Editor's note: The above video is from March 31, 2016.

Colin Kaepernick is willing to take a pay cut to play for the Denver Broncos, just not one as large as the reigning Super Bowl champions would like.

The Broncos are offering Kaepernick an annual salary of $7 million for the 2016 season and the 2017 season, a source close to the situation told CSNBayArea.com on Tuesday.

Kaepernick and the Broncos have "made progress" on a contract that would run through 2020, ESPN's Adam Schefter reported on Monday.

But the finances over the first two years are not favorable for Kaepernick. Agreeing to Denver's offer would cost the 28-year-old quarterback $12.4 million in base salary, and potentially as much as $16.2 million, over the next two years. His current contract with the 49ers pays a base salary of $11.9 million for the 2016 season and $14.5 million in 2017.

Even if the 49ers were to release Kaepernick before April 1 of next year, the quarterback could earn up to $14.3 million in 2016 -- more than the $14 million he would earn in two years with Denver.

Kaepernick would consider a deal with the Broncos that is slightly under his salary with the 49ers, according to the source. But Kaepernick “made his statement” regarding Denver’s current offer by reporting to San Francisco’s offseason program.

Kaepernick flew from Denver to the Bay Area late Sunday night after meeting with Broncos officials and arrived in time for the Monday morning start to the 49ers offseason program.

The 49ers quarterback will receive a $400,000 workout bonus for 90 percent participation in San Francisco's voluntary offseason program. He spent the majority of his first day under Chip Kelly’s tenure in meetings with new quarterbacks coach, Ryan Day, and offensive coordinator, Curtis Modkins.

A trade between the 49ers and Broncos is still a possibility, but the discrepancy in salary would have to be settled by the teams. Kaepernick and the 49ers are at odds, specifically over the diagnosis of injuries he sustained during the 2015 season, but the 49ers are not willing to pay the $4.9 million difference in salary in 2016 to send Kaepernick to Denver.

[REWIND: Kaepernick, 49ers at odds over injuries]

Kaepernick’s season ended when he underwent surgery in November to repair a torn labrum in his left shoulder. In January, he had a torn ligament in his right thumb repaired and an arthroscopic procedure performed on his left knee. Dr. Peter Millett at the Steadman Clinic in Vail, Colorado performed the work and Kaepernick spent the next two months in Vail undergoing rehab.

Kaepernick has had no setbacks medically, according to the source, and is expected to need at least one more month before he is football-ready.

Under his current contract, which runs through 2020, the 49ers have the option to release Kaepernick before April 1 of each year with a minimal cap hit.