<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

         (Mark one)
|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934

         For the fiscal year ended: December 31, 2003
                                    -----------------

|_|      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 333-63474

                         Callisto Pharmaceuticals, Inc.
                 (Name of small business issuer in its charter)

         Delaware                                         13-3894575
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

420 Lexington Avenue, Suite 2500, New York, New York           10170
----------------------------------------------------        ------------
(Address of Principal Executive Offices)                     (Zip Code)

                                 (212) 297-0010
                                 --------------
                (Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class                   Name of each exchange on which registered
-------------------                   -----------------------------------------
      None                                               None

Securities registered under Section 12(g) of the Exchange Act:

Title of class
--------------

None

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
                          |X|  Yes      |_|  No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

The issuer's revenues for the year ended December 31, 2003 were $-0- .



                                       1



<PAGE>


The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant on April 6, 2004, based on the closing bid
price on such date, was $71,669,572.

As of April 6, 2004 the issuer had a total of 27,023,993 shares of Common Stock
outstanding.

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








                                       2
<PAGE>


                         CALLISTO PHARMACEUTICALS, INC.
                                   FORM 10-KSB
                                      INDEX


------------------   --------------------------------------   --------
PART I                                                        PAGE
------------------   --------------------------------------   --------
Item 1.              Description of Business                  5
------------------   --------------------------------------   --------
Item 2.              Description of Property                  31
------------------   --------------------------------------   --------
Item 3.              Legal Proceedings                        31
------------------   --------------------------------------   --------
Item 4.              Submission of Matters to a Vote of       31
                     Security Holders
------------------   --------------------------------------   --------
PART II
------------------   --------------------------------------   --------
Item 5.              Market for Common  Equity and Related    32
                     Stockholder Matters
------------------   --------------------------------------   --------
Item 6.              Management's Discussion and Analysis     33
------------------   --------------------------------------   --------
Item 7.              Consolidated Financial Statements        39
------------------   --------------------------------------   --------
Item 8.              Changes In and Disagreements with        39
                     Accountants on Accounting and
                     Financial Disclosure
------------------   --------------------------------------   --------
Item 8A.             Controls and Procedures                  39
------------------   --------------------------------------   --------
PART III
------------------   --------------------------------------   --------
Item 9.              Directors and Executive Officers of      41
                     the Registrant
------------------   --------------------------------------   --------
Item 10.             Executive Compensation                   46
------------------   --------------------------------------   --------
Item 11.             Security Ownership of Certain            51
                     Beneficial Owners and Management
------------------   --------------------------------------   --------
Item 12.             Certain Relationships and Related        53
                     Transactions
------------------   --------------------------------------   --------
Item 13.             Exhibits and Reports on Form 8-K         53
------------------   --------------------------------------   --------





                                       3
<PAGE>



------------------    -------------------------------------   --------
Item 14.              Principal Accountant Fees and           56
                      Services
------------------    -------------------------------------   --------
Signatures                                                    57
------------------    -------------------------------------  ---------






                                       4
<PAGE>


                                     PART I

         This Form 10-KSB contains forward-looking statements that involve risks
and uncertainties. Such forward-looking statements are characterized by future
or conditional verbs and include, but are not limited to, statements regarding
the results of product development efforts, clinical trials and applications for
marketing approval of pharmaceutical products, and the scope and success of
future operations. Such statements are only predictions and our actual results
may differ materially from those anticipated in these forward-looking
statements. Factors that may cause such differences include, but are not limited
to, those discussed under "Risk Factors" and elsewhere in this Form 10-KSB for
the year ended December 31, 2003, as filed with the Securities and Exchange
Commission, including the uncertainties associated with product development, the
risk that products that appeared promising in early clinical trials do not
demonstrate efficacy in larger-scale clinical trials, the risk that we will not
obtain approval to market our products, the risks associated with dependence
upon key personnel and the need for additional financing. We do not assume any
obligation to update forward-looking statements as circumstances change.

Item 1.  Description of Business.

         Callisto Pharmaceuticals, Inc. is referred to throughout this report as
"Callisto," "we" or "us."

         We are a biopharmaceutical company focused on the development of drugs
to treat multiple myeloma (an incurable blood cancer that invades and
proliferates in bone marrow), other cancers and osteolytic bone disease. Our
lead drug candidate, Atiprimod, is a small-molecule, orally available drug with
antiproliferative and antiangiogenic activity.

         Atiprimod successfully completed Phase I clinical trials in rheumatoid
arthritis patients and in April 2004 we expect to commence a Phase I/IIa
open-label clinical trial of Atiprimod in relapsed multiple myeloma patients.
These are patients that no longer respond to chemotherapy, and are in advanced
stages of the disease. The Phase I/IIa clinical trial will be performed at two
sites, the Dana-Farber Cancer Institute (Boston) and The University of Texas
M.D. Anderson Cancer Center (Houston). On January 6, 2004, we announced that the
Office of Orphan Products Development of the United States Food and Drug
Administration (FDA) granted orphan drug designation to Atiprimod for the
treatment of multiple myeloma.

         In March 2002, Callisto Pharmaceuticals, Inc. ("Old Callisto")
purchased 99.7% of the outstanding common shares of Webtronics, Inc.,
("Webtronics") a public company for $400,000. Webtronics was incorporated in
Florida on February 2, 2001 and had limited operations at December 31, 2002.

         On April 30, 2003, pursuant to an Agreement and Plan of Merger dated
March 10, 2003, as amended April 4, 2003, Synergy Acquisition Corp., a
wholly-owned subsidiary of Webtronics merged into Synergy Pharmaceuticals Inc.
("Synergy") and Callisto Acquisition Corp., a wholly-owned subsidiary of
Webtronics merged into Old Callisto (collectively, the "Merger"). As a result of
the Merger, Old Callisto and Synergy became wholly-owned subsidiaries of
Webtronics. In the Merger Webtronics issued 17,318,994 shares of its common
stock in exchange for outstanding Old Callisto common stock and an additional
4,395,684 shares in exchange for outstanding Synergy common stock. Old Callisto
changed its name to Callisto Research Labs, LLC ("Callisto Research") and
Webtronics changed its name to Callisto Pharmaceuticals, Inc. and changed its
state of incorporation from Florida to Delaware. Subsequently, 65,757 shares of
common stock issued to former Synergy shareholders were returned to us under the
terms of certain indemnification agreements.



                                       5
<PAGE>

            On February 24, 2004, we entered into an agreement with Houston
Pharmaceuticals, Inc. ("HPI"), a privately held company, to acquire rights to a
novel cancer platform technology that deals with the design of novel
intercalator drug candidates that specifically target sites on DNA using a
technique referred to as site-directed intercalation. The site-directed
intercalation technology has resulted in the identification of a lead drug
candidate for melanoma that shows remarkable selectivity for human melanoma
cancer cell lines. We intend to pre-clinically evaluate this compound as a drug
candidate to treat melanoma. We intend to further explore the site-directed
intercalation technology as a platform to provide new anti-cancer drug
candidates for development.

Atiprimod To Treat Multiple Myeloma

         On August 28, 2002, our wholly-owned subsidiary, Synergy, entered into
a license agreement with AnorMED Inc. ("AnorMED"), a Canadian corporation, to
license Atiprimod (SKF 106615) from AnorMED. Atiprimod is one of a class of
compounds known as azaspiranes and was originally developed as a potential
treatment for rheumatoid arthritis based on encouraging data from a number of
animal models of arthritis and autoimmune indications. The development of this
drug originated with a partnership between AnorMED and SmithKline Beecham that
led to the successful filing of an investigational new drug application, or IND,
and completion of three Phase I clinical trials involving a total of 63
patients. The drug successfully completed both single and multiple dose Phase I
clinical trials in patients with rheumatoid arthritis. Both trials evaluated the
safety and pharmacokinetics (how the body takes up and eliminates drugs) of
Atiprimod and showed that the drug is well tolerated. In the third Phase I
clinical trial, the drug was found to be well tolerated in an open label
extension study performed with 43 patients from the first two studies, with
patients on the drug for as long as one year.

Preclinical Studies

         Atiprimod's specific lowering effect on the level of key growth factors
known to play an important role in the pathogenesis of multiple myeloma is the
basis for its potential use as a drug to treat this disease. Atiprimod has been
shown to inhibit the production of the pro-inflammatory mediators IL-6 and TNFa
in a number of animal models of inflammation and autoimmune disease. Atiprimod
has also been demonstrated using in vitro models of autocrine and paracrine
growth to inhibit proliferation of a number of human multiple myeloma cell
lines. Characterization of the mechanism of Atiprimod's antiproliferative
activity in a series of experiments showed that the drug works by inducing
apoptosis (programmed cell death) in myeloma cells. In a second series of
experiments performed with Atiprimod on co-cultures composed of multiple myeloma
cells plus bone marrow stromal cells (used to simulate the human disease), the
drug was found to have a profound effect on secretion of the angiogenic growth
factor VEGF. A separate set of experiments also suggest an additional
explanation for the disease modifying activity of Atiprimod originally observed
in adjuvant-induced arthritic-rat animal studies, and provide a further
rationale for the application of this drug to treat multiple myeloma. Using a
bone resorption assay to measure the effect of drug on osteoclast-mediated bone
resorption, Atiprimod demonstrated a profound effect on osteoclast function. The
drug appears to be selectively toxic for activated osteoclasts, displaying a
negligible effect on bone marrow stromal cells. Atiprimod has also recently been
demonstrated to show anti-cancer activity in the low micromolar range in human
colorectal cancer cell lines and in a number of other human tumor cell lines.
The drug was found to induce apoptosis and display anti-angiogenic activity.
Additional anticancer uses for Atiprimod are presently being evaluated
preclinically.



                                       6
<PAGE>

Completed Clinical Studies

         Atiprimod successfully completed single and multiple dose Phase I
clinical trials in patients with rheumatoid arthritis (RA). In the initial Phase
I study, 28 patients were given single escalating doses of drug (0.002 - 1.0
mg/kg), with a 4-month follow-up. Atiprimod was well tolerated, displaying no
clinically relevant changes in any laboratory parameters. In particular, liver
function tests remained in the normal range. The second Phase I study involved a
28-day multiple-dose-rising study in 35 RA patients. The study evaluated the
effect of food on bioavailability, as well as the safety and pharmacokinetics of
repeat dosing. Dosages included 0.1, 1.0, 5.0, and 10 mg/day plus a 14-day
cohort at 30 mg/day, with 4-month follow-up. All doses were well tolerated and
clinical tests were unremarkable. Significantly, reductions in tender and
swollen joint counts were noted in a number of subjects during the course of the
dosing period. Individuals from the two Phase I safety studies were also
involved in a Phase I open-label extension trial. Forty-three patients entered
the study and remained on the drug as long as 12 months. Clinical laboratory
results for all patients were unremarkable; in particular liver enzyme levels
remained within the normal range in all patients throughout the study period.

Development Strategy

         On September 23, 2003, we submitted to the FDA an IND for Atiprimod to
treat multiple myeloma patients. In April 2004 we expect to commence a Phase
I/IIa clinical trial of Atiprimod in relapsed multiple myeloma patients at two
sites, the Dana-Farber Cancer Institute (Boston) and The University of Texas
M.D. Anderson Cancer Center (Houston). Institutional review board approval from
both sites was received in March 2004. The clinical trial will be an open label
study, with the primary objective assessing safety of drug and identifying the
maximum tolerated dose. The secondary objectives are to measure the
pharmacokinetics, evaluate the response in patients with refractory disease and
to identify possible surrogate responses to drug to better determine the
mechanism of drug action. The duration of this clinical study will depend on how
well the drug is tolerated, and on drug response, with final results not
available until the fourth quarter of 2004 or the first quarter of 2005. If
Atiprimod produces positive responses, we intend to initiate a Phase IIb trial
in relapsed multiple myeloma patients in 2005.



                                       7
<PAGE>

         Although the primary indication of this Phase I/IIa clinical trial will
focus on multiple myeloma, the clinical trial will also look at bone resorption,
a considerable problem in multiple myeloma patients. We have preclinical data
showing a potent ability of Atiprimod to suppress bone resorption. Successful
demonstration of this indication in a clinical setting could have broad
applicability to other medical conditions exhibiting bone resorption, such as
metastatic breast and prostate cancer.

Manufacturing

         A practical, efficient and cost effective synthetic route for producing
Atiprimod on a commercial scale was originally developed by SmithKline Beecham
(SKB). In the course of this work, a new dimaleate salt form was developed. Over
7 kilos of Atiprimod drug substance, available from SKB, were used as a source
for generating the Atiprimod dimaleate drug product needed for the planned Phase
I/IIa clinical study. Several lots of drug substance were re-qualified to meet
current FDA approved release specifications. The full package of fully validated
analytical methods developed by SKB was transferred to a contract research
organization used by us to perform all analytical tests. We intend to identify
and contract with a future commercial supplier of both drug substance and drug
product in the second quarter of 2004.

Orphan Drug Status

         On January 6, 2004, we announced that the Office of Orphan Products
Development of the FDA granted orphan drug designation to Atiprimod for the
treatment of multiple myeloma. The FDA grants orphan drug status for drug
candidates that are intended to treat rare life-threatening diseases that, at
the time of application, affect no more than 200,000 patients in the United
States. The drug must have the ability to provide significant patient benefit
over currently available treatment or fill an unmet medical need. Orphan drug
designation entitles us to seven years of market exclusivity in the United
States, and ten years of market exclusivity in Europe, upon FDA marketing
approval, provided that we continue to meet certain conditions established by
the FDA. Once the FDA grants marketing approval of a new drug, the FDA will not
accept or approve other applications to market the same medicinal product for
the same therapeutic indication. Other incentives provided by orphan status
include certain tax benefits, eligibility for research grants and protocol
assistance. Protocol assistance includes regulatory assistance and possible
exemptions or reductions of certain regulatory fees.

Studies on Atiprimod for Other Cancer Indications

         We have also tested Atiprimod in the National Cancer Institute (NCI)
cancer screen and found the drug to be highly active in in vitro screens of
human cell lines from a number of solid tumors. The NCI is presently evaluating
Atiprimod in a number of xenograft mouse tumor model studies, including breast,
colon, lung and prostate solid tumors. Successful completion of these models
could provide an additional therapeutic use for Atiprimod that would require
only a small amendment to the existing IND to begin further clinical trials of
Atiprimod. New patents have been filed for broad use of Atiprimod to treat
cancer.



                                       8
<PAGE>

Site Directed Intercalation Technology

         On February 24, 2004, we entered into an agreement with HPI to acquire
the rights to two key patents covering a novel cancer platform technology. The
lead inventor on both patents, Dr. Waldemar Priebe, a Professor of Medicinal
Chemistry at The University of Texas M.D. Anderson Cancer Center, is an expert
in the synthesis of novel anti-cancer compounds. The first patent covers a
technology platform for site-directed DNA intercalation. This approach to target
intercalator drug candidates to new sites on DNA can potentially provide a new
way to attack cancer targets not achievable with older technologies. The second
patent covers new anthacycline analogs with increased potency and reduced
toxicity.

         The site-directed intercalation technology is exemplified by the
identification of a lead drug candidate for melanoma that shows remarkable
selectivity for human melanoma cancer cell lines. We intend to pre-clinically
evaluate this compound as a potential drug to treat melanoma.

         We also plan to pursue further development of site-directed
intercalation studies to identify additional clinical candidates from this
technology.

Guanylyl Cyclase Receptor Agonist Technology

         Our guanylyl cyclase receptor agonist (GCRA) program is focused on the
control of cyclic GMP, an important second messenger involved in key cellular
functions that are tied to inflammation, anti-tumorigenic responses and/or
cellular death (apoptosis). Uroguanylin, a hormone produced and secreted by
specialized cells in the human gastrointestinal tract, activates synthesis of
cyclic GMP, leading to apoptosis, an important event in the turnover of cells
lining the GI tract mucosa. Production of uroguanylin is dramatically suppressed
in colon cancer patients, and there is increasing evidence that the deficiency
of uroguanylin is one of the major reasons for development of polyps and colon
cancer. The discovery that uroguanylin is dramatically reduced in
gastrointestinal polyps and colon cancer and that the deficiency of this hormone
peptide is linked to the onset of colon carcinogenesis forms the basis for the
development of GCRA peptides as drugs to treat colon cancer and gastrointestinal
inflammation.

         Our GCRA program led to the development of CP304, a biologically
functional analog that has demonstrated superior biological activity, enhanced
temperature and protease stability and superior pH characteristics relative to
human uroguanylin. We are presently looking to out-license the GCRA technology,
or seek a partner, for further development as a potential treatment for colon
cancer and gastrointestinal inflammation.




                                       9
<PAGE>

Superantigen-based Bioterorrism Defense

         We have designed both a monoclonal antibody and a peptide that prevents
unregulated activation of T-cells (human white blood cells) by a wide range of
bacterial toxins (superantigens). This form of T-cell activation leads to a
lethal condition called toxic shock syndrome, and is typically generated by
bacteria from the class of Staphylococcus aureus and Streptococcus pyogens.
These bacteria offer attractive opportunities for bioterrorists, and, in
particular, the toxin from S. aureus is listed as a priority list B bioagent by
the national bioterrorism defense program. Both the antibody and the antagonist
peptide developed by us effectively block actions of the toxins in in vitro
assays as well as in mice and in rabbits. These experiments indicate that both
the peptide and the antibody have potential as biodefensive agents against a
bioweapon that utilizes toxins from staphylococcus and streptococcus strains. In
addition, the peptide may also be used directly or indirectly as an antigen in a
vaccine for the prevention and control of toxic shock and septic shock due to
Staphylococcal and Streptococcal infections.

Drug Development Strategy

         We are exploring the development of the monoclonal antibody as a
therapeutic agent to prevent, treat and control superantigen-mediated
bioweapons. Our goal is to demonstrate therapeutic utility of this agent in
animal models in which toxic shock and septic shock are induced by aerosolized
forms of superantigen toxins. The research work will be accomplished jointly in
collaboration with Dr. John Zabriskie, Professor Emeritus at the Rockefeller
University, NY, and with Dr. Sina Bavari, U.S. Army Medical Research Institute
of Infectious Diseases, Fort Detrick, MD. This program has been funded in part
by a $1.1 million grant from the U.S. Army.

Diagnostic Test for Obsessive-Compulsive Disorder

         During 2003 our Management and Board of Directors decided to terminate
our program to develop a diagnostic test for obsessive-compulsive disorder.

License agreements

         On August 28, 2002, Synergy entered into a worldwide license agreement
with AnorMED to research, develop, sell and commercially exploit the Atiprimod
patent rights. The license agreement provides for milestone payments and
royalties on net sales. Commencing on January 1, 2004 and on January 1 of each
subsequent year Synergy is obligated to pay AnorMED a maintenance fee of
$200,000 until the first commercial sale of the product. The first of these
annual maintenance fee payments under this agreement was made on January 22,
2004.

         On July 25, 2001, we entered into a license agreement to research,
develop, sell and commercially exploit certain Rockefeller University licensed
patents covering peptides and antibodies useful in treating toxic shock syndrome
and septic shock. We will pay Rockefeller a $7,500 annual maintenance fee until
the first commercial sale of the product. We will also pay royalties of 2% and
0.75% of net sales of product as defined in the agreement and will pay
Rockefeller 15% of any sublicense fee paid by sublicensees.



                                       10
<PAGE>


Government Regulation

         Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
products that may be developed by us. The nature and the extent to which such
regulation may apply will vary depending on the nature of any such products.
Virtually all of our potential products will require regulatory approval by
governmental agencies prior to commercialization. In particular, human
therapeutic products are subject to rigorous pre-clinical and clinical testing
and other approval procedures by the FDA and similar health authorities in
foreign countries. Various federal statutes and regulations also govern or
influence the manufacturing, safety, labeling, storage, record keeping and
marketing of such products. The process of obtaining these approvals and the
subsequent compliance with appropriate federal and foreign statutes and
regulations requires the expenditure of substantial resources. In order to test
clinically, produce and market products for diagnostic or therapeutic use, a
company must comply with mandatory procedures and safety standards established
by the FDA and comparable agencies in foreign countries. Before beginning human
clinical testing of a potential new drug, a company must file an IND and receive
clearance from the FDA. This application is a summary of the pre-clinical
studies that were conducted to characterize the drug, including toxicity and
safety studies, as well as an in-depth discussion of the human clinical studies
that are being proposed.

         The pre-marketing program required for approval of a new drug typically
involves a time-consuming and costly three-phase process. In Phase I, trials are
conducted with a small number of patients to determine the early safety profile,
the pattern of drug distribution and metabolism. In Phase II, trials are
conducted with small groups of patients afflicted with a target disease in order
to determine preliminary efficacy, optimal dosages and expanded evidence of
safety. In Phase III, large scale, multi-center comparative trials are conducted
with patients afflicted with a target disease in order to provide enough data
for statistical proof of efficacy and safety required by the FDA and others.

         The FDA closely monitors the progress of each of the three phases of
clinical testing and may, in its discretion, reevaluate, alter, suspend or
terminate the testing based on the data that have been accumulated to that point
and its assessment of the risk/benefit ratio to the patient. Estimates of the
total time required for carrying out such clinical testing vary between two and
ten years. Upon completion of such clinical testing, a company typically submits
a New Drug Application (NDA) or Product License Application (PLA) to the FDA
that summarizes the results and observations of the drug during the clinical
testing. Based on its review of the NDA or PLA, the FDA will decide whether or
not to approve the drug. This review process can be quite lengthy, and approval
for the production and marketing of a new pharmaceutical or medical diagnostic
product can require a number of years and substantial funding, and there can be
no assurance that any approvals will be granted on a timely basis, if at all.

         Once the product is approved for sale, FDA regulations govern the
production process and marketing activities, and a post-marketing testing and
surveillance program may be required to monitor continuously a product's usage
and effects. Product approvals may be withdrawn if compliance with regulatory
standards are not maintained. Other countries in which any products developed by
us may be marketed may impose a similar regulatory process.



                                       11
<PAGE>

Competition

         The biopharmaceutical industry is characterized by rapidly evolving
technology and intense competition. Our competitors include major pharmaceutical
and biotechnology companies, most of which have financial, technical and
marketing resources significantly greater than our resources. Academic
institutions, governmental agencies and other public and private research
organizations are also conducting research activities and seeking patent
protection and may commercialize products on their own or through joint venture.
We are aware of certain development projects for products to prevent or treat
certain diseases targeted by us. The existence of these potential products or
other products or treatments of which we are not aware, or products or
treatments that may be developed in the future, may adversely affect the
marketability of products developed.

Research and Development Expenses

         Research and development expenses consist primarily of salaries and
other personnel-related expenses, facilities costs, laboratory supplies, license
fees and patent legal costs. Research and development expenses were $1,369,985
for the year ended December 31, 2003, compared to $491,430 for the year ended
December 31, 2002. We expect our research and development expenses to increase
in 2004 as our products move into more expensive later stages of development,
including the Phase I/IIa clinical study on Atiprimod and related activities.

         In addition, during the twelve months ended December 31, 2003, we
incurred $6,734,818 of net purchased in-process research and development expense
related to the Merger. There was no such expense during the twelve months ended
December 31, 2002.

         On October 7, 2003 we were awarded a $265,267 Small Business Technology
Transfer Research grant from the National Institutes of Health for studies on
Atiprimod. The Principal and Co-Principal Investigators of the grant entitled
"Atiprimod to Treat Multiple Myeloma and Bone Resorption" are Dr. Gary S. Jacob,
our Chief Executive Officer, and Dr. Kenneth C. Anderson, Director of the Jerome
Lipper Multiple Myeloma Center of the Dana-Farber Cancer Institute,
respectively. The studies, which began in early 2004, utilize unique in vitro
and in-vivo methods and animal models at the Dana-Farber Cancer Institute and at
our in house laboratory facilities to explore Atiprimod's pharmacological
activity and mechanism of action. No funding was received during 2003 and we
will request grant funding as expenses are incurred during the first half of
2004. Approximately $25,000 of this grant will defray certain salary and wages
of our in-house scientists, the balance of which will reimburse incremental
supplies and sub-contractors.

Proprietary Rights

        We are able to protect our technology from unauthorized use by third
parties only to the extent that it is covered by valid and enforceable patents
or is effectively maintained as a trade secret. Accordingly, patents or other
proprietary rights are an essential element of our business. We are the assignee
or exclusive licensee of 3 pending patent applications and 12 issued patents in
the United States, and in most cases corresponding patents/applications in
foreign countries that we have deemed desirable. We seek patent protection of
inventions originating from our ongoing research and development activities that
are commercially important to our business.



                                       12
<PAGE>

        We have obtained licenses from various parties that give us rights to
technologies that we deem to be necessary or desirable for our research and
development. These licenses (both exclusive and non-exclusive) may require us to
pay royalties to the parties in addition to upfront or milestone payments.

        Patents extend for varying periods according to the date of patent
filing or grant and the legal term of patents in the various countries where
patent protection is obtained. The actual protection afforded by a patent, which
can vary from country to country, depends on the type of patent, the scope of
its coverage and the availability of legal remedies in the country.

        While trade secret protection is an essential element of our business
and we have taken security measures to protect our proprietary information and
trade secrets, we cannot give assurance that our unpatented proprietary
technology will afford us significant commercial protection. We seek to protect
our trade secrets by entering into confidentiality agreements with third
parties, employees and consultants. Our employees and consultants also sign
agreements requiring that they assign to us their interests in intellectual
property arising from their work for us. All employees sign an agreement not to
engage in any conflicting employment or activity during their employment with us
and not to disclose or misuse our confidential information. However, it is
possible that these agreements may be breached or invalidated, and if so, there
may not be an adequate corrective remedy available. Accordingly, we cannot
ensure that employees, consultants or third parties will not breach the
confidentiality provisions in our contracts, infringe or misappropriate our
trade secrets and other proprietary rights or that measures we are taking to
protect our proprietary rights will be adequate.

        In the future, third parties may file claims asserting that our
technologies or products infringe on their intellectual property. We cannot
predict whether third parties will assert such claims against us or against the
licensors of technology licensed to us, or whether those claims will harm our
business. If we are forced to defend ourselves against such claims, whether they
are with or without merit and whether they are resolved in favor of, or against,
our licensors or us, we may face costly litigation and the diversion of
management's attention and resources. As a result of such disputes, we may have
to develop costly non-infringing technology or enter into licensing agreements.
These agreements, if necessary, may be unavailable on terms acceptable to us, or
at all.

Employees

         As of April 6, 2004, we had 6 full-time employees. We believe our
employee relations are satisfactory.



                                       13
<PAGE>

Available Information

         We operate two subsidiary companies, Synergy Pharmaceuticals Inc. and
Callisto Research Labs, LLC. We were incorporated in Delaware in May 2003 and
our principal offices are at 420 Lexington Avenue, Suite 2500, New York, NY
10170.

         We maintain a site on the world wide web at
http://www.callistopharma.com; however, information found on our website is not
incorporated by reference into this report. We make available free of charge
through our website our Securities and Exchange Commission, or SEC, filings,
including our annual report on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably
practicable after we electronically file such material with, or furnish it to,
the SEC.

RISK FACTORS

         You should carefully consider the following risk factors and the other
information included herein as well as the information included in other reports
and filings made with the SEC before investing in our common stock. If any of
the following risks actually occurs, our business, financial condition or
results of operations could be harmed. The trading price of our common stock
could decline due to any of these risks, and you may lose part or all of your
investment.

Risks Related to Our Business

We are at an early stage of development as a company, currently have no source
of revenue and may never become profitable.

      We are a development stage biopharmaceutical company. Currently, we have
no products approved for commercial sale and, to date, we have not generated any
revenue. Our ability to generate revenue depends heavily on:

  o demonstration in Phase I/IIa clinical trials that our lead product
candidate, Atiprimod for the treatment of multiple myeloma, is safe and
effective;

  o  the successful development of our other product candidates;

  o our ability to seek and obtain regulatory approvals, including with respect
to the indications we are seeking;

  o  the successful commercialization of our product candidates; and

  o  market acceptance of our products.



                                       14
<PAGE>

      All of our existing product candidates will require extensive additional
clinical evaluation, regulatory review, significant marketing efforts and
substantial investment before they could provide us with any revenue. For
example, Atiprimod for the treatment of multiple myeloma is expected to enter
Phase I/IIa clinical trials in April 2004 and our other product candidates are
in preclinical development. As a result, if we do not successfully develop and
commercialize Atiprimod for the treatment of multiple myeloma, we will be unable
to generate any revenue for many years, if at all. We do not anticipate that we
will generate revenue for several years, at the earliest, or that we will
achieve profitability for at least several years after generating material
revenue, if at all. If we are unable to generate revenue, we will not become
profitable, and we may be unable to continue our operations.

We have incurred significant losses since inception and anticipate that we will
incur continued losses for the foreseeable future.

      As of December 31, 2003, we had an accumulated deficit of $25,817,730. We
have incurred losses in each year since our inception in 1996. We incurred a net
loss of $13,106,247 for the year ended December 31, 2003. These losses, among
other things, have had and will continue to have an adverse effect on our
stockholders' equity and working capital. We expect to incur significant and
increasing operating losses for the next several years as we expand our research
and development, initiate our clinical trials of Atiprimod for the treatment of
multiple myeloma, acquire or license technologies, advance our other product
candidates into clinical development, seek regulatory approval and, if we
receive FDA approval, commercialize our products. Because of the numerous risks
and uncertainties associated with our product development efforts, we are unable
to predict the extent of any future losses or when we will become profitable, if
at all. If we are unable to achieve and then maintain profitability, the market
value of our common stock will likely decline.

We will need to raise substantial additional capital to fund our operations, and
our failure to obtain funding when needed may force us to delay, reduce or
eliminate our product development programs or collaboration efforts.

      Our operations have consumed substantial amounts of cash since inception.
We expect to continue to spend substantial amounts to:

  o complete the clinical development of our lead product candidate, Atiprimod
for the treatment of multiple myeloma;

  o continue the development of our other product candidates;

  o finance our general and administrative expenses;

  o prepare regulatory approval applications and seek approvals for Atiprimod
for the treatment of multiple myeloma and our other product candidates;

  o license or acquire additional technologies;

  o launch and commercialize our product candidates, if any such product
candidates receive regulatory approval; and

  o develop and implement sales, marketing and distribution capabilities.



                                       15
<PAGE>

      In 2003, our cash used in operations increased significantly over 2002 and
we expect that our cash used in operations will continue to increase for the
next several years. We expect that our existing capital resources, will be
sufficient to fund our operations for at least the next 12 months. We will be
required to raise additional capital to complete the development and
commercialization of our current product candidates. Our future funding
requirements will depend on many factors, including, but not limited to:

  o the rate of progress and cost of our clinical trials and other development
activities;

  o any future decisions we may make about the scope and prioritization of the
programs we pursue;

  o the costs of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;

  o the costs and timing of regulatory approval;

  o the costs of establishing sales, marketing and distribution capabilities;

  o the effect of competing technological and market developments;

  o the terms and timing of any collaborative, licensing and other arrangements
that we may establish; and

  o general market conditions for offerings from biopharmaceutical companies.

      To date, our sources of cash have been primarily limited to the sale of
our equity securities. We cannot be certain that additional funding will be
available on acceptable terms, or at all. To the extent that we raise additional
funds by issuing equity securities, our stockholders may experience significant
dilution. Any debt financing, if available, may involve restrictive covenants
that impact our ability to conduct our business. If we are unable to raise
additional capital when required or on acceptable terms, we may have to
significantly delay, scale back or discontinue the development and/or
commercialization of one or more of our product candidates. We also may be
required to:

o seek collaborators for our product candidates at an earlier stage than
otherwise would be desirable and on terms that are less favorable than might
otherwise be available; and

o relinquish, license or otherwise dispose of rights to technologies, product
candidates or products that we would otherwise seek to develop or commercialize
ourselves on unfavorable terms.

If our agreement with AnorMED terminates, we may be unable to continue our
business.

      Our business is dependent on rights we have licensed from AnorMED. Under
the terms of the license agreement, we are obligated to meet certain milestones
and make specified payments. If we fail to fulfill those obligations or other
material obligations, the license agreement may be terminated. If AnorMED
terminates its agreement with us, we will have no further rights to utilize the
intellectual property covered by the terminated agreement, we would not be able
to commercialize Atiprimod and we may be forced to cease our operations,
particularly if we do not have rights to other product candidates.



                                       16
<PAGE>

Clinical trials involve a lengthy and expensive process with an uncertain
outcome, and results of earlier studies and trials may not be predictive of
future trial results.

      In order to receive regulatory approval for the commercialization of our
product candidates, we must conduct, at our own expense, extensive clinical
trials to demonstrate safety and efficacy of these product candidates. Clinical
testing is expensive, can take many years to complete and its outcome is
uncertain. Failure can occur at any time during the clinical trial process.

      The results of preclinical studies and early clinical trials of our
product candidates do not necessarily predict the results of later-stage
clinical trials. Product candidates in later stages of clinical trials may fail
to show the desired safety and efficacy traits despite having progressed through
initial clinical testing. The data collected from clinical trials of our product
candidates may not be sufficient to support the submission of a new drug
application or to obtain regulatory approval in the United States or elsewhere.
Because of the uncertainties associated with drug development and regulatory
approval, we cannot determine if or when we will have an approved product for
commercialization or achieve sales or profits.

Delays in clinical testing could result in increased costs to us and delay our
ability to generate revenue.

      We may experience delays in clinical testing of our product candidates. We
do not know whether planned clinical trials will begin on time, will need to be
redesigned or will be completed on schedule, if at all. Clinical trials can be
delayed for a variety of reasons, including delays in obtaining regulatory
approval to commence a trial, in reaching agreement on acceptable clinical trial
terms with prospective sites, in obtaining institutional review board approval
to conduct a trial at a prospective site, in recruiting patients to participate
in a trial or in obtaining sufficient supplies of clinical trial materials. Many
factors affect patient enrollment, including the size of the patient population,
the proximity of patients to clinical sites, the eligibility criteria for the
trial, competing clinical trials and new drugs approved for the conditions we
are investigating. Prescribing physicians will also have to decide to use our
product candidates over existing drugs that have established safety and
efficacy profiles. Any delays in completing our clinical trials will increase
our costs, slow down our product development and approval process and delay our
ability to generate revenue.

We may be required to suspend or discontinue clinical trials due to unexpected
side effects or other safety risks that could preclude approval of our product
candidates.

      Our clinical trials may be suspended at any time for a number of reasons.
For example, we may voluntarily suspend or terminate our clinical trials if at
any time we believe that they present an unacceptable risk to the clinical trial
patients. In addition, regulatory agencies may order the temporary or permanent
discontinuation of our clinical trials at any time if they believe that the
clinical trials are not being conducted in accordance with applicable regulatory
requirements or that they present an unacceptable safety risk to the clinical
trial patients.



                                       17
<PAGE>

      Administering any product candidates to humans may produce undesirable
side effects. These side effects could interrupt, delay or halt clinical trials
of our product candidates and could result in the FDA or other regulatory
authorities denying further development or approval of our product candidates
for any or all targeted indications. Ultimately, some or all of our product
candidates may prove to be unsafe for human use. Moreover, we could be subject
to significant liability if any volunteer or patient suffers, or appears to
suffer, adverse health effects as a result of participating in our clinical
trials.

If we are unable to satisfy regulatory requirements, we may not be able to
commercialize our product candidates.

      We need FDA approval prior to marketing our product candidates in the
United States. We expect to commence a Phase I/IIa trial of Atiprimod for the
treatment of multiple myeloma in April 2004. If we fail to obtain FDA approval
to market our product candidates, we will be unable to sell our product
candidates in the United States and we will not generate any revenue.

      This regulatory review and approval process, which includes evaluation of
preclinical studies and clinical trials of a product candidate as well as the
evaluation of our manufacturing process and our contract manufacturers'
facilities, is lengthy, expensive and uncertain. To receive approval, we must,
among other things, demonstrate with substantial evidence from well-controlled
clinical trials that the product candidate is both safe and effective for each
indication where approval is sought. Satisfaction of these requirements
typically takes several years and the time needed to satisfy them may vary
substantially, based on the type, complexity and novelty of the pharmaceutical
product. We cannot predict if or when we might submit for regulatory review any
of our product candidates currently under development. Any approvals we may
obtain may not cover all of the clinical indications for which we are seeking
approval. Also, an approval might contain significant limitations in the form of
narrow indications, warnings, precautions, or contra-indications with respect to
conditions of use.

      The FDA has substantial discretion in the approval process and may either
refuse to file our application for substantive review or may form the opinion
after review of our data that our application is insufficient to allow approval
of our product candidates. If the FDA does not file or approve our application,
it may require that we conduct additional clinical, preclinical or manufacturing
validation studies and submit that data before it will reconsider our
application. Depending on the extent of these or any other studies, approval of
any applications that we submit may be delayed by several years, or may require
us to expend more resources than we have available. It is also possible that
additional studies, if performed and completed, may not be considered sufficient
by the FDA to make our applications approvable. If any of these outcomes occur,
we may be forced to abandon our applications for approval, which might cause us
to cease operations.

      We will also be subject to a wide variety of foreign regulations governing
the development, manufacture and marketing of our products. Whether or not FDA
approval has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must still be obtained prior to manufacturing
or marketing the product in those countries. The approval process varies from
country to country and the time needed to secure approval may be longer or
shorter than that required for FDA approval. We cannot assure you that clinical
trials conducted in one country will be accepted by other countries or that
approval in one country will result in approval in any other country.



                                       18
<PAGE>

The commercial success of our product candidates will depend upon the degree of
market acceptance of these products among physicians, patients, health care
payors and the medical community.

      Our product candidates have never been commercialized for any indication.
Even if approved for sale by the appropriate regulatory authorities, physicians
may not prescribe our product candidates, in which case we could not generate
revenue or become profitable. Market acceptance of Atiprimod for the treatment
of multiple myeloma and our other product candidates by physicians, healthcare
payors and patients will depend on a number of factors, including:

  o  acceptance by physicians and patients of each such product as a safe and
     effective treatment;

  o  cost effectiveness;

  o  adequate reimbursement by third parties;

  o  potential advantages over alternative treatments;

  o  relative convenience and ease of administration; and

  o  prevalence and severity of side effects.

      If our product candidates are unable to compete effectively with marketed
cancer drugs, our commercial opportunity will be reduced or eliminated.

      We face competition from established pharmaceutical and biotechnology
companies, as well as from academic institutions, government agencies and
private and public research institutions. Many of our competitors have
significantly greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals and marketing approved products than we do.
Smaller or early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large, established
companies. Our commercial opportunity will be reduced or eliminated if our
competitors develop and commercialize cancer drugs that are safer, more
effective, have fewer side effects or are less expensive than our product
candidates. These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites
and patient registration for clinical trials, as well as in acquiring
technologies and technology licenses complementary to our programs or
advantageous to our business.

      We expect that our ability to compete effectively will depend upon our
ability to:



                                       19
<PAGE>

o successfully and rapidly complete clinical trials and submit for and obtain
all requisite regulatory approvals in a cost-effective manner;

o maintain a proprietary position for our products and manufacturing processes
and other related product technology;

o attract and retain key personnel;

o develop relationships with physicians prescribing these products; and

o build an adequate sales and marketing infrastructure for our product
candidates.

      Because we will be competing against significantly larger companies with
established track records, we will have to demonstrate to physicians that, based
on experience, clinical data, side-effect profiles and other factors, our
products are preferable to existing cancer drugs. If we are unable to compete
effectively in the cancer drug market and differentiate our products from
currently marketed cancer drugs, we may never generate meaningful revenue.

We currently have no sales and marketing organization. If we are unable to
establish a direct sales force in the United States to promote our products, the
commercial opportunity for our products may be diminished.

      We currently have no sales and marketing organization. If any of our
product candidates are approved by the FDA, we intend to market that product
directly to hospitals in the United States through our own sales force. We will
incur significant additional expenses and commit significant additional
management resources to establish this sales force. We may not be able to
establish these capabilities despite these additional expenditures. We will also
have to compete with other pharmaceutical and biotechnology companies to
recruit, hire and train sales and marketing personnel. If we elect to rely on
third parties to sell our product candidates in the United States, we may
receive less revenue than if we sold our products directly. In addition, we may
have little or no control over the sales efforts of those third parties. In the
event we are unable to develop our own sales force or collaborate with a third
party to sell our product candidates, we may not be able to commercialize our
product candidates which would negatively impact our ability to generate
revenue.

We may need others to market and commercialize our product candidates in
international markets.

      In the future, if appropriate regulatory approvals are obtained, we intend
to commercialize our product candidates in international markets. However, we
have not decided how to commercialize our product candidates in those markets.
We may decide to build our own sales force or sell our products through third
parties. If we decide to sell our product candidates in international markets
through a third party, we may not be able to enter into any marketing
arrangements on favorable terms or at all. In addition, these arrangements could
result in lower levels of income to us than if we marketed our product
candidates entirely on our own. If we are unable to enter into a marketing
arrangement for our product candidates in international markets, we may not be
able to develop an effective international sales force to successfully
commercialize those products in international markets. If we fail to enter into
marketing arrangements for our products and are unable to develop an effective
international sales force, our ability to generate revenue would be limited.



                                       20
<PAGE>

If the FDA does not approve our contract manufacturers' facilities, we may be
unable to develop or commercialize our product candidates.

      We rely on third-party contract manufacturers to manufacture our product
candidates, and currently have no plans to develop our own manufacturing
facility. The facilities used by our contract manufacturers to manufacture our
product candidates must be approved by the FDA. If the FDA does not approve
these facilities for the manufacture of our product, we may need to fund
additional modifications to our manufacturing process, conduct additional
validation studies, or find alternative manufacturing facilities, any of which
would result in significant cost to us as well as a delay of up to several years
in obtaining approval for and manufacturing of our product candidates. In
addition, our contract manufacturers will be subject to ongoing periodic
unannounced inspection by the FDA and corresponding state agencies for
compliance with good manufacturing practices regulations, or cGMPs, and similar
foreign standards. These regulations cover all aspects of the manufacturing,
testing, quality control and record keeping relating to our product candidates.
We do not have control over our contract manufacturers' compliance with these
regulations and standards. Failure by our contract manufacturers to comply with
applicable regulations could result in sanctions being imposed on us, including
fines, injunctions, civil penalties, failure of the government to grant market
approval of drugs, delays, suspension or withdrawals of approvals, operating
restrictions and criminal prosecutions, any of which could significantly and
adversely affect our business. In addition, we have no control over our contract
manufacturers' ability to maintain adequate quality control, quality assurance
and qualified personnel. Failure by our contract manufacturers to comply with or
maintain any of these standards could adversely affect the development of our
product candidates and our business.

If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities and may be required to limit commercialization of our
product candidates.

      We face an inherent risk of product liability lawsuits related to the
testing of our product candidates, and will face an even greater risk if we sell
our product candidates commercially. Currently, we are not aware of any
anticipated product liability claims with respect to our product candidates. In
the future, an individual may bring a liability claim against us if one of our
product candidates causes, or merely appears to have caused, an injury. If we
cannot successfully defend ourselves against the product liability claim, we may
incur substantial liabilities. Regardless of merit or eventual outcome,
liability claims may result in:

o  decreased demand for our product candidates;

o  injury to our reputation;

o  withdrawal of clinical trial participants;

o  costs of related litigation;




                                       21
<PAGE>

o  substantial monetary awards to patients;

o  product recalls;

o  loss of revenue; and

o  the inability to commercialize our product candidates.

      We have "clinical trial" liability insurance with a $2,000,000 annual
aggregate limit for up 40 patients participating in our Atiprimod clinical
trials. We intend to expand our insurance coverage to include the sale of
commercial products if marketing approval is obtained for our product
candidates. Our current insurance coverage may prove insufficient to cover any
liability claims brought against us. In addition, because of the increasing
costs of insurance coverage, we may not be able to maintain insurance coverage
at a reasonable cost or obtain insurance coverage that will be adequate to
satisfy any liability that may arise.

Even if we receive regulatory approval for our product candidates, we will be
subject to ongoing significant regulatory obligations and oversight.

      If we receive regulatory approval to sell our product candidates, the FDA
and foreign regulatory authorities may, nevertheless, impose significant
restrictions on the indicated uses or marketing of such products, or impose
ongoing requirements for post-approval studies. Following any regulatory
approval of our product candidates, we will be subject to continuing regulatory
obligations, such as safety reporting requirements, and additional
post-marketing obligations, including regulatory oversight of the promotion and
marketing of our products. If we become aware of previously unknown problems
with any of our product candidates here or overseas or our contract
manufacturers' facilities, a regulatory agency may impose restrictions on our
products, our contract manufacturers or on us, including requiring us to
reformulate our products, conduct additional clinical trials, make changes in
the labeling of our products, implement changes to or obtain re-approvals of our
contract manufacturers' facilities or withdraw the product from the market. In
addition, we may experience a significant drop in the sales of the affected
products, our reputation in the marketplace may suffer and we may become the
target of lawsuits, including class action suits. Moreover, if we fail to comply
with applicable regulatory requirements, we may be subject to fines, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecution. Any of these events could harm
or prevent sales of the affected products or could substantially increase the
costs and expenses of commercializing and marketing these products.

We rely on third parties to conduct our clinical trials. If these third parties
do not successfully carry out their contractual duties or meet expected
deadlines, we may not be able to seek or obtain regulatory approval for or
commercialize our product candidates.

      We have agreements with third-party contract research organizations, or
CROs, to provide monitors and to manage data for our clinical programs. We and
our CROs are required to comply with current Good Clinical Practices, or GCPs,
regulations and guidelines enforced by the FDA for all of our products in
clinical development. The FDA enforces GCPs through periodic inspections of
trial sponsors, principal investigators and trial sites. In the future, if we or
our CROs fail to comply with applicable GCPs, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA may require us to perform
additional clinical trials before approving our marketing applications. We
cannot assure you that, upon inspection, the FDA will determine that any of our
clinical trials for products in clinical development comply with GCPs. In
addition, our clinical trials must be conducted with product produced under cGMP
regulations, and will require a large number of test subjects. Our failure to
comply with these regulations may require us to repeat clinical trials, which
would delay the regulatory approval process.



                                       22
<PAGE>

      If any of our relationships with these third-party CROs terminate, we may
not be able to enter into arrangements with alternative CROs. If CROs do not
successfully carry out their contractual duties or obligations or meet expected
deadlines, if they need to be replaced, or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to adhere to our
clinical protocols, regulatory requirements or for other reasons, our clinical
trials may be extended, delayed or terminated, and we may not be able to obtain
regulatory approval for or successfully commercialize our product candidates. As
a result, our financial results and the commercial prospects for our product
candidates would be harmed, our costs could increase, and our ability to
generate revenue could be delayed.

If we fail to attract and keep senior management and key scientific personnel,
we may be unable to successfully develop our product candidates, conduct our
clinical trials and commercialize our product candidates.

      Our success depends in part on our continued ability to attract, retain
and motivate highly qualified management, clinical and scientific personnel and
on our ability to develop and maintain important relationships with leading
academic institutions, clinicians and scientists. We are highly dependent upon
our senior management and scientific staff, particularly Gary S. Jacob, our
Chief Executive Officer, and Donald Picker, our Executive Vice President, R&D.
The loss of services of Dr. Jacob, Dr. Picker or one or more of our other
members of senior management could delay or prevent the successful completion of
our planned clinical trials or the commercialization of our product candidates.

      The competition for qualified personnel in the biotechnology and
pharmaceuticals field is intense. We will need to hire additional personnel as
we expand our clinical development and commercial activities. We may not be able
to attract and retain quality personnel on acceptable terms given the
competition for such personnel among biotechnology, pharmaceutical and other
companies. We do not carry "key person" insurance covering any members of our
senior management.

If we fail to acquire and develop other products or product candidates, we may
be unable to grow our business.

      To date, we have in-licensed or acquired the rights to each of our product
candidates. As part of our growth strategy, we intend to license or acquire
additional products and product candidates for development and
commercialization. Because we have limited internal research capabilities, we
are dependent upon pharmaceutical and biotechnology companies and other
researchers to sell or license products to us. The success of this strategy
depends upon our ability to identify, select and acquire the right
pharmaceutical product candidates and products.



                                       23
<PAGE>

      Any product candidate we license or acquire may require additional
development efforts prior to commercial sale, including extensive clinical
testing and approval by the FDA and applicable foreign regulatory authorities.
All product candidates are prone to the risks of failure inherent in
pharmaceutical product development, including the possibility that the product
candidate will not be shown to be sufficiently safe and effective for approval
by regulatory authorities. In addition, we cannot assure you that any products
that we license or acquire that are approved will be manufactured or produced
economically, successfully commercialized or widely accepted in the marketplace.

      Proposing, negotiating and implementing an economically viable product
acquisition or license is a lengthy and complex process. Other companies,
including those with substantially greater financial, marketing and sales
resources, may compete with us for the acquisition or license of product
candidates and approved products. We may not be able to acquire or license the
rights to additional product candidates and approved products on terms that we
find acceptable, or at all.

We may undertake acquisitions in the future, and any difficulties from
integrating these acquisitions could damage our ability to attain or maintain
profitability.

         We may acquire additional businesses, products or product candidates
that complement or augment our existing business. Integrating any newly acquired
business or product could be expensive and time-consuming. We may not be able to
integrate any acquired business or product successfully or operate any acquired
business profitably. Moreover, we many need to raise additional funds through
public or private debt or equity financing to make acquisitions, which may
result in dilution to stockholders and the incurrence of indebtedness that may
include restrictive covenants.

We will need to increase the size of our organization, and we may experience
difficulties in managing growth.

      We are a small company with 6 employees as of April 6, 2004, most of whom
have joined us in the preceding twelve months. To continue our clinical trials
and commercialize our product candidates, we will need to expand our employee
base for managerial, operational, financial and other resources. Future growth
will impose significant added responsibilities on members of management,
including the need to identify, recruit, maintain and integrate additional
employees. Our future financial performance and our ability to commercialize our
product candidates and to compete effectively will depend, in part, on our
ability to manage any future growth effectively. To that end, we must be able
to:

o  manage our development efforts effectively;

o  manage our clinical trials effectively;





                                       24
<PAGE>

o   integrate additional management, administrative, manufacturing and sales
and marketing personnel;

o   maintain sufficient administrative, accounting and management information
systems and controls; and

 o  hire and train additional qualified personnel.

      We may not be able to accomplish these tasks, and our failure to
accomplish any of them could harm our financial results.

Reimbursement may not be available for our product candidates, which could
diminish our sales.

      Market acceptance and sales of our product candidates may depend on
reimbursement policies and health care reform measures. The levels at which
government authorities and third-party payors, such as private health insurers
and health maintenance organizations, reimburse patients for the price they pay
for our products could affect whether we are able to commercialize these
products. We cannot be sure that reimbursement will be available for any of
these products. Also, we cannot be sure that reimbursement amounts will not
reduce the demand for, or the price of, our products. We have not commenced
efforts to have our product candidates reimbursed by government or third party
payors. If reimbursement is not available or is available only to limited
levels, we may not be able to commercialize our products.

      In recent years, officials have made numerous proposals to change the
health care system in the United States. These proposals include measures that
would limit or prohibit payments for certain medical treatments or subject the
pricing of drugs to government control. In addition, in many foreign countries,
particularly the countries of the European Union, the pricing of prescription
drugs is subject to government control. If our products are or become subject to
government regulation that limits or prohibits payment for our products, or that
subject the price of our products to governmental control, we may not be able to
generate revenue, attain profitability or commercialize our products.

      As a result of legislative proposals and the trend towards managed health
care in the United States, third-party payors are increasingly attempting to
contain health care costs by limiting both coverage and the level of
reimbursement of new drugs. They may also refuse to provide any coverage of uses
of approved products for medical indications other than those for which the FDA
has granted market approvals. As a result, significant uncertainty exists as to
whether and how much third-party payors will reimburse patients for their use of
newly-approved drugs, which in turn will put pressure on the pricing of drugs.

Legislative or regulatory reform of the healthcare system may affect our ability
to sell our products profitably.

      In both the United States and certain foreign jurisdictions, there have
been a number of legislative and regulatory proposals to change the healthcare
system in ways that could impact upon our ability to sell our products
profitably. In recent years, new legislation has been proposed in the United
States at the Federal and state levels that would effect major changes in the
healthcare system, either nationally or at the state level.



                                       25
<PAGE>

         These proposals have included prescription drug benefit proposals for
Medicare beneficiaries introduced in Congress. Legislation creating a
prescription drug benefit and making certain changes in Medicaid reimbursement
has recently been enacted by Congress and signed by the President. Given this
legislation's recent enactment, it is still too early to determine its impact on
the pharmaceutical industry and our business. Further federal and state
proposals are likely. The potential for adoption of these proposals affects or
will affect our ability to raise capital, obtain additional collaborators and
market our products. We expect to experience pricing pressures in connection
with the sale of our products due to the trend toward managed health care, the
increasing influence of health maintenance organizations and additional
legislative proposals. Our results of operations could be adversely affected by
future healthcare reforms.

Risks Related to our Intellectual Property

It is difficult and costly to protect our proprietary rights, and we may not be
able to ensure their protection.

      Our commercial success will depend in part on obtaining and maintaining
patent protection and trade secret protection of our product candidates, and the
methods used to manufacture them, as well as successfully defending these
patents against third-party challenges. We will only be able to protect our
product candidates from unauthorized making, using, selling, and offering to
sell or importation by third parties to the extent that we have rights under
valid and enforceable patents or trade secrets that cover these activities.

      As of April 6, 2004, we own 4 issued United States patents and have
licensed rights to 8 issued United States patents and 78 issued foreign patents,
and to 3 pending United States patent applications and 39 pending foreign patent
applications. We do not and have not had any control over the filing or
prosecution of these patents or patent applications. We may file additional
patent applications and extensions.

      The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and involve complex legal and factual questions for which
important legal principles remain unresolved. No consistent policy regarding the
breadth of claims allowed in biotechnology patents has emerged to date in the
United States. The biotechnology patent situation outside the United States is
even more uncertain. Changes in either the patent laws or in interpretations of
patent laws in the United States and other countries may diminish the value of
our intellectual property. Accordingly, we cannot predict the breadth of claims
that may be allowed or enforced in our licensed patents or in third-party
patents.

      The degree of future protection for our proprietary rights is uncertain
because legal means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep our competitive advantage. For
example:



                                       26
<PAGE>

o others may be able to make compounds that are competitive with our product
candidates but that are not covered by the claims of our licensed patents, or
for which we are not licensed under our license agreements;

o we or our licensors might not have been the first to make the inventions
covered by our pending patent application or the pending patent applications and
issued patents of our licensors;

o we or our licensors might not have been the first to file patent applications
for these inventions;

o others may independently develop similar or alternative technologies or
duplicate any of our technologies;

o it is possible that our pending patent application or one or more of the
pending patent applications of our licensors will not result in issued patents;

o the issued patents of our licensors may not provide us with any competitive
advantages, or may be held invalid or unenforceable as a result of legal
challenges by third parties;

o we may not develop additional proprietary technologies that are patentable; or

o the patents of others may have an adverse effect on our business.

      We also may rely on trade secrets to protect our technology, especially
where we do not believe patent protection is appropriate or obtainable. However,
trade secrets are difficult to protect. While we use reasonable efforts to
protect our trade secrets, our employees, consultants, contractors, outside
scientific collaborators and other advisors may unintentionally or willfully
disclose our information to competitors. Enforcing a claim that a third party
illegally obtained and is using our trade secrets is expensive and time
consuming, and the outcome is unpredictable. In addition, courts outside the
United States are sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge, methods and
know-how.

We may incur substantial costs as a result of litigation or other proceedings
relating to patent and other intellectual property rights and we may be unable
to protect our rights to, or use, our technology.

      If we choose to go to court to stop someone else from using the inventions
claimed in our licensed patents, that individual or company has the right to ask
the court to rule that these patents are invalid and/or should not be enforced
against that third party. These lawsuits are expensive and would consume time
and other resources even if we were successful in stopping the infringement of
these patents. In addition, there is a risk that the court will decide that
these patents are not valid and that we do not have the right to stop the other
party from using the inventions. There is also the risk that, even if the
validity of these patents is upheld, the court will refuse to stop the other
party on the ground that such other party's activities do not infringe our
rights to these patents.



                                       27
<PAGE>

      Furthermore, a third party may claim that we are using inventions covered
by the third party's patent rights and may go to court to stop us from engaging
in our normal operations and activities, including making or selling our product
candidates. These lawsuits are costly and could affect our results of operations
and divert the attention of managerial and technical personnel. There is a risk
that a court would decide that we are infringing the third party's patents and
would order us to stop the activities covered by the patents. In addition, there
is a risk that a court will order us to pay the other party damages for having
violated the other party's patents. The biotechnology industry has produced a
proliferation of patents, and it is not always clear to industry participants,
including us, which patents cover various types of products or methods of use.
The coverage of patents is subject to interpretation by the courts, and the
interpretation is not always uniform. If we are sued for patent infringement, we
would need to demonstrate that our products or methods of use either do not
infringe the patent claims of the relevant patent and/or that the patent claims
are invalid, and we may not be able to do this. Proving invalidity, in
particular, is difficult since it requires a showing of clear and convincing
evidence to overcome the presumption of validity enjoyed by issued patents.

      Because some patent applications in the United States may be maintained in
secrecy until the patents are issued, because patent applications in the United
States and many foreign jurisdictions are typically not published until eighteen
months after filing, and because publications in the scientific literature often
lag behind actual discoveries, we cannot be certain that others have not filed
patent applications for technology covered by our licensors' issued patents or
our pending applications or our licensors' pending applications or that we or
our licensors were the first to invent the technology. Our competitors may have
filed, and may in the future file, patent applications covering technology
similar to ours. Any such patent application may have priority over our or our
licensors' patent applications and could further require us to obtain rights to
issued patents covering such technologies. If another party has filed a United
States patent application on inventions similar to ours, we may have to
participate in an interference proceeding declared by the United States Patent
and Trademark Office to determine priority of invention in the United States.
The costs of these proceedings could be substantial, and it is possible that
such efforts would be unsuccessful, resulting in a loss of our United States
patent position with respect to such inventions.

      Some of our competitors may be able to sustain the costs of complex patent
litigation more effectively than we can because they have substantially greater
resources. In addition, any uncertainties resulting from the initiation and
continuation of any litigation could have a material adverse effect on our
ability to raise the funds necessary to continue our operations.

Risks Related to our Common Stock

Market volatility may affect our stock price and the value of a holder's
investment.

      The market prices for securities of biopharmaceutical companies in general
have been highly volatile and may continue to be highly volatile in the future.
The following factors, in addition to other risk factors described in this
section, may have a significant impact on the market price of our common stock:

o announcements of technological innovations or new products by us or our
competitors;



                                       28
<PAGE>

o announcement of FDA approval or non-approval of our product candidates or
delays in the FDA review process;

o actions taken by regulatory agencies with respect to our product candidates,
clinical trials, manufacturing process or sales and marketing activities;

o regulatory developments in the United States and foreign countries;

o the success of our development efforts and clinical trials;

o the success of our efforts to acquire or in-license additional products or
product candidates;

o any intellectual property infringement action, or any other litigation,
involving us;

o announcements concerning our competitors, or the biotechnology or
biopharmaceutical industries in general;

o actual or anticipated fluctuations in our operating results;

o changes in financial estimates or recommendations by securities analysts;

o sales of large blocks of our common stock;

o sales of our common stock by our executive officers, directors and significant
stockholders and;

o the loss of any of our key scientific or management personnel.

      The occurrence of one or more of these factors may cause our stock price
to decline, and you may not be able to resell your shares at or above the price
you paid for your shares. In addition, the stock markets in general, and the
markets for biotechnology and biopharmaceutical stocks in particular, have
experienced extreme volatility that has often been unrelated to the operating
performance of particular companies. These broad market fluctuations may
adversely affect the trading price of our common stock.

We are at risk of securities class action litigation.

      In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially relevant for us because biotechnology and
biopharmaceutical companies have experienced significant stock price volatility
in recent years. If we faced such litigation, it could result in substantial
costs and a diversion of management's attention and resources, which could harm
our business.

The ownership interests of our officers, directors and largest stockholders
could conflict with the interests of our other stockholders.

      As of April 6, 2004, our officers, directors and holders of 5% or more of
our outstanding common stock beneficially own approximately 29.5% of our common
stock As a result, these stockholders, acting together, will be able to
significantly influence all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. The interests of this group of stockholders
may not always coincide with our interests or the interests of other
stockholders.



                                       29
<PAGE>

Our common stock may be deemed penny stock with a limited trading market.

         Our common stock is currently listed for trading in the OTC Bulletin
Board which is generally considered to be a less efficient market than market
such as NASDAQ or other national exchanges, and which may cause difficulty in
conducting trades and difficulty in obtaining future financing. Further, our
securities are subject to the "penny stock rules" adopted pursuant to Section 15
(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
penny stock rules apply to non-NASDAQ companies whose common stock trades at
less than $5.00 per share or which have tangible net worth of less than
$5,000,000 ($2,000,000 if the company has been operating for three or more
years). Such rules require, among other things, that brokers who trade "penny
stock" to persons other than "established customers" complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade "penny stock" because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. In the event that we remain
subject to the "penny stock rules" for any significant period, there may develop
an adverse impact on the market, if any, for our securities. Because our
securities are subject to the "penny stock rules," investors will find it more
difficult to dispose of our securities. Further, for companies whose securities
are traded in the OTC Bulletin Board, it is more difficult: (i) to obtain
accurate quotations, (ii) to obtain coverage for significant news events because
major wire services, such as the Dow Jones News Service, generally do not
publish press releases about such companies, and (iii) to obtain needed capital.

We have not paid cash dividends in the past and do not expect to pay cash
dividends in the future. Any return on investment may be limited to the value of
our stock.

         We have never paid cash dividends on our stock and do not anticipate
paying cash dividends on our stock in the foreseeable future. The payment of
cash dividends on our stock will depend on our earnings, financial condition and
other business and economic factors affecting us at such time as the board of
directors may consider relevant. If we do not pay cash dividends, our stock may
be less valuable because a return on your investment will only occur if our
stock price appreciates.

A sale of a substantial number of shares of our common stock may cause the price
of our common stock to decline.

         If our stockholders sell substantial amounts of our common stock in the
public market, including shares issued upon the exercise of outstanding options
or warrants, the market price of our common stock could fall. These sales also
may make it more difficult for us to sell equity or equity-related securities in
the future at a time and price that we deem reasonable or appropriate.
Approximately 21.6 million shares of restricted common stock issued to
stockholders in connection with the Merger will be eligible for sale pursuant to
Rule 144 beginning on April 30, 2004. In addition, we are obligated to file a
registration statement with the Securities and Exchange Commission within 90
days of the closing of our private placement in January 2004 registering the
resale of the shares of common stock sold in the private placement.



                                       30
<PAGE>

Item 2.  Description of Property.

         We currently lease 2,722 square feet of office space located at 420
Lexington Avenue, Suite 2500, New York, New York through August 31, 2008. This
facility contains our executive and administrative headquarters.

         Additionally, we currently lease 2,120 square feet of laboratory space
located at 7 Deer Park Drive, Suite N, Monmouth Junction, New Jersey through
November 2005.

         We believe our existing facilities are well maintained, in good
operating condition, and that our existing and planned facilities will be
adequate to support our operations for the foreseeable future.

Item 3.  Legal Proceedings.

         We are not a party to any pending legal proceedings.

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

         There were no matters submitted to a vote of security holders during
the three months ended December 31, 2003.




                                       31
<PAGE>


PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

Market Information

         Our common stock has been quoted on the OTC Bulletin Board under the
symbol "CLSP.OB" since May 21, 2003. Prior to May 21, 2003, our common stock was
quoted on the OTC Bulletin Board under the symbol "WEBR.OB" but never traded.
The following table shows the reported high and low closing bid quotations per
share for our common stock based on information provided by the OTC Bulletin
Board. Particularly since our common stock is traded infrequently, such
over-the-counter market quotations reflect inter-dealer prices, without markup,
markdown or commissions and may not necessarily represent actual transactions or
a liquid trading market.

----------------------   ---------------   --------
2003                     High              Low
----------------------   ---------------   --------
Fourth Quarter           $4.05             $3.95
----------------------   ---------------   --------
Third Quarter             5.30             3.00
----------------------   ---------------   --------
Second Quarter            5.80             4.50
----------------------   ---------------   --------


Number of Stockholders

         As of April 6, 2004, there were 193 holders of record of our common
stock.

Dividend Policy

         Historically, we have not paid any dividends to the holders of our
common stock and we do not expect to pay any such dividends in the foreseeable
future as we expect to retain our future earnings for use in operation and
expansion of our business.

Recent Sales of Unregistered Securities

         In the Merger, Webtronics issued 17,318,994 shares of its common stock
in exchange for outstanding Old Callisto common stock and an additional
4,395,684 shares in exchange for outstanding Synergy common stock. The issuance
of shares was done in accordance with Regulation D under the Securities Act of
1933, as amended. In connection therewith, a filing on Form D with the
Securities and Exchange Commission was made on May 15, 2003. Subsequently,
65,757 shares of common stock issued to former Synergy shareholders were
returned to us under the terms of certain indemnification agreements.




                                       32
<PAGE>

         From November 2003 through January 2004, we sold and issued 3,905,432
shares of common stock at an issue price of $1.50 for aggregate gross proceeds
of $5,858,148. The issuance of shares was done in accordance with Regulation D
under the Securities Act of 1933, as amended. In connection therewith, a filing
on Form D with the Securities and Exchange Commission was made on November 21,
2003. We intend to use the net proceeds from the sale of these shares for
working capital and to further the clinical development of our lead drug
candidate, Atiprimod. We are obligated to file a registration statement with the
Securities and Exchange Commission within 90 days of the final closing
registering the resale of the shares of common stock sold in the private
placement. Failure to meet this deadline could result in our being obligated to
pay certain liquidated damages to the investors. We incurred fees aggregating
$508,615 to various selling agents. In addition, we issued 31,467 shares of
common stock and an aggregate 370,543 warrants to purchase common stock to such
selling agents. The warrants are immediately exercisable at $1.90 per share and
will expire five years after issuance.

Item 6.  Management's Discussion and Analysis

         The following discussion should be read in conjunction with our
financial statements and other financial information appearing elsewhere in this
Annual Report. In addition to historical information, the following discussion
and other parts of this Annual Report contain forward-looking information that
involves risks and uncertainties.

Overview

         We are a development stage biopharmaceutical company, whose primary
focus is on biopharmaceutical product development. Since inception in June 1996
our efforts have been principally devoted to research and development, securing
patent protection, obtaining corporate relationships and raising capital. Since
inception through December 31, 2003, we have sustained cumulative net losses of
$25,817,730. Our losses have resulted primarily from expenditures incurred in
connection with the purchase of in-process research and development, stock based
compensation expense, patent filing and maintenance, outside accounting and
legal services and regulatory consulting fees.

         From inception through December 31, 2003 we have not generated any
revenue from operations. We expect to incur additional losses to perform further
research and development activities. We do not currently have any commercial
biopharmaceutical products, and do not expect to have such for several years, if
at all. Our lead drug candidate, Atiprimod, is a small molecule, orally
available drug, with antiprolifererative and antiangiogenic activity. Atiprimod
successfully completed Phase I clinical trials in rheumatoid arthritis patients.

History

         In March 2002, Old Callisto purchased 99.7% of the outstanding common
shares of Webtronics, a public company, for $400,000. Webtronics was
incorporated in Florida on February 2, 2001 and had limited operations during
the year ended December 31, 2002. On April 30, 2003, as a result of the Merger,
Old Callisto and Synergy became wholly-owned subsidiaries of Webtronics. Old
Callisto changed its name to Callisto Research Labs, LLC and Webtronics changed
its name to Callisto Pharmaceuticals, Inc. and changed its state of
incorporation from Florida to Delaware. (See footnote 4 to the Consolidated
Financial Statements).





                                       33
<PAGE>

Plan of operation

         Our plan of operations for the next twelve months is to focus primarily
on the clinical development of Atiprimod for multiple myeloma and bone
resorption disease. Additionally we are seeking to acquire or in-license
additional clinical drug candidates.

         On August 28, 2002, Synergy entered into a worldwide license agreement
with AnorMED to research, develop, sell and commercially exploit the Atiprimod
patent rights. The license agreement provides for milestone payments and
royalties on net sales. Commencing on January 1, 2004 and on January 1 of each
subsequent year Synergy is obligated to pay AnorMED a maintenance fee of
$200,000 until the first commercial sale of the product. The first of these
annual maintenance fee payments under this agreement was made on January 22,
2004 and will be reported as research and development expense in the quarter
ended March 31, 2004

         On September 23, 2003, we submitted to the FDA an IND for Atiprimod to
treat multiple myeloma patients. In April 2004 we expect to commence a Phase
I/IIa clinical trial of Atiprimod in relapsed multiple myeloma patients at two
sites, the Dana-Farber Cancer Institute (Boston) and The University of Texas
M.D. Anderson Cancer Center (Houston). This Phase I/IIa clinical trial will be
an open label study, with the primary objective of assessing safety of our drug
and identifying the maximum tolerated dose. The duration of this Phase I/IIa
clinical trial will depend on how well the drug is tolerated, and on drug
response, with final results not available until the fourth quarter of 2004 or
the first quarter of 2005. If Atiprimod produces positive responses, we intend
to initiate a Phase IIb trial in relapsed multiple myeloma patients in 2005.

             From November 2003 through January 21, 2004, we sold and issued
3,905,432 shares of common stock at an issue price of $1.50 per share for
aggregate gross proceeds of $5,858,148. We incurred fees aggregating $508,615 to
various selling agents. In addition, we issued 31,467 shares of common stock and
an aggregate 370,543 warrants to purchase common stock to such selling agents.
The warrants are immediately exercisable at $1.90 per share and will expire five
years after issuance. As of December 31, 2003, we had closed on a portion of
this transaction, specifically 2,776,666 shares of common stock at a price of
$1.50 per share, for aggregate gross proceeds of $4,164,721, less $361,625 in
fees to various selling agents.

Atiprimod for Other Cancer Indications

           The National Cancer Institute (NCI) is presently evaluating Atiprimod
in a number of xenograft mouse tumor model studies, including breast, colon,
lung and prostate solid tumors at no cost to us. Successful completion of these
models could provide an additional therapeutic use for Atiprimod that would
require only a small amendment to the existing IND to begin further clinical
trials of Atiprimod. This study is being funded entirely by NCI. We have filed
new patents for broad use of Atiprimod to treat cancer.




                                       34
<PAGE>


DNA Intercalation Technology

         On February 24, 2004, we entered into an agreement with HPI to acquire
the rights to a novel site-directed DNA intercalation cancer platform
technology. We issued to HPI 25,000 shares of common stock and reimbursed HPI
approximately $100,000 for various costs and expenses. In addition we granted
HPI 1,170,000 performance based stock options exercisable at $3.60 per share
which vest upon the achievement of certain milestones. We also agreed to pay HPI
a royalty of 2% of the net sales of any products resulting from commercializing
the patents. The technology platform for site-directed DNA intercalation is
exemplified by the identification of a lead drug candidate for melanoma that
shows remarkable selectivity for human melanoma cancer cell lines. We intend to
pre-clinically evaluate this compound as a potential drug to treat melanoma, and
plan to pursue further development of site-directed intercalation studies to
identify additional clinical candidates from this technology.

Superantigen-based Bioterorrism Defense

         We intend to evaluate our superantigen-based monoclonal antibody in an
animal model for toxic shock syndrome in 2004. Successful demonstration of this
antibody's ability to protect animals against aerosolized forms of superantigen
toxins is key to the development of this antibody as a biodefense against
bioweapons that utilize streptococcal and staphylococcal bacteria.

Manufacturing

         We currently do not manufacture our drug compounds in-house and we do
not intend to do so in the future. We currently use a non-commercial supplier to
manufacture Atiprimod for use in our clinical trials. We intend to identify and
contract with a commercial supplier of Atiprimod in the second quarter of 2004.

Employees

         Our plan is to use contract research organizations for most of our
development efforts, including monitoring of clinical trial results, thus
minimizing the need to hire full time employees. As of April 6, 2004, we had 6
full-time employees.

         Our product development activities are in their early stages and we
cannot make estimates of the costs or the time it will take to complete. Net
cash inflows from any products developed may take several years to achieve. We
may need additional funding to complete these activities. We expect that our
existing capital resources will be sufficient to fund our operations for at
least the next 12 months.

Off-balance Sheet Arrangements

         We had no off-balance sheet arrangements as of December 31, 2003.

Critical Accounting Policies

         Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Our accounting policies are described in Note 3 of the
notes to our consolidated financial statements included in this Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2003. The financial
statements are prepared in accordance with accounting principles generally
accepted in the United States of America, which requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.



                                       35
<PAGE>

           Accounting for stock based compensation: We have adopted Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). As provided for by SFAS 123, we have also elected to account for
our stock-based compensation programs according to the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25")." Accordingly, compensation expense has been recognized based on the
intrinsic value of stock issued or options granted to employees and directors
for services rendered.

         Research and Development: We do not currently have any commercial
biopharmaceutical products, and do not expect to have such for several years, if
at all and therefore our research and development costs are expensed as
incurred. These include expenditures in connection with an in-house research and
development laboratory, salaries and staff costs, application and filing for
regulatory approval of our proposed products, purchase of in-process research
and development, regulatory and scientific consulting fees, contract research
and royalty payments to outside suppliers, facilities and universities as well
as legal and professional fees associated with filing and maintaining our patent
and license rights to our proposed products. While certain of our research and
development costs may have future benefits, our policy of expensing all research
and development expenditures is predicated on the fact that we have no history
of successful commercialization of biopharmaceutical products to base any
estimate of the number of future periods that would be benefited.

         Research Grants: We currently have a research grant from the National
Institute of Health for studies on Atiprimod. The studies began in early 2004
and no funding was received during 2003. We request grant funding to reimburse
expenses as incurred and record the receipt as an offset to research and
development expense.




                                       36
<PAGE>


Results of Operations

Twelve Months Ended December 31, 2003 and December 31, 2002

         We had no revenues during the twelve months ended December 31, 2003 and
December 31, 2002 because we do not have any commercial biopharmaceutical
products, and we do not expect to have such products for several years, if at
all.

         Research and development expenses increased $878,555 or 179% to
$1,369,985 for the twelve months ended December 31, 2003 from $491,430 for the
same period in 2002. The results of operations of Synergy for the period May 1,
2003 through December 31, 2003 are included in the consolidated statement of
operations for the year ended December 31, 2003, and are not included in the
results of 2002. Of this increase in research and development expense,
approximately 63% or $556,000 was attributable to costs associated with
preparing and filing our IND for Atiprimod in September of 2003. These IND
related costs included quantitative analysis and synthesis, as well as
pre-clinical management consulting fees paid to contract research organizations
to develop and advise on IND requirements, proposed clinical trial protocols,
site selection and principal investigator contracting. Also contributing to this
increase in research and development expense were higher salaries and wages,
which increased approximately $200,000 as we retained two key executive staff
scientists from Synergy. The remainder of this increase in research and
development was primarily due to the acquisition of the Synergy research
laboratory facility in conjunction with the Merger. No such expenses were
incurred in 2002. We expect our research and development expenses to increase in
2004 as our products move into more expensive later stages of development.

         During the twelve months ended December 31, 2003 we also incurred
$6,734,818 of net purchased in-process research and development expense related
to the Merger. There was no such expense during the twelve months ended December
31, 2002.

         General and administrative expenses for the twelve months ended
December 31, 2003 of $1,398,090 increased $170,391 or 14% from the $1,227,699 we
incurred for the twelve months ended December 31, 2002. During 2002, we recorded
a charge of $400,000 associated with the purchase of Webtronics. Excluding this
$400,000 charge in 2002, the increase in general and administrative expenses was
$570,391 or 69% from 2002 to 2003 primarily from higher legal, accounting and
professional fees incurred in connection with the Merger, regulatory filings,
insurance and travel associated with fund raising activities during 2003.

         Stock-based compensation expense recorded during the twelve months
ended December 31, 2003, totaled $3,833,946 as compared to $332 recorded during
the twelve months ended December 31, 2002. This increase was primarily
attributable to options issued in connection with the Merger, to retain several
key Synergy scientists, at approximately the same time our shares of common
stock commenced trading on the OTC Bulletin Board on June 17, 2003. The
remaining balance of unamortized deferred stock based compensation expense,
presented in the stockholder's equity section of our December 31, 2003 Balance
Sheet, totaled $5,480,007.




                                       37
<PAGE>

         During December 2003 Synergy sold certain New Jersey State tax loss
carry forwards under a state economic development program for cash of
approximately $221,000, the proceeds of which have been and will be used to
support research and development activities in New Jersey. This state tax
benefit was recorded as Other Income during the fourth quarter ended December
31, 2003 and there was no such benefit in 2002.

         Net loss for the twelve months ended December 31, 2003 was $13,106,247
compared to a net loss of $1,684,965 incurred for the twelve months ended
December 31, 2002.

Liquidity and Capital Resources

         As of December 31, 2003 we had $3,956,486 in cash and cash equivalents,
compared to $2,223,462 as of December 31, 2002. This increase in cash of
$1,733,024 during the twelve months ended December 31, 2003 was principally the
result of our private placement of common stock, which yielded net proceeds of
$3,803,374 through December 31, 2003, partially offset by cash used in operating
activities of $2,015,888. Our working capital as of December 31, 2003 was
$2,745,360, compared to $1,808,652 as of December 31, 2002.

         The private placement, which began in July 2003, had a final closing in
January 2004. As of December 31, 2003, we had issued 2,776,666 shares of common
stock at a price of $1.50 per share for aggregate gross proceeds of $4,164,999,
less $361,625 in fees to various selling agents. Through January 2004, we sold
an aggregate 3,905,432 shares of our common stock at an issue price of $1.50 per
share for aggregate gross proceeds of $5,858,148. We incurred a total aggregate
of $508,615 in fees and issued 31,467 shares of common stock and 370,543
warrants to purchase common stock to various selling agents in January 2004. The
warrants are exercisable at $1.90 per share and will expire five years after
issuance. See Note 9 of our consolidated financial statements for a pro forma
disclosure of the balance sheet impact of this transaction had it closed as of
December 31, 2003.

         Our working capital requirements will depend upon numerous factors
including but not limited to the nature, cost and timing of: pharmaceutical
research and development programs; pre-clinical and clinical testing; obtaining
regulatory approvals; technological advances and our ability to establish
collaborative arrangements with research organizations and individuals needed to
commercialize our products.

         Our capital resources will be focused primarily on the clinical
development and regulatory approval of Atiprimod for multiple myeloma and bone
resorption disease, a major complication associated with multiple myeloma
disease. We expect to commence a Phase I/IIa trial of Atiprimod for the
treatment of multiple myeloma in early April 2004.

         Our product development efforts are thus in their early stages and we
cannot make estimates of the costs or the time it will take to complete. The
risk of completion of any program is high because of the long duration of
clinical testing, extended regulatory approval and review cycles and uncertainty
of the costs. Net cash inflows from any products developed make take several
years to achieve. We could however receive grants, contracts or technology
licenses in the short-term. The amount and timing of these inflows, if any, is
not known.




                                       38
<PAGE>

         On October 7, 2003, we were awarded a $265,267 Small Business
Technology Transfer Research grant from the National Institutes of Health for
studies on Atiprimod. The studies began in early 2004 and no funding was
received during 2003. We request grant funding to reimburse expenses as incurred
and record the receipt as an offset to research and development expense.

         We are in the process of raising additional capital through a private
placement of common stock, which began in March 2004. There can be no assurance
we will be successful in these fund raising efforts.

Contractual Obligations and Commitments

    The following is a summary of our significant contractual cash obligations
for the periods indicated that existed as of December 31, 2003, and is based on
information appearing in the Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>

                                                Less than     1 - 3       3 - 5      More than
                                    Total        1 year       years       years       5 years
                                 ----------     --------    --------    --------     ---------
<S>                                <C>          <C>         <C>         <C>          <C>
Operating Leases                   $582,710     $150,895    $253,983    $177,832            -
Minimum patent royalty /
license fees                      1,037,500      207,500     415,000     415,000           (1)
                                 ----------     --------    --------    --------     ---------
Total obligations                $1,620,210     $358,395    $668,983    $592,832            -
                                 ==========     ========    ========    ========     =========

</TABLE>

(1) For purposes of this schedule we have assumed that all patents not
commercialized within 5 years will be abandoned, license agreements will be
terminated and associated minimum royalty payments will cease.


Item 7. Financial Statements.

         The full text of our audited consolidated financial statements for the
fiscal years ended December 31, 2003 and 2002 begins on page F-1 of this Annual
Report on Form 10-KSB.

Item 8. Changes and Disagreements with Accountants on Accounting and Financial
Disclosure.

         On August 6, 2003, we filed a Form 8-K disclosing that Baum & Company,
PA had resigned as our independent accountants with no disagreements and that
BDO Seidman, LLP had been retained as our independent accountants.

Item 8A. Controls and Procedures.

         Our Chief Executive Officer and Principal Financial Officer, based on
evaluation of our disclosure controls and procedures (as defined in Rules
13a-5(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended)
required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of December 31,
2003, have concluded that our disclosure controls and procedures were effective
to ensure the timely collection, evaluation and disclosure of information
relating to our company that would potentially be subject to disclosure under
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated there under.



                                       39
<PAGE>

         There has been no significant change in our internal controls over
financial reporting that could significantly affect internal controls subsequent
to September 30, 2003 except that during the fourth quarter of 2003 we
implemented additional controls and procedures designed to better monitor and
record capital transactions including stock based compensation transactions.




                                       40
<PAGE>

                                    PART III

Item 9. Directors and Executive Officers of the Registrant.

         The following table sets forth certain information regarding the
directors and executive officers of Callisto Pharmaceuticals, Inc. as of April
6, 2004:

<TABLE>
<CAPTION>

     Name                      Age     Positions
     ----                      ---     ---------
     <S>                       <C>     <C>
     Gabriele M. Cerrone       32      Chairman of the Board
     Gary S. Jacob             57      Chief Executive Officer, Chief Scientific
                                       Officer; Chairman of Synergy Pharmaceuticals
                                       Inc.
     Donald H. Picker          58      Executive Vice President, R&D
     Bernard F. Denoyer        56      Vice President, Finance
     Kunwar Shailubhai         46      Senior Vice President, Drug Discovery of
                                       Synergy Pharmaceuticals Inc.
     Iain G. Ross              50      Director
     Edwin Snape               63      Director
     Albert J. Henry           66      Director
     Michael J. Zelefsky       43      Director
     Christoph Bruening        36      Director

</TABLE>

Gabriele M. Cerrone has served as our Chairman of the Board of Directors since
May 2003. Mr. Cerrone has served as a Senior Vice President of Investments of
Oppenheimer & Co. Inc., a financial services firm since March 1999. Prior to
such affiliation, Mr. Cerrone held the position of Managing Director of
Investments at Barington Capital, L.P., a merchant bank, between March 1998 and
March 1999. Between May 2001 and May 2003, Mr. Cerrone served on the board of
directors of SIGA Technologies, Inc.

Gary S. Jacob, Ph.D. has served as our Chief Executive Officer as well as Chief
Scientific Officer since May 2003 and Chairman of Synergy Pharmaceuticals Inc.
since October 2003. Dr. Jacob served as Chief Scientific Officer of Synergy
Pharmaceuticals Inc. from 1999 to 2003. From 1990 to 1998, Dr. Jacob served as a
Monsanto Science Fellow, specializing in the field of Glycobiology. From 1997 to
1998, Dr. Jacob was Director of Functional Genomics, Corporate Science &
Technology, Monsanto, where he played a pivotal role in the rapid development of
Monsanto's plant genomics strategy and the buildup of the in-house advanced
genomics program. From 1990 to 1997, Dr. Jacob was Director of Glycobiology,
G.D. Searle Pharmaceuticals Inc. From 1986 to 1990, Dr. Jacob was Manager of the
G.D. Searle Glycobiology Group located at Oxford University, England.

Donald H. Picker, Ph.D. has served as our Executive Vice President, R&D since
April 2004. From May 2003 until March 2004, Dr. Picker served as Senior Vice
President, Drug Development. Dr. Picker was Chief Executive Officer and
President of Synergy Pharmaceuticals Inc. and a member of its board of directors
from 1998 to April 2003. From 1996 to 1998, Dr. Picker was President and Chief
Operating Officer of LXR Biotechnology Inc., an apoptosis drug development
company. From 1991 to 1996, he was Senior Vice President of Research and
Development at Genta Inc., an antisense drug development company.



                                       41
<PAGE>

Bernard F. Denoyer, CPA has served as our Vice President, Finance since January
2004. From July 2003 to December 2003, Mr. Denoyer served as an independent
consultant to our company providing interim CFO services. In addition to our
company, Mr. Denoyer provided interim CFO and other services to emerging
technology companies, principally portfolio companies of Marsh & McLennan
Capital, LLC, from October 2000 to December 2003. From October 1994 until
September 2000, Mr. Denoyer served as Chief Financial Officer and Senior Vice
President. at META Group, Inc., a public information technology research
company. From 1990 to 1993 he was Vice President Finance of Environetics, Inc.,
a pharmaceutical water diagnostic business.

Kunwar Shailubhai, Ph.D., has served as Senior Vice President, Drug Discovery of
Synergy Pharmaceuticals Inc. since April 2004. From May 2003 until March 2004,
Dr. Shailubhai served as our Executive Vice President. From 2001 to April 2003,
Dr. Shailubhai held the position of Vice President, Drug Discovery at Synergy
Pharmaceuticals Inc. Between 1993 and 2000, he was affiliated with Monsanto
Company as Group Leader of the cancer chemoprevention group during which time he
was involved in several cancer research projects.

Christoph Bruening has served as a Director of our company since May 2003. Mr.
Bruening organized Value Relations GmbH, a full service investor relations firm
operating in Frankfurt, Germany in 1999 and currently serves as its Managing
Partner. From 1998 to 1999, Mr. Bruening served as a funds manager and Director
of Asset Management for Value Management and Research AG, a private investment
fund and funds manager in Germany. From 1997 to 1998, Mr. Bruening was a
financial analyst and Head of Research for Value Research GmbH. On February 26,
2004, Mr. Bruening became President and the sole director of Used Kar Parts,
Inc., a company which planned to develop an on-line marketplace for used car
parts. Mr. Bruening is currently evaluating the company's current business plan
and evaluating potential acquisitions. In addition, Mr. Bruening is currently a
member of the advisory board of Clarity AG.

Albert J. Henry has served as a Director of our company since May 2003. From
1992 to 1996 Mr. Henry was Chief Executive Officer of Synergy Pharmaceuticals
Inc. and from 1992 to April 2003, Mr. Henry served as Chairman of Synergy
Pharmaceuticals Inc. Mr. Henry is founder of the Wall Street venture capital
firm Henry & Associates. Most recently, Mr. Henry was Vice Chairman of IVAC
Medical Systems, Inc. and Chairman of Ivonyx, Inc. Mr. Henry is currently
Chairman and Chief Executive Officer of Infusion Reimbursement Specialists, Inc.
and MSO Medical. Mr. Henry is currently a director of Motion Analysis Corp and
Intercept Corp.

Iain G. Ross has served as a Director of our company since June 2003. Mr. Ross
has been Chairman of Biomer Technology Ltd. since January 2003 and serves as a
director of a number of healthcare technology companies including Angle
Technology plc, Eden Biopharm Group and Pegasus Therapeutics Ltd. Mr. Ross is an
advisor to Apax Partners and PPM Ventures in London. From 2001 to 2002, Mr. Ross
was Chairman and Chief Executive Officer of Allergy Therapeutics Ltd. and from
1995 to 2000, Mr. Ross was Chief Executive Officer of Quadrant Healthcare plc,
which was sold to Elan Corporation in 2000.




                                       42
<PAGE>

Edwin Snape, Ph.D. has served as a Director of our company since May 2003. Dr.
Snape has been a principal at New England Partners, a private equity firm for
ten years. Previously, he was Managing General Partner of the Vista Group, an
international private equity firm. Dr. Snape is Chairman of Memry Corporation
and Vice Chairman of Deltex Medical Holdings, Inc. He is also a director of
Diomed, Inc.

Michael J. Zelefsky, M.D. has served as a Director of our company since
September 2003. Since 1997, Dr. Zelefsky has been the Chief of Brachytherapy
Service, Department of Radiation Oncology, Memorial Sloan-Kettering Cancer
Center, where he is board certified in radiation oncology. He is Editor-In-Chief
of the Journal of Brachytherapy, and Past President of the American
Brachytherapy Society. Dr. Zelefsky has received a number of awards including
the Memorial Sloan-Kettering Cancer Center Boyer Award for Excellence in
Clinical Research. He is an active clinical researcher, as well, who has been
the Principal Investigator on prospective trials using novel therapeutic agents
with radiotherapy for patients with advanced stage genitourinary and head and
neck cancers.

Compensation of Directors

         Each of our directors is entitled to receive a cash payment of $5,750
per calendar quarter. Messrs. Cerrone, Snape and Henry have waived their right
to such payments. In addition, Messrs. Cerrone, Bruening, Ross, Snape and Henry
each received a grant of 75,000 stock options to purchase common stock at an
exercise price equal to $1.50 per share. Such options vest over a period of
three years. Dr. Zelefsky received a grant of 60,000 stock options to purchase
common stock at an exercise price equal to $2.50 per share. Such options also
vest over a period of three years.

Audit Committee

         The audit committee's responsibilities include: (i) reviewing the
independence, qualifications, services, fees, and performance of the independent
auditors, (ii) appointing, replacing and discharging the independent auditors,
(iii) pre-approving the professional services provided by the independent
auditors, (iv) reviewing the scope of the annual audit and reports and
recommendations submitted by the independent auditors, and (v) reviewing our
financial reporting and accounting policies, including any significant changes,
with management and the independent auditors. The audit committee currently
consists of Christoph Bruening. Our Board has determined that Mr. Bruening is
"independent" as that term is defined under applicable SEC rules. We currently
do not have an audit committee financial expert serving on our audit committee.
We expect to shortly appoint a director who qualifies as an "audit committee
financial expert" as defined in Item 401(e) of Regulation S-B promulgated by the
SEC.

Scientific Advisory Board

         Our scientific advisory board assists us in identifying research and
development opportunities, in reviewing with management the progress of our
projects and in recruiting and evaluating scientific staff. Although we expect
to receive guidance from the members of our scientific advisory board, all of
its members are employed on a full-time basis by others and, accordingly, are
able to devote only a small portion of their time to us. Management expects to
meet with its scientific advisory board members individually from time to time
on an informal basis. We have entered into a consulting agreement with each
member of the scientific advisory board. The scientific advisory board consists
of the following scientists:



                                       43
<PAGE>

Robert A. Kyle, M.D. Dr. Kyle is the Chairman of our scientific advisory board
and is Professor of Medicine and Laboratory Medicine at Mayo Medical School. He
served as the William H. Donner Professor of Medicine at Mayo Medical School. He
was previously Section Head of the Division of Hematology and subsequently,
Chairman of the Division of Hematology at Mayo Clinic, and served as
Secretary-General of the International Society of Hematology. He is currently on
the Board of Directors and is Chairman of the Scientific Advisory Board of the
International Myeloma Foundation. Dr. Kyle's research interests include the
biology and management of multiple myeloma, amyloidosis and monoclonal
gammopathy of undetermined significance. Dr. Kyle has received a number of
awards including the Waldenstrom Award for Myeloma Research, Henry S. Plummer
Distinguished Internist Award and the Distinguished Clinician Award from Mayo
Clinic.

Kenneth C. Anderson, M.D. Dr. Anderson is the Kraft Family Professor of Medicine
at Harvard Medical School; and serves as Chief of the Division of Hematologic
Neoplasia, Director of the Jerome Lipper Multiple Myeloma Center and Vice Chair
of the Joint Program in Transfusion Medicine at Dana-Farber Cancer Institute.
His translational research focuses on development of novel therapeutics
targeting the myeloma cell in its microenvironment. He hosted the VI
International Myeloma Workshop on Multiple Myeloma, serves on the Board of
Directors and as Chairman of the Scientific Advisors of the Multiple Myeloma
Research Foundation, and is a Doris Duke Distinguished Clinical Research
Scientist.

Moshe Talpaz, M.D. Dr. Talpaz currently holds the titles of Professor of
Medicine, David Burton, Jr. Endowed Chair at the M.D. Anderson Cancer Center,
Houston, Texas. Dr. Talpaz was formerly Chairman of the Department of
Bioimmunotherapy of the M.D. Anderson Cancer Center. Dr. Talpaz has been and
continues to be involved in the clinical development of numerous cancer drugs
and has been a pioneer in developing currently accepted treatment protocols
especially in the leukemia area. Dr. Talpaz is a member of many committees such
as the National Comprehensive Cancer Network Guidelines Panel and sits on
several editorial and advisory boards, such as Hematology Digest, Bone Marrow
Transplantation and Clinical Cancer Research. In 2003, Dr. Talpaz received the
prestigious "Leukemia and Lymphoma Society Service to Mankind Award" for his
pioneering work in this cancer field. Dr. Talpaz discovered the use of
interferon -a for treating chronic myeloid leukemia (CML) and he was the
principal investigator until FDA approval. In addition, Dr. Talpaz has acted as
a consultant to Hoffman LaRoche with regards to the FDA approval process for
interferon.

Randall K. Johnson, Ph.D. Dr. Johnson has over 30 years of experience in
government and industry working in cancer drug discovery and development. His
career began as section head at the laboratories of experimental chemotherapy at
The National Cancer Institute and was followed by over 20 years at SmithKline
Beecham and later GlaxoSmithKline. At SmithKline Beecham and GlaxoSmithKline,
Dr. Johnson held numerous positions including Director of the Department of
Biomolecular Discovery, Development Project Leader, Research Program Leader and
culminating in the Group Director of the Department of Oncology Research. Dr.
Johnson has been involved in numerous cancer working group committees such as
The Southern Cancer Study Group and The Southwest Oncology Group and on
editorial boards of cancer journals such as "Cancer Treatment Reports" and "The
Journal of the National Cancer Institute."



                                       44
<PAGE>

Compliance with Section 16(a) of the Exchange Act.

         During 2003, our common stock was not registered under Section 12 of
the Exchange Act and therefore our executive officers, directors and ten percent
or more beneficial holders of our common stock were not subject to Section
16(a).

Code of Business Conduct and Ethics

         We have adopted a formal Code of Business Conduct and Ethics applicable
to all Board members, executive officers and employees. A copy of this Code of
Business Conduct and Ethics is filed as an exhibit to this report.




                                       45
<PAGE>


Item 10.  Executive Compensation.

         The following summary compensation table sets forth certain information
concerning compensation paid to our Chief Executive Officer and our two most
highly paid executive officers (the "Named Executive Officers") for services
rendered in all capacities for the year ended December 31, 2003. Our predecessor
company, Webtronics, never paid any executive compensation to its officers. No
other executive officer of our company was paid a salary and bonus aggregating
greater than $100,000 during such time period.

<TABLE>
<CAPTION>

                                                       Annual Compensation              Long Term Compensation
                                                 ------------------------------   --------------------------------
  Name and Principal                        Year    Salary          Bonus         Securities Underlying
  Position                                          ($)             ($)           Options (#)
  <S>                                       <C>     <C>             <C>          <C>
  Gary S. Jacob                             2003    $144,792        $0              500,000
  Chief Executive Officer and Chief
  Scientific Officer

  Donald H. Picker                          2003    $126,661        $10,000         325,000
  Executive Vice President, R&D

  Kunwar Shailubhai                         2003    $110,833        $0              350,000(1)
  Executive Vice President, Drug
  Discovery of Synergy
  Pharmaceuticals, Inc.

</TABLE>


(1) All of such stock options were granted on June 13, 2003 pursuant to an
employment agreement entered into with us at that time. On April 6, 2004, the
employment agreement was terminated and the 325,000 unvested stock options were
canceled. At the same time, Dr. Shailubhai entered into an employment agreement
with Synergy Pharmaceuticals Inc. and was granted 100,000 stock options
exercisable at $1.50 per share, 50,000 of such stock options vest in June 2004
and the remainder vest in December 2004.




                                       46
<PAGE>

Option Grants in Fiscal Year 2003

         The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during the fiscal year ended
December 31, 2003.

<TABLE>
<CAPTION>

                                         Number of Shares    Percent of Total
                                           Underlying        Options Granted to    Exercise Price     Expiration
Name                                     Options Granted     Employees in 2003     Per Share             Date
--------------------------------        -----------------    -------------------   ---------------    -----------
<S>                                     <C>                  <C>                   <C>                <C>
Gary S. Jacob                               500,000 (1)               42.5%             $1.50          6/13/2013
Chief Executive Officer and Chief
Scientific Officer

Donald H. Picker                           325,000 (2)                27.7%             $1.50          9/23/2013
Executive Vice President, R&D

Kunwar Shailubhai                          350,000 (3)                29.9%             $1.50          6/13/2013
Senior  Vice President, Drug
Discovery of Synergy
Pharmaceuticals, Inc.

</TABLE>


(1)   150,000 options vest on 6/13/2004; 150,000 options vest on 6/13/2005 and
      200,000 options vest on 6/13/2006.

(2)   83,333 options vest on 7/19/2004; 108,333 options vest on 7/19/2005 and
      133,334 options vest on 7/19/2006.

(3)   All of such stock options were granted on June 13, 2003 pursuant to an
      employment agreement entered into with us at that time. On April 6, 2004,
      the employment agreement was terminated and the 325,000 unvested stock
      options were canceled. At the same time, Dr. Shailubhai entered into an
      employment agreement with Synergy Pharmaceuticals Inc. and was granted
      100,000 stock options exercisable at $1.50 per share, 50,000 of such stock
      options vest in June 2004 and the remainder vest in December 2004.




                                       47
<PAGE>


Aggregated Option Exercises in 2003 and Year End Option Values

         The following table provides certain information with respect to the
Named Executive Officers concerning the exercise of stock options during the
fiscal year ended December 31, 2003 and the value of unexercised stock options
held as of such date.


<TABLE>
<CAPTION>

                                      Number of Shares Underlying Options      Value of Unexercised In the
                                             at December 31, 2003            Money Options at December 31,
                                                                                     2003 ($) (1)
                                       ----------------------------------- ----------------------------------
Name                                   Exercisable       Unexercisable     Exercisable      Unexercisable
-------------------------------------- ----------------- ----------------- ---------------- -----------------
<S>                                    <C>               <C>               <C>              <C>
Gary S. Jacob                                 0              500,000             $0            $1,225,000
Chief Executive Officer and Chief
Scientific Officer


Donald H. Picker                               0             325,000             $0            $  796,250
Executive Vice President, R&D

Kunwar Shailubhai                           25,000           325,000(2)        $61,250         $  796,250
Senior Vice President, Drug
Discovery of Synergy
Pharmaceuticals, Inc.

</TABLE>

During the fiscal year ended December 31, 2003, no options were exercised.

(1)   Amounts calculated by subtracting the exercise price of the options from
      the market value of the underlying common stock using the closing bid
      price on the OTCBB of $3.95 per share on December 31, 2003.

(2)   All of such stock options were granted on June 13, 2003 pursuant to an
      employment agreement entered into with us at that time. On April 6, 2004,
      the employment agreement was terminated and the 325,000 unvested stock
      options were canceled. At the same time, Dr. Shailubhai entered into an
      employment agreement with Synergy Pharmaceuticals Inc. and was granted
      100,000 stock options exercisable at $1.50 per share, 50,000 of such stock
      options vest in June 2004 and the remainder vest in December 2004.





                                       48


<PAGE>
Employment Agreements

         On June 13, 2003, we entered into an employment agreement with Gary S.
Jacob, Ph.D., our Chief Executive Officer and Chief Scientific Officer. Dr.
Jacob's employment agreement is for a term of 18 months beginning June 13, 2003
and is automatically renewable for successive one year periods at the end of the
term. Dr. Jacob's salary is $225,000 per year and he is eligible to receive a
cash bonus of up to 15% of his salary per year. In connection with the
employment agreement, Dr. Jacob received a grant of 500,000 stock options which
vest over a three year period and are exercisable at $1.50 per share.

         On June 13, 2003, we entered into an employment agreement with Kunwar
Shailubhai, Ph.D., pursuant to which Dr. Shailubhai serves as Executive Vice
President, and Head of Research and Development for a term of 18 months
beginning June 13, 2003, which is automatically renewable for successive one
year periods at the end of the term. Dr. Shailubhai's salary is $170,000 per
year and he is eligible to receive a cash bonus of up to 15% of his salary per
year. In connection with the employment agreement, Dr. Shailubhai received a
grant of 25,000 stock options which are fully vested and have an exercise price
of $1.50 per share. Dr. Shailubhai also received a grant of 325,000 stock
options which vest over a three year period and are exercisable at $1.50 per
share.

         On April 6, 2004 Dr. Shailubhai's employment agreement was terminated
and Dr. Shailubhai entered into an employment agreement with Synergy pursuant to
which he agreed to serve as Senior Vice President, Drug Discovery of Synergy.
The agreement is for a term of 12 months beginning April 6, 2004 and is
automatically renewable for successive one year periods at the end of term. Dr.
Shailubhai's salary is $150,000 and he is eligible to receive a cash bonus of up
to 15% of his salary. Dr. Shailubhai's 325,000 unvested stock options, granted
pursuant to his previous employment agreement, were cancelled and he received a
new grant of 100,000 stock options exercisable at $1.50 per share, 50,000 of
such stock options vest in June 2004 and the remainder vest in December 2004.

         On September 23, 2003, we entered into an employment agreement with
Donald H. Picker, Ph.D., pursuant to which Dr. Picker agreed to serve as our
Vice President, Drug Development. Dr. Picker's employment agreement is for a
term of 18 months beginning September 23, 2003 and is automatically renewable
for successive one year periods at the end of the term. Dr. Picker's salary is
$175,000 per year and he is eligible to receive cash bonuses upon the
achievement of certain milestones. Dr. Picker received a grant of 325,000 stock
options which vest over a three year period and are exercisable at $1.50 per
share. On April 6, 2004 Dr. Picker's employment agreement was amended and his
title changed to Executive Vice President, R&D.

         On January 15, 2004, we entered into an employment agreement with
Bernard Denoyer, our Vice President, Finance. Mr. Denoyer's employment agreement
is for a term of 12 months beginning January 15, 2004 and is automatically
renewable for successive one year periods at the end of the term. Mr. Denoyer's
salary is $90,000 per year and he is eligible to receive a cash bonus of up to
10% of his salary per year. Mr. Denoyer received a grant of 100,000 stock
options which vest over a three year period and are exercisable at $3.60 per
share.



                                       49
<PAGE>

Stock Option Plan

         We rely on incentive compensation in the form of stock options to
retain and motivate directors, executive officers, employees and consultants.
Incentive compensation in the form of stock options is designed to provide
long-term incentives to directors, executive officers employees and consultants,
to encourage them to remain with us and to enable them to develop and maintain
an ownership position in our common stock.

            The stock option plan authorizes the grant of stock options to
directors, eligible employees, including executive officers and consultants. The
value realizable from exercisable options is dependent upon the extent to which
our performance is reflected in the value of our common stock at any particular
point in time. Equity compensation in the form of stock options is designed to
provide long-term incentives to directors, executive officers and other
employees. We approve the granting of options in order to motivate these
employees to maximize stockholder value. Generally, vesting for options granted
under the stock option plan is determined at the time of grant, and options
expire after a 10-year period. Options are generally granted at an exercise
price not less than the fair market value at the date of grant. As a result of
this policy, directors, executives, employees and consultants are rewarded
economically only to the extent that the stockholders also benefit through
appreciation in the market. Options granted to employees are based on such
factors as individual initiative, achievement and performance. In administering
grants to executives, the compensation committee of the Board of Directors
evaluates each executive's total equity compensation package. The compensation
committee generally reviews the option holdings of each of the executive
officers, including vesting and exercise price and the then current value of
such unvested options. We consider equity compensation to be an integral part of
a competitive executive compensation package and an important mechanism to align
the interests of management with those of our stockholders.

            As of December 31, 2003, options for 2,083,056 shares were
outstanding under our stock option plan, and options for 7,916,944 shares remain
available for future grants. The options we grant under the Plan may be either
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or non-statutory stock options at
the discretion of the Board of Directors and as reflected in the terms of the
written option agreement. The stock option plan is not a qualified deferred
compensation plan under Section 401(a) of the Code, and is not subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended
(ERISA). In addition, as of December 31, 2003, we have granted 2,770,504 stock
options not subject to the stock option plan.





                                       50
<PAGE>


The following table summarizes information about our equity compensation plans
as of December 31, 2003.

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>


---------------------------- ------------------------------- ---------------------------- ----------------------------
Plan Category                Number of Shares of Common      Weighted-Average Exercise    Number of Options
-------------                Stock to be Issued upon         Price of Outstanding         Remaining Available for
                             Exercise of Outstanding         Options                      Future Issuance Under
                             Options                                                      Equity Compensation Plans
                                                                                          (excluding securities
                                                                                          reflected in column (a))

                                       (a)                            (b)                             (c)
---------------------------- ------------------------------- ---------------------------- ----------------------------
<S>                          <C>                              <C>                         <C>
Equity  Compensation  Plans  2,083,056                                   $1.71            7,916,944
Approved by Stockholders
---------------------------- ------------------------------- ---------------------------- ----------------------------
Equity Compensation Plans    2,770,504                                   $1.53            n/a
Not Approved by
Stockholders
---------------------------- ------------------------------- ---------------------------- ----------------------------
            Total            4,853,560                                   $1.61            7,916,944
---------------------------- ------------------------------- ---------------------------- ----------------------------


</TABLE>

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

         The following table sets forth certain information regarding beneficial
ownership of shares of our common stock as of April 6, 2004 by (i) each person
know to beneficially own more than 5% of the outstanding common stock, (ii) each
of our directors, (iii) the Named Executive Officers and (iv) all directors and
executive officers as a group. Except as otherwise indicated, the persons named
in the table have sole voting and investment power with respect to all shares
beneficially owned, subject to community property laws, where applicable. Unless
otherwise indicated, the address of each beneficial owner listed below is c/o
Callisto Pharmaceuticals, Inc., 420 Lexington Avenue, Suite 2500, New York, N.Y.
10170.





                                       51
<PAGE>

<TABLE>
<CAPTION>

                                                                                  Shares of Common Stock
                Name and Address of Beneficial Owner                               Beneficially Owned (1)
--------------------------------------------------------------        ---------------------------------------------
                                                                         Number of Shares      Percentage of Class
                                                                      ---------------------- ----------------------
<S>                                                                   <C>                    <C>
Gabriele M. Cerrone                                                            2,799,237(2)              10.1%
  Chairman of the Board


Gary S. Jacob                                                                    108,297                   *
  Chief Executive Officer and Chief Scientific Officer
Donald H. Picker                                                                  97,408                   *
  Executive Vice President, R&D
Kunwar Shailubhai                                                                 25,000(3)                *
   Senior Vice President, Drug Discovery of Synergy
    Pharmaceuticals Inc.
Iain  G. Ross                                                                          0
  Director
Edwin Snape                                                                      914,402(4)               3.4%
  Director

Michael J. Zelefsky                                                                    0
  Director
Christoph Bruening                                                               368,199(5)               1.4%
  Director
Albert J. Henry                                                                1,632,164(6)               6.0%
  Director
All Directors and Executive Officers as a group (10)                           5,944,707(7)              21.4%

Donald G. Drapkin                                                              2,350,000(8)               8.6%

Panetta Partners Ltd.                                                          2,049,237                  7.6%

Henry Ventures II Limited                                                      1,632,164                  6.0%

* less than 1%

</TABLE>




                                       52
<PAGE>



(1)     Applicable percentage ownership as of April 6, 2004 is based upon
        27,023,993 shares of common stock outstanding. Beneficial ownership is
        determined in accordance with Rule 13d-3 of the Securities Exchange Act
        of 1934, as amended. Under Rule 13d-3, shares issuable within 60 days
        upon exercise of outstanding options, warrants, rights or conversion
        privileges ("Purchase Rights") are deemed outstanding for the purpose of
        calculating the number and percentage owned by the holder of such
        Purchase Rights, but not deemed outstanding for the purpose of
        calculating the percentage owned by any other person. "Beneficial
        ownership" under Rule 13d-3 includes all shares over which a person has
        sole or shared dispositive or voting power.

(2)     Consists of 750,000 shares of common stock issuable upon exercise of
        stock options held by Mr. Cerrone and 2,049,237 shares held by Panetta
        Partners, Ltd., of which Mr. Cerrone is the sole general partner and in
        such capacity only exercises voting and dispositive control.

(3)     Consists of 25,000 shares of common stock issuable upon exercise of
        stock options.

(4)     Such shares are held by NEGF II, L.P. and New England Partners Capital,
        L.P.. Mr. Snape is a principal of NEGF II, L.P. and New England Partners
        Capital, L.P.

(5)     Includes 25,000 shares of common stock issuable upon exercise of stock
        options.

(6)     Such shares are held by Henry Venture II Limited. Mr. Henry is the
        Chairman of Henry Venture II Limited.

(7)     Includes 800,000 shares of common stock issuable upon exercise of stock
        options.

(8)     Includes 250,000 shares of common stock issuable upon exercise of stock
        options held by Mr. Drapkin and 1,500,000 shares of common stock held by
        the Drapkin Family Charitable Foundation.

Item 12. Certain Relationships and Related Transactions.

None

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

(a)      Exhibits

         Exhibit
         Number     Description
         -------    -----------

         2.1        Agreement and Plan of Merger by and among Callisto
                    Pharmaceuticals, Inc., Webtronics, Inc., Callisto
                    Acquisition Corp., Synergy Pharmaceuticals Inc. and Synergy
                    Acquisition Corp. dated as of March 10, 2003 (1)



                                       53
<PAGE>

         2.2        Amendment to Agreement and Plan of Merger dated as of April
                    4, 2003 (2)

         3.1        Certificate of Incorporation (3)

         3.2        Bylaws (4)

         4.1        1996 Incentive and Non-Qualified Stock Option Plan (5)

         4.2        Form of Warrant to purchase shares of common stock issued in
                    connection with the sale of common stock (6)

         10.1       Employment Agreement dated June 13, 2003 by and between
                    Callisto Pharmaceuticals, Inc. and Gary S. Jacob (7)*

         10.2       Employment Agreement dated April 6, 2004 by and between
                    Synergy Pharmaceuticals Inc. and Kunwar Shailubhai *

         10.3       Employment Agreement dated June 13, 2003 by and between
                    Callisto Pharmaceuticals, Inc. and Donald H. Picker (9)*

         10.4       Amendment to Employment Agreement dated April 6, 2004 by and
                    between Callisto Pharmaceuticals, Inc. and Donald H. Picker*

         10.5       License Agreement dated as of August 28, 2002 by and between
                    Synergy Pharmaceuticals Inc. and AnorMED Inc. (10)**

         10.6       Employment Agreement dated January 15, 2004 by and between
                    Callisto Pharmaceuticals, Inc and Bernard Denoyer*

         10.7       Form of Registration Rights Agreement dated as of January
                    21, 2004 by and among the Registrant and the Purchasers set
                    forth on the signature page thereto (11)

         14         Code of Business Conduct and Ethics

         16         Letter of Changes in Registrant's Certifying Accountants
                    (12)

         21         List of Subsidiaries

         31.1       Certification of Chief Executive Officer required under Rule
                    13a-14(a)/15d-14(a) under the Exchange Act

         31.2       Certification of Principal Financial Officer required under
                    Rule 13a-14(a)/15d-14(a) under the Exchange Act




                                       54
<PAGE>

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

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

         *  Management contract or compensatory plan or arrangement required to
            be filed as an Exhibit to this form pursuant to Item 601 of
            Regulation S-K.

         ** Confidential treatment has been requested with respect to deleted
            portions of this agreement.

(1)    Incorporated by reference to Exhibit 2.1 filed with the Company's Current
       Report on Form 8-K filed on March 19, 2003.

(2)    Incorporated by reference to Exhibit 2.2 filed with the Company's Current
       Report on Form 8-K filed on April 30, 2003.

(3)    Incorporated by reference to Exhibit 99.1 filed with the Company's
       Current Report on Form 8-K filed on May 28, 2003.

(4)    Incorporated by reference to Exhibit 99.2 filed with the Company's
       Current Report on Form 8-K filed on May 28, 2003.

(5)    Incorporated by reference to Exhibit 4.1 filed with the Company's Current
       Report on Form 8-K filed on April 30, 2003.

(6)    Incorporated by reference to Exhibit 10.1 filed with the Company/s
       Current Report on Form 8-K filed on January 28, 2004.

(7)    Incorporated by reference to Exhibit 10.1 filed with the Company's
       Current Report on Form 10-QSB filed on August 20, 2003.

(8)    Incorporated by reference to Exhibit 10.2 filed with the Company's
       Current Report on Form 10-QSB filed on August 20, 2003.

(9)    Incorporated by reference to Exhibit 10.3 filed with the Company's
       Current Report on Form 10-QSB filed on November 14, 2003.

(10)   Incorporated by reference to Exhibit 10.4 filed with the Company's
       Current Report on Form 10-QSB filed on November 14, 2003.

(11)   Incorporated by reference to Exhibit 4.1 filed with the Company's Current
       Report on Form 8-K filed on January 28, 2004.

(12)   Incorporated by reference to Exhibit 16 filed with the Company's Current
       Report on Form 8-K filed on August 1, 2003.

(b)     Reports on Form 8-K

        We did not file a Current Report on Form 8-K during the last quarter of
the period covered by this Annual Report on Form 10-KSB.




                                       55
<PAGE>


Item 14.  Principal Accountant Fees and Services

Audit Fees.

         The aggregate fees billed and unbilled for the fiscal year ended
December 31, 2003 for professional services rendered by our principal
accountants for the audits of our annual financial statements, the reaudit of
the 2002 and 2001 financial statements, and the review of our financial
statements included in our quarterly reports on Form 10-QSB were approximately
$115,000.

Audit-Related Fees.

         The aggregate fees billed for the fiscal year ended December 31, 2003
for assurance and related services rendered by our principal accountants related
to the performance of the audit or review of our financial statements,
specifically accounting research, were $2,500.

Tax and Other Fees.

         There were no aggregate fees billed for the fiscal years ended December
31, 2003 and 2002 as there were no tax related or other services rendered by our
principal accountants in connection with the preparation of our federal and
state tax returns.

         Consistent with SEC policies and guidelines regarding audit
independence, the Audit Committee is responsible for the pre-approval of all
audit and permissible non-audit services provided by our principal accountants
on a case-by-case basis. Our Audit Committee has established a policy regarding
approval of all audit and permissible non-audit services provided by our
principal accountants. Our Audit Committee pre-approves these services by
category and service. Our Audit Committee has pre-approved all of the services
provided by our principal accountants.



                                       56
<PAGE>


SIGNATURES

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

Date:  April 14, 2004                    Callisto Pharmaceuticals, Inc.

                                         By: s/ Gary S. Jacob
                                         -------------------------------------
                                         Gary S. Jacob,
                                         Chief Executive Officer

         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
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

         Signature                                 Title                                     Date
-----------------------------            --------------------------------------      ---------------------
<S>                                      <C>                                         <C>
/s/ Gary S. Jacob                        Chief Executive Officer                     April 14, 2004
-----------------                        (Principal Executive Officer)
Gary S. Jacob


/s/ Bernard F. Denoyer                   Vice President, Finance                     April 14, 2004
----------------------                   (Principal Accounting Officer)
Bernard F. Denoyer


/s/ Gabriele M. Cerrone                  Chairman of the Board                       April 14, 2004
 ----------------------
Gabriele M. Cerrone


/s/ Iain G. Ross                         Director                                    April 14, 2004
 ---------------
Iain Ross


/s/ Edwin Snape                          Director                                    April 14, 2004
 --------------
Edwin Snape


/s/ Albert J. Henry                      Director                                    April 14, 2004
 ------------------
Albert J. Henry


/s/ Michael J. Zelefsky                  Director                                    April 14, 2004
 ----------------------
Michael J. Zelefsky

/s/ Christoph Bruening                   Director                                    April 14, 2004
 ---------------------
Christoph Bruening

</TABLE>




                                       57
<PAGE>


                         CALLISTO PHARMACEUTICALS, INC.

                          (A Development Stage Company)



                   Index to Consolidated Financial Statements

<TABLE>
<CAPTION>

                                                                                    Page
                                                                                    ----
<S>                                                                                 <C>
 Report of Independent Certified Public Accountants
                                                                                     F-2

 Consolidated Balance Sheet as of December 31,  2003                                 F-3

 Consolidated Statements of Operations for the two years in the period ended
      December 31, 2003, and for the period from June 5, 1996 (inception) to
      December 31, 2003                                                              F-4

 Consolidated Statements of Changes in Stockholders' Equity for the period from
      June 5, 1996 (inception) to December 31, 2003                                  F-5

  Consolidated Statements of Cash Flows for the years ended December 31, 2003
      and 2002, and for the period from June 5, 1996 (inception) to
      December 31, 2003                                                              F-7

 Notes to consolidated financial statements                                          F-8


</TABLE>



                                       F-1
<PAGE>


               Report of Independent Certified Public Accountants



Board of Directors
Callisto Pharmaceuticals, Inc.
New York, New York


         We have audited the accompanying consolidated balance sheet of Callisto
Pharmaceuticals, Inc. (a development stage company) (the "Company") as of
December 31, 2003, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 2003 and for the period from June 5, 1996 (inception) to
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 on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Callisto
Pharmaceuticals, Inc. as of December 31, 2003, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
2003 and for the period from June 5, 1996 (inception) to December 31, 2003, in
conformity with accounting principles generally accepted in the United States.

The 2002 financial statements, which were previously audited by other auditors,
have been restated as described in Note 10.

/s/ BDO Seidman, LLP
-----------------------

New York, New York
April 8, 2004






                                      F-2
<PAGE>


                         CALLISTO PHARMACEUTICALS, INC.
                          (A Development Stage Company)

                           CONSOLIDATED BALANCE SHEET

                                December 31, 2003

<TABLE>
<CAPTION>

<S>                                                                              <C>
                                     ASSETS
Current assets:
      Cash and cash equivalents                                                  $  3,956,486
      Prepaid expenses                                                                 52,644
                                                                                 ------------
                                                                                    4,009,130

Property and equipment, net                                                            46,488

Security deposits                                                                      62,980
                                                                                 ------------
                                                                                 $  4,118,598
                                                                                 ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable                                                           $    842,520
      Accrued expenses                                                                 79,625
      Selling agent fees payable related to private placement                         341,625
                                                                                 ------------
                                                                                    1,263,770
Stockholders' equity:
      Common stock, $.0001 par value, authorized 75,000,000
         shares, 25,928,760  outstanding at December 31, 2003                           2,590
      Additional paid-in-capital                                                   34,149,975
      Unamortized deferred stock based compensation                                (5,480,007)
      Deficit accumulated during the development stage                            (25,817,730)
                                                                                 ------------
                                                                                    2,854,828
                                                                                 ------------
                                                                                 $  4,118,598
                                                                                 ============
</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.




                                      F-3
<PAGE>


                         CALLISTO PHARMACEUTICALS, INC.
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                                        For the
                                                                                                      Period from
                                                                         For the year                 June 5, 1996
                                                                      ended December 31,             (Inception) to
                                                                -------------------------------        December 31,
                                                                    2003              2002                 2003
                                                                ------------       ------------       ------------
<S>                                                             <C>                <C>                <C>
Revenues                                                        $          -       $          -       $          -

Costs and Expenses:
   Research and development                                        1,369,985            491,430          4,902,361
   Purchased in-process research and development                   6,734,818                  -          6,734,818
   General and administrative                                      1,398,090          1,227,699          6,249,473
   Stock-based compensation                                        3,833,946                332          8,618,502
                                                                ------------       ------------       ------------
Loss from operations                                             (13,336,839)        (1,719,461)       (26,505,154)

  Interest income                                                      8,767             34,496            465,600
  Other income                                                       221,824                  -            221,824
                                                                ------------       ------------       ------------
Net loss                                                        $(13,106,247)      $ (1,684,965)      $(25,817,730)
                                                                ============       ============       ============

Weighted average shares outstanding:
               Basic and diluted                                  21,357,659         17,318,994

Net loss per common share: Basic and diluted                    $      (0.61)      $      (0.10)

</TABLE>


        The accompanying notes are an integral part of these consolidated
                              financial statements.







                                      F-4
<PAGE>
                         CALLISTO PHARMACEUTICALS, INC.
                          (A Development Stage Company)

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                Preferred                    Common        Additional
                                                 Preferred      Stock Par       Common      Stock Par       Paid in
                                                    Shares       Value          Shares        Value          Capital
                                                 ---------     ----------       ------      ----------     -----------
<S>                                              <C>           <C>          <C>             <C>            <C>
Balance at inception, June 5, 1996                       -              -            -               -               -
    Net loss for the period
    Issuance of founder shares                           -              -    2,642,500             264             528
    Common stock issued                                  -              -    1,356,194             136             272
    Common stock issued via private
      placement                                          -              -    1,366,667             137       1,024,863
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 1996                               -              -    5,365,361             537       1,025,663
     Net loss for the year                               -              -            -               -               -
     Common stock issued via private
     placement                                           -              -    1,442,666             144       1,081,855
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 1997                               -              -    6,808,027             681       2,107,518
    Net loss for the year
    Amortization of Stock based
      Compensation                                       -              -            -               -          52,778
    Common stock issued via private
      placement                                          -              -    1,416,667             142      1,062,358
    Common stock issued for
       services                                          -              -      788,889              79         591,588
    Common stock repurchased and
     cancelled                                           -              -     (836,792)            (84)        (96,916)
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 1998                               -              -    8,176,791             818       3,717,326
     Net loss for the year                               -              -            -               -               -
     Deferred Compensation - stock
      options                                            -              -            -               -           9,946
     Amortization of Stock based
       Compensation                                      -              -            -               -               -
     Common stock issued for
       services                                          -              -            -               -       3,168,832
     Common stock issued via private
       placement                                         -              -      346,667              34         259,966
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 1999                               -              -    8,523,458             852       7,156,070
     Net loss for the year                               -              -            -               -               -
     Amortization of Stock based
       Compensation                                      -              -            -               -               -
     Common stock issued                                 -              -    4,560,237             455         250,889
     Other                                                                                                         432
     Preferred shares issued                     3,485,299            348            -               -       5,986,302
     Preferred stock issued for
       services                                    750,000             75            -               -       1,124,925
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 2000                       4,235,299            423   13,083,695           1,307      14,518,618
     Net loss for the year                               -              -            -               -               -
     Deferred Compensation - stock
        options                                                                                                 20,000
     Amortization of Stock based
        Compensation                                     -              -            -               -               -
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 2001                       4,235,299            423   13,083,695           1,307      14,538,618
     Net loss for the year                               -              -            -               -               -
     Amortization of Stock based
       Compensation                                      -              -            -               -               -
                                                 ---------     ----------   ----------      ----------     -----------
Balance, December 31, 2002                       4,235,299     $      423   13,083,695      $    1,307     $14,538,618
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                    Deficit
                                              Unamortized          Accumulated
                                                Deferred            during the                 Total
                                              Stock Based           Development            Stockholders'
                                               Compensation           Stage                   Equity
                                              --------------       --------------          -------------
<S>                                           <C>                  <C>                     <C>
Balance at inception, June 5, 1996                         -                    -                      -
    Net loss for the year                                                (404,005)              (404,005)
     Issuance of founder shares                            -                    -                    792
     Common stock issued                                   -                    -                    408
     Common stock issued via private
       placement                                           -                    -              1,025,000
                                              --------------       --------------          -------------
Balance, December 31, 1996                                 -             (404,005)               622,195
     Net loss for the year                                 -             (894,505)              (894,505)
     Common stock issued via private
       placement                                           -                    -              1,081,999
                                              --------------       --------------          -------------
Balance, December 31, 1997                                 -           (1,298,510                809,689
    Net loss for the year                                  -           (1,484,438)            (1,484,438)
    Amortization of Stock based
       Compensation                                        -                    -                 52,778
    Common stock  issued                                                                       1,062,500
     Common stock issued for                               -                    -                      -
     services                                                                                    591,667
   Common Stock repurchased and cancelled                  -                    -                (97,000)
                                              --------------       --------------          -------------
Balance, December 31, 1998                                 -           (2,782,948)               935,196
     Net loss for the year                                             (4,195,263)            (4,195,263)
      Deferred Compensation - stock
      options                                         (9,946)                   -                      -
      Amortization of Stock based
        Compensation                                   3,262                    -                  3,262
     Common stock issued for
     services                                              -                    -              3,168,832
     Common stock issued via private
       placement                                           -                    -                260,000
                                              --------------       --------------          -------------
Balance, December 31, 1999                            (6,684)          (6,978,211)               172,027
      Net loss for the year                                            (2,616,261)            (2,616,261)
      Amortization of Stock based
        Compensation                                   4,197                                       4,197
     Common stock  issued                                  -                    -                251,344
     Other                                                 -                    -                    432
     Preferred shares issued                               -                    -              5,986,650
     Preferred stock issued for
     services                                              -                    -              1,125,000
                                              --------------       --------------          -------------
Balance, December 31, 2000                            (2,487)          (9,594,472)             4,923,389
     Net loss for the year                                 -           (1,432,046)            (1,432,046)
      Deferred Compensation - stock
        options                                      (20,000)                   -                      -
      Amortization of Stock based
        Compensation                                  22,155                    -                 22,155
                                              --------------       --------------          -------------
Balance, December 31, 2001                              (332)         (11,026,518)             3,513,498
     Net loss for the year                                 -           (1,684,965)            (1,684,965)
     Amortization of Stock based
       Compensation                                      332                    -                    332
                                              --------------       --------------          -------------
Balance, December 31, 2002                                 -         ($12,711,483)         $   1,828,865

</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.


                                      F-5
<PAGE>



                         CALLISTO PHARMACEUTICALS, INC.
                          (A Development Stage Company)

      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)

<TABLE>
<CAPTION>
                                                                                                        Deficit
                                          Preferred             Common                 Unamortized    Accumulated
                                            Stock               Stock      Additional    Deferred      during the       Total
                               Preferred     Par     Common      Par        Paid in     Stock Based   Development   Stockholders'
                                   Stock    Value     Stock     Value        Capital   Compensation       Stage        Equity
                               ---------  -------    -------    -----      ----------  ------------   -------------  ------------
<S>                            <C>        <C>      <C>          <C>        <C>         <C>            <C>            <C>
Balance, December 31,
  2002                          4,235,299    $423  13,083,695   $1,307     $14,538,618             -  ($12,711,483)    $1,828,865

Net loss for the year                   -       -           -        -               -             -   (13,106,247)   (13,106,247)

Conversion of preferred
  stock in connection
  with the Merger              (4,235,299)   (423)  4,235,299      423               -             -             -              -

Common stock issued to
  former Synergy
  stockholders                          -           4,329,927      432       6,494,458             -             -      6,494,890

Common stock issued in
  exchange for  Webtronics
  common stock                          -           1,503,173      150            (150)           -              -              -

Deferred Compensation -
   stock options                        -                   -        -       9,313,953   (9,313,953)             -              -

Amortization of deferred
  Stock based Compensation              -                   -        -               -    3,833,946              -      3,833,946

Private placement of
  common stock, net                     -       -   2,776,666      278       3,803,096            -              -      3,803,374
                               ----------    ----  ----------   ------     -----------  -----------   ------------    -----------
Balance, December 31,
  2003                                  -       -  25,928,760   $2,590     $34,149,975  ($5,480,007)  ($25,817,730)    $2,854,828
                               ==========    ====  ==========   ======     ===========  ===========   ============    ===========

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                      F-6
<PAGE>


                         CALLISTO PHARMACEUTICALS, INC.
                          (A Development Stage Company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                            Period from
                                                                                                           June 5, 1996
                                                                              Year ended December 31,     (Inception) to
                                                                           ----------------------------    December 31,
                                                                               2003             2002           2003
                                                                           ------------    ------------    ------------
<S>                                                                        <C>             <C>             <C>
Cash flows from operating activities:
      Net loss                                                             $(13,106,247)   $ (1,684,965)   $(25,817,730)
      Adjustments to reconcile net loss to net cash used in operating
        activities:
            Depreciation and amortization                                        27,755           6,778          38,149
            Stock based compensation expense                                  3,833,946             332       8,618,502
            Purchased in-process research and development                     6,734,818               -       6,734,818
     Changes in operating assets and liabilities:
         Prepaid expenses                                                       (24,188)         (8,796)        (52,644)
            Security deposit                                                    (62,980)              -         (62,980)
           Accounts payable and accrued expenses                                581,008         304,663       1,024,274
                                                                           ------------    ------------    ------------
                  Total adjustments                                          11,090,359         302,977      16,300,119
                                                                           ------------    ------------    ------------
            Net cash used in operating activities                            (2,015,888)     (1,381,988)     (9,517,611)
                                                                           ------------    ------------    ------------
Cash flows from investing activities:
      Acquisition of equipment                                                  (54,462)        (22,029)        (84,637)
                                                                           ------------    ------------    ------------
     Net cash used in investing activities                                      (54,462)        (22,029)        (84,637)
                                                                           ------------    ------------    ------------
Cash flows from financing activities:
     Net proceeds from issuance of common and preferred stock, net of
       repurchases                                                            3,803,374               -      13,558,734
                                                                           ------------    ------------    ------------
     Net cash provided by financing activities                                3,803,374               -      13,558,734
                                                                           ------------    ------------    ------------
Net increase (decrease) in cash and cash equivalents                          1,733,024      (1,404,017)      3,956,486
Cash and cash equivalents at beginning of year                                2,223,462       3,627,479               -
                                                                           ------------    ------------    ------------
Cash and cash equivalents at end of year                                   $  3,956,486    $  2,223,462    $  3,956,486
                                                                           ============    ============    ============
Supplementary disclosure of cash flows information:
      Cash paid for taxes                                                  $     23,834    $     13,487    $     60,042
                                                                           ============    ============    ============

</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.



                                      F-7
<PAGE>

                         CALLISTO PHARMACEUTICALS, INC.
                          (A Development Stage Company)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business overview:

Callisto Pharmaceuticals, Inc. ("Callisto") is a development stage
biopharmaceutical company, whose primary focus is on biopharmaceutical product
development. See footnote 4 for a complete description of recent business
combination and basis of presentation. Since inception in June of 1996 our
efforts have been principally devoted to research and development, securing and
protecting our patents and raising capital. From inception through December 31,
2003, Callisto has sustained cumulative net losses of $25,817,730 Callisto's
losses have resulted primarily from expenditures incurred in connection with
research and development activities, application and filing for regulatory
approval of our proposed products, stock based compensation expense, patent
filing and maintenance expenses, purchase of in-process research and
development, outside accounting and legal services and regulatory, scientific
and financial consulting fees. From inception through December 31, 2003 Callisto
has not generated any revenue from operations, expects to incur additional
losses to perform further research and development activities and does not
currently have any commercial biopharmaceutical products, and does not expect to
have such for several years, if at all.

Callisto's product development efforts are thus in their early stages and
Callisto cannot make estimates of the costs or the time it will take to
complete. The risk of completion of any program is high because of the many
uncertainties involved in bringing new drugs to market including the long
duration of clinical testing, the specific performance of proposed products
under stringent clinical trial protocols, the extended regulatory approval and
review cycles, the nature and timing of costs and competing technologies being
developed by organizations with significantly greater resources.

2. Basis of presentation:

The accompanying consolidated financial statements of Callisto include the
accounts of Callisto Pharmaceuticals, Inc., and its wholly-owned subsidiaries
Synergy Pharmaceuticals Inc. and Callisto Research Labs, LLC and have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). All significant intercompany balances and
transactions have been eliminated (see note 4).




                                      F-8
<PAGE>


3. Summary of significant accounting policies

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

Cash equivalents - Cash and cash equivalents consist of short term, highly
liquid investments, with original maturities of less than three months when
purchased and are stated at cost.

Fair value of financial instruments - Callisto's financial instruments consist
of cash and accounts payable. These financial instruments are stated at their
respective carrying values which are equivalent to fair value due to their short
term nature.

Business concentrations and credit risks - All of Callisto's cash and cash
equivalents as of December 31, 2003 are on deposit with two major money center
financial institutions. Deposits at any point in time may exceed federally
insured limits.

Accounting for stock based compensation - Callisto has adopted Statement of
Financial Accounting Standard ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". As provided for by SFAS 123, Callisto has also elected to
continue to account for its stock-based compensation programs according to the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees ("APB 25")." Accordingly, compensation expense has been
recognized to the extent of employee or director services rendered based on the
intrinsic value of stock options granted under the plans.

Recent accounting pronouncement - In December 2002, the Financial Accounting
Standards Board issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123",
to provide alternative methods of transition for a voluntary change 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 (see below) and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results.



                                      F-9
<PAGE>


Had compensation cost for stock options granted to employee and directors been
determined based upon the fair value at the grant date for awards, consistent
with the methodology prescribed under SFAS 123, Callisto's net loss would have
been as follows:

<TABLE>
<CAPTION>

                                                              Years ended December 31,
                                                          --------------------------------
                                                              2003               2002
                                                          ------------      --------------
<S>                                                       <C>               <C>
Net loss, as reported                                     $(13,106,247)     $  (1,684,965)

Add: Stock-based employee compensation expense
recorded under APB No. 25 intrinsic method                   1,996,890                 --

Deduct: Stock-based employee compensation
expense determined under fair value based method
for all employee awards                                     (2,510,721)                --
                                                          ------------      -------------
Pro forma net loss                                        $(13,620,078)     $  (1,684,965)
                                                          ============      =============

Net loss per share:
     Basic and diluted -as reported                       $      (0.61)     $       (0.10)
                                                          ============      =============

     Basic and diluted -pro forma                         $      (0.64)     $       (0.10)
                                                          ============      =============
</TABLE>

The fair value of the options granted to employees during 2003 and 2002 ranged
from $0.00 to $5.53 on the date of grant using the Black-Scholes methodology.
The following weighted average assumptions were used for determining fair value
in 2003 and 2002: no dividend yield, expected volatility of 0% to April 30, 2003
and 100% since Callisto's common stock began to trade publicly on June 16, 2003,
risk free interest rates of 2.87% to 4.50% and expected lives of 7 to 10 years.

Net Loss per Share - Basic and diluted net loss per share is presented in
conformity with SFAS No. 128, "Earnings per Share", for all periods presented.
In accordance with SFAS No. 128, basic and diluted net loss per common share was
determined by dividing net loss applicable to common stockholders by the
weighted-average common shares outstanding during the period. Diluted
weighted-average shares are the same as basic weighted-average shares since the
inclusion of issuable shares pursuant to the exercise of stock options, would
have been antidilutive.

Research and development - Callisto does not currently have any commercial
biopharmaceutical products, and does not expect to have such for several years,
if at all and therefore research and development costs are expensed as incurred.
These include expenditures in connection with an in-house research and
development laboratory, salaries and staff costs, application and filing for
regulatory approval of our proposed products, patent filing and maintenance
expenses, purchase of in-process research and development, regulatory and
scientific consulting fees as well as




                                           F-10
<PAGE>


contract research and royalty payments to outside research suppliers, facilities
and universities. In addition 100% of the salary of Callisto's Chief Executive
Officer was also included in research and development expense during the twelve
months ended December 31, 2002 due to his extensive involvement with Callisto's
product development efforts. During the twelve month ended December 31, 2003
Callisto's Chief Executive Officer devoted nearly 100% of his time to the
Merger, staff recruitment, office relocation, public relations and
presentations, and the private placement, thus we charged his salary to general
and administrative expense.

Research Grants - Callisto currently has a research grant from the National
Institutes of Health for studies on Atiprimod. The studies began in early 2004
and no funding was received during 2003. We request grant funding to reimburse
expenses as incurred and record the receipt as an offset to research and
development expense.

Income taxes - Income taxes are accounted for under the asset and liability
method prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Deferred income taxes are recorded for temporary
differences between financial statement carrying amounts and the tax basis of
assets and liabilities. Deferred tax assets and liabilities reflect the tax
rates expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided if it is more likely than
not that some or the entire deferred tax asset will not be realized.

4. Merger and consolidation:

In March 2002, Callisto Pharmaceuticals, Inc. ("Old Callisto") purchased 99.7%
of the outstanding common shares of Webtronics, Inc., ("Webtronics") a public
company for $400,000. Webtronics was incorporated in Florida on February 2, 2001
and had limited operations during the year ended December 31, 2002. The purchase
price of Webtronics was treated as a cost of becoming a public company, however
because there was no capital raised at the time, the amount was charged to
general and administrative expense during the year ended December 31, 2002.

On April 30, 2003, pursuant to an Agreement and Plan of Merger dated March 10,
2003, as amended April 4, 2003, Synergy Acquisition Corp., a wholly-owned
subsidiary of Webtronics merged into Synergy Pharmaceuticals Inc. ("Synergy")
and Callisto Acquisition Corp., a wholly-owned subsidiary of Webtronics merged
into Old Callisto (collectively, the "Merger"). As a result of the Merger, Old
Callisto and Synergy became wholly-owned subsidiaries of Webtronics. In
connection with the Merger Webtronics issued 17,318,994 shares of its common
stock in exchange for outstanding Old Callisto common stock and an additional
4,395,684 shares in exchange for outstanding Synergy common stock. Subsequently,
65,757 shares of common stock issued to former Synergy shareholders were
returned to Callisto under the terms of certain indemnification agreements. The
Merger was accounted for as a recapitalization of Old Callisto by an exchange of
Webtronics common stock for the net assets of Old Callisto consisting
primarily of cash and fixed assets. Old Callisto then changed its name to
Callisto Research Labs, LLC and Webtronics changed its name to Callisto
Pharmaceuticals, Inc. and changed its state of incorporation from Florida to
Delaware. Callisto remains the continuing legal entity and registrant for
Securities and Exchange Commission reporting purposes.



                                      F-11
<PAGE>

The merged companies are considered to be in the development stage. No revenues
have been realized since inception and all activities have been concentrated in
research and development of biopharmaceutical products not yet approved by the
Food and Drug Administration. The fair value of the net shares issued to former
Synergy shareholders in the Merger totaled $6,494,890. The fair value per share
of $1.50, used to determine this amount, was the value per share Callisto sold
common stock in a private placement. The total consideration was allocated in
full to the Synergy research and development projects which had not yet reached
technological feasibility and having no alternative use was charged to purchased
in-process research and development expense during the year ended December 31,
2003.

The results of operations of Synergy for the period May 1, 2003 through December
31, 2003 are included in the Consolidated Statement of Operations for the year
ended December 31, 2003 and for the period from June 5, 1996 (inception) to
December 31, 2003. The Statement of Operations for the year ended December 31,
2002 includes only the results of Old Callisto.

The following combined pro forma results of operations for the years ended
December 31, 2003 and 2002 have been prepared as if the merger with Synergy had
occurred at January 1, 2002.


                                                      2003             2002
                                                   -----------      -----------
Revenues                                              $      -       $       -
Net loss                                           (13,513,820)     (2,559,554)
Net loss per common share - basic and diluted         $  (0.58)      $   (0.11)
(23,296,920 and 23,217,578 common shares in
2003 and 2002, respectively)

In addition, Callisto assumed liabilities in excess of Synergy assets acquired
at April 30, 2003 as follows:

Cash                                                              $     9,501
Accounts receivable                                                   258,928
Rent deposit                                                           44,746
Fixed assets                                                           38,343
                                                                  -----------
Total assets acquired                                                 351,518
Accounts payable and other liabilities assumed                       (591,446)
                                                                  -----------
Net liabilities assumed in excess of assets acquired                 (239,928)
Fair value of shares issued to Synergy shareholders                (6,494,890)
                                                                  -----------
Total consideration paid by Callisto to acquire Synergy           $(6,734,818)
                                                                  ===========


                                     F-12
<PAGE>


5. Property and equipment:

Equipment consists of laboratory, testing and computer equipment, stated at
cost, with useful lives ranging from 2-4 years, depreciated on a straight line
basis. Depreciation expense for the years ended December 31, 2003 and 2002 and
from June 5, 1996 (inception) to December 31, 2003 was $27,755, $6,778 and
$38,149, respectively.

                                                           December 31,
                                                     ------------------------
                                                       2003           2002
                                                       ----           ----

Equipment                                            $ 46,294        $ 30,175
Furniture and fixtures                                 38,343               -
Less - Accumulated depreciation                       (38,149)        (10,394)
                                                     --------        --------
Property and equipment, net                          $ 46,488        $ 19,781
                                                     ========        ========


6. Stock option plan:

In 1996, Callisto adopted an incentive and non-qualified stock option plan (the
"Plan") for employees, consultants and outside directors to purchase up to
2,000,000 shares of common stock. The Plan was amended in December 2002 to
increase the number of shares authorized under the Plan to 10,000,000. The
option term for options granted under the Plan is ten years from date of grant
and there were 7,916,944 option shares available for future grants as of
December 31, 2003.

The Company recognizes deferred compensation expense for the intrinsic value of
unvested stock options granted to employees. Deferred stock-based compensation
is amortized to stock-based compensation expense over the vesting period of the
stock option. During the twelve months ended December 31, 2003, 2002 and for the
period from June 5, 1996 (inception) to December 31, 2003 Callisto recognized
$3,833,946, $332 and $8,618,502, respectively, as stock-based compensation
expense related to issuance of stock and stock options. At December 31, 2003
there was $5,480,007 remaining in unamortized deferred compensation.


                                     F-13
<PAGE>


The following represent options outstanding for the years since June 5, 1996
(inception) through December 31, 2003.

<TABLE>
<CAPTION>

                                                     Number          Exercise Price       Weighted Average
                                                   of Shares            Per Share           Exercise Price
                                                  ----------         -----------------    -----------------
<S>                                               <C>                <C>                  <C>
Balance, June 5, 1996 (inception)                          0                     $0.00            $0.00

1996: Granted                                         66,668                     $0.75            $0.75
                                                  ----------
Balance, December 31, 1996                            66,668                     $0.75            $0.75

1997: Granted                                        166,668                     $0.75            $0.75
                                                  ----------
Balance, December 31, 1997                           233,336                     $0.75            $0.75

1998: Granted                                        264,169                     $0.75            $0.75
                                                  ----------
Balance, December 31, 1998                           497,505                     $0.75            $0.75

1999: Granted                                        633,334             $0.75 - $4.90            $1.92
                                                  ----------
Balance, December 31, 1999                         1,130,839             $0.75 - $4.90            $1.41

2000: Granted                                        815,666             $2.85 - $6.75            $3.83
      Forfeitures                                    (15,000)            $        0.75            $0.75
                                                  ----------
Balance, December 31, 2000                         1,931,505             $0.75 - $6.75            $2.44

2001: Granted                                        730,000             $1.25 - $6.50            $2.77
                                                  ----------
Balance, December 31, 2001                         2,661,505             $0.75 - $6.75            $2.53

2002: Granted                                        330,000             $4.50 - $6.50            $5.50
                                                  ----------
Balance, December 31, 2002                         2,991,505             $0.75 - $6.75            $2.86

2003: Granted                                      3,013,555             $1.10 - $2.50            $1.48
      Forfeitures                                 (1,151,500)            $2.85 - $6.75            $4.51
                                                  ----------
Balance, December 31, 2003                         4,853,560             $0.75 - $6.75            $1.61
                                                  ==========

</TABLE>

Included in the balance at December 31, 2003 were 2,770,504 non-Plan options, of
which 2,092,504 were exercisable.




                                      F-14
<PAGE>


Options are exercisable as follows at December 31, 2003:

<TABLE>
<CAPTION>

                                            Options Outstanding                            Options Exercisable
                             ------------------------------------------------------  -------------------------------
                                Number        Weighted Average    Weighted Average    Number       Weighted Average
Exercise Price                of Shares        Remaining Life      Exercise Price    of Shares      Exercise Price
--------------               ----------     -------------------   -----------------  ---------      ----------------
<S>                          <C>            <C>                   <C>                <C>           <C>
$0.75 - $1.10                 1,115,839            6.3 years              $0.91       1,115,839          $0.91
$1.25 - $1.75                 2,683,555            9.1 years              $1.44       1,015,555          $1.33
$1.95 - $2.85                   892,500            6.9 years              $2.33         807,500          $2.31
$4.90 - $6.75                   161,666            6.4 years              $5.32          61,666          $6.00
All options:
$0.75 - $6.75                 4,853,560            8.0 years              $1.61       3,000,560          $1.53


</TABLE>

7. Income taxes:

At December 31, 2003, Callisto had available Federal net operating tax loss
carry forwards of approximately $14,000,000 expiring through 2022 to offset
future taxable income. The net deferred tax asset has been fully offset by a
valuation allowance due to uncertainties regarding realization of benefits from
these future tax deductions. As a result of the change in control provisions of
Internal Revenue Code Section 382, a significant portion of these net operating
loss carry forwards may be subject to limitation on future utilization.

On December 15, 2003 Synergy sold certain New Jersey State tax loss carry
forwards under a state economic development program for cash of approximately
$222,000, the proceeds of which have been and will be used to support research
and development activities in New Jersey. This state tax benefit was recorded as
Other Income during the fourth quarter ended December 31, 2003.

8. Commitments and contingencies:

License agreements:

On August 28, 2002, Synergy entered into a worldwide license agreement with
AnorMED, Inc. ("AnorMED") to research, develop, sell and commercially exploit
the Atiprimod patent rights. The license agreement provides for milestone
payments and royalties on net sales. Commencing on January 1, 2004 and on
January 1 of each subsequent year Synergy is obligated to pay AnorMED a
maintenance fee of $200,000 until the first commercial sale of the product. The
first of these annual maintenance fee payments under this agreement was made on
January 22, 2004 and will be reported as research and development expense in the
quarter ended March 31, 2004. The agreement will terminate upon expiration of
the last to expire of any patents included in the licensed patents as defined in
the agreement.




                                      F-15
<PAGE>

On July 25, 2001, Callisto entered into a license agreement to research,
develop, sell and commercially exploit certain Rockefeller University licensed
patents covering peptides and antibodies useful in treating toxic shock syndrome
and septic shock. Callisto will pay Rockefeller a $7,500 annual maintenance fee
until the first commercial sale of the product. Callisto will pay royalties of
2% and 0.75% of net sales of product as defined in the agreement and will pay
Rockefeller 15% of any sublicense fee paid by sublicensees. The agreement will
terminate upon the later of (a) expiration of the last to expire or become
abandoned patent right or (b) 20 years after the effective date of the
agreement. During the twelve months ended December 31, 2003 and 2002, Callisto
paid Rockefeller University $0 and $7,500, respectively.

On April 11, 2001, Callisto entered into a license agreement with Dartmouth
College to research, develop, manufacture and sell certain Dartmouth patent
rights covering a method to enhance antibiotics against Staphylococcus and other
bacteria. Callisto was obligated to pay to Dartmouth a minimum annual license
fee of $10,000 for 2002; $15,000 for 2003 and $25,000 per annum from 2004 and
thereafter. During the twelve months ended December 31, 2003 and 2002 Callisto
paid Dartmouth $42,868 and $265,261, respectively, under this agreement.
Callisto and Dartmouth entered into a settlement and general release agreement
which terminated this license in August 2003. Pursuant to the settlement and
general release agreement, Callisto paid $42,868 to Dartmouth.

On July 7, 1998 Callisto entered into a Patent License Agreement with the United
States Public Health Service ("PHS"), under which Callisto had an exclusive
license to make, use, sell, lease, import and export and to otherwise
commercially exploit certain licensed patents covering a diagnostic method for
detecting obsessive compulsive disorder. Callisto paid an initial license issue
royalty fee in the amount of $50,000 in 1998 and minimum annual royalty fees of
$10,000 in each year through December 31, 2003. Callisto terminated this
agreement by mutual consent in January 2004.

Employment Agreements:

On June 13, 2003, Callisto entered into an employment agreement with Gary S.
Jacob, Ph.D., to serve as our Chief Executive Officer and Chief Scientific
Officer. Dr. Jacob's employment agreement is for a term of 18 months beginning
June 13, 2003 and is automatically renewable for successive one year periods at
the end of the term. Dr. Jacob's salary is $225,000 per year and he is eligible
to receive a cash bonus of up to 15% of his salary per year. In connection with
his employment agreement, Dr. Jacob received a grant of 500,000 stock options
which vest over a three year period and are exercisable at $1.50 per share.

On June 13, 2003, Callisto entered into an employment agreement with Kunwar
Shailubhai, Ph.D. to serve as Executive Vice President and Head of Research and
Development for a term of 18 months beginning June 13, 2003 and is automatically
renewable for successive one year periods at the end of the term. Dr.
Shailubhai's salary is $170,000 per year and he is eligible to receive a cash
bonus of up to 15% of his salary per year. In connection with his employment
agreement, Dr. Shailubhai received a grant of 25,000 stock options which are
fully vested and have an exercise price of $1.50 per share. Dr. Shailubhai also
received a grant of 325,000 stock options which vest over a three year period
and are exercisable at $1.50 per share.


                                      F-16
<PAGE>


On April 6, 2004, Dr. Shailubhai's employment agreement was terminated and he
entered into an employment agreement with Synergy in which he agreed to serve as
Senior Vice President, Drug Discovery. Dr. Shailubhai's employment agreement is
for a term of 12 months beginning April 6, 2004 and is automatically renewable
for successive one year periods at the end of the term. Dr. Shailubhai's salary
is $150,000 per year and he is eligible to receive a cash bonus of up to 15% of
his salary per year. His unvested options for 325,000 shares granted June 13,
2003 were cancelled and Dr. Shailubhai received a new grant of 100,000 stock
options which are exercisable at $1.50 per share. 50,000 of such stock options
vest in June 2004 and the remainder vest in December 2004. The new grant of
options will be subject to variable accounting.

On September 23, 2003, Callisto entered into an employment agreement with Donald
H. Picker, Ph.D., to serve as Vice President, Drug Development. The employment
agreement is for a term of 18 months beginning September 23, 2003 and is
automatically renewable for successive one year periods at the end of the term.
Dr. Picker's salary is $175,000 per year and he is eligible to receive a cash
bonus of up to $45,000 per year upon the achievement of certain performance
milestones. During the twelve months ended December 31, 2004, Dr. Picker was
paid $10,000 of this bonus and earned an additional $10,000 which was accrued as
of December 31, 2003 and paid in early January 2004. In connection with his
employment agreement, Dr. Picker received a grant of 325,000 stock options which
vest over a three year period and are exercisable at $1.50 per share.

On January 15, 2004, Callisto entered into an employment agreement with Bernard
Denoyer, its Vice President, Finance. Mr. Denoyer's employment agreement is for
a term of 12 months beginning January 15, 2004 and is automatically renewable
for successive one year periods at the end of the term. Mr. Denoyer's salary is
$90,000 per year and he is eligible to receive a cash bonus of up to 10% of his
salary per year. Mr. Denoyer received a grant of 100,000 stock options which
vest over a three year period and are exercisable at $3.60 per share.

Lease agreements:

On August 20, 2003 Callisto entered into a five year lease for its corporate
headquarters in New York City with an approximate rent of $100,000 annually
through August 2008. On November 4, 2003, Synergy entered a two year lease for
laboratory space in New Jersey, principally to support combined Callisto and
Synergy research efforts, with an approximate rent of $50,000 annually through
November 2005. During the years ended December 31, 2003 and 2002 and for the
period from June 5, 1996 (inception) to December 31, 2003, total rent expense
was $67,261, $51,856 and $187,083, respectively. Total annual commitments under
these leases for each of the twelve months ended December 31, are as follows:

                         2004           $150,895
                         2005            149,927
                         2006            104,055
                         2007            106,138
                         2008             71,695
                                        --------
                         Total          $582,710
                                        ========






                                      F-17
<PAGE>


Other:

In April 2003 Callisto settled legal fees totaling approximately $352,000,
accrued as of December 31, 2002, for approximately $100,000. The balance was
reversed into general and administrative expense in the second quarter of 2003.

On October 7, 2003, Callisto was awarded a $265,267 Small Business Technology
Transfer Research grant from the National Institutes of Health for studies on
Atiprimod. No funding was received during 2003 and Callisto will request grant
funding as expenses are incurred during the first half of 2004 and record the
receipt as an offset to research and development expense. Approximately $25,000
of this grant will defray certain salary and wages of in-house scientists, the
balance of which will reimburse incremental supplies and sub-contractors.

9. Stockholders' equity:

From November 2003 through January 2004, Callisto sold and issued 3,905,432
shares of common stock at an issue price of $1.50 for aggregate gross proceeds
of $5,858,148. Callisto incurred an aggregate of $508,615 in fees to various
selling agents and issued 31,467 shares of common stock and an aggregate 370,543
warrants to purchase common stock to such selling agents. The warrants are
immediately exercisable at $1.90 per share and will expire five years after
issuance. As of December 31, 2003 Callisto had closed on a portion of this
transaction, specifically 2,776,666 shares of common stock at a price of $1.50
per share for aggregate gross proceeds of $4,164,999, less $361,625 incurred in
fees to various selling agents.

Had this entire private placement been completed by December 31, 2003 pro forma
selected balance sheet items would have been as follows:

                                               As reported         Pro forma
                                                   2003               2003
                                               -----------         ---------

Cash and cash equivalents                      $ 3,956,486         $ 5,161,020

Total assets                                     4,118,598           5,323,132

Total liabilities                                1,263,770             922,145

Stockholders' equity                           $ 2,854,828         $ 4,400,987

Common shares outstanding                       25,928,760          27,057,526


During 2000, the Board of Directors approved an increase in the authorized
common shares from 35,000,000 shares to 60,000,000 shares and a one-for-three
reverse split of the common stock. All share and per share information has been
adjusted to reflect the stock split as if it had occurred at the beginning of
the earliest period presented. In May 2003, as part of the Merger, the
authorized common shares were increased to 75,000,000 shares.

During 2000, Callisto sold 2,252,441 shares of Series A convertible preferred
stock at $1.70 per share and 1,232,858 shares of Series B convertible preferred
stock at $1.75 per share. In addition the Board of Directors authorized the
issuance of 750,000 shares of Series C convertible preferred stock at $0.10 per
share to an executive officer of Callisto. The net proceeds from the sale of
these 4,235,299 shares of convertible preferred stock totaled $6,061,650. The
holders of the convertible preferred stock had equal voting rights with the
common stockholders, had certain liquidation preferences and were convertible at
any time into shares of common stock at a ratio of one share of common stock for
each share of convertible preferred stock at the election of the holder.
Callisto recorded compensation expenses of approximately $1,050,000 related to
the shares sold to the executive officer. During the second quarter of 2003 all
of the convertible preferred stockholders converted their shares of preferred
stock to common stock in connection with the Merger.


                                      F-18
<PAGE>

During 2000, Callisto also sold 4,526,903 shares of common stock at a purchase
price of $0.05 per share to certain officers and directors of the company for
services performed in the year 1999. Based on the most recent private placement
of common stock during the fourth quarter of 1999, the value of these shares
was determined to be $0.70 per share and Callisto recorded $3,168,832 as stock
based compensation expense for the twelve months ended December 31, 2000.


During 1998, as part of a settlement agreement between the founding partners of
CSO Ventures, Inc. and Callisto, one of the founders of CSO sold 836,792 shares
of common stock back to Callisto at a price of approximately $0.12 per share,
for $97,000. Concurrently Callisto entered into a stock purchase agreement with
a private investor to sell him 766,667 shares of common stock at a price of
$92,000 or $0.12 per share. The fair value of the common stock issued was
determined to $0.75 per share and Callisto recorded $483,000 of stock based
compensation expense.

During the period from December 1996 to December 1999, Callisto completed the
following private placements of its common stock:

                  Shares           Price per share          Gross proceeds
                  ------           ---------------          --------------

December 1996     1,366,667        $0.75                    $1,025,000
December 1997     1,442,667        $0.75                     1,081,999
October 1998      1,416,667        $0.75                     1,062,500
January 1999        146,667        $0.75                       110,000
December 1999       200,000        $0.75                       150,000
                  ---------                                 ----------
  Total           4,572,668                                 $3,429,499
                  =========                                 ==========

10. Restatement:

The consolidated balance sheet as of December 31, 2002 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 2002 and for the period from June 5, 1996
(inception) to December 31, 2002 have been restated to reflect the following:

The purchase of Webtronics for $400,000 in 2002 was recorded as an investment on
the previously issued balance sheet as of December 31, 2002. This has been
recorded as general and administrative expense in 2002.

Patent costs were previously capitalized and amortized over the life of the
patent. Callisto does not currently have any commercial biopharmaceutical
products, and does not expect to have such for several years, if at all. The
amount incorrectly capitalized, net of accumulated amortization, as of December
31, 2002 was $461,961. As a result, Callisto recorded additional research and
development expense of $19,733 and $461,961, respectively, for the twelve months
ended December 31, 2002 and for the period from June 5, 1996 (inception) to
December 31, 2002.

Stock-based compensation from June 5, 1996 (inception) to December 31, 2002 had
not been recorded. A review of stock and option records back to inception,
together with a re-assessment of the facts and circumstances at the time,
indicated a need to record stock-based compensation expense. Stock-based
compensation expense for the year ended December 31, 2002 and for the period
from June 5, 1996 (inception) to December 31, 2002 was $332 and $4,784,556,
respectively.



                                      F-19
<PAGE>
The quarterly financial statements of Callisto will be restated to reflect
corrections to stock based compensation. The following is a summary of the
impact of these adjsutments:
<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                                                           -------------

                                                                                                                       December 31,
                                             March 31, 2002         June 30, 2002        September 30, 2002                2002
                                             --------------         -------------        ------------------            ------------
<S>                                          <C>                    <C>                   <C>                         <C>
Net loss -- as reported                        $(326,192)             $(759,120)            $(409,745)                  $(519,584)

Net loss -- restated                            (242,464)              (675,226)             (328,718)                   (438,557)

Loss per share -- basic and diluted --
                  as reported                  $   (0.02)             $   (0.04)            $   (0.02)                  $   (0.03)

Loss per share -- basic and diluted --
                  restated                         (0.01)                 (0.04)                (0.02)                      (0.03)


                                                                           Quarter Ended
                                                                           -------------

                                                                                                                       December 31,
                                             March 31, 2003         June 30, 2003        September 30, 2003                2003
                                             --------------         -------------        ------------------            ------------

Net loss -- as reported                      $(1,041,413)           $(9,898,139)          $(1,366,524)                 $(1,585,138)

Net loss -- restated                            (521,221)            (9,574,788)           (1,373,814)                  (1,636,424)

Loss per share -- basic and diluted --
                  as reported                  $   (0.06)             $   (0.47)            $   (0.06)                   $   (0.07)

Loss per share -- basic and diluted --
                  restated                         (0.03)                 (0.45)                (0.06)                       (0.07)
</TABLE>

Callisto intends to file amended Forms 10-QSB for the quarters ended June 30,
2003 and September 30, 2003 to reflect these adjustments as soon as is
practicable.

11. Subsequent events:

On February 24, 2004, Callisto entered into an agreement with Houston
Pharmaceuticals, Inc., ("HPI") a privately held company, to acquire the rights
to two key patents covering a novel cancer platform technology. Callisto issued
to HPI 25,000 shares of common stock at a fair value of $90,000 and reimbursed
HPI approximately $100,000 for various costs and expenses. The total
consideration of $190,000 will be accounted for as purchased in process research
and development expense during the first quarter of 2004. In addition, Callisto
granted to HPI 1,170,000 performance based stock options, exercisable at $3.60
per share, which vest upon the achievement of certain milestones. If the
milestones are achieved Callisto will record additional research and development
expense based upon the fair value of the options at that time. Callisto also
agreed to pay HPI a royalty of 2% of net sales from any products resulting from
commercializing the patents.

         Callisto is in the process of raising additional capital through a
private placement of common stock, which began in March 2004. There can be no
assurance that Callisto will be successful in these fund raising efforts.







                                      F-20
<PAGE>


Index to Exhibits
-----------------

Exhibit
Number   Description
------   -----------

2.1      Agreement and Plan of Merger by and among Callisto Pharmaceuticals,
         Inc., Webtronics, Inc., Callisto Acquisition Corp., Synergy
         Pharmaceuticals Inc. and Synergy Acquisition Corp. dated as of March
         10, 2003 (1)

2.2      Amendment to Agreement and Plan of Merger dated as of April 4, 2003 (2)

3.1      Certificate of Incorporation (3)

3.2      Bylaws (4)

4.1      1996 Incentive and Non-Qualified Stock Option Plan (5)

4.2      Form of Warrant to purchase shares of common stock issued in connection
         with the sale of common stock (6)

10.1     Employment Agreement dated June 13, 2003 by and between Callisto
         Pharmaceuticals, Inc. and Gary S. Jacob (7)*

10.2     Employment Agreement dated April 6, 2004 by and between Synergy
         Pharmaceuticals Inc. and Kunwar Shailubhai *

10.3     Employment Agreement dated June 13, 2003 by and between Callisto
         Pharmaceuticals, Inc. and Donald H. Picker (9)*

10.4     Amendment to Employment Agreement dated April 6, 2004 by and between
         Callisto Pharmaceuticals, Inc. and Donald H. Picker *

10.5     License Agreement dated as of August 28, 2002 by and between Synergy
         Pharmaceuticals Inc. and AnorMED Inc. (10)**

10.6     Employment Agreement dated January 15, 2004 by and between Callisto
         Pharmaceuticals, Inc and Bernard Denoyer*

10.7     Form of Registration Rights Agreement dated as of January 21, 2004 by
         and among the Registrant and the Purchasers set forth on the signature
         page thereto (11)

14       Code of Business Conduct and Ethics

16       Letter of Changes in Registrant's Certifying Accountants (12)



                                      F-21
<PAGE>

21       List of Subsidiaries

31.1     Certification of Chief Executive Officer required under Rule
         13a-14(a)/15d-14(a) under the Exchange Act

31.2     Certification of Principal Financial Officer required under Rule
         13a-14(a)/15d-14(a) under the Exchange Act

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

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

*  Management contract or compensatory plan or arrangement required to be filed
   as an Exhibit to this form pursuant to Item 601 of Regulation S-K.

** Confidential treatment has been requested with respect to deleted portions of
   this agreement.

(1)      Incorporated by reference to Exhibit 2.1 filed with the Company's
         Current Report on Form 8-K filed on March 19, 2003.

(2)      Incorporated by reference to Exhibit 2.2 filed with the Company's
         Current Report on Form 8-K filed on April 30, 2003.

(3)      Incorporated by reference to Exhibit 99.1 filed with the Company's
         Current Report on Form 8-K filed on May 28, 2003.

(4)      Incorporated by reference to Exhibit 99.2 filed with the Company's
         Current Report on Form 8-K filed on May 28, 2003.

(5)      Incorporated by reference to Exhibit 4.1 filed with the Company's
         Current Report on Form 8-K filed on April 30, 2003.

(6)      Incorporated by reference to Exhibit 10.1 filed with the Company/s
         Current Report on Form 8-K filed on January 28, 2004.

(7)      Incorporated by reference to Exhibit 10.1 filed with the Company's
         Current Report on Form 10-QSB filed on August 20, 2003.

(8)      Incorporated by reference to Exhibit 10.2 filed with the Company's
         Current Report on Form 10-QSB filed on August 20, 2003.

(9)      Incorporated by reference to Exhibit 10.3 filed with the Company's
         Current Report on Form 10-QSB filed on November 14, 2003.

(10)     Incorporated by reference to Exhibit 10.4 filed with the Company's
         Current Report on Form 10-QSB filed on November 14, 2003.

(11)     Incorporated by reference to Exhibit 4.1 filed with the Company's
         Current Report on Form 8-K filed on January 28, 2004.

(12)     Incorporated by reference to Exhibit 16 filed with the Company's
         Current Report on Form 8-K filed on August 1, 2003.


                                      F-22