U.S. SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549

                                    FORM 10-KSB
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                        OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________

                   COMMISSION FILE NUMBER: 000-33039

                          CALBATECH, INC.
         (Exact name of Company as specified in its charter)

        Nevada                                      86-0932112
(State of incorporation                       (I.R.S. Employer)
                                               Identification No.)

     15375 Barranca Parkway, Suite I101, Irvine, California 92618
         (Address of principal executive offices)  (Zip Code)

             Company's telephone number: (949) 450-9910

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

     Securities registered pursuant to Section 12(g) of the Act: Common
                        Stock, $0.001 Par Value

     Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Company was required to file such reports), and (2) been
subject to such filing requirements for the past 90 days. Yes X  No___

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Company'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 [  ].

    CalbaTech, Inc. had revenue of $11,782 and miscellaneous income of
$44,404 for the fiscal year ended on December 31, 2003. The aggregate market
value of the voting stock held by non-affiliates of the Company as of March 31,
2004: Common Stock, par value $0.001 per share -- $1,668,555. As of March 31,
2003, the Company had 22,302,902 shares of common stock issued and outstanding,
of which 7,529,789 were held by non-affiliates.

                             TABLE OF CONTENTS

PART I                                                            PAGE

ITEM 1.  Description of Business....................

ITEM 2.  Description of Property...................

ITEM 3.  Legal Proceedings.....................

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

PART II

ITEM 5.  Market for Common Equity and Other Shareholder Matters.

ITEM 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations................

ITEM 7.  Financial Statements....................

ITEM 8.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure..............

PART III

ITEM 9.  Directors, Executive Officers, Promoters
         and Control Persons; Compliance with Section
         16(a) of the Exchange Act...................

ITEM 10. Executive Compensation..................

ITEM 11. Security Ownership of Certain Beneficial
         Owners and Management....................

ITEM 12. Certain Relationships and Related Transactions.........

ITEM 13. Exhibits and Reports on Form 8-K...............

ITEM 14. Principal Accountant Fees And Services............

Signatures.................................

PART I.

RISK FACTORS AND CAUTIONARY STATEMENTS

Forward-looking statements in this report are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. The Company wishes to advise readers that actual results
may differ substantially from such forward-looking statements.
Forward-looking statements include statements concerning underlying
assumptions and other statements that are other than statements of
historical facts. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by the statements, including, but not
limited to, the following: the ability of the Company to provide for
its obligations, to provide working capital needs from operating
revenues, to obtain additional financing needed for any future
acquisitions, to meet competitive challenges and technological
changes, and other risks detailed in the Company's periodic report
filings with the Securities and Exchange Commission.

ITEM 1. BUSINESS.

Introduction

Calbatech, Inc. ( Formerly, Traffic Technology Inc. ) ("CalbaTech" or
"Company") was organized on April 29, 2002 under the laws of the
state of Nevada. The Company is a development stage enterprise, as
defined by Statement of Financial Accounting Standards No. 7 ("SFAS
No. 7").  On January 3, 2003, the Company completed an Agreement and
Plan of Exchange ("Agreement") with Traffic Technology, Inc.
("Traffic").  As a result of the acquisition, there was a change in
control of the public entity, and Traffic Technology, Inc. changed
its name to CalbaTech, Inc.

CalbaTech is focused on developing and providing products and
platforms to the research market, both for biotech and pharmaceutical
companies, as well as academic institutions.  CalbaTech is
concentrating on acquiring, incubating and developing early stage
life science based companies that are developing next generation
products and technologies, both in the United States and in the
United Kingdom.  In addition to growth through acquisition, CalbaTech
is building an experienced and innovative scientific staff, including
several notable members of its Scientific Advisory Board, that intend
to contribute breakthrough innovation in areas of biological discovery.

Mission and Objectives

In order to accomplish our goals, CalbaTech is pursuing a strategy of
combining products and technologies, and the companies that house
them, into the following divisions:  1) Molecular Applications; 2)
Research Reagents; and 3) Cellular Therapeutics.  By pursuing such a
strategy, each division can produce value added and increasing
returns on shareholder's investment through cross marketing of
products and geographic expansion, as well as to achieve product
enhancement and efficiency.

CalbaTech intends to acquire or develop technology in three ways: 1)
Through technology transfer alliances with universities, primarily in
California and Scotland, for which CalbaTech acquires, licenses and
finances the further development of new university technologies to
reach the market place; 2) Identification and acquisition of non-
university developed technologies, and specifically, providing a
proven path for UK technologies to enter into the US marketplace; and
3) Development of technological innovations in-house by CalbaTech
scientists and members of its Scientific Advisory Board.

Upon identification of a technology that CTI believes has good
commercial potential, CTI will acquire the company that owns the
technology, or in the case of acquisition of a license, form a
wholly-owned subsidiary to house the license.  Each new company will
be held in as a wholly-owned or mostly-owned subsidiary of CTI.  The
inventors or original owners of the technology will receive shares of
CTI and be given incentive to continue to contribute to the
development of their technology.  Milestones will be created for the
inventors/owners.  As milestones are reached, the inventors/owners
will be granted shares in the subsidiary company.  It is the intent
of CTI that the inventor/owners contribute to the successful
commercialization of their technology and have a big share in the
rewards of commercialization.  When the technology is ready for
commercialization, CTI will have either identified a potential
license partner, will spin the subsidiary out as its own publicly
traded vehicle, or will retain the subsidiary as an operating company.

In exchange for transferring a technology to CTI, a contributing
university will receive a royalty on sales of the resultant product.
In regard to the inventor/owners, if the commercialization strategy
is a license, the inventor/owners will also share in royalty income.
If the subsidiary is sold or spun out, the inventor/owners will,
through their achievement of milestones, have valuable shares in the
subsidiary with CTI retaining a minority equity ownership position in
the subsidiary upon spin out.

Accomplishments to Date

Since its inception, it has been the Company's intention to
accomplish its mission statement in two steps.  The first step was to
fill a research and development pipeline with projects capable of
providing significant return to the CalbaTech shareholders.  These
projects would be short term to commercialization and require minimal
investment to get to market.   On that front, CalbaTech has several
significant accomplishments.

Molecular Applications Division

The Molecular Applications Division has an active program of
molecular biology applications and research.  This Division, working
closely with established academic research groups, is developing
novel technologies and intellectual property in several key areas.
These include pathogen microarrays and other areas of optimal growth
potential in diagnostics, electronic-based DNA detection systems and
novel approaches to DNA sample preparation.  In conjunction with
Molecularware, Inc., a software subsidiary of the Company focused on
developing microarray and laboratory information software, the
Division will be able to develop integrated DNA processing systems
for diagnostics and research.  To date, the Company has accomplished
the following within the Division:

     - CalbaTech acquired the right, title and interest to a platform
       technology, a novel device for DNA and RNA purification in
       sample preparation.  DNA and RNA are purified from cellular
       lysate using "smart membranes", circumventing the need for
       tedious procedures involved in biomagnetic and other solid phase
       extraction techniques.  The patent application for this
       technology has been filed and funding will be applied toward the
       development of this technology.

     - CalbaTech acquired Molecularware, Inc., which is involved in
       bioinformatics and has coded software that offers data
       management software solutions for high throughput biology.
       Molecularware has developed intellectual property that may allow
       researchers and scientists to more rapidly and efficiently
       facilitate integration of data and thereby enhance high-
       throughput screening. Molecularware's intellectual property
       emphasizes data integration and allows scientists to manage and
       analyze date from high throughput instruments, such as liquid
       handling robots, microarraying robots, and microarray scanners.
       While the current product line has, and will continue to,
       produce sales, CalbaTech is seeking to foster further
       development of Molecularware's intellectual property and
       eventually produce a more commercially-viable product.  Please
       see www.molecularware.com.

     - CalbaTech signed an exclusive research agreement with the
       University of California to support the research of Dr. C.U.
       Jia, a prominent University of California, Irvine researcher,
       working on DNA-based diagnosis of pathogens. The goal is to
       develop a pathogen chip-based detection system to simplify the
       complexity of pathogen identification and develop it into a
       single automated format for detecting multiple pathogens. The
       pathogen chip could be useful for the diagnosis of infectious
       diseases, including SARS, surveillance of the pathogen
       population, and monitoring of the environment. It could also be
       used for research, emerging infectious diseases, and responding
       to respiratory bio-terrorism threats.  CalbaTech has signed a
       Letter of Intent to negotiate with the University of California
       for an exclusive license to this platform technology for which a
       provisional patent application was filed in 2001.  The
       development of a respiratory pathogen bio-chip has accomplished
       its first technical milestone.  Recent work on different
       coronaviruses (including SARS and other two human coronaviruses)
       showed that the chip approach could specifically differentiate
       all three human coronaviruses. The most recent pathogen chip,
       version-103, contains a total of 97 different pathogen probes,
       primarily focusing on respiratory pathogens. This panel, once
       fully optimized, will be made available initially for clinical
       pathology researchers.

     - CalbaTech and researcher Dr. Marc Madou of University of
       California, Irvine, Department of Mechanical and Aerospace
       Engineering, have been awarded a $250,000 University of
       California Discovery Grant for a project entitled "Rapid and
       Low-Cost Biomolecule Detection on Adjacent Impedance Probing
       (AIP) Electrode with Impedance Amplifying Labels." The research
       involves a novel electrode-based array devices and methods of
       operation in nucleic acid (DNA/RNA) analysis. This platform
       technology enables high-density electrode arrays to be produced
       and interrogated electronically as opposed to the traditional
       optical detection methods such as those used on the Affymetrix
       (NASDAQ: AFFX) chip. Today, most detection schemes for DNA
       hybridization involve optical measurements using a variety of
       labels, such as fluorescent and/or chemiluminescent probes,
       photoproteins, and others.  While those optical methods afford
       the necessary sensitivity for most of these measurements, the
       cost of the equipment can be high, and therefore, less expensive
       alternatives are highly desirable. The novel electrical
       detection of biomolecule in the technology being developed by
       CalbaTech and UCI will involve less complicated and less
       expensive instrumentation compared to the traditional optical
       methods.  Applications for this technology include medical and
       clinical diagnostics.

Before joining UCI as the Chancellor's Professor in Mechanical and
Aerospace Engineering, Dr. Madou was Vice President of Advanced
Technology at Nanogen (NASDAQ: NGEN) in San Diego, California.  He
specializes in the application of miniaturization technology to
chemical and biological problems (Bio-MEMS).  He is the author of
several books in this burgeoning field that he helped pioneer both
in academia and industry.

     - CalbaTech purchased the intellectual property and entered a
       collaboration with Dr. Gerald C. Huth, an eminent physicist
       developing a novel technique, which in his opinion represents a
       fundamental breakthrough in radiation detection technology. The
       key advantages of this technique are that it can be applied to
       the remote detection of nuclear materials. Moreover this
       technology is based on the novel use and refinement of an
       existing detector technology and has already been successfully
       tested in this capacity by a government agency.   The Company is
       currently seeking request for proposals from agencies related to
       the Department of Defense, to develop means to detect and
       identify shielded radiological materials, with emphasis on
       special nuclear materials.  In addition, the Company is
       discussing a collaboration with Dr. Madou and his research group
       at UCI and an invention by Dr. Huth for an artificial retina.

Research Reagents Division

The Research Reagents Division is dedicated to meeting the needs of
research scientists in the pharmaceutical, biotech, medical and
academic research sectors by providing cell and molecular biology
reagents and associated consumables.  Molecula (VA), a wholly-owned
subsidiary of the Company, is actively expandings its product range
in siRNA.  This builds upon its well-established reputation as a
designer and supplier of active antisense oligonucleotides.  The
Company has also licensed the North American rights to distribute
QICC's (United Kingdom) range of immuno-histochmistry accessories and
reagents.  Further acquisitions are planned to extend the overall
product range offered by this division.  The following has been
accomplished within this Division to date:

CalbaTech acquired Molecula Research Laboratories, LLC, a
reagent company in Herndon Virgina.  Molecula is focused on gene
function solutions using RNAi technology.  Their proprietary
computer algorithm - T.A.R.G.E.T.? (The Advanced RNAi Guidance
Evaluation Technology) system and 10 years of gene silencing
experience, allows Molecula to consistently deliver active RNA
duplexes for specific target gene silencing.

Molecula also develops and sells numerous research reagents for
cell transfection, DNA and RNA purification, protein expression,
microarray analysis, gene expression analysis and other
innovative and fundamental products.  Molecula received a non-
exclusive license to Patent 6,506,599 "Genetic Inhibition by
Double-Stranded RNA" from the Carnegie Institute of Washington
DC which has been a pioneering force in basic scientific
research since 1902.  This license will allow Molecula to offer
a comprehensive RNAi portfolio.  Molecula also sells
transfection reagents, a novel IPTG replacement for increased
protein expression, neuropeptides and biochemicals.  Please see
www.molecula.com.

CalbaTech is exclusively licensed to distribute Qicc, Ltd.
products in North America and Japan.  The Company has the option
to acquire majority ownership in Qicc, Ltd. which is based in
Scotland.  Qicc has designed a staining system that
significantly speeds up and improves the efficiency of manual
ICC and other common lab procedures.  ICC is known as IHC in the
US, and is a collective term given to a series of diagnostic
techniques that use antibodies to fix and stain cells and tissue
sections to determine the presence of disease.  QiccStain? IHC
kits are FDA cleared Class 1 devices.  Please see www.Qicc.co.uk.

Cellular Therapies Division

The Cellular Therapies Division covers a wide range of cell-based
research projects with CalbaTech dedicated to delivery of cell based
clinical therapies.  Specifically, these include cardiovascular stem
cell therapy for recovery post myocardial infarction, islet cell
logistics support for diabetes, and stem cell logistics for long term
health monitoring.  The Company believes this is an emerging market
in which there are major opportunities for new entrants to establish
new standards through novel stem cell research techniques and
business models.  The Company is positioning itself through strategic
research initiatives to identify and take advantage of such
opportunities as they emerge from the interaction between fundamental
research and an evolving regulatory environment.  The first action
within this Division was as follows:

CalbaTech acquired iStem Technologies, which is developing
intellectual property relating to the efficient and effective
delivery of stem cells to diseased or dead areas of the heart.
Dr. Jason Van Tassel, M.D. is the inventor of this platform
technology that, through the utilization of an application to an
endoscope, delivers stem cells to infracted areas of the heart.
The intellectual property is based upon an endoscope, one of the
least invasive tools to operate on the heart, and stem cells,
delivered to infracted cardiac tissue, which will stimulate re-
generation of tissue.  This device should allow for effective
and efficient delivery of stem cells heart tissue to promote
regeneration.  CalbaTech is currently seeking collaborative
partners for this innovative device.

Distribution Strategy

There are many large competitors within the markets the Company
wishes to access.  It is not the Company's strategy to compete with
these companies, but rather to establish distribution relationships
with them.  Each of these competitors has an area of focus and has
developed a competitive edge in their area of focus.  It is the
Company's strategy to acquire, incubate and develop products and
technologies that are symbiotic with these areas of focus. Once a
market need and a profit motive are established, the Company intends
to generate distribution relationships that utilize the sales and
marketing forces of these companies.

Additionally, where possible, the Company will private label products
and provide the distributors a non-exclusive license to market and
sell the products bearing their name.  In return, the Company will
receive a percentage of the revenues derived from the sale of each product.

In this way, not only will the Company be spared the time, expense
and learning curve of establishing its own sales force, but it will
become a partner of the larger life-science firms rather than the
competitor.  It would be much more difficult to quickly establish the
Company's brand name and generate large revenues on its own.
However, through use of this strategy, the Company's products will be
marketed by some of the largest sales organizations in the world.
This will result in significant revenues in the shortest period of
time.  By way of analogy, the Company hopes to emulate Microsoft
rather than Apple.  Similar to Windows? by Microsoft, the Company
believes that these large marketing organizations will be able to
quickly establish a significant market share in markets that
otherwise would have taken the Company years to enter.  For example,
reaching the more than 500,000 U.S. physicians in the Point-Of-Care
market would be a Herculean task without large corporate partners.
However, with these intended corporate partners, the Company's
products can be sold to the market in quantity in a relatively short
period of time.

Identification of New Projects

University Technology Transfer Alliances

Most universities are very good at creating and developing
intellectual property; however, very few do a good job of generating
revenue for the university from their IP.  The academic, by nature,
is not an entrepreneur, but an intellectual in search of knowledge.
The Company's strategy is to act as the entrepreneurial arm for
academics/inventors and their sponsoring universities, creating a
novel approach to pre-Venture Capital funding of new technologies
with select business oriented academic institutions.

The Company will be establishing links between university-developed
technologies and commercial organizations.  This will be accomplished
through close working relationships with universities in which the
Company will either act as the technology transfer agent of the
university or work through the university's technology transfer office
to acquire, license and finance the further development of new
university technologies for commercialization by industry. When
developed technologies are ready for commercialization, the subsidiary
housing them will either be sold to a technology company for an equity
stake, spun out as a public company with the Company retaining a small
ownership position, or retained as an operating company. Within this
structure, companies can rapidly grow their technology assets while
universities receive royalties for each transferred technology.

The Company has established a good working relationship with the
University of California at Irvine ("UCI"), which has, to date
resulted in two research agreements in which the Company will receive
licenses to commercialize the developed technology.  The Company is
also currently cultivating relationships with a university located in
the UK.  UCI and the UK university each have a large, diverse
portfolio of developing life-science based technologies.

Non-University Developed Technologies

The Company will also work to identify technologies developed outside
of the university system and apply the same model of acquiring and
financing the further development of such technologies for sale, spin-
out, or retention.  To this end, the Company has established a
pipeline to certain technologies developed in the UK by making use of
relationships forged by its Chief Technology Officer, Dr. John Gordon.
As a model CTI will acquire 100% of the target company, with the
original owners receiving an equity position in CalbaTech, and with
milestones achievement, earn back equity.

The Company does not intend to be limited to UK or university derived
technologies.  It will work diligently to identify technologies
developed in it own backyard through use of its own network.  During
the last five years, the Company's officers and directors have worked
within the financial and emerging growth community and have developed
potential leads to developing technology companies in need of
financing or acquisition.  Much of that accomplished to date has
resulted this experience.

CalbaTech Derived Technologies

The Company has access to a number of creative scientists, either on
staff or as members of its Scientific Advisory Board (please see
"Scientific Advisory Board" in Part III).  Each of these individuals
has the ability to invent technologies de novo, bring new technologies
to the Company through their network, or both. For example, Dr. Gordon
is a respected research scientist who invented the core technology
that led to the creation of two biomedical technology companies, one
of which had a private market capitalization exceeding $100 million.
In addition to serving as the Chief Technology Officer responsible for
identifying potential technologies for the Company, and serving as a
liaison between CalbaTech and the groups managing technologies
acquired by the Company, Dr. Gordon will also work within the
Company's laboratory to advance technological concepts created by him.
Dr. Gordon's expertise is wide ranging, encompassing both academic
research and industry experience in the pharmaceutical and diagnostics
industries.  He has extensive experience of operating on both sides of
the academic industry interface that is a primary focus of the
Company's business model.

Similarly, the Company anticipates that other scientists will bring a
great depth of experience at the highest levels of academic and
commercial research to CalbaTech. CalbaTech will work to raise its
profile in two acknowledged hot-spots of life science research where
we have excellent contacts, Southern California and Scotland.  The
intention is to develop such a good reputation amongst researcher and
research institutions that a steady stream of technologies come to the
Company.  The Company believes that once the advantages for rapid
development funding are combined with liquidity, this will occur.  As
evidence of the soundness of the general principle, two other
companies that are similar in model, though different in application,
U-Tek and RCT, have successfully pursued a similar technology
identification model and both are publicly traded NASDAQ companies. We
believe that this is a relatively underserved market where there is
ample room for new entrants offering a route to rapid liquidity and a
focus-localized service.

Technology And Product Development Process

The current development strategy of the Company is based upon the
definition and completion of certain definite phases.  The Company
intends to implement a proven program development methodology.  The
Company will use a definitive product pipeline and a development
program designed for use and reuse of common elements of hardware,
software and "chemware".  Through the use of a phased development
program and the employment of its core technologies for multiple
applications where applicable, the Company will realize the benefits
of cost effectiveness and various synergies that will lead to a more
rapid and less costly development cycle.

PATENTS AND PROPRIETARY TECHNOLOGY

It is the Company's intention to vigorously protect its proprietary
property through the filing of U.S. and international patent
applications, both broad and specific where necessary and reasonable.
The Company believes it will attain both strong and broad patent
protection for its technologies.  The Company intends to protect its
inventions in all major countries where significant markets for the
Company's product may be created. It is the Company's intention that
all its products be protected under various pending patents, patents,
copyright and trademarks.

The Company has the policy of disclosing its proprietary information
only under a Confidentiality Agreement.  This Agreement has a special
clause regarding ownership by the Company of all inventions related
to, or based in any way upon, the Company's technologies.
The Company will aggressively protect its intellectual property
through the protections provided by the Patent Process and
continually monitor the intellectual property of others as it relates
to the Company.

Employees

The Company currently has eight employees. The Company does not have
any collective bargaining agreements covering any of its employees,
has not experienced any material labor disruption and is unaware of
any efforts or plans to organize its employees. The Company considers
relations with its employees to be good.

ITEM 2. PROPERTIES.

The Company's principal executive and administrative offices are
located at 15375 Barranca Parkway, Suite I-101, Irvine, California
92618.  The facility consists of approximately 3,000 square feet and
is equipped as a general molecular biology and biochemistry lab with
is prime purpose being development and testing of DNA micro-array
reagents, including a wet lab and cleanroom.  There is also sufficient
space to support future integration programs whereby reagents can be
integrated with the DNA detection platform being developed at UCI.
The current lease expires at the end of July 2004 and has a current
yearly rent of $49,365.  It is expected that a new lease will be
signed at a similar rate. The Company considers these offices to be
adequate and suitable for its current needs, but as the Company
expands, it expects to expand its facilities and as such, is looking
for larger facilities on an ongoing basis.

ITEM 3. LEGAL PROCEEDINGS.

Other than as set forth below, the Company is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Company has been threatened.
The Company is subject to legal proceedings and claims that arise in
the ordinary course of its business.  Although occasional adverse
decisions or settlements may occur, the Company believes that the
final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.

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

During the last quarter of fiscal year-ended December 2003, the
Company did not submit any matters to a vote of security holders.

PART II.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

The Company's Common Stock has been and is currently traded on the
over-the-counter market and quotations are published on the OTC
Bulletin Board under the symbol "CLBE".  The following table sets
forth the range of high and low bid prices of the Common Stock for
each fiscal quarterly period. Prices reported represent prices
between dealers, do not include retail markups, markdowns or
commissions and do not represent actual transactions.

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2003

                                                 High          Low

Quarter Ended December 31, 2003                    .47         .10
Quarter Ended September 30, 2003                   .85         .20
Quarter Ended June 30, 2003                       2.00         .60
Quarter Ended March 31, 2003                       .15         .05

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 2002

                                                 High          Low

Quarter Ended December 31, 2002                    .15         .05
Quarter Ended September 30, 2002                   .15         .05
Quarter Ended June 30, 2002                        N/a         N/a
Quarter Ended March 31, 2002                       N/a         N/a

The ability of individual stockholders to trade their shares in a
particular state may be subject to various rules and regulations of
that state. A number of states require that an issuer's securities be
registered in their state or appropriately exempted from registration
before the securities are permitted to trade in that state.
Presently, the Company has no plans to register its securities in any
particular state. Further, most likely the Company's shares will be
subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
commonly referred to as the "penny stock" rule. Section 15(g) sets
forth certain requirements for transactions in penny stocks and Rule
15g-9(d)(1) incorporates the definition of penny stock as that used
in Rule 3a51-1 of the Exchange Act.

The Commission generally defines penny stock to be any equity
security that has a market price less than $5.00 per share, subject
to certain exceptions. Rule 3a51-1 provides that any equity security
is considered to be a penny stock unless that security is: registered
and traded on a national securities exchange meeting specified
criteria set by the Commission; authorized for quotation on The
NASDAQ Stock Market; issued by a registered investment company;
excluded from the definition on the basis of price (at least $5.00
per share) or the issuer's net tangible assets (at least $2 million);
or exempted from the definition by the Commission. If the Company's
shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements of broker-dealers
who sell penny stocks to persons other than established customers and
accredited investors, generally persons with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.

For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such securities
and must have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the
delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock market. A broker-dealer also
must disclose the commissions payable to both the broker-dealer and
the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent disclosing
recent price information for the penny stocks held in the account and
information on the limited market in penny stocks. Consequently,
these rules may restrict the ability of broker-dealers to trade
and/or maintain a market in the Company's Common Stock and may affect
the ability of stockholders to sell their shares.

Holders of Common Equity

As of March 31, 2004, there were approximately 280 shareholders of
record of the Company's common stock.

Dividend Information

The Company has not declared or paid cash dividends on its Common
Stock or made distributions in the past, and the Company does not
anticipate that it will pay cash dividends or make cash distributions
in the foreseeable future, other than non cash dividends described
below. The Company currently intends to retain and invest future
earnings, if any, to finance its operations.

Transfer Agent

The Company has designated Transfer Online as its transfer agent for
the common stock.

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

When used in this Form 10-KSB and in our future filings with the
Securities and Exchange Commission, the words or phrases will likely
result, management expects, or we expect, will continue, is
anticipated, estimated or similar expressions are intended to identify
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995.  Readers are cautioned not
to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made.  These statements are subject
to risks and uncertainties, some of which are described below.  Actual
results may differ materially from historical earnings and those
presently anticipated or projected.  We have no obligation to publicly
release the result of any revisions that may be made to any forward-
looking statements to reflect anticipated events or circumstances
occurring after the date of such statements.

General Overview

The following a discussion of CabaTech's Plan of Operations.

CalbaTech is in the development stage and is focused on developing and
providing products and platforms to the research market, both for
biotech and pharmaceutical companies, as well as academic
institutions.  CalbaTech is concentrating on acquiring, incubating
and developing early stage life science based companies that are
developing next generation products and technologies, both in the
United States and in the United Kingdom.  In addition to growth
through acquisition, CalbaTech is building an experienced and
innovative scientific staff, including several notable members of its
Scientific Advisory Board, that intend to contribute breakthrough
innovation in areas of biological discovery.

Critical Accounting Policies:

     -  business combinations

     -  stock-based compensation.

Business combinations

The Financial Accounting Standards Boards (FASB) issued Statement of
Financial Standards ("SFAS") No. 141, Business Combinations, which
established accounting and reporting standards for business combinations and
requires that all business combinations be accounted for by the purchase
method.  Under the purchase method of accounting, the cost, including
transaction costs, is allocated to the underlying net assets, based on
their respective estimated fair values.  The excess of the purchase price
over the estimated fair values of the net assets acquired is recorded as
goodwill.

The judgments made in determining the estimated fair values and expected
useful lives assigned to each class of assets and liabilities acquired can
significantly impact net income.  For example, different classes of assets
will have useful lives that differ.  Consequently, to the extent a longer-
lived asset is ascribed greater value under the purchase method than a
shorter-lived asset, there may be less amortization recorded in a given
period.

Determining the fair value of certain assets and liabilities acquired is
subjective in nature and often involves the use of significant estimates and
assumptions.  We use a one-year period following the consummation of
acquisitions to finalize estimates of the fair values of assets and
liabilities acquired.  Two areas, in particular, that require significant
judgment are estimating the fair values and related useful lives of
identifiable intangible assets.  While there are a number of different
methods used in estimating the value of acquired intangibles, there are
wwo approaches primarily used; the discounted cash flow and market
comparison approaches.  Some of the more significant estimates and
assumptions inherent in the two approaches include; projected future
cash flows (including timing); discount rate reflecting the risk inherent
in the future cash flows; perpetual growth rate; determination of
appropriate market comparables; and the determination of whether a
premium or a discount should be applied to comparables.  Most of the
foregoing assumptions are made based on available historical information.

Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure.  This statement amends SFAS No. 123 -
Accounting for Stock-Based Compensation, providing alternative methods of
voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation.  FAS 148 also requires disclosure of
the method used to account for stock-based employee compensation and the effect
of the method in both the annual and interim financial statements.  The
provisions of this statement related to transition methods are effective
for fiscal years ending after December 15, 2002, while provisions related to
disclosure requirements are effective in financial reports for interim periods
beginning after December 31, 2002.

The Company elected to continue to account for stock-based compensation plans
using the intrinsic value-based method of accounting prescribed by APB No. 25,
"Accounting for Stock Issued to Employees", and related interpretations.
Under the provisions of APB No. 25, compensation expense is measured at the
grant date for the difference between the fair value of the stock and the
exercise price.

Results of Operations

The Company's revenues are difficult to forecast and may vary
significantly from quarter to quarter and year to year. In addition
the Company's expense levels for each quarter are, to a significant
extent, fixed in advance based upon the Company's expectation as to
the net revenues to be generated during that quarter. The Company
therefore is generally unable to adjust spending in a timely manner
to compensate for any unexpected shortfall in net revenues.  Further
as a result of these factors any delay in product introductions,
whether due to internal delays or delays caused by third party
difficulties, or any significant shortfall in demand in relation to
the Company's expectations, would have an almost immediate adverse
impact on the Company's operating results and on its ability to
maintain profitability in a quarter.

Comparison of the Year Ended December 31, 2003 with the Year Ended
December 31, 2002

During the period ended December 31, 2003 the Company began to
generate revenues due to the acquisition of Molecula Research
Laboratories, LLC as a wholly-owned subsidiary of the Company which
had $11,782 in revenues.  Additionally, the Company had $44,404 in
miscellaneous income.  The Company believes that with the infusion of
working capital provided in the recent months, and modest continued
growth capital support from the Company, Molecula is projected to
increase its revenue substantially in 2004.  Additionally, the
Company anticipates acquiring two other identified companies in 2004,
each with current annual revenues exceeding $1,000,000 and
profitable.  Molecula and the other anticipated acquisitions
complement each other and the Company should be able to continue to
streamline expenses and combine marketing efforts to achieve greater
success in a shorter period of time. The Company believes that the
completion of these two acquisitions and an aggressive cross
marketing plan between each of the two potential acquisitions and
Molecula could result in annual revenues for the Research Reagents
Division of approximately $5,000,000.

Cost of revenues consists of direct manufacturing costs and applied
overhead expenses for the Molecula's research reagent business, as
well as labor costs associated with its service revenue.  Cost of
revenues as a percentage of net revenues were 48% in the year ended
December 31, 2003.  The Company had no revenues in the period ended
December 31, 2002.  The cost of goods sold percentage will fluctuate
from quarter to quarter because absorbed overhead increases when
volume is decreasing and because labor ratios are less than optimized
in manufacturing processes when revenues are lower.  As revenues
increases, cost of goods sold as a percentage of revenue should
become more and more favorable for the company. The overall increase
in the cost of goods sold during 2003 is directly attributable to the
increase in net revenues.

General and administrative (operating) expenses increased during 2003
due primarily to merger and acquisition expenses as well as to a
material increase in the general business activity of the Company.
Administrative expenses for consultants, legal costs, audits and
accounting services have all increased during these 2003 periods over
2002 and these costs may increase in the coming months.  Although certain
of the Company's general and administrative expenses are to a significant
extent fixed in advance, the Company is making efforts to adjust
spending in relation to the expected net revenues and available
working capital.  Until these expense categories have gone full
cycle, the administrative expenses will continue to rise but will
become more controlled in relation to sales revenue as the company
becomes better funded and revenues increase.  The Company has taken
significant steps to reduce this amount in 2004 and expects to report
a reduction of this number through settlement or the issuance of
restricted stock for outstanding liabilities.  The Company
anticipates that it will report significantly reduced expenses and
liabilities in Q1 and Q2 of 2004.

Net Income (Loss)

For the reasons outlined above the Company realized a net loss of
$3,789,887 for the year ended December 31, 2003 as compared to a net
loss of $92,803 for the period ended December 31, 2002.  Also as
explained above, the Company has taken significant steps to reduce
this amount in 2004 and expects to report a reduction of this number
through settlement or the issuance of restricted stock for
outstanding liabilities.  The Company anticipates that it will report
significantly reduce expenses and liabilities in Q1 and Q2 of 2004.

Liquidity and Capital Resources

Cash and cash equivalents at December 31, 2003 was $17,894 and
$26,228 at December 31, 2002.  The current assets of the Company
decreased from $226,228 at December 31, 2002 to $56,036 at December
31, 2003, due largely to a deposit of $200,000 as of December 31,
2002 related to the acquisition of CalbaTech.  As a result of our
operating losses for the year ended December 31, 2003, we generated a
cash flow deficit of $308,703 from operating activities.  We met our
cash requirements during this period through the private placement of
$110,000 of common stock, $61,276 proceeds from lines of credit, $152,000 net
proceeds from issuance of notes payable, and $6,635 in advances from
shareholders.  The Company has used its working capital to finance
ongoing operations and the development and marketing of its products.
In the future, the company intends to evaluate, from time to time,
acquisitions of products or companies that could complement the
Company's business, expand its product line, or augment its revenues
and cash flows.

The Company's success and ongoing financial viability is contingent
upon its selling of its products and the related generation of cash
flows.  However, should it be necessary, Management believes it would be
able to meet its cash flow requirements through additional debt or
equity financing.  There is no assurance that such financing will be available
in the future to meet additional capital needs of the Company, or that any such
terms or conditions of any such financing would be favorable to the Company.
Both the management of the Company's current growth and the expansion
of the Company's current business involve significant financial risk
and require significant capital investment.

The independent auditors report on the Company's December 31, 2003 financial
statements included in this Form states that the Company's recurring losses
raise substantial doubts about the Company's ability to continue as a going
concern.

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities." Interpretation 46 changes the criteria
by which one company includes another entity in its consolidated
financial statements. Previously, the criteria were based on control
through voting interest. Interpretation 46 requires a variable
interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's
residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to
variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first fiscal
year or interim period beginning after June 15, 2003. Certain of the
disclosure requirements apply in all financial statements issued after
January 31, 2003, regardless of when the variable interest entity was
established. The Company does not expect the adoption to have a
material impact to the Company's financial position or results of operations.

In April 2003, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 149 amends SFAS No. 133 to
provide clarification on the financial accounting and reporting of
derivative instruments and hedging activities and requires that
contracts with similar characteristics be accounted for on a
comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The adoption of
SFAS 149 will not have a material impact on the Company's results of
operations or financial position.

In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
The adoption of this statement did not have a material impact on the
Company's financial position.

In December 2003, the FASB issued SFAS No. 132 (revised), EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS-AN
AMENDMENT OF FASB STATEMENTS NO. 87, 88, AND 106.  This statement
retains the disclosure requirements contained in FASB statement no.
132, Employers' Disclosures about Pensions and Other Postretirement
Benefits, which it replaces.  It requires additional disclosures to
those in the original statement 132 about the assets, obligations,
cash flows, and net periodic benefit cost of defined benefit pension
plans and other defined benefit postretirement plans.  The required
information should be provided separately for pension plans and for
other postretirement benefit plans.  The revision applies for the first
fiscal or annual interim period ending after December 15, 2003 for
domestic pension plans for June 15, 2004 for foreign pension plans and
requires certain new disclosures related to such plans.  The adoption
of this statement will not have a material impact on the Company's
results of operations or financial positions.
Twelve Month Plan of Operations

The following Twelve Month Plan of Operation should be read in
conjunction with the financial statements and accompanying notes
included in this Form 10-KSB.

CalbaTech has accomplished the first part of its mission by filling
its R&D pipeline with exciting, next generation products and
technologies from which an impressive future revenue stream can be created.

The second part is to build a revenue base to continually support
current and future R&D.  It is CalbaTech's goal in within the next
twelve months to acquire at least two positive revenue generating
companies capable not only of sustaining themselves, but also of
contributing capital to the other R&D projects undertaken by
CalbaTech, as well as providing a proven pathway to commercialization
for the products produced through the R&D.

To this end, CalbaTech has identified two reagent companies as
potential acquisition candidates for the Research Reagents Division
and has had substantive discussions with each of them.  Each of these
companies has revenue in excess of $1 million with significant
positive income.  As part of CalbaTech's strategy, we believe each of
these companies would enjoy a significant increase in revenue through
cross marketing and geographic expansion, both with each other and
with Molecula.  The Company believes that the completion of these two
acquisitions and an aggressive cross marketing plan between each of
the two potential acquisitions and Molecula could result in annual
revenues for the Research Reagents Division of approximately $5,000,000.

Furthermore, CalbaTech is pursuing joint ventures with two companies
that have developed therapies for which they would contract with
CalbaTech to develop additional applications to such therapies.  In
addition to revenue generated from the development contracts, in each
instance CalbaTech would receive an exclusive license to market the
application within the research market.

In order to implement our business plan and increase revenues, the
Company is implementing the following initiatives:

1.)  Aggressively negotiate with each of the two identified
acquisition candidates within the Research Reagents Division and
complete acquisition of each as a wholly, or mostly owned subsidiary
of the Company;

2.)  Complete agreements for joint ventures to develop new
applications to developed therapies within the Cellular Therapies Division;

3.)  CalbaTech intends to develop technological innovations by in-
house CalbaTech scientists;

4.)  During the next 12 months, the Company will increase its
exposure through various industry related trade shows and seminars.
Each year, there are several hundred trade shows throughout the
United States that pertain to developing technologies related to
life-sciences.  The Company intends to take advantage of these trade
shows to both provide a forum to develop sales for its current
products, to develop collaborative partnerships for its current
products and to seek other entities or intellectual property that
would be advantageous for the Company to acquire.

5.)  The Company will seek to implement a marketing program with
future alliances with Investor Relations (IR) firms, industry
experts, media and other key professionals experienced in
successfully promoting public corporations;

6.)   During the next 12 months, the Company will be continuing to
search for additional capital including debt financing, expansion
capital, etc.  This search for capital may include equity lines of
credit, or other traditional forms of financing.

These projected expenditures  are dependent upon our generating
revenues and obtaining sources of financing in excess of our existing
capital resources. There is no guarantee that we will be successful
in raising the funds required or generating revenues sufficient to
fund the projected costs of research and development during the next
twelve months.

Acquisition or Disposition of Plant and Equipment

We do not anticipate the sale of any significant property, plant or
equipment during the next twelve months. We do not anticipate the
acquisition of any significant property, plant or equipment during
the next 12 months.

Number of Employees

For the fiscal year ended December  31, 2003, we have relied on the
services of outside consultants for services and  as of December 31,
2003, the Company has eight employees.  In order for us to attract
and retain quality personnel, we anticipate we will have to offer
competitive salaries to future employees. We do not anticipate our
employment base will significantly change  during the next 12 months.
As we continue to expand, we will incur additional cost for
personnel. This projected increase in personnel is dependent upon our
generating revenues and obtaining sources of financing. There is no
guarantee that we will be successful in raising the funds required or
generating revenues sufficient to fund the projected increase in the
number of employees.

Forward Looking Statements.

The foregoing Managements Discussion and Analysis of Financial
Condition and Results of Operations "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933, as
amended, and Rule 3b-6 under the Securities Act of 1934, as amended,
including statements regarding, among other items, the Company's
business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the
industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-looking
statements are based largely on the Company's expectations and are
subject to a number of risks and uncertainties, including but not
limited to, those risks associated with economic conditions generally
and the economy in those areas where the Company has or expects to
have assets and operations; competitive and other factors affecting
the Company's operations, markets, products and services; those risks
associated with the Company's ability to successfully negotiate with
certain customers, risks relating to estimated contract costs,
estimated losses on uncompleted contracts and estimates regarding the
percentage of completion of contracts, associated costs arising out of
the Company's activities and the matters discussed in this report;
risks relating to changes in interest rates and in the availability,
cost and terms of financing; risks related to the performance of
financial markets; risks related to changes in domestic laws,
regulations and taxes; risks related to changes in business strategy
or development plans; risks associated with future profitability; and
other factors discussed elsewhere in this report and in documents
filed by the Company with the Securities and Exchange Commission. Many
of these factors are beyond the Company's control. Actual results
could differ materially from these forward-looking statements. In
light of these risks and uncertainties, there can be no assurance that
the forward-looking information contained in this Form 10-KSB will, in
fact, occur. The Company does not undertake any obligation to revise
these forward-looking statements to reflect future events or
circumstances and other factors discussed elsewhere in this report and
the documents filed or to be filed by the Company with the Securities
and Exchange Commission.

Inflation

In the opinion of management, inflation has not had a material effect
on the operations of the Company.

Cautionary Factors that may Affect Future Results

We provide the following cautionary discussion of risks, uncertainties
and possible inaccurate assumptions relevant to our business and our
products. These are factors that we think could cause our actual
results to differ materially from expected results. Other factors
besides those listed here could adversely affect us.

Trends, Risks and Uncertainties

The Company has sought to identify what it believes to be the most
significant risks to its business as discussed in "Risk Factors"
above, but cannot predict whether or to what extent any of such risks
may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an
investment decision with respect to the Company's stock.

Limited operating history; anticipated losses; uncertainly of future results

The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based.  The
Company's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the business
model that the Company intends to market and the potential acceptance
of the Company's business model.  The Company will be incurring costs
to develop, introduce and enhance its products, to establish marketing
relationships, to acquire and develop products that will complement
each other, and to build an administrative organization.  To the
extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected.  There
can be no assurance that the Company will be able to generate
sufficient revenues from the sale of its products and services.  The
Company expects that negative cash flow from operations may exist for
the next 12 months as it continues to develop and market its products
and services.  If cash generated by operations is insufficient to
satisfy the Company's liquidity requirements, the Company may be
required to sell additional equity or debt securities.  The sale of
additional equity or convertible debt securities would result in
additional dilution to the Company's shareholders.

Potential fluctuations in quarterly operating results may fluctuate
significantly in the future as a result of a variety of factors, most
of which are outside the Company's control, including:  the demand for
the Company's products and services; seasonal trends in demand and
pricing of products and services; the amount and timing of capital
expenditures and other costs relating to the expansion of the
Company's operations; the introduction of new services and products by
the Company or its competitors; price competition or pricing changes
in the industry; political risks and uncertainties involving the
world's markets; technical difficulties and general economic
conditions.  The Company's quarterly results may also be significantly
affected by the impact of the accounting treatment of acquisitions,
financing transactions or other matters.  Due to the foregoing
factors, among others, it is possible that the Company's operating
results may fall below the expectations of the Company and/or
investors in some future quarter.

Management of Growth

The Company expects to experience growth in the number of employees
relative to its current levels of employment and the scope of its
operations.  In particular, the Company may need to hire scientists,
as well as sales, marketing and administrative personnel.
Additionally, acquisitions could result in an increase in employee
headcount and business activity.  Such activities could result in
increased responsibilities for management.  The Company believes that
its ability to attract, train, and retain qualified technical, sales,
marketing, and management personnel, will be a critical factor to its
future success.  During strong business cycles, the Company may
experience difficulty in filling its needs for qualified personnel.

The Company's future success will be highly dependent upon its ability
to successfully manage the expansion of its operations.  The Company's
ability to manage and support its growth effectively will be
substantially dependent on its ability to implement adequate financial
and management controls, reporting systems, and other procedures and
hire sufficient numbers of financial, accounting, administrative, and
management personnel. The Company is in the process of establishing
and upgrading its financial accounting and procedures.  There can be
no assurance that the Company will be able to identify, attract, and
retain experienced accounting and financial personnel. The Company's
future operating results will depend on the ability of its management
and other key employees to implement and improve its systems for
operations, financial control, and information management, and to
recruit, train, and manage its employee base.  There can be no
assurance that the Company will be able to achieve or manage any such
growth successfully or to implement and maintain adequate financial
and management controls and procedures, and any inability to do so
would have a material adverse effect on the Company's business,
results of operations, and financial condition.

The Company's future success depends upon its ability to address
potential market opportunities while managing its expenses to match
its ability to finance its operations.  This need to manage its
expenses will place a significant strain on the Company's management
and operational resources.  If the Company is unable to manage its
expenses effectively, the Company's business, results of operations,
and financial condition may be materially adversely affected.

Risks associated with acquisitions

As a major component of its business strategy, the Company expects to
acquire assets and businesses relating to or complementary to its
operations.  Any acquisitions by the Company would involve risks
commonly encountered in acquisitions of companies.  These risks would
include, among other things, the following:  the Company could be
exposed to unknown liabilities of the acquired companies; the Company
could incur acquisition costs and expenses higher than it anticipated;
fluctuations in the Company's quarterly and annual operating results
could occur due to the costs and expenses of acquiring and integrating
new businesses or technologies; the Company could experience
difficulties and expenses in assimilating the operations and personnel
of the acquired businesses; the Company's ongoing business could be
disrupted and its management's time and attention diverted; the
Company could be unable to integrate successfully.

Liquidity and Working Capital Risks; Need for Additional Capital to
Finance Growth and Capital Requirements

We have had limited working capital and we may rely upon notes
(borrowed funds) to operate. We may seek to raise capital from public
or private equity or debt sources to provide working capital to meet
our general and administrative costs until net revenues make the
business self-sustaining.  We cannot guarantee that we will be able to
raise any such capital on terms acceptable to us or at all. Such
financing may be upon terms that are dilutive or potentially dilutive
to our stockholders. If alternative sources of financing are required,
but are insufficient or unavailable, we will be required to modify our
growth and operating plans in accordance with the extent of available
funding.

Potential fluctuations in quarterly operating results

Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, most of which are outside
our control, including: the demand for our products; seasonal trends
in purchasing, the amount and timing of capital expenditures and other
costs relating to the development of our products; price competition
or pricing changes in the industry; technical difficulties or system
downtime; general economic conditions, and economic conditions
specific to the healthcare industry. Our quarterly results may also be
significantly impacted by the impact of the accounting treatment of
acquisitions, financing transactions or other matters. Particularly at
our early stage of development, such accounting treatment can have a
material impact on the results for any quarter. Due to the foregoing
factors, among others, it is likely that our operating results will
fall below our expectations or those of investors in some future quarter.

Dependence Upon Management

Our future performance and success are dependant upon the efforts and
abilities of our Management. To a very significant degree, we are
dependent upon the continued services of James DeOlden, Edward Deese
and John Gordon, our founders and  Directors. If we lost the services
of Mr. DeOlden, Mr. Deese or Dr. John Gordon or other key employees
before we could get a qualified replacement, that loss could
materially adversely affect our business.  We do not maintain key man
life insurance on any of our Management.

Lack of Independent Directors

We cannot guarantee that our Board of Directors will have a majority
of independent directors in the future. In the absence of a majority
of independent directors, our executive officers, who are also
principal stockholders and directors, could establish policies and
enter into transactions without independent review and approval
thereof. This could present the potential for a conflict of interest
between the Company and its stockholders generally and the controlling
officers, stockholders or directors.

Limitation of Liability and Indemnification of Officers and Directors

Our officers and directors are required to exercise good faith and
high integrity in our Management affairs. Our Articles of
Incorporation provide, however, that our officers and directors shall
have no liability to our shareholders for losses sustained or
liabilities incurred which arise from any transaction in their
respective managerial capacities unless they violated their duty of
loyalty, did not act in good faith, engaged in intentional misconduct
or knowingly violated the law, approved an improper dividend or stock
repurchase, or derived an improper benefit from the transaction. Our
Articles and By-Laws also provide for the indemnification by us of the
officers and directors against any losses or liabilities they may
incur as a result of the manner in which they operate our business or
conduct the internal affairs, provided that in connection with these
activities they act in good faith and in a manner that they reasonably
believe to be in, or not opposed to, the best interests of the
Company, and their conduct does not constitute gross negligence,
misconduct or breach of fiduciary obligations. To further implement
the permitted indemnification, we have entered into Indemnity
Agreements with our officers and directors.

Continued Control by Current Officers and Directors

At year end the present officers and directors own  approximately  66% of the
outstanding shares of Common Stock, and therefore are in a position to
elect all of our Directors and otherwise control the Company,
including, without limitation, authorizing the sale of equity or debt
securities of the Company, the appointment of officers, and the
determination of officers' salaries. Shareholders have no cumulative
voting rights. (See Security Ownership of Certain Beneficial Owners
and Management) Audit's Opinion Expresses Doubt About The Company's
Ability To Continue As a "Going Concern".

Delays in the Introduction of Our Products

The Company may be subject to regulation by numerous governmental
authorities.  Failure to obtain regulatory approvals or delays in
obtaining regulatory approvals by the Company, its collaborators or
licensees would adversely affect the marketing of products developed
by the Company, as well as hinder the Company's ability to generate
product revenues.  Further, there can be no assurance that the
Company, its collaborators or licensees will be able to obtain the
necessary regulatory approvals.   Although the Company does not
anticipate problems satisfying any of the regulations involved, the
Company cannot foresee the possibility of new regulations that could
adversely affect the business of the Company.

The healthcare industry is a highly regulated industry and is subject
to numerous statutes, rules and regulations administered by
healthcare commissions or similar regulatory authorities of each
jurisdiction.  The Company may be required to submit applications
relating to their activities or products (including detailed
background information concerning controlling persons within their
organization) that are then reviewed for approval.  The Company may
incur significant expense in seeking to obtain licenses for its
products and concepts.  No assurances can be given that its products
will be approved in any particular jurisdiction.  The failure to
obtain such approval or delay in obtaining such approval in any
jurisdiction that the Company seeks to introduce its products or
concepts may have a materially adverse effect upon the Company's business.

Dependence on Independent Parties to Produce our Products

The Company may be dependent upon current and future collaborations
with and among independent parties to research, develop, test,
manufacture, sell or distribute our products.   The Company intends
to continue to rely on such collaborative arrangements.  Some of the
risks and uncertainties related to the reliance on such
collaborations include, but are not limited to 1) the ability to
negotiate acceptable collaborative arrangements, 2) the fact that
future or existing collaborative arrangements may not be successful
or may not result in products that are marketed or sold, 3) such
collaborative relationships may actually act to limit or restrict the
Company, 4) collaborative partners are free to pursue alternative
technologies or products either on their own or with others,
including the Company's competitors, for the diseases targeted by the
Company's programs and products and 5) the Company's partners may
terminate a collaborative relationship and such termination may
require the Company to seek other partners, or expend substantial
additional resources to pursue these activities independently.  These
efforts may not be successful and may interfere with the Company's
ability to manage, interact and coordinate its timelines and
objectives with its strategic partners.

Government Regulation and Legal Uncertainties

The Company is not currently subject to many direct government
regulation, other than the securities laws and the regulations
thereunder applicable to all publicly owned companies, the laws and
regulations applicable to businesses generally. It is possible that
certain laws and regulations may be adopted at the local, state,
national and international level that could effect the Company's
operations. Changes to such laws could create uncertainty in the
marketplace which could reduce demand for the Company's products or
increase the cost of doing business as a result of costs of litigation
or a variety of other such costs, or could in some other manner have a
material adverse effect on the Company's business, financial
condition, results of operations and prospects. If any such law or
regulation is adopted it could limit the Company's ability to operate
and could force the business operations to cease, which would have a
significantly negative effect on the shareholder's investment. The
integrated disclosure system for small business issuers adopted by the
Securities and Exchange Commission in Release No. 34-30968 and
effective as of August 13, 1992, substantially modified the
information and financial requirements of a "Small Business Issuer,"
defined to be an issuer that has revenues of less than $25,000,000; is
a U.S. or Canadian issuer; is not an investment company; and if a
majority-owned subsidiary, the parent is also a small business issuer;
provided, however, an entity is not a small business issuer if it has
a public float (the aggregate market value of the issuer's outstanding
securities held by non-affiliates) of $25,000,000 or more. The Company
is deemed to be a "small business issuer." The Securities and Exchange
Commission, state securities commissions and the North American
Securities Administrators Association, Inc. ("NASAA") have expressed
an interest in adopting policies that will streamline the registration
process and make it easier for a small business issuer to have access
to the public capital markets. The Company can make no assurances that
any of these agencies will adopt any such policies. Also, an agency
could adopt such policy that may have a detrimental effect to the
Company's operations and it could have a significantly negative effect
on the value of the Company's equity.

Limited Market Due To Penny Stock

The Company's stock differs from many stocks, in that it is a "penny
stock." The Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." These rules include, but are not
limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and
15g-7 under the Securities and Exchange Act of 1934, as amended.
Because our securities probably constitute "penny stock" within the
meaning of the rules, the rules would apply to us and our securities.
The rules may further affect the ability of owners of our stock to
sell their securities in any market that may develop for them. There
may be a limited market for penny stocks, due to the regulatory
burdens on broker-dealers. The market among dealers may not be active.
Investors in penny stock often are unable to sell stock back to the
dealer that sold them the stock. The mark-ups or commissions charged
by the broker-dealers may be greater than any profit a seller may
make. Because of large dealer spreads, investors may be unable to sell
the stock immediately back to the dealer at the same price the dealer
sold the stock to the investor. In some cases, the stock may fall
quickly in value. Investors may be unable to reap any profit from any
sale of the stock, if they can sell it at all. Stockholders should be
aware that, according to the Securities and Exchange Commission
Release No. 34- 29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. These patterns include:
- Control of the market for the security by one or a few broker-
dealers that are often related to the promoter or issuer; -
Manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases; - "Boiler room"
practices involving high pressure sales tactics and unrealistic price
projections by inexperienced sales persons; - Excessive and
undisclosed bid-ask differentials and markups by selling broker-
dealers; and - The wholesale dumping of the same securities by
promoters and broker- dealers after prices have been manipulated to a
desired level, along with the inevitable collapse of those prices with
consequent investor losses. Furthermore, the "penny stock" designation
may adversely affect the development of any public market for the
Company's shares of common stock or, if such a market develops, its
continuation. Broker-dealers are required to personally determine
whether an investment in "penny stock" is suitable for customers.
Penny stocks are securities (i) with a price of less than five dollars
per share; (ii) that are not traded on a "recognized" national
exchange; (iii) whose prices are not quoted on the NASDAQ automated
quotation system (NASDAQ-listed stocks must still meet requirement (i)
above); or (iv) of an issuer with net tangible assets less than
$2,000,000 (if the issuer has been in continuous operation for at
least three years) or $5,000,000 (if in continuous operation for less
than three years), or with average annual revenues of less than
$6,000,000 for the last three years. Section 15(g) of the Exchange
Act, and Rule 15g-2 of the Commission require broker-dealers dealing
in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential
investors in the Company's common stock are urged to obtain and read
such disclosure carefully before purchasing any shares that are deemed
to be "penny stock." Rule 15g-9 of the Commission requires broker-
dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that
investor. This procedure requires the broker-dealer to (i) obtain from
the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has
sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the
investor with a written statement setting forth the basis on which the
broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming
that it accurately reflects the investor's financial situation,
investment experience and investment objectives. Compliance with these
requirements may make it more difficult for the Company's stockholders
to resell their shares to third parties or to otherwise dispose of them.

ITEM 7. FINANCIAL STATEMENTS.

Financial statements as of and for the year ended December 31, 2003,
and for the period ended December 31, 2002 are presented in a separate
section of this report following Part IV.

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

On January 23, 2003 , upon recommendation of its Board od Directors,
the Company dismissed  its certifying accountant, Eide Bailly LLP
("Edie").  Edie 's report on the Company's financial statements for
of the two fiscal years ended December  31, 2001 and 2000 did not
contain any adverse opinion or disclaimer of opinion, and was not
modified as to uncertainty, audit scope, or accounting principles.
There were no disagreements with Edie  on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure, during the two fiscal years ended December 31,
2001  and during the interim period ended January 23, 2003, which, if
not resolved to Edie's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection
with its report, as required by Item 304(a)(3) of Regulation S-B.
The Company  engaged Russell Bedford Stefanou Mirchandani LLP ("
Russell Bedford Stefanou Mirchandani") as its certifying accountant as
of April 9, 2003 for the  Company's fiscal year ending December 31,
2002. The Company has not consulted Russell Bedford Stefanou
Mirchandani previously.

ITEM 8A.  CONTROLS AND PROCEDURES.

     Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange
Commission's rules and forms.  Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports
that we file under the Exchange Act is accumulated and communicated
to our management, including our principal executive and financial
officers, as appropriate to allow timely decisions regarding required
disclosure.

     Evaluation of disclosure and controls and procedures.  As of the
end of the period covered by this Annual Report, we conducted an
evaluation, under the supervision and with the participation of our
chief executive officer and chief financial officer, of our
disclosure controls and procedures (as defined in Rules 13a-15(e) of
the Exchange Act).  Based on this evaluation, our chief executive
officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commission rules and forms.

     Changes in internal controls over financial reporting.  There
was no change in our internal controls, which are included within
disclosure controls and procedures, during our most recently
completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal controls.

PART III.

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

Officers and Directors.

The names and respective positions of the directors, executive
officers, and key employees of the Company are set forth below; there
are no other promoters or control persons of the Company. The
directors named below will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and
have qualified. Directors are elected for a one-year term at the
annual stockholders' meeting. Officers will hold their positions at
the will of the board of directors, absent any employment agreement.
There are no arrangements, agreements or understandings between non-
management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence
the management of the Company's affairs. The directors and executive
officers of the Company are not a party to any material pending legal
proceedings.

James DeOlden, Esq. - Chief Executive Officer, Director

Mr. DeOlden, B.A. History (1996) from Virginia Commonwealth
University, J.D. (1998) from Whittier Law School, is an attorney
admitted to the California Bar and practices transactional and
securities law in Irvine, California.  Mr. DeOlden, in conjunction
with being a founder of CalbaTech, is limiting his practice of law to
focus on the growth and development of CalbaTech.  In his law
practice, Mr. DeOlden currently represents or has represented both
publicly-traded and private companies, with the focus being on
emerging growth companies in various stages of corporate existence or
development.

John Gordon, Ph.D. - Executive Vice President, Director

Dr. Gordon, B.Sc. Honors in Cell Biology (1982), Ph.D. Biochemistry
(1989) from the University of Glasgow is an experienced
immunologist/biochemist. Dr. Gordon is the pioneer of a biomedical
technology based on exploiting Compact Disc technology that is likely
to become the main alternative to "laboratory on a chip" technologies
used in drug screening and diagnostics. The bio-compact disc enables
chemical and biological testing to be performed within modified
optical discs, using either a stand-alone instrument that acts as the
optical disc reader, or a slightly modified disc drive that plugs into
a standard personal computer (PC).

Dr. Gordon's primary role will be to identify promising technologies
developed by others. Dr. Gordon has spent the last 20 years in the
life-sciences developing and researching technologies.

Edward H. Deese - President, Chief Operating Officer, Director

Mr. Deese, B.S. Economics (1985) from the University of California,
Irvine has been involved in entrepreneurial business development for
the past 17 years. Most recently, Mr. Deese has served in several
interim capacities for publicly traded companies or subsidiaries
thereof.  Prior to this, Mr. Deese was a founder, Director, and Chief
Financial Officer of Burstein Technologies, Inc., an Irvine,
California bio-technology company. At Burstein Technologies, he
assisted in raising over $35 million in private equity funding. Prior
to Burstein Technologies, Mr. Deese served in a variety of
entrepreneurial ventures, including three companies that went public
through IPOs.

David Killen - Director of Marketing and Business Development

Mr. Killen has 13 years of experience in designing, structuring and
implementing sales and marketing processes to provide capital
equipment, consumables and software to the Life Science/Biotechnology
markets. Following his undergraduate and postgraduate training in
Molecular Genetics and Molecular Biology at the University of Glasgow
in Scotland, Mr. Killen joined International Biotechnologies Inc. in
Cambridge England as part of a start-up team that established market
presence for IBI in the UK. After relocating to the United States, he
spent several years with Kodak Scientific Imaging Systems before
joining Schleicher and Schuell (Dassel, Germany) as USA Life Sciences
Marketing Manager. Most recently, Mr. Killen worked as Business
Manager for Genetix (New Milton England) to develop their operations
in the Eastern USA.

Scientific Advisory Board

The Company has engaged the services of the following individuals as
members of its Scientific Advisory Board.  Members are encouraged to
submit new ideas to the Company and to advise the Company on its
business activities, technology and product development.

Kary B. Mullis, Ph.D.

Dr. Kary Mullis received the 1993 Nobel Prize in chemistry for his
invention of the polymerase chain reaction (PCR).  The process, which
Dr. Mullis conceptualized in 1983, is hailed as one of the monumental
scientific techniques of the twentieth century.  A method of
amplifying DNA, PCR multiplies a single microscopic strand of genetic
material billions of times within minutes.  The process has multiple
applications in medicine, genetics, biotechnology, and forensics.
Dr. Mullis has authored several major patents.  His patented
inventions include the PCR technology and an UV-sensitive plastic
that changes color in response to light.

From 1973 to 1977, Dr. Mullis was a postdoctoral fellow in pediatric
cardiology at the University of Kansas Medical School, with an
emphasis in the areas of angiostensin and pulmonary vascular
physiology.  From 1977 to 1979, Dr. Mullis did postdoctoral work in
pharmaceutical chemistry at the University of California in San
Francisco.  Dr. Mullis joined the Cetus Corporation in California as
a DNA chemist in 1979 where he conducted research on oligonucleotide
synthesis and invented the polymerase chain reaction. In 1986, Dr.
Mullis was named director of molecular biology at Xytronyx, Inc. in
San Diego, where his work concentrated on DNA technology and
photochemistry.  In 1987, Dr. Mullis began consulting on nucleic acid
chemistry for more than a dozen corporations, including: Angenics,
Cytometrics, Eastman Kodak, Abbott Labs, Milligen/Biosearch and
Specialty Laboratories.

Dr. Mullis holds a Ph.D. from the University of California at
Berkeley and a B.S. from the Georgia Institute of Technology.

David O'Bryan, Ph.D.

Dr. O'Bryan, B.S. (1969) from Boston College, Ph.D., Medical Sciences
- Biochemistry from Boston University Medical School, served as a
senior vice president at SmithKline Beecham Clinical Labs. Dr.
O'Bryan has spent 28+ years working in the clinical testing industry.
Dr. O'Bryan is extremely well connected in the diagnostic industry
and has significant experience in gaining access to new technology.
On behalf of SmithKline Beecham Clinical Labs, he negotiated the
first license to PCR from Roche Diagnostics. In the last two years,
he secured the first license to HCV nucleic acid testing from Chiron
Diagnostics and a license for the exclusive use of patented gene
sequences used to diagnose Hereditary Hemachromatosis from Progenitor
with an ability to sub license other service providers. Dr. O'Bryan
is playing a major role in strategy development.

Gerald C. Huth, Ph.D.

Dr. Huth, Ph.D. in Physics has a long successful history of
innovative product development beginning with his invention of the
Avalanche Photodetection sensors, and revolutionary invention which
replaced photomultiplier tubes with a solid state silicon equivalent.
Dr. Huth created and directed the Department of Physics at the
University of Southern California where many technologies were
created and developed for commercial applications through a long
association with the NIH and the DOE.  In 1985 Dr. Huth founded
Xsirius Scientific, Inc. to commercialize ideas generated by
university colleagues around the world.  Xsirius Scientific was
completed an IPO in 1986 and was listed on NASDAQ.  Two subsidiaries
of Xsirius were also developed by Dr. Huth and completed IPOs and
were listed on NASDAQ.  Dr. Huth is actively providing new ideas and
intellectual property to CalbaTech.

Paul Heaney, Ph.D.

Dr. Heaney, Ph.D. Medicinal Chemistry, has a successful track record
of leading and managing technology innovation, development and
product commercialization in many fields of Life Sciences, including
Biotechnology, Clinical Diagnostics and Pharmaceutical Discovery. His
two most recent companies, Sequenom and Orchid Biosciences, achieved
tremendous initial public offering success and are leaders in their
fields of genomics, biochemical analysis and lab-on-chip
instrumentation. As Executive Vice President of Research and
Technology at Sequenom, Dr. Heaney's team was responsible for the
development of the highly acclaimed and commercially successful chip-
based MassARRAY Genotyping Platform. This platform, which has become
the industry standard for Genetic Variation Analysis, was chosen by
leaders of the Human Genome Project at the Whitehead Institute and
the Sanger Centre.

(b)  Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons holding 10% or more
of the Company's common stock to file reports regarding their
ownership and regarding their acquisitions and dispositions of the
Company's common stock with the Securities and Exchange Commission.
Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the fiscal year ended December 31, 2003
and subsequently, the Company is unaware that any required reports
were not timely filed.

ITEM 10. EXECUTIVE COMPENSATION.

No other executive officer of the Company received total salary and bonus
in excess of $100,000 during the fiscal year ended December 31, 2003
and prior.

                       Summary Compensation Table




<TABLE>
<CAPTION>
                           Annual compensation                      Long-term Compensation
                                                                 Awards           Payouts
Name and                                  Other           Restricted   Securities
principal                                 annual            stock     underlying      LTIP    All other
position       Year     Salary   Bonus   compensation     award(s)
options/SARs    payouts compensation
  (a)          (b)       (c)      (d)       (e)            (f)          (g)            (h)      (i)
<S>            <C>      <C>       <C>     <C>             <C>         <C>             <C>       <C>

James DeOlden  2003    $142,083(1) 95,000(1) 25,295(1)     $60,000       0              0        0
CEO            2002       0        0         0              0            0              0        0
               2001       0        0         0              0            0              0        0
Edward Deese   2003    $142,083(1) 95,000(1) 25,295(1)     $60,000       0              0        0
President      2002       0        0         0              0            0              0        0
COO            2001       0        0         0              0            0              0        0
John Gordon    2003    $142,083(1) 95,000(1) 25,295(1)     $60,000       0              0        0
CTO            2002       0        0         0              0            0              0        0
               2001       0        0         0              0            0              0        0
</TABLE>



(1) Contractual agreements with James DeOlden, Edward Deese and John
Gordon as officers have been attached to previous filings.  Mr. DeOlden,
received only $14,000 in actual cash payments in 2003, Mr. Deese received
only $62,500 in actual cash payments in 2003 and Mr. Gordon received $0
in actual cash payments in 2003.  As these salaries have not been paid in
full, either in payments in restricted stock nor cash, such outstanding
amounts have carried over through 2004.

(2) Through the acquisition agreement between CalbaTech and Traffic
Tech, restricted shares were issued for all shareholders of the
formerly private company, CalbaTech.  Such issuance was a tax-free
exchange and no value was placed upon those issuances.
Insurance Plans

The Company currently does not provide medical and/or dental plan
benefits to any of its employees, but at such time as the Company has
the resources necessary to provide such benefits, intends to provide
these benefits to its full-time employees.

Other Benefit Plans

Stock Option Plan.

The Company adopted a Stock Option Plan in 2003 and allocated
10,000,000 shares to this plan.  The purpose of this plan will be as follows:

A.  Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;

B.  Encourage selected employees, directors and consultants to
accept or continue employment or association with the
Company; and

C.  Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation
in the growth in value of the common stock of the Company..
The Company had not issued any Stock Options pursuant to the Plan
included therein to any employees as of December 31, 2003.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 31, 2004.  This
chart reflects the number of shares held by those shareholders controlling
more than five percent, those shareholders that are officers and/or
directors, as well as a collective group of all of the above.

                                    OWNERSHIP

Name                   Number of Shares of         Approximate Percent
                         Common Stock              of Common Shares Owned

Edward H. Deese           4,787,482                       21.47

James DeOlden             4,978,413                       22.32

John F. Gordon            5,007,218                       22.45

Group: All Officers/
Directors (1)            14,773,113                       66.24

All Shares Outstanding   22,302,902                      100.00

1.  This total number encompasses three persons.

(1) Each person has sole voting power and sole dispositive power as
to all of the shares shown as beneficially owned by them.

(2) Other than as provided for in Employment Agreements, previously
filed, none of these security holders has the right to acquire any
amount of the shares within sixty days from options, warrants, rights,
conversion privilege, or similar obligations. The amount owned is
based on issued common stock, as well as stock options that are
currently exercisable.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the past two years, and not as otherwise disclosed of in any
other filing, there have not been any transactions that have occurred
between the Company and its officers, directors, and five percent or
greater shareholders, unless listed below.

From time to time the Company's officers and shareholders advance
funds to the Company.  The note payable-related parties balance
outstanding was $36,635 and $30,000 as of December 31, 2003 and
2002 respectively.  No formal arrangements or repayment terms exist.

Certain of the officers and directors of the Company are engaged in
other businesses, either individually or through partnerships and
corporations in which they have an interest, hold an office, or serve
on a board of directors. As a result, certain conflicts of interest
may arise between the Company and its officers and directors. The
Company will attempt to resolve such conflicts of interest in favor of
the Company. The officers and directors of the Company are accountable
to it and its shareholders as fiduciaries, which requires that such
officers and directors exercise good faith and integrity in handling
the Company's affairs. A shareholder may be able to institute legal
action on behalf of the Company or on behalf of itself and other
similarly situated shareholders to recover damages or for other relief
in cases of the resolution of conflicts is in any manner prejudicial
to the Company.

PART IV.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM

8-K.

Exhibits.

Exhibits included or incorporated by reference in this document are
set forth in the Exhibit Index.

Index to Financial Statements and Schedules.                      Page

Audit Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements

Reports on Form 8-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The following table sets forth fees billed to us by our auditors
during the years ended December 31, 2003 and 2002 for: (i) services
rendered for the audit of our annual financial statements and the
review of our quarterly financial statements, (ii) services by our
auditor that are reasonably related to the performance of the audit or
review of our financial statements and that are not reported as Audit
Fees, (iii) services rendered in connection with tax compliance, tax
advice and tax planning, and (iv) all other fees for services rendered.

                                  December 31, 2003     December 31, 2002

(i)     Audit Fees                   45,325.90                  0
(ii)    Audit Related Fees                   0                  0
(iii)   Tax Fees                             0                  0
(iv)    All Other Fees                       0                  0

Total fees

     AUDIT FEES. Consists of fees billed for professional services
rendered for the audit of CalbaTech's consolidated financial
statements and review of the interim consolidated financial statements
included in quarterly reports and services that are normally provided
by our auditors in connection with statutory and regulatory filings or
engagements.

     AUDIT-RELATED FEES. Consists of fees billed for assurance and
related services that are reasonably related to the performance of the
audit or review of CalbaTech, Inc.'s consolidated financial statements
and are not reported under "Audit Fees." There were no Audit-Related
services provided in fiscal 2003 or 2002.

     TAX FEES. Consists of fees billed for professional services
for tax compliance, tax advice and tax planning. There were no tax
services provided in fiscal 2003 or 2002.

     ALL OTHER FEES. Consists of fees for products and services
other than the services reported above. There were no management
consulting services provided in fiscal 2003 or 2002.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-
AUDIT SERVICES OF INDEPENDENT AUDITORS

     The Company currently does not have a designated Audit
Committee, and accordingly, the Company's Board of Directors' policy
is to pre-approve all audit and permissible non-audit services
provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any pre-
approval is detailed as to the particular service or category of
services and is generally subject to a specific budget. The
independent auditors and management are required to periodically
report to the Company's Board of Directors regarding the extent of
services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. The
Board of Directors may also pre-approve particular services on a case-
by-case basis.

                               CERTIFICATION

I, James DeOlden, certify that:

1.   I have reviewed this report on Form 10-KSB of CalbaTech, Inc.;

2.   Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for the periods presented in
this report;

4.   The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14 for the registrant
and have:

     a)   designed  such  disclosure  controls  and  procedures  to
ensure  that material  information  relating  to  the  registrant,
including  its consolidated subsidiaries,  is made known to us by
others within those entities,  particularly  during  the  period in
which  this  report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions
about  the effectiveness  of the disclosure  controls and procedures
based on our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);

     a)   all  significant  deficiencies  in the design or operation
of internal controls  which could  adversely  affect the  registrant's
ability to record,  process,  summarize,  and  report  financial  data
and  have identified for the  registrant's  auditors any material
weaknesses in internal controls; and

     b)   any fraud, whether or not material,  that involves
management or other employees who have a  significant  role in the
registrant's  internal controls; and

6.   The  registrant's  other  certifying  officers and I have
indicated in this report whether or not there were significant
changes in internal controls  or in other  factors  that could
significantly  affect  internal controls  subsequent to the date of
our most recent  evaluation,  including any  corrective  actions,
with  regard  to  significant  deficiencies  and material weaknesses.

Date:  May 4, 2004

/s/ James DeOlden
James DeOlden, CEO and Secretary


                               CERTIFICATION

I, Edward Deese, certify that:

1.   I have reviewed this report on Form 10-KSB of CalbaTech, Inc.;

2.   Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;

3.   Based on my knowledge, the financial statements and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for the periods presented in
this report;

4.   The  registrant's  other  certifying  officers  and I are
responsible  for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to
ensure  that material  information  relating  to  the  registrant,
including  its consolidated subsidiaries,  is made known to us by
others within those entities,  particularly  during  the  period in
which  this  report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this report (the "Evaluation Date"); and

     c)   presented  in  this  report  our  conclusions about  the
effectiveness  of the disclosure  controls and procedures based on our
evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);

     a)   all  significant  deficiencies  in the design or operation
of internal controls  which could  adversely  affect the  registrant's
ability to record,  process,  summarize,  and  report  financial  data
and  have identified for the  registrant's  auditors any material
weaknesses in internal controls; and

     b)   any fraud, whether or not material,  that involves
management or other employees who have a  significant  role in the
registrant's  internal controls; and

6.   The registrant's other certifying officers and I have indicated
in this report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions, with regard to
significant deficiencies and material weaknesses.

Date:  May 4, 2004

/s/ Edward Deese
Edward Deese, President and Treasurer

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.

                                       CalbaTech, Inc.

Dated: May 4, 2004                  By: /s/ James DeOlden
                                       James DeOlden, CEO


Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the date indicated:

Signature                  Title                            Date

/s/ James DeOlden        CEO/Secretary/Director            May 4, 2004
James DeOlden

/s/Edward Deese          President/Treasurer/Director      May 4, 2004
Edward Deese

/s/John Gordon, PhD      Vice-President/CTO/Director       May 4, 2004
John Gordon, PhD


                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                         FINANCIAL STATEMENTS AND SCHEDULES

                             DECEMBER 31, 2003 AND 2002

                            FORMING A PART OF ANNUAL REPORT
                   PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
                                  CALBATECH, INC.

                                           F-1

                                   CALBATECH, INC.
                             INDEX TO FINANCIAL STATEMENTS

Index to Financial Statements                                          PAGE

Report of Independent Certified Public Accountants                      F-3

Balance Sheets at December 31, 2003 and 2002                            F-4

Statements of Losses for the year ended December 31, 2003 and
the period April 29, 2002 to
December 31, 2002 and the period April 29, 2002 (date of
inception) to December 31, 2003                                         F-5

Statements of Deficiency in Stockholders' Equity for the period
April 29, 2002
(date of inception) to December 31, 2003                          F-6 - F-8

Statements of Cash Flows for the year ended December 31, 2003
and period ended
April 29, 2002 to December 31, 2002 and the period April 29,
2002 (date of inception)
to December 31, 2003                                             F-9 - F-11

Notes to Financial Statements                                    F-12- F-29

                                         F-2

                            CERTIFIED PUBLIC ACCOUNTANTS


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Calbatech, Inc.
Irvine, CA 90064


We have audited the accompanying balance sheets of Calbatech,
Inc., a development stage company, as of December 31, 2003 and
2002 and the related statements of losses, deficiency in
stockholders' equity and cash flows for the year ended December
31, 2003 and the period from April 29, 2002 (date of inception)
to December 31, 2002 and for the period April 29, 2002 (date of
inception) through December 31, 2003. These financial statements
are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial
statements based upon 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 misstatements. 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 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 Calbatech, Inc. as of December 31, 2003 and 2002, and the
results of its operations and its cash flows for the year ended
December 31, 2003 and the period April 29, 2002 (date of
inception) to December 31, 2002 and from April 29, 2002 (date of
inception) to December 31, 2003, 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 the Note P to the accompanying financial
statements, the Company is in the development stage and has not
established a source of revenues. This raises substantial doubt
about the Company's ability to continue as a going concern.
Management's plans in regard to this matter are described in
Note P. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


/s/RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
Russell Bedford Stefanou Mirchandani LLP
Certified Public Accountants
McLean, Virginia
April 13, 2004

                                        F-3

                                  CALBATECH, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS


                                                             December 31,
                                                           2003        2002

ASSETS

CURRENT ASSETS:
Cash and cash equivalents                                 $   17,894  $ 26,228
Accounts receivable                                           10,763         -
Deposits                                                           -   200,000
    Total Current Assets                                      28,657   226,228

Property, plant and equipment: (Note D)                       29,542         -
 Less: accumulated depreciation                               (2,163)        -
Total property, plant and equipment                           27,379         -

Total Assets                                                  56,036   226,228

LIABILITIES AND (DEFICIENCY) IN STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable and accrued  expenses (Note L)          1,130,903    64,031
  Capital leases payable - short term portion (Note O)         8,915         -
  Notes payable - banks (Note F)                              61,276         -
  Notes payable (Note E)                                      50,000   100,000
  Convertible notes payable - current portion (Note G)       800,000         -
  Notes payable - related parties (Note K)                    36,635    30,000
    Total Current Liabilities:                             2,087,729   194,031

Long term debt
  Capital leases payable - long term (Note O)                  2,636         -
  Convertible notes payable - long term portion (Note G)           -   115,000
    Total Long Term Liabilities:                               2,636   115,000
(DEFICIENCY) IN STOCKHOLDERS' EQUITY (Note H)
Preferred stock, par value $0.001 per
share; 25,000,000 shares authorized and
0 shares issued and outstanding as of
December 31, 2003 and 2002                                         -         -
Common Stock, par value $0.001 per
share; 99,000,000 shares authorized,
15,856,393 and 9,999,999 shares issued
and outstanding as of December 31, 2003
and 2002 , respectively                                      15,856     10,000
Common stock subscription                                   137,700          -
Additional paid in capital                                1,705,740          -
Treasury stock, at cost                                     (10,935)         -
Accumulated deficit                                      (3,882,690)   (92,803)
  Total (Deficiency) in Stockholders' Equity             (2,034,329)   (82,803)

Total Liabilities and (Deficiency) in
Stockholders' Equity                                         56,036    226,228

               See accompanying notes to financial statements

                                          F-4

                                    CALBATECH, INC.
                              (A DEVELOPMENT STAGE COMPANY)
                            CONSOLIDATED STATEMENTS OF LOSSES



<TABLE>
<CAPTION>
                                                                For the Period from    For the Period from
                                                                 April 29, 2002          April 29, 2002
                                      For the Year Ended        (date of inception)    (date of inception)
                                         December 31,             to December 31,        to December 31,
                                             2003                      2002                  2003
<S>                                   <C>                         <C>                     <C>
REVENUES:
  Net sales                           $        11,782             $            -          $       11,782
  Cost of sales                                (5,634)                         -                  (5,634)
  Gross Profit                                  6,148                          -                   6,148

OPERATING EXPENSES
  General, selling and administrative       2,210,728                     92,125                2,302,853
  Goodwill impairment                       1,226,652                          -                1,226,652
  Depreciation                                  2,163                          -                    2,163
  Total Operating Expenses                  3,439,543                     92,125                3,531,668

LOSS FROM OPERATIONS                       (3,433,395)                   (92,125)              (3,525,520)
  Other Income (Expenses)                      44,403                          -                   44,403
  Interest Expense, net                      (276,561)                      (678)                (277,239)
  Income Taxes                                      -                          -                        -

NET LOSS                                   (3,665,553)                   (92,803)              (3,758,356)

Beneficial conversion
discount-preferred stock dividend            (124,334)                         -                 (124,334)
Net loss available to
common stockholders                        (3,789,887)                   (92,803)              (3,882,690)
Net loss per common share (basic and
assuming dilution)                              (0.32)                     (0.01)

Weighted average common shares
outstanding                                11,885,371                  9,919,027
</TABLE>



                    See accompanying notes to financial statements.

                                          F-5

                               CALBATECH, INC. ("CTI")
                             (A DEVELOPMENT STAGE COMPANY)
                     STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
               FOR THE PERIOD APRIL 29, 2002 (DATE OF INCEPTION) THROUGH
                                    DECEMBER 31, 2003




<TABLE>
<CAPTION>
                          Pref   Common    Common    Add'L    Treasury   Treasury   Subcrip  Common   Accumu  Total
                 Pref    Shares-  Shares    Shares    Paid     Shares     Stock       tion    Stock   lated   Def. In
                 Shares   Amount            Amount    in                  Amount     Shares   Subscrip Deficit Stock
                                                     Capital                                    tion          Holders
                                                                                                              Equity
<S>             <C>      <C>      <C>       <C>      <C>      <C>        <C>         <C>       <C>    <C>    <C>
Common Shares
of CTI issued
May 1, 2002 to
founders in
exchange of
services rendered
valued at $0.001
per share             -       -    8,599,999 $ 8,600    $     -      -   $       -        -   $     -   $ -   $  8,600
Common shares of CTI
issued May 1, 2002 to
founders in exchange
for cash at $0.001 per
share
                      -       -     1,400,000  1,400          -      -          -         -         -     -      1,400
Net Loss              -       -             -      -          -      -          -         -         -  92,803) (92,803)
Balance at December 31,
2002
                      -       -     9,999,999 10,000          -      -          -         -         - (92,803) (82,803)
Balance of TTI common
shares prior to merger
(post March 28, 2003
reverse split)
                      -       -     1,199,491  1,199          -      -          -         -         -       -    1,199
Issuance of TTI common
stock to CTI founders
in connection with
reverse merger (post
March 28, 2003 reverse
stock split)
                      -       -     5,766,591  5,767          -      -           -        -         -       -     5,767
Issuance of common
stock subscription to
founders in connection
with reverse merger
(post March 28, 2003
reverse stock split)
                      -      -              -      -          -      -           -   3,939,882  3,940       -     3,940
Assumption of treasury
stock in connection
with reverse merger on
March 28, 2003 (post
reverse split)
                      -      -             -       -          -  213,611   (10,935)          -      -       -  (10,935)
Cancellation of common
stock in connection
with reverse merger on
March 28, 2003
                      -      -   (9,999,999) (10,000)         -        -         -           -      -       -  (10,000)
Common Stock issued on
May 2, 2003 for
acquisition at $0.01
per share
                      -      -    3,939,882    3,940          -        -         -   (3,939,882) (3,940)    -         -
Common stock issued on
May 2, 2003 for
services rendered at
$0.59 per share
                      -      -      285,000      285    167,865        -         -            -       -     -   168,150
Common stock issued on
May 2, 2003 to officers
compensation at $0.59
per share
                      -      -      225,000      225    132,525        -         -            -      -      -   132,750
Common stock issued on
May 13, 2003 for
services rendered at
$1.02 per share
                             -       20,000       20     20,380        -         -            -      -      -    20,400
Common stock issued on
June 25, 2003 for
services rendered at
$0.59 per share
                    -       -      107,500       107     63,318        -         -            -      -      -   63,425

                                                  F-6
Issuance of common stock
subscription on July 1,
2002 in connection with
the acquisition of
Molecularware, Inc at
$0.46 per share
                    -       -            -         -          -        -         -    300,000  137,700     -   137,700
Common stock issued on
August 7, 2003 for
services rendered at
$0.27 per share
                    -       -       300,000      300    81,300         -         -          -        -     -   81,600
Common stock issued on
August 18, 2003 for
services rendered at
$0.33 per share
                    -       -       500,000      500   164,500         -         -          -        -     -   165,000
Common stock issued on
September 9, 2003 for
services rendered at
$0.36 per share
                    -       -       100,000      100    35,600         -         -          -        -     -   35,700
Preferred stock issued on
September 29, 2003 in
conversion of notes
payable at $1.00 per
share            117,000  117             -        -   116,883         -         -          -        -     -   117,000
Preferred stock issued on
September 29, 2003 in
payment of interest on
notes payable at $1.00
per share         7,334    7              -        -   7,327           -         -          -        -     -     7,334
Common stock issued on
October 2, 2003 for
services rendered at
$0.40 per share
                      -    -        330,000      330  131,670         -          -          -        -     -   132,000
Sale of common stock on
October 2, 2003 at $0.25
per share
                      -    -         40,000       40    9,960         -          -          -        -       -  10,000
Common stock issued on
November 5, 2003 for
services rendered at
$0.17 per share
                      -    -       300,000       300  50,700          -         -          -        -       -   51,000
Cancellation of
convertible preferred
shares due to debt
forgiveness (Note H)
               (33,403)  (33)            -         - (33,370)         -         -          -        -      -   (33,403)
Common stock issued on
November 19, 2003 for
services rendered at
$0.19 per share
                     -     -       140,000      140  26,460           -         -         -         -      -    26,600
Common stock issued on
December 4, 2003 for
services rendered at
$0.23 per share
                     -     -       440,000      440  100,760          -         -         -         -      -   101,200
Sale of common stock on
December 4, 2003 at $0.25
per share
                     -     -       400,000      400   99,600          -         -         -         -      -   100,000

                                                          F-7
Issuance of
common stock
on December
4, 2003 in
connection
with the
acquisition
of Molecular
Research Labs
at $0.40 per
share
                    -     -        500,000     500  199,500          -          -         -        -      -   200,000
Conversion of
preferred
stock to
common stock
on December
22, 2003 at
a conversion
rate of 13.88
shares of
common per
preferred share
          (90,931)    (91)     1,262,929    1,263   (1,172)         -          -          -       -      -          -
Beneficial
conversion
discount-
preferred
stock
dividend        -       -             -         -  124,334                                               -    124,334
Interest
expenses-
beneficial
conversion of
convertible
debentures
               -       -             -         -   200,000          -         -           -      -      -     200,000
Stock based
compensation
for
the issuance
of stock
options
to
consultants
in exchange
for services
(Note J)
             -      -               -         -     7,600           -        -            -     -      -       7,600
Net Loss
                -                                                                             (3,789,887) (3,789,887)
Balance as of
December 31, 2003
             -     -    15,856,393   15,856  1,705,740  213,611  (10,935)  300,000    137,700  (3,882,690) $(2,034,329)
</TABLE>



              See accompanying notes to financial statements.

                                         F-8

                                   CALBATECH, INC.
                           (A DEVELOPMENT STAGE COMPANY)
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





<TABLE>
<CAPTION>
                                                                For the Period from    For the Period from
                                                                 April 29, 2002          April 29, 2002
                                      For the Year Ended        (date of inception)    (date of inception)
                                         December 31,             to December 31,        to December 31,
                                             2003                      2002                  2003
<S>                                   <C>                         <C>                     <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                               $    (3,789,887)          $      (92,803)         $     (3,882,690)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Adjustments for depreciation                     2,163                        -                     2,163
Common stock issued in
connection
with reverse merger, net                       (10,029)                       -                   (10,029)
Common stock subscribed in
connection with acquisition of
 Molecular wave, Inc.                          137,700                        -                   137,700
Common stock issued in
connection with the acquisition
of Molecular Research Labs                     200,000                        -                   200,000
Stock based compensation for
the issuance of stock options
to consultants in exchange for
services (Note J)                                7,600                        -                     7,600
Beneficial conversion discount
-interest expenses in
connection with convertible debt               200,000                        -                   200,000
Beneficial conversion discount
-preferred stock dividend in
connection with convertible debt               124,334                        -                   124,334
Debt issued in connection with
acquisition                                    600,000                        -                   600,000
Debt assumed in connection with
acquisition                                     11,551                        -                    11,551
Common stock issued or
subscribed in connection with
services rendered                              845,075                    8,600                   853,675
Common stock issued for
officers compensation                          132,750                        -                   132,750
Bad debts written off                            9,211                        -                     9,211
Common stock issued as payment
for interest                                     7,334                        -                     7,334
Debt forgiveness- cancellation
of convertible preferred stock
(Note H)                                       (33,403)                       -                   (33,403)
(Increase)decrease in:
Accounts receivable                            (19,974)                       -                   (19,974)
Deposits                                       200,000                 (200,000)                        -
Increase (decrease) in:
Accounts payable                             1,066,872                   64,031                  1,130,903
Net cash used in operating
activities                                    (308,703)                (220,172)                  (528,875)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets                    (29,542)                       -                    (29,542)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock, net                              110,000                     1,400                   111,400
Proceeds from notes payable- banks              61,276                         -                    61,276
Advances from shareholder                        6,635                    30,000                    36,635
Payments for notes payable                     (52,500)                        -                   (52,500)
Proceeds from issuance of notes payable        204,500                   215,000                   419,500
Net cash provided by financing activities      329,911                   246,400                   576,311

Net (decrease)increase in cash
and cash equivalents:                           (8,334)                   26,228                    17,894

Cash and cash equivalents at
beginning of period                             26,228                         -                         -
Cash and cash equivalents at
end of period                                   17,894                    26,228                    17,894
</TABLE>



                       See accompanying notes to financial statements
                                             F-9

                                      CALBATECH, INC.
                               (A DEVELOPMENT STAGE COMPANY)
                    SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS



<TABLE>
<CAPTION>
                                                                For the Period from    For the Period from
                                                                 April 29, 2002          April 29, 2002
                                      For the Year Ended        (date of inception)    (date of inception)
                                         December 31,             to December 31,        to December 31,
                                             2003                      2002                  2003
<S>                                   <C>                         <C>                     <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for interest                                     9,912                        -                  9,912
Cash paid during the period for taxes                -                        -                      -
Common stock issued in exchange
for services                                   977,825                    8,600                986,425
Stock based compensation for
the issuance of stock options
to consultants in exchange for
services                                         7,600                        -                  7,600

Common stock issued in
connection with reverse merger, net             10,906                        -                 10,906
Acquisition of Traffic
Technology Inc.
Excess of assets acquired over
liabilities assumed                           (211,997)                       -               (211,997)
Common stock retained                           11,997                        -                 11,997
Treasury stock assumed                         (57,666)                       -                (57,666)
Goodwill impaired                             (257,666)                       -               (257,666)

Acquisition of Molecularware :
Excess of assets acquired
over liabilities assumed                      (23,872 )                       -                (23,872)
Convertible debt issued                       600,000                         -                600,000
Common stock issued                           137,700                         -                137,700
Goodwill impaired                            (713,828)                        -               (713,828)

Acquisition of Molecular
Research Lab :
Excess of liabilities assumed
over assets acquired                           55,158                         -                 55,158

Common stock issued                           200,000                         -                200,000

Goodwill acquired/impaired                   (255,158)                        -               (255,158)
</TABLE>



                     See accompanying notes to financial statements
                                            F-10


                                    CALBATECH, INC.
                             (A DEVELOPMENT STAGE COMPANY)
                             NOTES TO FINANCIAL STATEMENTS
                              DECEMBER 31, 2003 AND 2002

NOTE A - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the
preparation of the accompanying financial statements follows.

Business and Basis of Presentation

Calbatech Inc, (formerly Traffic Technology Inc.) ("Company")
was organized on April 29, 2002 under the laws of the state of
Nevada. The Company is a development stage enterprise, as
defined by Statement of Financial Accounting Standards No. 7
("SFAS No. 7") and is focused on incubating life science based
companies that are developing next generation products and
technologies.

Also, Company through its subsidiary - Molecula Research
Laboratories, LLC is focused on gene function solutions using
RNAi technology.  Its proprietary computer algorithm -
T.A.R.G.E.T.* (The Advanced RNAi Guidance Evaluation Technology)
system and 10 years of gene silencing experience, allows
Molecula to consistently deliver active RNA duplexes for
specific target gene silencing.  Molecula also develops and
sells numerous research reagents for cell  transfection, DNA and
RNA purification, protein expression, microarray analysis, gene
expression analysis and other innovative and fundamental
products.

From its inception through the date of these financial
statements the Company has incurred significant operating
expenses. Consequently, its operations are subject to all risks
inherent in the establishment of a new business enterprise. As
of December 31, 2003, the Company has accumulated losses of
$(3,882,690) which include goodwill impairment of $(1,226,652)
for the year ended December 31, 2003.

The consolidated financial statements include the accounts of
the Registrant, its wholly owned subsidiary, Molecularware, Inc.
and its majority  owned subsidiary, Molecula Research
Laboratories, LLC and that of Traffic Technology, Inc. with whom
the Registrant merged. All significant inter-company
transactions and balances have been eliminated in consolidation.

Acquisitions and Capital Restructure

On January 3, 2003, the Company completed an Agreement and Plan
of Exchange ("Agreement") with Traffic Technology, Inc.
("Traffic").  As a result of the acquisition, there was a change
in control of the public entity, and Traffic Technology, Inc.
changed its name to CalbaTech, Inc.  For accounting purposes,
the Company shall be the surviving entity. The transaction is
accounted for using the purchase method of accounting. The total
purchase price and carrying value of net assets acquired of
Traffic was $200,000 of which $100,000 was paid in cash and
$100,000 was paid in notes payable.  The results of operations
of Traffic subsequent to the Agreement are included in the
Company's consolidated statement of losses.

Effective with the Agreement, all previously outstanding common
stock, preferred stock, options and warrants owned by the
Company's stockholders were exchanged for an aggregate of
5,766,591 shares of Traffic's common stock and a common stock
subscription of 3,939,882 shares.  The value of the stock that
was issued was the historical cost of Traffic's net tangible
assets, which did not differ materially from their fair value.
The value of the 1,199,491 shares of common stock that were
retained by Traffic's stockholders was based on the par value of
$.001 per share of Traffic's common stock. In accordance with
SFAS No. 141, CalbaTech is the acquiring entity.

                               F-11

The total consideration paid was $257,666 and the significant
components of the transaction are as follows:

Common stock retained by
Traffic shareholders                   $     11,997
Excess of assets acquired over
liabilities assumed                        (211,997)
Treasury stock assumed
(57,666)
Goodwill impaired                           257,666

On July 1, 2003, the Company acquired Molecularware, Inc., as a
wholly owned subsidiary.  Molecularware, Inc. was acquired by
issuance of common stock subscriptions totaling 300,000 shares
valued at the time acquisition at $137,700.  In addition, the
Company issued 12% convertible debt totaling $600,000 as
settlement of the outstanding liabilities of Molecularware, Inc.
(Note E).  The convertible debt can be converted in to shares of
Company's common stock within thirty days after the effective date
a registration statement is filed with the Securities and Exchange
Commission ("SEC") at a conversion price equal to twenty percent
of the closing price of the Company's common stock on the date of
the conversion.

The total consideration paid was $713,828 and the significant
components of the transaction are as follows:

Common stock issued                $    137,700
Convertible debt issued                 600,000
Excess of assets acquired over
liabilities assumed                     (23,872)
Goodwill impaired                       713,828

In October 2003, the Company acquired Molecula Research
Laboratories, LLC (Molecula), Herndon, Virginia, a leading company
in gene silencing technologies for gene and protein function
studies by acquiring eighty percent of the shares of the company
which was held by the CEO of the company. The Company issued
500,000 shares of common stock valued at $200,000 for acquisition.
The remaining twenty percent of the shares continue to be held by
Media Tech, Inc.

The total consideration paid was $255,158 and the significant
components of the transaction are as follows:

Common stock issued                                        $ 200,000
Excess of liabilities assumed over assets acquired            55,158
Goodwill impaired                                            255,158

                                  F-12

Revenue Recognition

For revenue from product sales, the Company recognizes revenue
in accordance with SEC Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101").  SAB
101 requires that four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling price is
fixed and determinable; and (4) collectibility is reasonably
assured. Determination of criteria (3) and (4) are based on
management's judgments regarding the fixed nature of the selling
prices of the products delivered and the collectibility of those
amounts.  Provisions for discounts and rebates to customers,
estimated returns and allowances, and other adjustments are
provided for in the same period the related sales are recorded.
The Company defers any revenue for which the product has not
been delivered or is subject to refund until such time that the
Company and the customer jointly determine that the product has
been delivered or no refund will be required.

Use of Estimates

The preparation of the financial statement in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures.  Accordingly, actual results could
differ from those estimates.

Foreign Currency Translation

The Company translates the foreign currency financial statements
in accordance with the requirements of Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation."
Assets and liabilities are translated at current exchange rates,
and related revenue and expenses are translated at average
exchange rates in effect during the period.  Resulting
translation adjustments are recorded as a separate component in
stockholders' equity.  Foreign currency translation gains and
losses are included in the statement of operations.

Cash Equivalents

For the purpose of the accompanying financial statements, all
highly liquid investments with a maturity of three months or
less are considered to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or market determined
by the first-in, first-out (FIFO) method.  Inventories consist
of products available for sale to distributors and customer. At
December 31, 2003 and 2002, the Company did not have any
inventory.

Property and Equipment

Property and equipment is stated at cost. Depreciation is
calculated using the straight-line method over the estimated
useful lives of the assets.

                               F-13

Long-Lived Assets

The Company has adopted Statement of Financial Accounting
Standards No. 144 ("SFAS 144"). The Statement requires that
long-lived assets and certain identifiable intangibles held and
used by the Company be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in
business conditions, recurring losses, or a forecasted inability
to achieve break-even operating results over an extended period.
The Company evaluates the recoverability of long-lived assets
based upon forecasted undercounted cash flows. Should an
impairment in value be indicated, the carrying value of
intangible assets will be adjusted, based on estimates of future
discounted cash flows resulting from the use and ultimate
disposition of the asset.  SFAS No. 144 also requires assets to
be disposed of be reported at the lower of the carrying amount
or the fair value less costs to sell.

Impairment of Long-Lived Assets

The Company has adopted Statement of Financial Accounting
Standards No. 144 (SFAS 144). The Statement requires that long-
lived assets and certain identifiable intangibles held and used
by the Company be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Events relating to recoverability
may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to
achieve break-even operating results over an extended period.
The Company evaluates the recoverability of long-lived assets
based upon forecasted undercounted cash flows. Should an
impairment in value be indicated, the carrying value of
intangible assets will be adjusted, based on estimates of future
discounted cash flows resulting from the use and ultimate
disposition of the asset.  SFAS No. 144 also requires assets to
be disposed of be reported at the lower of the carrying amount
or the fair value less costs to sell.

Income Taxes

The Company has adopted Financial Accounting Standards No. 109
("SFAS 109") which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences
of events that have been included in the financial statement or
tax returns.  Under this method, deferred tax liabilities and
assets are determined based on the difference between financial
statements and the tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the
differences are expected to reverse.  Temporary differences
between taxable income reported for financial reporting purposes
and income tax purposes are insignificant.

Research and Development

The Company accounts for research and development costs in
accordance with the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 2 ("SFAS 2"),
"Accounting for Research and Development Costs".  Under SFAS 2,
all research and development costs must be charged to expense as
incurred.  Accordingly, internal research and development costs
are expensed as incurred.  Third-party research and developments
costs are expensed when the contracted work has been performed
or as milestone results have been achieved.  Company-sponsored
research and development costs related to both present and
future products are expensed in the period incurred.  The
Company expenditures of $71,038 and $0, on research and product
development for the year ended December 31, 2003 and for the
period April 29, 2002 (date of inception) to December 31, 2002.

                             F-14

Advertising

The Company follows the policy of charging the costs of
advertising to expenses incurred.  The Company charged to
operations $6,590 and $0,as advertising costs for the year ended
December 31, 2003 and for the period April 29, 2002 (date of
inception) to December 31, 2002, respectively.

Comprehensive Income

Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income," establishes standards
for reporting and displaying of comprehensive income, its
components and accumulated balances.  Comprehensive income is
defined to include all changes in equity except those resulting
from investments by owners and distributions to owners.  Among
other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements.  The Company does not have any items of
comprehensive income in any of the periods presented.

Segment Information

The Company has adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise
and Related Information ("SFAS 131") in the years ended December
31, 2001 and subsequent years. SFAS 131 establishes standards
for reporting information regarding operating segments in annual
financial statements and requires selected information for those
segments to be presented in interim financial reports issued to
stockholders.  SFAS 131 also establishes standards for related
disclosures about products and services and geographic areas.
Operating segments are identified as components of an enterprise
about which separate discrete financial information is available
for evaluation by the chief operating decision maker, or
decision making group, in making decisions on how to allocate
resources and assess performance.

Stock Based Compensation

In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment
of SFAS 123." This statement amends SFAS No. 123, "Accounting
for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary charge to the fair value based method
of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method
used on reported results. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value
method prescribed in APB Opinion No. 25 and related
interpretations. Accordingly, compensation expense for stock
options is measured as the excess, if any, of the fair market
value of the Company's stock at the date of the grant over the
exercise price of the related option. The Company has adopted
the annual disclosure provisions of SFAS No. 148 in its
financial reports for the year ended December 31, 2002 and
subsequent years.

                               F-15

Had compensation costs for the Company's stock options been
determined based on the fair value at the grant dates for the
awards, the Company's net loss and losses per share would have
been as follows (transactions involving stock options issued to
employees and Black-Scholes model assumptions are presented in
Note J):

                              For the year ended      For the period April 29,
                               December 31, 2003        2002 (date of
                                                          inception to
                                                        December 31, 2002
Net loss - as reported            $ (3,789,887)          $  (92,803)
Add: Total stock based
employee compensation
expense as reported
under intrinsic value
method (APB. No. 25)                         -                    -
Deduct: Total stock
based employee
compensation expense as
reported under fair
value based method (SFAS
No. 123)                                     -                   -
Net loss - Pro Forma                (3,789,887)            (92,803)
Net loss attributable to
common stockholders -
Pro forma                           (3,789,887)            (92,803)
Basic (and assuming
dilution) loss per share
- as reported                            (0.32)              (0.01)
Basic (and assuming
dilution) loss per share
- Pro forma                              (0.32)              (0.01)

Net Loss per Share

The Company has adopted Statement of Financial Accounting
Standard No. 128, "Earnings Per Share" ("SFAS 128"), specifying
the computation, presentation and disclosure requirements of
earnings per share information.  Basic earnings per share have
been calculated based upon the weighted average number of common
shares outstanding.  Stock options and warrants have been
excluded as common stock equivalents in the diluted earnings per
share because they are either anti dilutive, or their effect is
not material.  There is no effect on earnings per share
information for the year ended December 31, 2003 relating to the
adoption of this standard.

Liquidity

As shown in the accompanying financial statements, the Company
incurred a net loss of $(3,789,887) and $(92,803) during the
year ended December 31, 2003 and during the period April 29,
2002 (date of inception) through December 31, 2002,
respectively.  The Company's total liabilities exceeded its
total assets by $2,059,072 as of December 31, 2003.

Concentration of Credit Risk

Financial instruments and related items, which potentially
subject the Company to concentrations of credit risk, consist
primarily of cash, cash equivalents and trade receivables.  The
Company places its cash and temporary cash investments with high
credit quality institutions.  At times, such investments may be
in excess of the FDIC insurance limit. The Company periodically
reviews its trade receivables in determining its allowance for
doubtful accounts. At December 31, 2003 and 2002, allowance for
doubtful account balance was $0.

                                   F-16

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities." Interpretation 46
changes the criteria by which one company includes another
entity in its consolidated financial statements. Previously, the
criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's
residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that
entity. The consolidation requirements of Interpretation 46
apply immediately to variable interest entities created after
January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements
apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established.
The Company does not expect the adoption to have a material
impact to the Company's financial position or results of operations.

In April 2003, the FASB issued Statement No.149, "Amendment of
Statement of 133 on Derivative Instruments and Hedging
Activities ", which amends Statement 133, Accounting for
Derivative Instruments and Hedging Activities. The adoption of
this statement did not have a material impact on the Company's
financial position.

In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity. The adoption of this statement did not
have a material impact on the Company's financial position.

In December 2003, the FASB issued SFAS No. 132 (revised),
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT
BENEFITS - AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, AND 106.
This statement retains the disclosure requirements contained in
FASB statement no. 132, Employers' Disclosures about Pensions
and Other Postretirement Benefits, which it replaces. It
requires additional disclosures to those in the original
statement 132 about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other
defined benefit postretirement plans. The required information
should be provided separately for pension plans and for other
postretirement benefit plans. The revision applies for the first
fiscal or annual interim period ending after December 15, 2003
for domestic pension plans and June 15, 2004 for foreign pension
plans and requires certain new disclosures related to such
plans. The adoption of this statement will not have a material
impact on the Company's results of operations or financial positions.

Reclassification

Certain prior period amounts have been reclassified for
comparative purposes.

NOTE B - IMPAIRMENT OF GOODWILL

The Company has adopted Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets" (SFAS
No. 142) effective April 29, 2002 (date of inception). SFAS No.
142 addresses how intangible assets that are acquired
individually or with a group of other assets should be accounted
for in financial statements upon their acquisition. This
statement requires goodwill amortization to cease and for
goodwill to be periodically reviewed for impairment.

                                 F-17

Under SFAS No. 142, goodwill impairment occurs if the net book
value of a reporting unit exceeds its estimated fair value. The
Company has performed impairment tests periodically and has
written off $(1,226,652)  and $0 for goodwill impairment for the
year ended December 31, 2003 and 2002, respectively mainly due
to the followings:

     - Significant operating losses

     - Lack of revenues and profitability

As a result of these events and circumstances, Company
management believes that more likely than not the fair value of
the reporting unit's goodwill has been reduced below its
carrying value. As a result, management performed an evaluation
of the reporting unit's tangible and intangible assets for
purposes of determining the implied fair value of goodwill at
various dates. Upon completion of the assessment, management
recorded a non-cash impairment charge of $(1,226,652), net of
tax, or $(0.10) per share for the year ended December 31, 2003
and $0 or $(0.0) per share for the period from April 29, 2002
(date of inception) to December 31, 2002, to reduce the carrying
value of goodwill in this reporting unit to its estimated value of $ 0.

Considerable management judgment is necessary to estimate fair
value. Accordingly, actual results could vary significantly from
managements' estimates.

NOTE C - DEPOSIT

On December 12, 2002, the Company had entered into an Agreement
and Plan of Exchange ("Agreement") hereby Traffic Technology,
Inc. ("Traffic") would acquire the Company in exchange for
$200,000. The Agreement was consummated on January 3, 2003 (see
Note M).  Concurrent with entering into the Agreement, the
Company deposited with Traffic an aggregate amount of $200,000,
comprised of $100,000 in cash and promissory note payable to
significant shareholders of Traffic in the amount of $100,000.
In May 2003, $50,000 was paid towards the amount due on the
promissory note (see Note E).

NOTE D - PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment at December 31, 2003 and 2002 are as
follows:

                                     2003           2002

Furniture and fixtures               $   1,658      $      -
Equipment                               22,687             -
Computer equipment                       5,197             -

                                        29,542             -
Less:
Accumulated depreciation                 2,163             -
Net property and equipment              27,379             -

The total depreciation expense for the year ended December 31,
2003 and 2002 amounted to $2,163 and $0, respectively.

                                  F-18

NOTE E - NOTES PAYABLE

Notes payable at December 31, 2003 and 2002 consists of the
following:

                                                    2003      2002
Note payable, $50,000 was
due on or before March
20, 2003 and $50,000 due
on or before June 20,
2003, accrues interest at
18% per annum on past due
amounts only, issued in
connection with the
Agreement subject to
finalization of
liabilities with list of
outstanding creditors.
(Note C). The amount due
in June 2003 is yet to be
paid by the Company and
is now due on demand.                           $ 50,000     $ 100,000
Note payable -shareholder, accrues
interest at 0% per annum,
unsecured (Note K)                                36,635        30,000

                                                  86,635       130,000
Less: current portion                            (86,635)     (130,000)

                                                       -             -

NOTE F - NOTES PAYABLE - BANKS

Notes payable - bank at December 31, 2003 and 2002 consists of
the following:

                                                  2003         2002
Bank line of credit,
guaranteed by its
officers, in the amount
of $50,000 and bears
interest at a rate of
10.75% per annum. The
credit calls for the
minimum payment of
interest only.                                   $ 49,500      $      -
Line of credit, guaranteed by its
officers, in the amount
of $12,500 and bears
interest at a rate of
8.50% per annum. The
credit calls for the
minimum payment of
interest only.                                     11,776             -

                                                   61,276             -
Less: current portion                             (61,276)            -

                                                        -           -

                                   F-19

NOTE G - CONVERTIBLE NOTES PAYABLE

A summary of convertible promissory notes payable at December
31, 2003 and 2002 is as follows:

                                                    2003         2002
12% convertible debentures, issued in
settlement of the outstanding obligations
of subsidiary; MolecularWare, Inc.,
unpaid principal together with accrued
and unpaid interest is convertible into
shares of the Company's common stock
within thirty days after the effective
date a registration statement is filed
with the Securities and Exchange
Commission ("SEC") at a conversion price
equal to twenty percent of the closing
price of the Company's common stock on
the date of the conversion.                        $600,000     $115,000
10% convertible debentures, is payable
and due on June 10, 2005, unpaid
principal together with accrued and
unpaid interest is, at the option of the
holder, convertible into shares of the
Company's common stock at any time before
maturity, at a conversion price equal to
fifty percent of the closing price of the
Company's common stock on the date of the
conversion. The Company has recorded
$100,000 as beneficial conversion
discount - interest expense during the
year ended December 31, 2003

                                                   100,000             -
10% convertible debentures, is payable on
demand, unpaid principal together with
accrued and unpaid interest is, at the
option of the holder, convertible into
shares of the Company's common stock at
any time at a conversion price equal to
fifty percent of the closing price of the
Company's common stock on the date of the
conversion. The Company has recorded
$100,000 as beneficial conversion
discount - interest expense during the
year ended December 31, 2003
                                                   100,000            -
10% convertible debentures, is payable
and due two years from the date of the
note with the latest maturity date of
December 14, 2004, unpaid principal
together with accrued and unpaid interest
is, at the option of the holder,
convertible into shares of the Company's
common stock within thirty days after the
effective date a registration statement
is filed with the Securities and Exchange
Commission ("SEC") at a conversion price
equal to fifty percent of the closing
price of the Company's common stock on
the date of the conversion.                              -      115,000

                                                   800,000      115,000
Less: current portion                              800,000            -

Convertible note payable- long term                      -      115,000

Convertible Debentures

In December 2002, the Company entered into convertible
promissory notes ("Debentures) with the Company officers,
shareholders, and sophisticated investors in the principal
amount of $115,000.  The Debentures accrue interest at 10% per
annum and is payable and due two years from the date of the note
with the latest maturity date of December 14, 2004.  Note
holders have the option to convert any unpaid note principal
together with accrued and unpaid interest into shares of the
Company's common stock within thirty days after the effective
date a registration statement is filed with the Securities and
Exchange Commission ("SEC") at a conversion price equal to fifty
percent of the closing price of the Company's common stock on
the date of the conversion.

                                            F-20

NOTE G - CONVERTIBLE NOTES PAYABLE

Convertible Debentures

Because the conversion price is unknown and contingent upon a
future event as of the date of issuance, the Company did not
record a beneficial conversion feature.  Additionally, the
Company did not incur any financing costs in connection with the
issuance of the convertible debentures.

During the year ended December 31, 2003, the Company entered
into Debentures with sophisticated investors in the principal
amounts of $204,500.  .

During 2003, the Company offered holders of 10% convertible
debenture holder's an option to convert the debentures into
convertible preference shares.

In September 2003, note holders totaling to $124,334 including
accrued interest payable of $7,334 -10 percent convertible
debentures was converted in convertible preferred stock at a
valuation price of $1.00 per share and the remaining $2,500 was
paid off in October 2003. The Company recorded beneficial
conversion discount - preference dividend of $124,334 relating
to issuance of convertible preference shares.

In December 2003, the Company cancelled 33,403 convertible
preference shares and recorded $33,403 as miscellaneous income
due to forgiveness of debt.

In December 2003, the Company issued 1,262,929 shares of common
stock for $90,931 convertible preference shares at the rate of
13.88 shares of common stock for each preferred share converted.

During the year ended December 31, 2003; the Company issued
$600,000, 12%interest bearing convertible debentures in
settlement of the outstanding obligations of subsidiary;
MolecularWare, Inc. Debenture holders have the option to convert
any unpaid note principal together with accrued and unpaid
interest into shares of the Company's common stock within thirty
days after the effective date a registration statement is filed
with the Securities and Exchange Commission ("SEC") at a
conversion price equal to twenty percent of the closing price of
the Company's common stock on the date of the conversion.
Because the conversion price is unknown and contingent upon a
future event as of the date of issuance, the Company did not
record a beneficial conversion feature.  No other financing
costs were incurred by the Company in connection with the
issuance of convertible debenture.

NOTE H - COMMON STOCK

The Company is authorized to issue 200,000,000 shares of common
stock, with a par value of $0.001 per share. On May 1, 2002, the
Company issued 8,599,999 shares of its common stock to its
founders for services rendered. The Company valued the shares
issued at $0.001 per share, which represents the fair value of
the services received, which did not differ materially from the
value of the stock issued.

On May 1, 2002, the Company issued 1,400,000 shares of its
common stock to its founders in exchange for $1,400 in cash.

On March 28, 2003, effective with the Company's Merger with
Traffic Technology, Inc. ("Traffic") (see Note C), all
previously outstanding common stock, preferred stock, options
and warrants owned by the Company's stockholders were exchanged
for an aggregate of 5,766,591 shares of the Traffic's common
stock.  The value of the stock that was issued was the
historical cost of Traffic's net tangible assets, which did not
differ materially from their fair value.  The value of the
1,199,491 shares of common stock that were retained by Traffic
Technology, Inc. stockholders was based on the par value of
$0.001 per share of the Traffic's common stock (see Note C).
The Company also issued a common stock subscription for
3,939,882 shares of common stock in connection with the merger
(see Note C).

                                   F-21

On April 21, 2003, the Company affected a "fourteen-for-one"
reverse stock split of its outstanding shares of common stock.
The authorized shares remain unchanged. All references in the
financial statements and notes to financial statements, numbers
of shares and share amounts have been retroactively restated to
reflect the reverse split.

On May 2, 2003, the Company issued 510,000 shares of common
stock for services rendered at $0.59 per share, which represents
the fair value of the services received which did not differ
materially from the value of the stock issued. Out of 510,000
shares, 225,000 shares valued at $132,750, were issued to the
three officers of the Company towards officers compensation.

On May 13, 2003, the Company issued 20,000 shares of common
stock for services rendered at $1.02 per share, which represents
the fair value of the services received which did not differ
materially from the value of the stock issued.

On June 25, 2003, the Company issued 107,500 shares of common
stock for services rendered at $0.59 per share, which represents
the fair value of the services received which did not differ
materially from the value of the stock issued.

On July 1, 2003, the Company acquired Molecularware, Inc., as a
wholly owned subsidiary by issuance of common stock
subscriptions totaling 300,000 shares valued at the time
acquisition at $137,700. (Note A)

On August, 7, 2003, the Company issued 300,000 shares of common
stock for services rendered at $0.27 per share, which represents
the fair value of the services received which did not differ
materially from the value of the stock issued.

On August 18, 2003, the Company issued 500,000 shares of common
stock for services rendered at $0.33 per share, which represents
the fair value of the services received which did not differ
materially from the value of the stock issued

On September 9, 2003, the Company issued 100,000 shares of
common stock for services rendered at $0.36 per share which
represents the fair value of the services received which did not
differ materially from the value of the stock issued.

In October 2003, the Company issued 330,000 and 40,000 shares of
common stock for services rendered at $0.40 and $0.25 per share
respectively, which represents the fair value of the services
received and which did not differ materially from the value of
the stock issued.

In November 2003, the Company issued 300,000 and 140,000 shares
of common stock for services rendered at $0.17 and $0.19 per
share respectively, which represents the fair value of the
services received and which did not differ materially from the
value of the stock issued. In December 2003, the Company
cancelled 33,403 convertible preference shares and recorded
$33,403 as miscellaneous income due to forgiveness of debt.

In December 2003, the Company sold 400,000 shares of common
stock at $0.25 per share and issued 500,000 shares of common
stock at $0.40 per share in connection with the acquisition of
Molecular Research Labs.

                                 F-22

In December 2003, the Company issued 440,000 shares of common
stock for services rendered at $0.23 which represents the fair
value of the services received and which did not differ
materially from the value of the stock issued.

In December 2003, the Company issued 1,262,929 shares of common
stock in lieu of $90,931 convertible preference shares at the
rate of 13.88 shares of common stock for each preferred share
converted.

NOTE I - CONVERTIBLE PREFERRED STOCK

The Company is authorized to issue 25,000,000 shares of
preferred stock with a par value of $0.001 per share.  In
September 2003, the Company issued 117,000 shares of convertible
preferred stock in conversion of notes payable at $1 per share
and 7,334 shares of the same class at $1.00 per share in payment
of accrued interest. As of December 31, 2003, the company has
converted 90,931 preferred shares into common stock at the rate
of 13.88 shares of common stock per preferred share.

NOTE J - STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in options
outstanding and the related prices for the shares of the
Company's common stock issued to employees at December 31, 2003.




<TABLE>
<CAPTION>
                                        Options Outstanding                     Options Exercisable
Exercise      Number          Weighted Average          Weighted Average
Prices       Outstanding      Remaining Contractual     Exercise Price         Number      Weighted Average
                                  Life (Years)                               Exercisable    Exercise Price
<S>            <C>                    <C>                    <C>               <C>              <C>
$0.001          300,000                8.92                  $ 0.001               -              $0.001
</TABLE>



Transactions involving stock options issued to employees are
summarized as follows:


                                      Number of Shares     Weighted Average
                                                            Price Per Share
Outstanding at December  31, 2001
       Granted                                     -            $ -
       Exercised                                   -              -
       Cancelled or expired                        -              -
Outstanding at December  31, 2002            300,000          0.001
       Granted                                     -              -
       Exercised                                   -              -
       Cancelled or expired                        -              -
Outstanding at December 31, 2003             300,000         $0.001

                                   F-23

The weighted-average fair value of stock options granted to
employees during the year ended December 31, 2003 and 2002 and
the weighted-average significant assumptions used to determine
those fair values, using a Black-Scholes option pricing model
are as follows:

                                                  2003        2002
Weighted average grant date
fair value per share:                          $      -      $      -
Significant assumptions
(weighted-average):
Risk-free interest rate at grant date             1.13%           1.64%
Expected stock price volatility                     71%              0%
Expected dividend payout                             0%              0%
Expected option life-years (a)                       9              10

(a)The expected option life is based on contractual expiration dates.

If the Company recognized compensation cost for the non-
qualified employee stock option plan in accordance with SFAS No.
123, the Company's proforma net loss and net loss per share
would have been $(3,789,887) and $(0.32) , and $(92,863) and
$(0.01) in 2003 and 2002, respectively.

Non-Employee Stock Options

On December 1, 2002, the Company issued 80,000 options to a
consultant as incentive to enter into a consulting agreement
with the Company for a period of one year.  The 80,000 options
vest quarterly over a period of three years with an exercise
price of $.01 per share and a life of ten years from the date of
grant.   The amount of the expense charged to operations in
connection with granting the options was $7,600 and $0,   for
the year ended December 31, 2003 and for the period from April
29, 2002 (date of inception) to December 31, 2002, respectively.

The following table summarizes the changes in options
outstanding and the related prices for the shares of the
Company's common stock issued to consultants at December 31, 2003.




<TABLE>
<CAPTION>
                                        Options Outstanding                     Options Exercisable
Exercise      Number          Weighted Average          Weighted Average
Prices       Outstanding      Remaining Contractual     Exercise Price         Number      Weighted Average
                                  Life (Years)                               Exercisable    Exercise Price
<S>            <C>                    <C>                    <C>               <C>              <C>
$0.001          80,000               10.0                  $ 0.01               26,667         $0.01
</TABLE>



Transactions involving stock options issued to consultants are
summarized as follows:

                                      Number of Shares     Weighted Average
                                                            Price Per Share
Outstanding at December 31,  2001
      Granted                                   -               $-
      Exercised                                 -                -
      Cancelled or expired                      -                -
Outstanding at December 31, 2002            80,000            0.01
      Granted                                    -               -
      Exercised                                  -               -
      Cancelled or expired                       -               -
Outstanding at December 31, 2003            80,000           $0.01

                                       F-24

The weighted-average fair value of stock options granted to
consultants during the year ended December 31, 2003 and for the
period April 29, 2002 to December 31, 2002 and the weighted-average
significant assumptions used to determine those fair values, using a
Black-Scholes option pricing model are as follows:


                                                           2003       2002

Weighted average grant date fair
value per share:                                           $ 0.28       -
Significant assumptions (weighted-average):
Risk-free interest rate at grant date                        1.13%   1.64%
Expected stock price volatility                                71%      0%
Expected dividend payout                                        0%      0%
   Expected option life-years (a)                              10      10

(a)The expected option life is based on contractual expiration dates.

NOTE K - RELATED PARTY TRANSACTIONS

From time to time the Company's officers and shareholders advance
funds to the Company. The notes payable-related parties balance
outstanding was $36,635 and $30,000 as of December 31, 2003 and 2002,
respectively.  No formal arrangements or repayment terms exist (see
Note E).

The Company entered into various convertible promissory notes
"Debentures") with its officers and shareholders (Note G). These
notes were converted into convertible preferred stock at a rate of $1
per share. As of December 31, 2003, the preferred shares were
converted to the Company's common stock (Note H).

During the year ended 2003, the company issued 75,000 common shares
each, as bonus shares, to three of its officers. Shares were valued
at $0.59 per share totaling to $132,750.

NOTE L - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at December 31, 2003 and
2002 are as follows:


                                              2003                2002

Accounts payable                          $    137,412         $        29
Accrued salaries                               841,180              51,100
Accrued vacation                                56,385               8,530
Payroll liabilities                             36,018               3,694
Accrued interest                                59,908                 678
Total                                        1,130,903              64,031

NOTE M- INCOME TAXES

The Company has adopted Financial Accounting Standards No. 109, which
requires the recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statement or tax returns.

                                       F-25

Under this method, deferred tax liabilities and assets are determined
based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.  Temporary
differences between taxable income reported for financial reporting
purposes and income tax purposes are insignificant.  At December 31,
2003, the Company has available for federal income tax purposes a net
operating loss carry forward of approximately $3,900,000, expiring in
the year 2022, that may be used to offset future taxable income.  Due
to significant changes in the Company's ownership, the future use of
its existing net operating losses may be limited.

The Company has provided a valuation reserve against the full amount
of the net operating loss benefit, since in the opinion of management
based upon the earnings history of the Company; it is more likely
than not that the benefits will not be realized.

Components of deferred tax assets as of December 31, 2003 and 2002
are as follows:
Non current:


                                                      2003        2002

Net operating loss carry forward                 $1,325,000    $  18,000
Valuation allowance                              (1,325,000)     (18,000)
Net deferred tax asset                                    -            -

NOTE N- LOSSES PER SHARE

The following table presents the computation of basic and diluted
losses per share as of December 31 2003 and 2002, respectively:


                                                     2003          2002

Loss available for common shareholders              $(3,789,887) $ (92,803)
Basic and fully diluted loss per share                   $(0.32)    $(0.01)
Weighted average common shares outstanding           11,885,371   9,919,027

Net loss per share is based upon the weighted average shares of
common stock outstanding.

NOTE O- COMMITMENTS AND CONTINGENCIES

Lease Commitments

Operating Lease Commitments

The Company has operating leases for equipment used in its operation
with a minimum monthly lease payment due of $1,664 expiring on
various dates. Also, the Company leases office space in Irvine,
California at a rate of approximately $4,200 per month.

                                      F-26

Schedule of future minimum lease payments under operating equipment
and premises leases at December 31, 2003 are as follows:

2004              $49,368
2005                  767
Total             $50,135

Rental expenses charged to operations for the years ended December
31, 2003 and 2002 were $34,898 and $0, respectively.

Capital Lease Obligations

The Company leases equipment financed by capital leases. Equipment
include the following amounts for capitalized leases at December 31,
2003 and 2002:

                                                     2003          2002
Equipments                                         $  9,500     $        -
Computer equipments                                   3,010              -
                                                     12,510              -
Less accumulated depreciation                           854              -
Total                                                11,656              -

The Company has capital leases for equipment used in its operation.
The future minimum lease payments at December 31, 2003 are as follows:

2004          $ 9,991
2005            1,196
2006            1,196
2007            1,021

               13,404

Less: amount
representing
interest       (1,853)

               11,551
Less: current
Portion        (2,636)
Long-term
Portion         8,915

The Company has recorded equipment purchased under non-cancelable
leases with an original cost of $12,510 and $0 as of December 31,
2003 and 2002, respectively. Depreciation expenses of $854 And $0,
has been charged to operations for the years ended December 31, 2003
and for the period April 29, 2002 to December 31, 2002, respectively.

                                       F-27

Binding Letter of Intent

In November 2002, the Company entered into a binding Letter of Intent
with Qicc, Ltd. ("Qicc") to purchase an exclusive license for a term
of five years.  The Company is required to pay Qicc $200,000 for the
license with an initial payment of $20,000 to be made on January 14,
2003 and nine equal installments of $20,000 on the 14th of each month
thereafter until the balance is paid in full.  In addition, Qicc is
entitled to royalty payments equal to fifteen percent of gross sales.
For the year ended December 31, 2003 and the period April 29, 2002 to
December 31, 2002, the Company paid royalty expenses of $8,337 $$0,
respectively. At December 31, 2003, the contract with Qicc has been
terminated and no other payment is due under the contract.

Employment Agreements

The Company has employment agreements with key employees. In addition
to salary and benefit provisions, the agreements include defined
commitments should the employees terminate the employment with or
without cause.

NOTE P - GOING CONCERN MATTERS

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.  As
shown in the accompanying financial statements for the year ended
December 31, 2003 and for the period April 29, 2002 (date of
inception) through December 31, 2002, the Company has incurred losses
of $3,789,887 and $92,803, respectively.  In addition, the Company
has a deficiency in stockholder's equity of $2,034,329 and $82,803 at
December 31, 2003 and 2002, respectively.  These factors among others
may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.

The Company's existence is dependent upon management's ability to
develop profitable operations.  Management is devoting substantially
all of its efforts to establishing its business and there can be no
assurance that Company's efforts will be successful.  However, the
planned principal operations have not fully commenced and no
assurance can be given that management's actions will result in
profitable operations or the resolution of its liquidity problems.
The accompanying statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.

In order to improve the Company's liquidity, the Company is actively
pursuing additional equity financing through discussions with
investment bankers and private investors.  There can be no assurance
the Company will be successful in its efforts to secure additional
equity financing.

                                F-28

                                   EXHIBIT INDEX

Exhibit            Description

2.1         Articles of Incorporation*
2.1.1       Articles of Amendment to Articles of Incorporation, dated
            September 16, 1998*
2.1.2       Articles of Amendment dated March 20, 2003*
2.1.3       Articles of Merger dated March 20, 2003 for redomicile *
2.1.3.1     Merger Agreement underlying Articles of Merger for redomicile *
2.1.4       Articles of Merger dated March 20, 2003 for merger of
            subsidiary, CalbaTech, Inc., into Parent, Traffic
            Technology, Inc. with name change to CalbaTech, Inc. post merger *
2.1.4.1     Merger Agreement underlying Articles of Merger for merger
            of Subsidiary and Parent and concurrent name change *
2.2         Bylaws of Traffic Technology, Inc., a Nevada Corporation *
6.1         Consulting Agreement with Pinnacle West Capital
            Corporation, dated May 30, 2000*
6.2         Distributor Agreement with Layton Solar, dated April 3, 2000*
6.2.1       Amendment to Distributor Agreement with Layton Solar,
            dated August 24, 2000*
6.3         Distributor Agreement with IMS Industries, dated March 17, 2000*
6.4         Distributor Agreement with Taiwan Signal Technologies
            Co. dated June 30, 2000*
6.5         Distributor Agreements with Artflex, Sinalizacao and
            Viaria Ltd., dated August 7, 2000*
6.6         Distributor Agreement with Supremetech Engineering Co.,
            dated August 15, 2000*
6.7         Consulting Service Agreement for LED Traffic Signal
            Technology Transfer and Licensing with JCI Group, Inc.
            (China), dated January 8, 2001*
6.8         LED Single Lens Traffic Signal Technology Transfer and
            Consulting Service Agreement with JCI Group, Inc. Japan),
            dated April 25, 2001*
6.9         Form of Distributor Agreement (United States)*
10.1        Employment Agreement for James DeOlden *
10.2        Employment Agreement for Edward Deese *
10.3        Employment Agreement for John Gordon *
10.4        Employment Agreement for David Killen *
10.5        Asset Purchase Agreement (Zoval Enterprises) *
10.6        Agreement and Plan of Reorganization for the acquisition
            of Molecularware (filed herein)
10.7        Agreement and Plan of Reorganization for the acquisition
            of Molecula (filed herein)
10.8        Indemnification Agreement - James DeOlden
10.9        Indemnification Agreement - Edward Deese
10.10       Indemnification Agreement - John Gordon
23.1        Consent of RBSM, LLP (filed herein)
24.1        Power of Attorney (filed herein)
31.1        Certification pursuant of Chief Executive Officer to 18 U.S.C.
            Section 1350, as adopted to Section 906 of the Sarbanes Oxley Act
            of 2002.
31.2        Certification pursuant of Chief Financial Officer to 18 U.S.C.
            Section 1350, as adopted to Section 906 of the Sarbanes
            Oxley Act of 2002.

*Documents previously filed with the SEC