted  cash  consists  of cash  identified  for  specific  use. At
December 31, 2003,  restricted  cash is comprised of $138,000 that is restricted
to cover our letter of credit issued to our building lessor.

STOCK-BASED COMPENSATION

         As permitted under the Statements of Financial Accounting Standards No.
123  ("SFAS  123"),  "Accounting  for  Stock-Based  Compensation,"  the  Company
accounts for its  stock-based  compensation  for options  issued to employees in
accordance  with the provisions of Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock Issued to  Employees"  ("APB 25").  As such,  for options
granted to  employees  and  directors,  compensation  expense is  recorded  on a
straight-line  basis  over the  shorter  of the  period  that the  services  are
provided  or the  vesting  period,  only  if the  current  market  price  of the
underlying  stock exceeds the exercise  price.  Certain pro forma net income and
earnings  per share  disclosures  for  employee  stock  option  grants  are also
included  below as if the fair  value  method  as  defined  in SFAS 123 had been
applied.  Transactions in equity  instruments  with  non-employees  for goods or
services are accounted for by the fair value method.

        Had  compensation  cost for the Plan been determined based upon the fair
value at the grant date for options  granted,  consistent with the provisions of
SFAS  123,  the  Company's  net  loss and net loss per  share  would  have  been
increased to the pro forma amounts indicated below:

                                                      2003        2002
                                                   ---------    ---------

     Net loss - as reported ....................   $  (2,812)   $ (11,200)
     Effect of stock-based compensation
        included in reported net loss ..........        --           --
     Effect of stock-based compensation
        per SFAS 123 ...........................        (148)        (242)
                                                   ---------    ---------
     Net loss applicable to common stock -
        pro forma ..............................   $  (2,960)   $ (11,442)
                                                   =========    =========

     Basic and diluted:
        Loss per share - as reported ...........   $   (0.17)   $   (0.65)
        Effect of stock-based compensation
           included in reported net loss .......        --           --
        Effect of stock-based compensation
           per SFAS 123 ........................       (0.01)       (0.01)
                                                   ---------    ---------
        Net loss applicable to common stock -
           pro forma ...........................   $   (0.18)   $   (0.66)
                                                   =========    =========


                                       35
<PAGE>


         The fair value of each option  grant under the Plan is estimated on the
date of grant using the  Black-Scholes  option-pricing  model with the following
assumptions:


                                                          2003           2002
                                                          ----           ----

     Risk-free interest .....................             4.0%           4.0%
     Expected life ..........................          6.9 years      6.9 years
     Expected volatility ....................           167.0%         167.0%
     Expected dividend ......................              --             --


         The expected life was determined based on the Plan's vesting period and
exercise behavior of the employees.

INVENTORIES

         We review  the  components  of our  inventory  on a  regular  basis for
excess,  obsolete and  impaired  inventory  based on estimated  future usage and
sales.  Additionally,  material  write-downs  in  our  inventory  can  occur  if
competitive  conditions or new product introductions by our customers or us vary
from our current  expectations.  Inventories were valued at $35,000 at September
2003.  During  the fourth  quarter of 2003,  inventory  values  were  reduced by
approximately  $35,000 due to the proposed sale of our intellectual  property to
Applera  (Note 11) whereby the inventory on hand at December 31, 2003 was deemed
impaired and, therefore, devalued to $0.00.

PROPERTY AND EQUIPMENT AND LONG LIVED ASSETS

         Property and  equipment are stated at cost.  Depreciation  is generally
calculated on a  straight-line  basis over their estimated  useful lives,  which
range from 3 to 10 years.  Leasehold improvements are generally depreciated over
their  estimated  useful  lives or over the  period of the lease,  whichever  is
shorter.  Long-lived  assets,  including  intangibles,   are  accounted  for  at
amortized  cost. As part of an ongoing review of the valuation and  amortization
of long-lived assets,  management  assesses the carrying value of such assets if
facts and  circumstances  suggest  that  they may be  impaired.  If this  review
indicates that  long-lived  assets will not be  recoverable,  as determined by a
non-discounted  cash flow analysis over the remaining  amortization  period, the
carrying  value of the  Company's  long-lived  assets  would be  reduced  to its
estimated fair value based on discounted cash flows.  Long-lived  assets consist
primarily of leasehold improvements,  computer equipment,  office furniture, and
equipment.  As part of its review of its third  quarter  financial  results  and
entering into an agreement to sell all its  intellectual  property,  the Company
performed an impairment  assessment of fixed assets.  The impairment  assessment
was  performed to  determine  whether any  impairment  existed.  The  impairment
indicators included, but were not limited to, the decline in the Company's stock
price,  the net book value of the assets,  and the overall decline in forecasted
growth  rates  which  have  negatively   impacted  the  Company's  revenues  and
forecasted  revenue growth rates, and the impact of the sale of the intellectual
property.  As a result,  the Company  recorded a $493,000  impairment  charge to
reduce  fixed assets to reflect  their  current  estimated  fair market value in
forth  quarter.  Fair market value was  determined  based on the estimated  fair
value of the equipment.  The estimates and assumptions used under our assessment
may change in the short term resulting in the need to further  write-down  other
long-lived assets.

GOODWILL

         Beginning  January 1, 2002, the Company adopted  Statement of Financial
Accounting  Standards No. 142 (SFAS 142) "Goodwill and Other Intangible Assets,"
and, as a result,  ceased  amortizing  goodwill.  The Company tests goodwill for
impairment  annually or on an interim basis if an event or  circumstance  occurs
between the annual tests that may indicate  impairment of goodwill.  As a result
of the  Company's  impairment  test in the fourth  quarter of fiscal  2002,  the
Company wrote off its remaining goodwill of approximately $8.5 million.


                                       36
<PAGE>


DEFERRED PATENT COSTS

         The  Company  capitalizes  legal  costs  directly  incurred in pursuing
patent  applications as deferred patent costs. When such applications  result in
an issued patent,  the related costs are amortized over the remaining legal life
of the patents,  generally 15 years, using the straight-line method. The Company
reviews its issued patents and pending patent applications, and if it determines
to abandon a patent  application or that an issued patent no longer has economic
value, the unamortized  balance in deferred patent costs relating to that patent
is immediately expensed.

         It is  possible  the above  estimates  of future  economic  life of the
Company's   commercialization   revenues,   the  amount  of  anticipated  future
commercialization  revenues,  or both, will be reduced significantly in the near
term  due to  alternative  technologies  developed  by  other  biotechnology  or
pharmaceutical  companies.  As a result,  the carrying amount of deferred patent
costs may be reduced in the future.

RESEARCH AND DEVELOPMENT COSTS

         Research and  development  costs are expensed when incurred and include
both internal research and development costs and payments to third parties.

INCOME TAXES

         The Company  accounts for income taxes in accordance with the Statement
of Financial  Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the  recognition  of deferred tax  liabilities  and assets at currently
enacted tax rates for the expected  future tax  consequences of events that have
been included in the financial  statements or tax returns. A valuation allowance
is  recognized  to reduce the net  deferred  tax asset to an amount that is more
likely than not to be  realized.  The tax  provision  shown on the  accompanying
statement of operations is zero since the deferred tax asset  generated from the
net operating loss is offset in its entirety by a valuation allowance.

CONCENTRATION OF CREDIT RISK

         Financial  instruments,   which  potentially  subject  the  Company  to
concentrations of credit risk, consist principally of temporary cash investments
and trade  receivables.  At December 31, 2003,  substantially  all cash and cash
equivalents were on deposit with one financial  institution.  Concentrations  of
credit risk with respect to trade receivables are limited due to the majority of
the  outstanding   accounts  receivable  being  from  Government   institutions.
Generally,  the Company does not require collateral or other security to support
customer receivables.

EARNINGS PER SHARE

         Basic earnings per share is based upon the  weighted-average  number of
common  shares  outstanding.  Diluted  earnings  per  share  is  based  upon the
weighted-average  number of common shares and dilutive  potential  common shares
outstanding. Potential common shares are outstanding options under the Company's
stock  option  plans and  outstanding  warrants,  which are  included  under the
treasury stock method.

         Options and warrants to purchase  2,373,802 and  1,941,757  shares with
exercise  prices  greater  than the average  market  prices of common stock were
outstanding  during the years ended  December  31, 2003 and 2002,  respectively.
These  options  and  warrants  were,  therefore,  excluded  from the  respective
computations  of  diluted  earnings  per share  because  their  effect  would be
anti-dilutive.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The  carrying  value  of  the  Company's  cash  and  cash  equivalents,
receivables,  payables and accrued  expenses  approximate  fair value due to the
short maturity of these instruments.


                                       37
<PAGE>


SEGMENT INFORMATION

         Statement of Financial  Accounting  Standards No. 131, Disclosure About
Segment of an Enterprise and Related Information,  establishes standards for the
reporting of information  about  operating  segments.  The Company's  continuing
operations constitute a single operating segment.

RECENT ACCOUNTING PRONOUNCEMENTS

         RECENT  PRONOUNCEMENTS - SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH  CHARACTERISTICS  OF BOTH LIABILITIES AND EQUITY, was issued in
May 2003 and  requires  issuers to  classify as  liabilities  (or assets in some
circumstances) three classes of freestanding  financial  instruments that embody
obligations for the issuer. SFAS No. 150 is effective for financial  instruments
entered into or modified  after May 31, 2003 and is  otherwise  effective at the
beginning of the first interim period beginning after June 15, 2003.  Management
believes  the  adoption  of SFAS No.  150 will have no  immediate  impact on its
financial position or results of operations.

        The FASB issued Interpretation ("FIN") No.45, Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness  of  Others,  in  November  2002 and FIN No. 46,  Consolidation  of
Variable  Interest  Entries,  in January  2003.  FIN No. 45 is  applicable  on a
prospective  basis  for  initial  recognition  and  measurement   provisions  to
guarantees  issued after December 2002;  however,  disclosure  requirements  are
effective  immediately.  FIN No. 45 requires a guarantor  to  recognize,  at the
inception  of a  guarantee,  a liability  for the fair value of the  obligations
undertaken in issuing the guarantee and expands the required  disclosures  to be
made by the guarantor about its obligation under certain  guarantees that it has
issued.  The  adoption  of FIN No.  45 did not  have a  material  impact  on the
Companies financial position or results of operations.  FIN No. 46 requires that
a company  that  controls  another  entity  through  interest  other than voting
interest  should  consolidate  such  controlled  entity in all cases for interim
periods beginning after June 15, 2003.  Management does not believe the adoption
of FIN No. 46 will have a material  impact on its financial  position or results
of operations.

2.       GOING CONCERN

         The accompanying  financial  statements have been prepared on the basis
that the Company is a going  concern,  which  contemplates  the  realization  of
assets and the satisfaction of liabilities in the normal course of business. The
accompanying  financial  statements reflect a loss of $2,812,000 and $11,250,000
for the years ended December 31, 2003 and 2002,  respectively.  Working  capital
and  stockholders'  equity  is  $557,000  and  $1,037,000,  respectively,  as of
December 31, 2003.

         The Company is currently  consuming cash to fund its operations and the
research  and  development  of its nucleic  acid  diagnostic  technologies.  The
proposed sale of the Company's  intellectual  property to Applera (see Note 11),
if  successful,  will  result in the receipt of net  proceeds  of  approximately
$3,600,000, after payment of all expenses associated with the transaction. After
closing the contemplated  sale of our  intellectual  property and complying with
the requirements of the Assignment  Agreement with Applera to provide consulting
services,  the Company  anticipates that it would terminate all of its remaining
employees  and  terminate its existing  lease  pursuant to an early  termination
agreement.  Consequently,  following the transaction,  after payment of employee
severance and lease terminations  costs, the Company would have limited overhead
costs of  operation.  Completion  of the  transaction  is subject to a number of
closing conditions,  including stockholder  approval.  There can be no assurance
that these conditions will be met.

         If the Company is not  successful  in closing the Applera  transaction,
the Company may be required to further curtail operations or liquidate assets.

3.       DISCONTINUED OPERATIONS

         On December 20, 2001, the Company's  stockholders  approved the sale of
the  Hemostasis  business.  On December 21, 2001, the Company closed the sale of
substantially  all of the assets of its Hemostasis  business to Trinity  Biotech
plc for total  consideration  of  US$6,250,000,  plus the  assumption of certain


                                       38
<PAGE>


liabilities.  The assets  sold  included  the  operations  located  in  Ventura,
California,  and the Company's wholly owned Swedish subsidiary,  Biopool AB. The
total  consideration  paid to the Company of US$6,250,000  consisted of cash and
notes as follows:  (a) US$3,658,500 in cash at closing; (b) a note in the amount
of  US$855,200  due one year from the closing date,  however,  the note was paid
subsequent to December 31, 2002;  (c) a note in the amount of  US$1,166,200  due
two years from the closing date;  and (d) a note in the amount of US$570,100 due
three years from the closing date. The note carried interest at a rate of 5% per
annum and was  collateralized  by a second position on substantially  all of the
U.S.  assets of Trinity  Biotech  plc. As a result of a  settlement  between the
Company and Trinity Biotech plc during 2003, the Company  received the remaining
balance of the notes, net of a discount of $225,000.

         The Hemostasis business was a distinct operating segment, whose sale is
accounted  for  as   discontinued   operations  in  accordance  with  ACCOUNTING
PRINCIPLES  BOARD  OPINION 30 - REPORTING  THE RESULTS OF OPERATIONS - REPORTING
THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS,  AND EXTRAORDINARY,  UNUSUAL
AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS

4.       INVENTORIES

         We review  the  components  of our  inventory  on a  regular  basis for
excess,  obsolete and  impaired  inventory  based on estimated  future usage and
sales.  Additionally,  material  write-downs  in  our  inventory  can  occur  if
competitive  conditions or new product introductions by our customers or us vary
from our current  expectations.  Inventories were valued at $35,000 at September
2003.  During  the fourth  quarter of 2003,  inventory  values  were  reduced by
approximately  $35,000 due to the proposed sale of our intellectual  property to
Applera  whereby the inventory on hand at December 31, 2003 was deemed  impaired
and, therefore, devalued to $0.00.

5.       REVOLVING LINE OF CREDIT

         As of December 31, 2003,  the Company had a $138,000  standby letter of
credit  issued  as a  security  deposit  in  conjunction  with the  lease of the
Broomfield,  Colorado,  facility.  This  letter of credit is  collateralized  by
restricted  cash balances  equal to the amount  outstanding  under the letter of
credit.

6.       COMMITMENTS AND CONTINGENCIES

LEASES

         The   Company   leases   certain   equipment   and   facilities   under
non-cancelable  operating leases.  Continuing  operations lease expense for 2003
and 2002 was approximately $300,000 and $288,000,  respectively. At December 31,
2003,  approximate future minimum annual lease commitments are $290,000 in 2004,
$263,000 in 2005, and $63,000 in 2006.

         On November 11,  2003,  the Company  entered into an early  termination
agreement  with the landlord.  The agreement  provides for rent abatement and an
early termination  option. The gross rent is reduced by $5,000 per month for the
period of December  2003  through  May 2004.  The abated  gross rent  carries an
accrued  interest  charge  at 6% per  annum.  The  early  termination  agreement
stipulates  that the Company  will pay 50% of the  remaining  base rent plus the
abetted gross rent plus any unpaid interest.

7.       STOCKHOLDERS' EQUITY

         Effective August 10, 2000, the former Xtrana,  Inc. was merged with and
into the Company pursuant to an Agreement and Plan of  Reorganization  dated May
3, 2000, between the former Xtrana and the Company, as reported on the Company's
Current Report on Form 8-K filed with the Securities and Exchange  Commission on
August 11, 2000,  and amended  October 24, 2000.  The Company  issued  8,829,461
shares of the Company's common stock in exchange for all the outstanding capital
stock of the former  Xtrana,  with an additional  540,000 shares to be issued in
connection  with the  exercise  of certain  warrants,  for a total of  9,369,461
shares.  During 2001,  270,000 of the 540,000  warrants were exercised using the
cashless  exercise  feature for a total of 163,851 shares  issued.  Of the total
shares issued, 936,946 shares were held in escrow


                                       39
<PAGE>


for purposes of satisfying Xtrana's indemnification  obligations.  These shares,
less 3,365 shares that were canceled  pursuant to the merger agreement  relating
to excess warrants issued to certain  financial  advisors,  were released to the
former Xtrana stockholders on November 6, 2001. In addition, 936,946 shares were
held in escrow and were contingently  cancelable if certain sales objectives for
the Xtrana  business were not met.  Also, an  additional  1,030,641  shares were
issuable to the former  Xtrana  stockholders  if certain sales  objectives  were
exceeded. The sales objectives were not achieved;  therefore, the 936,946 shares
in escrow were canceled,  and the additional  1,030,641  shares were not issued.
The 936,946  contingent shares were reflected as outstanding  common stock until
canceled in the fourth  quarter of 2002 as the holders of these  shares had full
right to vote the shares while in escrow.

8.       STOCK OPTION PLANS AND WARRANTS

         The Company has two stock option plans (the "Plans") for the benefit of
employees,  officers,  directors, and consultants of the Company. As of December
31,  2003,  a total of  3,946,634  shares of the  Company's  common  stock  were
reserved  for  issuance  under the Plans.  Options  granted  under the Plans are
generally  exercisable  for a period of ten  years  from the date of grant at an
exercise  price that is not less than the closing  price of the common  stock on
the date of grant. Options granted under the Plans generally vest over a one- to
five-year period from the date of the grant.

         Stock option activity for 2003 and 2002 was as follows:

                                                                        WEIGHTED
                                                                        AVERAGE
                                      SHARES                            EXERCISE
                                   OUTSTANDING       PRICE RANGE         PRICE
--------------------------------------------------------------------------------

BALANCE AT JANUARY 1, 2002 ....     1,941,757     $0.4800 - $2.6800     $   1.13

Granted .......................       667,750     $0.2300 - $0.7800     $   0.35
Exercised .....................          --                    --           --
Cancelled .....................      (719,328)    $0.3200 - $2.6800     $   1.19
                                    ---------

BALANCE AT DECEMBER 31, 2002 ..     1,890,179     $0.2300 - $2.5000     $   0.83
Granted .......................          --                    --           --
Exercised .....................          --                    --           --
Cancelled .....................      (201,132)    $0.2900 - $1.3750     $   0.92
                                    ---------

BALANCE AT DECEMBER 31, 2003 ..     1,689,047     $0.2300 - $2.5000     $   0.82

The following  information  summarizes stock options outstanding at December 31,
2003:

                              OUTSTANDING                      EXERCISABLE
                  ------------------------------------   -----------------------
                                   WEIGHTED AVERAGE
                               -----------------------
                                 REMAINING                              WEIGHTED
                               CONTRACTUAL                               AVERAGE
                      NUMBER       LIFE IN    EXERCISE        NUMBER    EXERCISE
EXERCISE PRICE    OUTSTANDING       MONTHS       PRICE   EXERCISABLE       PRICE
--------------------------------------------------------------------------------
$ 0.01 - $ 0.31       110,250          103     $ 0.230       110,054     $ 0.230
$ 0.32 - $ 0.62       542,414           98     $ 0.384       454,246     $ 0.377
$ 0.63 - $ 0.93       347,749           77     $ 0.713       235,870     $ 0.725
$ 0.94 - $ 1.25       326,634           68     $ 0.998       307,463     $ 0.996
$ 1.26 - $ 1.56       308,250           79     $ 1.498       251,997     $ 1.498
$ 1.57 - $ 1.87        12,500           44     $ 1.687        12,500     $ 1.687
$ 2.19 - $ 2.25        41,250           38     $ 2.395        41,250     $ 2.395
                  --------------------------------------------------------------
                    1,689,047           83     $ 0.822     1,413,380     $ 0.829

         At December 31, 2003, 2,257,587 shares were available for future grants
under the Plans.


                                       40
<PAGE>


         The weighted average remaining  contractual life of outstanding options
at December 31, 2003, was 6.9 years. At December 31, 2003,  there were 1,413,380
options exercisable with weighted average exercise prices of $0.83.

         During 2002 the options  were  granted at the market price of the stock
and had a weighted average fair value of $0.36 per option.

         As of December 31, 2003,  the Company had 684,755  warrants to purchase
common stock outstanding and exercisable for prices ranging from $0.01 to $1.875
with a weighted  average  exercise  price of $0.9105  per  share.  The  weighted
average  remaining  contractual life of these warrants at December 31, 2003, was
3.9 years. These warrants have expiration dates ranging from 2004 to 2011.

9.       INCOME TAXES

         The reconciliation of income tax attributable to continuing  operations
computed at the U.S.  Federal  Statutory rates to the income tax provision is as
follows:

                                                        YEARS ENDED DECEMBER 31,
                                                                 2003     2002
                                                                -----    -----

     Tax at U.S. statutory rate (34%) .....................      -34%     -34%
     Permanent differences ................................        1%      26%
     Effect of gain on sale ...............................      --       --
     State income tax expense net of federal benefit ......        2%       2%
     Valuation allowance ..................................       31%       6%
                                                                -----    -----

          Net expense (benefit) ...........................     0.00%    0.00%
                                                                =====    =====

         The components of the Company's  deferred tax assets and liabilities at
December 31, 2003 are as follows:

                                                          (in thousands)
                                                       CURRENT    LONG TERM
                                                       -------     -------
     Deferred tax assets:
          Net operating loss carryforwards ........    $     0     $ 3,139
          Other ...................................         12           0
          Accumulated depreciation amortization ...          0         255
          R & D credit ............................          0          45
          Foreign tax credit ......................          0         564
          Valuation reserve .......................        (12)     (4,003)
                                                       -------     -------
       Subtotal ...................................       --          --

     Net deferred tax (liability) asset ...........    $  --       $  --
                                                       =======     =======

         At December 31, 2003,  the Company had  available  net  operating  loss
carryforwards  of  approximately  $8,460,000  in the United  States.  The United
States  carryforwards  expire in varying amounts through 2023. Under section 382
of the Internal  Revenue Code, the utilization of the federal net operating loss
carryforwards  may be limited based on changes in the percentage of ownership in
the Company.

10.      RETIREMENT PLAN

         The Company has a defined contribution plan for its domestic operations
under which  employees who have satisfied  minimum age and service  requirements
may defer compensation  pursuant to Section 401(k) of the Internal Revenue Code.
Participants in the plan may contribute between 1% and 20% of their pay, subject
to the limitations placed by the IRS. The Company, at its discretion,  may match
a portion of the amount contributed by the employee.  The Company  contributions
are offset by forfeitures of unvested balances for


                                       41
<PAGE>


terminated  employees.  The net Company  contributions were $0.00 and $29,000 in
2003 and 2002, respectively.

11.      SUBSEQUENT EVENT

         On January 26, 2004, the Company  entered into an Assignment  Agreement
with Applera Corporation  through its Applied Biosystems Group.  Pursuant to the
Assignment  Agreement,  the  Company  agreed  to sell  substantially  all of its
intellectual  property,  including all patents and  know-how,  but excluding its
trademarks and trade names, to Applera for total  consideration of US$4,000,000.
Applera  agreed to pay and deliver to the Company  total cash  consideration  of
$4,000,000 in the following  manner:  $3,600,000 in cash at closing ($100,000 of
which has already been received in the form of a  non-refundable  deposit);  and
$400,000  in cash  ninety  (90)  days  after  closing,  subject  to the  Company
providing certain consulting  services as provided in the Assignment  Agreement.
Completion  of the  transaction  is subject  to a number of closing  conditions,
including approval of the Company's stockholders.


                                       42