Edgar Filing: WEBTRONICS INC

UNITED STATES 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, 2002

[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the transition period from _________ to _________

Commission File No. 333-63474

WEBTRONICS, INC.
(Name of Small Business Issuer in Its Charter)

Florida 65-110840
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)

420 Lexington Avenue, Suite 601, New York, New York 10170
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(Address of Principal Executive Offices) (Zip Code)

(212) 672-9190
(Issuer's Telephone Number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: (None)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: (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 past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $0

The market value of the common stock held by non-affiliates cannot be estimated
since there is no market for the company's shares.

There were 1,054,500 shares of common stock outstanding as of March 20, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (check one):

Yes No X
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INTRODUCTORY NOTE

This Annual Report on Form 10-KSB may be deemed to contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company
intends that such forward-looking statements be subject to the safe harbors
created by such statutes. The forward-looking statements included herein are
based on current expectations that involve a number of risks and uncertainties
set forth under "Risk Factors." Accordingly, to the extent that this Annual
Report contains forward-looking statements regarding the possible acquisitions,
financial condition, operating results, business prospects or any other aspect
of the Company, please be advised that the Company's actual financial condition,
operating results and business performance may differ materially from that
projected or estimated by the Company in forward-looking statements.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND OF THE COMPANY

We were incorporated in the State of Florida on February 2, 2001 for
the purpose of selling foreclosure and mortgage information through the
Internet. In an effort to develop that business, we entered into a contract with
a web hosting service on a month to month basis to provide disk space for an
e-commerce site. Our temporary website arrangement was suspended to preserve
cash and pending the development of a plan to index with numerous search
engines, select mortgage calculators and a plan of financing.

On March 15, 2002, the Company and its principal stockholders entered
into a Stock Purchase Agreements with Callisto Pharmaceuticals, Inc.
("Callisto"), pursuant to which Callisto purchased 1,051,336 of the 1,054,500
outstanding shares of our common stock for $400,000. Funds for such purchase
came from Callisto's working capital.

On March 10, 2003, we entered into a merger agreement with Callisto and
Synergy Pharmaceuticals, Inc., an unaffiliated company ("Synergy") under which
Callisto and Synergy agreed to merge in a stock for stock transaction and each
become subsidiaries of Webtronics.

The merger agreement contemplates that we will issue 17,318,994 shares
of our common stock (after giving effect to the stock split described below) to
holders of Callisto common stock and 4,395,684 shares to holders of Synergy
common stock in exchange for outstanding Callisto and Synergy common stock. As a
result of the merger and stock split there will be a total of approximately
23,217,578 of our shares outstanding. Closing of the merger is subject to
several contingencies including obtaining shareholders' consent and the
satisfactory completion of due diligence by both parties.

The possible merger of Callisto and Synergy will result in Callisto,
which is presently our parent, becoming our wholly owned subsidiary.
Accordingly, most of the presently outstanding shares of our common stock would,
after the effective date of the proposed merger, be treated as if they were
treasury shares and no longer outstanding. The merger agreement contemplates all
such shares actually being returned to our treasury and cancelled. In order to
provide for a reasonable number of shares not held by affiliates following the
proposed merger, we declared a 475-for-one stock split effective March 31, 2003.
At the effect time of the split, there was 500,887,500 shares of our common
stock outstanding, of which 499,384,600 were owned by Callisto and will be
cancelled following the proposed merger and 1,502,900 is owned by others. The
number of shares outstanding and the earnings per share calculations have been
retroactively restated for the 475-for-one stock split.

The merger agreement also contemplates that we will re-domesticate as a
Delaware corporation following the proposed merger, leaving Florida, our
historical state of incorporation, and change our name to Callisto
Pharmaceuticals, Inc.

Our offices are located at 420 Lexington Avenue, Suite 620, New York,
New York 10170, which are also Callisto's offices. Our telephone number is (212)
672-9190.

We presently do not have a corporate Internet website. 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
15(d) of the Securities Exchange Act of 1934, as amended, are available on the
website of the Securities and Exchange Commission at www.sec.gov shortly after
they are filed or furnished.

Description of the Business of Callisto and Synergy

If the proposed merger is completed, we will pursue the historical
business of Callisto and Synergy and abandon our development of our business of
selling foreclosure and mortgage information through the Internet. If the
proposed merger is completed, we will file a Form 8-K Report with the Securities
and Exchange Commission which will contain the audited financial statements of
Callisto and Synergy and certain required pro forma financial information.

The completion of the merger is subject to the satisfaction or waiver
of certain conditions, including the consent of the securities holders of
Callisto and Synergy.

If the proposed merger is not completed, we will continue the
development of the mortgage and foreclosure information business described in
our annual report on Form 10-KSB for the year ended December 31, 2001.

GENERAL

Callisto is a biotechnology company that focuses on the development of
innovative products for the treatment of infectious diseases and their
immunological conditions. Callisto has developed a diagnostic test for Obsessive
Compulsive Disorder and related neuropsychiatric disorders. Callisto is also
developing a peptide (small protein) that has demonstrated the ability to bind
important components of the human immune system, which is being studied for
efficacy in treating toxic shock syndrome and sepsis and rheumatoid arthritis.

CALLISTO PHARMACEUTICALS, INC.

Overview

Callisto is a biopharmaceutical company whose mission is the
development of innovative products for the diagnosis and treatment of infectious
diseases and their immunological complications. Product development efforts are
focused on the relationship between inflammation, autoimmune diseases,
neurological disorders, and infectious disease. One product candidate, based on
a patented synthetic polypeptide antigen, has successfully completed preclinical
testing. Callisto believes its multidisciplinary approach will lead to
diagnostic and therapeutic products targeting markets with limited competition
and unmet clinical needs.

Callisto claims a distinct advantage in the development of biological agents for
the treatment and diagnosis of disease on the basis of its expertise in
ligand-specific peptide design, analysis and synthesis (as demonstrated in the
Microbiology/Immunology laboratory of Professor John B. Zabriskie, Callisto's
founding scientist, at Rockefeller University). This approach to the design of
biological agents is the potential source of several important classes of drugs
(including proprietary vaccines), natural and recombinant antibodies, and
modulators of immune function.

Product Candidates

Toxic Shock Syndrome

In the area of infectious disease Callisto is developing a therapeutic
agent for toxic shock syndrome, an often-fatal consequence of gram-positive
bacterial infection. These gram-positive bacteria, species of streptococcus and
staphylococcus, synthesize toxins (superantigens) that non-specifically activate
the immune system. Aberrant activation of the immune system leads to
overproduction of cytokines (factors that effect other cells and are synthesized
by immune cells) resulting in shock, multiple organ failure and death. Using a
synthetic peptide whose sequence is similar to those of various toxins of
gram-positive bacteria, Callisto has developed a proprietary antibody (Anti
Toxic Shock or ATS antibody) that recognizes the different toxins and
neutralizes their biological effect. The ATS antibody has been shown to inhibit
the synthesis of cytokines and protect animals from shock. Callisto is
developing several forms of this antibody to be administered early in toxic
shock cases to block the effect of bacterial toxins and prevent or mitigate the
signs and symptoms of this serious disease. Callisto expects its ATS antibody to
be sold principally to hospitals for use in critical care or emergency room
settings.

Peptide Therapy

There is evidence that the synthetic peptide itself protects cells from
the stimulus of superantigens, so the peptide alone, or a smaller modification
of it, might be a useful agent in the treatment of toxic shock. The development
of ligand specific peptides represents a pathway of streamlined rational drug
development and production, since commercial quantities of specifically designed
peptides can be produced through established contract GMP facilities.

Systemic Inflammatory Response Syndrome (SIRS)

Callisto is developing an immunotherapeutic product for the treatment
of Systemic Inflammatory Response Syndrome (SIRS), an often-fatal condition.
Most cases of SIRS are due to infection caused by either gram-negative or
gram-positive bacteria. As with toxic shock, SIRS involves the over-activation
of the immune system beginning with cytokine synthesis and release. In SIRS due
to infectious disease, however, excess cytokine synthesis is triggered by
components of the cell wall of gram-positive bacteria or the outer membrane of
gram-negative bacteria. Callisto has developed an antibody that has been shown
to block cytokine release triggered by both cell wall and outer membrane
components, and may therefore be effective in SIRS cases caused by either
gram-positive or gram-negative bacterial infections. In addition, since SIRS
caused by gram-negative bacteria is often complicated and aggravated by
low-grade infection with gram-positive bacteria, the use of ATS antibody is
expected to be beneficial. Callisto has developed a strategy for successful
clinical development of a therapeutic agent for SIRS based on testing the
prophylactic and therapeutic action of the drug in homogeneous patient
populations treated early in the course of the disorder.

Diagnostic Test for OCD

Callisto's lead program is a diagnostic test for obsessive-compulsive
disorder (OCD). According to the National Institute of Mental Health, OCD occurs
in about one in fifty Americans, and OCD related social and economic costs
exceed $8 billion annually. In the United States and western Europe, 3 million
children are screened for OCD each year. There is currently no laboratory test
available to diagnose OCD, and Callisto believes its diagnostic test, designed
to identify a marker for the disease in affected patients, will assist
psychiatrists in establishing the appropriate medical and/or psychological
treatment. Callisto has identified a molecular marker, designated D8/17,
consistently and selectively present on the immune cells of OCD patients. The
marker can be detected with a monoclonal antibody for which Callisto holds a
patent. Two independent clinical trials with more than 100 subjects, published
in the American Journal of Psychiatry, confirm the validity and utility of
Callisto's diagnostic marker for OCD.

Treatment for OCD

Callisto is also conducting basic research on the molecular and immune
mechanisms that cause OCD with the objective of developing specific therapeutic
products for the treatment of this disorder. An observation made by Dr.
Zabriskie has led to new knowledge of the pathogenesis of this disease. and will
be the basis for the rational design of a drug for the treatment of this disease
that affects five million people in the United States. The design and synthesis
of this drug are dependent on Callisto's special expertise in protein chemistry.

Rheumatoid Arthritis

Based on experience with an animal model of rheumatoid arthritis,
Callisto is exploring several promising approaches to the development of
therapies for this widespread and crippling autoimmune disease.

Research and Development

Building a Technical Platform

Callisto is building a scientific and manufacturing platform for the
discovery, development and production of unique products for the diagnosis and
treatment of microbial, autoimmune and neurological diseases. The steps in the
development of these products are as follows:

o The isolation, purification, analysis and molecular characterization
of microbial antigens, virulence factors, and cellular antigens
responsible for human microbial diseases.

o The design and synthesis of proprietary antigens that evoke a
protective immune response to specific microbes or other agents that
cause human disease.

o The production of ligand or antigen specific peptides, polypeptides
and antibody products that neutralize the infectious microbes or
cell products that are the cause of disease.

o The development and production of polyclonal human recombinant
antibody products for the treatment of disease.

o The molecular characterization of antibodies and mechanisms involved
in autoimmune diseases.

o The design, synthesis and production of peptide and antibody
products for the treatment of autoimmune diseases.

o The production of specific monoclonal antibodies that are the basis
of products used in the diagnosis of disease.

Drug Development Program

Callisto's drug development program has been designed to be cost
effective and efficient. Once ligand specific peptides are designed and
proprietary organisms that are the source of ScFv antibodies are developed in
the laboratories of Callisto and its affiliates, Callisto intends, initially, to
contract out the production of such products. Callisto believes that excess
capacity for the production of recombinant human proteins exists, and that this
drug development strategy will save Callisto considerable capital investment at
the initial stages of product development and commercialization. A similar
approach may be taken to the development of mammalian and avian polyclonal
antibody products, which may be produced by strategic alliances with several
companies that have considerable expertise in these areas.

Once compounds are developed for clinical trials, Callisto intends to
further streamline the development and approval of its drugs by strategies that
have served other successful emerging biotechnology companies well. Thus, it
will conduct clinical trials in economic settings. It will seek to prove
efficacy and safety for narrow indications before expanding the use of its drugs
for wide applications. It will choose to develop drugs that have potentially
broad applications. Callisto will establish proof of principle through
investigator INDs and will take advantage of the rapid development structure
afforded by the Orphan Drug Act. Finally, it will seek early licensing of its
products in an effort to provide funds for rapid development and exploitation of
its opportunities.

In the final development stage, Callisto expects to be supported by
funds from new investment, licensing fees, and product revenues. It will seek to
expand its manufacturing base to assure timely delivery and maintain exclusive
control over developmental and manufacturing innovations in the production of
its drugs.

Product Candidate Summary

The following table lists the status of Callisto's product candidates
and research and discovery programs. A more detailed description of these
product candidates and research and discovery programs follows. Callisto's
product candidates are subject to risks of failure inherent in the development
of products based on innovative technologies.

------------------------------------------------- -------------------------------------------------- ----------------------
Status of
Product Candidates Program/Disease Development*
------------------------------------------------- -------------------------------------------------- ----------------------

Diagnostic Marker for Obsessive - Compulsive OCD Clinical
Disorder
------------------------------------------------- -------------------------------------------------- ----------------------
Superantigen Product Group Toxic Shock Syndrome due to Preclinical/
Antitoxin Antibodies Staphylococcal and Streptococcal Clinical
Synthetic peptide antitoxin toxins. Collateral therapy in the
Polypeptide antitoxin vaccine treatment of SIRS.
------------------------------------------------- -------------------------------------------------- ----------------------
Antibody, receptor antagonist or OCD Basic Research
ligand specific polypeptide that
blocks action of antineuronal
auto-antibodies in OCD
------------------------------------------------- -------------------------------------------------- ----------------------
Anti-mucopeptide antibodies, Rheumatoid Arthritis Basic Research
enzymatically derived mucopeptide
fragments, and synthetic peptides
------------------------------------------------- -------------------------------------------------- ----------------------

*Research activities include initial research and development related to the
specific therapeutic and its delivery. Preclinical indicates that Callisto is
conducting pharmacology testing, toxicity testing, formulation process
development, and/or development of the manufacturing process prior to possible
submission of an IND.

Obsessive-Compulsive Disorder and Related Diseases - Description

Obsessive-Compulsive Disorder (OCD) is a chronic and often disabling
medical condition that is characterized by recurrent thoughts (obsessions)
and/or repetitive rituals (compulsions) that are distressful and/or interfere
with life's routine. Approximately five million people in the U.S., or one in 50
Americans, are thought to suffer from OCD. Of these five million, a majority
have not been diagnosed. About 15 to 20 per cent of persons with OCD come from
families in which another immediate family member has the same or similar
problem. Although OCD usually begins in adolescence, it may begin in childhood.
For the most part, onset is gradual, but there are cases of acute onset. The
majority of individuals have a waxing and waning course, with exacerbation of
symptoms that may be related to stress. About 15% show progressive deterioration
in occupational and social functioning. OCD may also be associated with major
depressive disorder, other anxiety disorders, (e.g. social phobia, panic
disorder) and eating disorders.

Tourette's syndrome is another neurological disorder characterized by
involuntary movements and uncontrollable vocal sounds called tics. In the U.S.
population, approximately 100,000 cases of Tourette's syndrome have been
documented. There is a high incidence of OCD in individuals with Tourette's
syndrome, with estimates ranging from 35 to 50 percent. Autism is another
developmental disorder that is detected by age 3 and about 125,000 children
suffer from this brain disorder in the U.S.

The current diagnosis of these psychiatric disorders is based on family
history, observation, and the response of patients to a questionnaire and the
allocation of a subjective score. Positron Emission Tomography, MRI, EEG and CT
have been used to confirm the diagnosis but these are expensive and seldom used.
Callisto believes there is a critical need for an objective and cost effective
diagnosis for OCD and related neurological disorders that is amenable to mass
screening.

Callisto's Diagnostic Test for Obsessive-Compulsive Disorder

Callisto has developed a test for the diagnosis of OCD and related
neurological disorders. This immunodiagnostic test is based on a monoclonal
antibody, tagged with a fluorescent dye that detects a marker called D8/17 that
is present in the immune cells of children diagnosed with OCD and related
disorders. Using a monoclonal antibody that detects D8/17 on cells. Callisto's
investigators collaborating with the National Institutes of Health and the
University of Florida undertook two open-label studies to determine if the
marker D8/17 was a positive indicator of OCD. In the first study, immune cells
from 85% of children who were diagnosed as having OCD or other tic disorders
were positive for the D8/17 marker, while cells from normal children exhibited
background fluorescence. In the second study, immune cells of all children
diagnosed with OCD scored positive for the D8/17 marker. In addition, the number
of immune cells bearing D8/17 or the concentration of this starker on B cells
appeared to correlate with disease severity. A total of 112 children
participated in these studies. Following the publication of these results, a
large number of academic institutions have submitted blood samples to
Rockefeller for analysis of D8/17.

Current pharmacotherapy for the treatment of OCD and related disorders
is the use of serotonin reuptake inhibitors, a major class of psychiatric drugs
most commonly used in the treatment of depression. The overuse of psychiatric
drugs in children is a serious public health concern, and Callisto believes that
an objective and sensitive test for OCD would guide physicians in the
appropriate prescription of these medications.

A second major problem associated with these drugs is that patients
have to be treated for a considerable period of time before the onset of
clinical improvement. In addition, different chemical classes of inhibitors are
available and when patients are unresponsive to one class, they are often
treated with a different class. A diagnostic test that could predict efficacy
before the onset of clinical improvement would significantly expand the market
for this test. Callisto plans to submit protocols to various Institutional
Review Boards for approval and to initiate these studies. These studies will
ascertain whether the number of immune cells bearing D 8/17 or the concentration
of this marker on these cells decreases following drug therapy thereby
predicting clinical improvement.

Callisto's current test is a cell based fluorescence assay and the
blood samples are processed before the immune cells are fixed and stained with
anti-D8/17 antibody. To simplify the diagnostic test Callisto is developing a
second generation assay that will employ the fluorescent activated cell scanner
(FACS) technique currently used in most hospitals to detect surface antigens
such as CD4+ and CD8+ lymphocytes to determine their ratios seen in HIV
patients. To date 50 samples have been tested by both conventional
immunofluorescence and FACS analysis. Analysis demonstrated 90%-100% correlation
of the two tests and their ability to distinguish OCD patients from controls.
The advantage of the FACS analysis is that it counts 10-20,000 cells very
rapidly, gives an objective read-out and can be standardized in all hospitals in
the world using these machines.

Streptococcal and Staphylococcal Toxic Shock Syndrome - Description

A vast majority of gram-positive bacterial infections induced by
Streptococcus pyogenes or Staphylococcus aureus have been controlled by
antibiotic therapy. However, with the emergence of antibiotic resistant
bacteria, the incidence of antibiotic resistant infections in the normal
population is on the rise. The incidence increases with age and older people are
more susceptible to developing infection. The frequency of infection is also
increased in immunocompromised patients or those in surgical, transplant, trauma
or burn units. Patients receiving an invasive prosthesis also appear to be at a
higher risk. The most serious form of a gram-positive bacterial infection is
Toxic Shock Syndrome. 20,000 cases of TSS are reported annually in the US.
Fever, hypotension, rash, and multiple organ failure characterize this disease.
Mortality is high, estimated at 30-50%. Therapy is supportive and consists of
the use of antibiotics, fluid replacement, pressors (drugs to increase blood
pressure), and intravenous immunoglobulin.

Toxin molecules (exotoxins and enterotoxins) synthesized by
Streptococci or Staphylococci are responsible for TSS. These toxins (known as
superantigens) non-specifically activate the cells of the immune system and
induce the synthesis of inflammatory cytokines (signaling proteins synthesized
by immune cells) such as TNFa, IL-1 and IL-6- TNFa appears to be the first
cytokine synthesized, and in turn it induces the synthesis of IL-I and IL-6.
Aberrant induction of cytokine release is followed by an overwhelming
inflammatory response leading to shock, multiple organ failure and, frequently,
death.

Using a synthetic peptide whose sequence is similar to various toxins
of gram-positive bacteria, Callisto has developed a proprietary antibody (ATS
antibody) that recognizes the different toxins and neutralizes their biological
effect. The ATS antibody has been shown to inhibit the synthesis of cytokines
and protect animals from shock.

Antipeptide Treatment of Streptococcal and Staphylococcal Toxic Shock Syndrome

Callisto, through its collaboration with Rockefeller, has identified a
peptide sequence that is common to various toxins of Streptococcus pyogenes and
Staphylococcus aureus. An antibody directed against this peptide (antipeptide
antibody) recognizes the entire family of Streptococcal and Staphylococcal
toxins. Non-specific activation of immune cells induced by the various toxins
and the synthesis of TNFa is blocked when these cells are exposed to the
antipeptide antibody. In animal studies this antibody protects rabbits from the
lethal effects of a number of different toxins. In animal studies in a clinical
setting, the antipeptide antibodies would be administered early in toxic shock
cases to block the deleterious effects of these toxins. Callisto expects its ATS
antibody to be sold principally to hospitals for use in critical care or
emergency room settings.

Systemic Inflammatory Response Syndrome

The Systemic Inflammatory Response Syndrome may be characterized as a series of
systemic biological responses to infection or other severe systemic challenges.
Its early diagnosis is based on the presence of two of the following signs: body
temperature greater than 38(degree)C or lower than 36(degree)C; heart rate
greater than 90 beats per minute; tachypnea (rapid breathing) and an abnormal
white cell count. A positive blood culture for bacteria may or may not be
demonstrated. When organ dysfunction is observed, SIRS has progressed to severe
sepsis. When the clinical disease has progressed to severe sepsis with multiple
organ failure, the outcome is often fatal. Approximately 400,000 to 500,000
cases of SIRS are reported annually and the mortality rate is high, estimated at
15-20% (40-60% in severe cases). Therapies for the treatment of SIRS are
supportive and with the exception of steroids, do not address the disease
process. Current therapy involves the use of high doses of antibiotics,
aggressive fluid replacement, pressor agents and steroids.

The principal inducer of SIRS is lipid A, the glycolipid that is
present in lipopolysaccharide(LPS), a component of the outer membrane of
gram-negative bacteria. LPS induces the synthesis of a variety of cytokines
including TNFa, IL-1 and IL-6. TNFa appears to be the first cytokine induced
followed by IL-1 and IL-6. Many experimental therapies (anti-LPS, IL-1 receptor
antagonists, TNFa receptor and anti-TNFa) have been developed for the treatment
of SIRS. Many of these agents have failed in clinical trials. These therapies
were considered rational and novel at the time of their development. Some of the
therapies were designed to neutralize the biological effects of cytokines (TNFa,
IL-1). It is thought that failure was due to administration of the drugs too
late in the progress of the disease. Others cite the lack of homogeneity in the
patient groups studied. Nevertheless, examples can be cited in which agents
targeting endotoxin or TNFa were quite effective when utilized for prophylaxis
or employed early in the SIRS response in homogeneous clinical groups.

Recent information on SIRS suggests that these patients often have
low-grade fever and concomitant infection with gram-positive bacteria. Studies
conducted at Rockefeller and other institutions indicate that the toxicity
associated with LPS is significantly enhanced (greater than 1,000 fold) by the
toxins synthesized by gram-positive bacteria. The failure of anti-LPS may have
been due to the inability of anti-LPS to neutralize the effects of the toxins
synthesized by gram-positive bacteria.

Having evaluated the large amount of data collected following these
failed clinical trials and potential reasons for their failure. Callisto's
approach to the clinical management of SIRS is conservative. The potential
products target the toxic bacterial components or products (the root cause of
the disease) rather than the downstream events resulting from the interaction of
the inducers with the immune system. Since the timing of pharmacological
intervention is critical- therapy will be initiated when SIRS is suspected. The
effects of Callisto's drugs will first be studied in homogeneous groups of
patients with well-defined diseases among whom a fatal outcome in the absence of
SIRS would not be anticipated. Two different clinical approaches have been
designed by Callisto to treat SIRS.

Antipeptide Antibody treatment of SIRS

In the first approach, patients with SIRS are targeted to receive the
antipeptide antibody that is being developed for the treatment of SIRS. As
stated earlier, recent animal studies conducted at Rockefeller and other
institutions indicate that the toxicity of LPS is greatly enhanced when
non-toxic amounts of staphylococcal enterotoxins are injected. Blocking the
effects of enterotoxin by the antipeptide antibody markedly reduces the toxicity
associated with LPS. Evidence supporting this approach has been derived in
animal models of SIRS. In these studies, the antipeptide antibody protected
rabbits from lethal SIRS when they were treated with a combination of LPS and
enterotoxin. TNFa synthesis was significantly curtailed. Treatment with the
antipeptide antibody will be initiated early in the disease process.

Treatment with the peptide itself has also proved effective in animal
models of septic shock. The 12 amino acid peptide is able to inhibit lethality
in a mouse model of septic shock. The peptide can be administered up to 2 hours
after the second hit in a two hit model of septic shock. Treatment with the
peptide itself could prove to be useful even after the patient enters the
hospital.

Invasive Fasciitis caused by Group A Beta-hemolytic Streptococci

Group A beta-hemolytic streptococcus (GABS) may be the agent of a
rapidly spreading infection known as invasive fasciitis. The condition is
resistant to treatment and has a death rate of 20-50%. In severe cases the
progression of the disease may be too rapid to be stopped with antibiotics and
aggressive surgical debridement is required. Therapy usually includes
Clindamycin, which has several favorable actions. It kills bacteria, suppresses
toxin synthesis, facilitates phagocytosis and suppresses synthesis of
penicillin-binding proteins. Finally, it inhibits LPS-induced TNFa, production
by monoocytes. Such infections are accompanied by toxic shock syndrome, which is
expected to respond to Callisto's ATS antibody. Experimental evidence by C. D.
Ashbaugh et al. suggests that the rapidly invasive fasciitis is expected to
respond more favorably to treatment with an antibody against GABS carbohydrate
antigen.

The Challenge and Opportunity of Autoimmune Disease

Autoimmune diseases, which affect eight to ten million Americans, are
chronic, debilitating, and in some cases life-threatening conditions in which
the immune system, designed to protect a human or animal from foreign pathogens,
infectious organisms, and malignant tumors, turns upon its host and attacks and
destroys tissues and organs. These diseases tend to be chronic, age-related and
more common in females.

Autoimmune disease is a term referring to a spectrum of diseases
sharing a common characteristic, i.e. abnormal alteration of the production,
selection and function of immunocompetent cells, so that these cells or their
humoral products attack and destroy the normal cells and tissues of the body.
Autoimmune diseases are systemic diseases, but are divided into distinct
diseases or disease syndromes as a result of restriction of the autoantibody
response and preferential attack or destruction of cell components, tissue types
and organs. Thus, in rheumatoid arthritis, connective tissue of the joints is
most affected while systemic lupus erythematosis, a systemic disease, refers to
a skin lesion, first presenting on the face.
Susceptibility to the changes that occur in these cells appears to be
genetically determined. However, abnormalities in the normal process of somatic
mutation that characterizes the immune response are usually involved and an
external antigenic stimulus often appears to be an initiating event.
Abnormalities in the function of T-cells to induce NK cells to suppress
forbidden clones that attack normal tissues may occur. Acute and chronic damage
occurs to tissues as a direct result of attack by antibodies and T-lymphocytes.
Finally, immune complexes evoke a destructive inflammatory response mediated by
complement.

Therapy of these diseases has been based on a variety of strategies,
and has become more focused and rational as knowledge of the detailed
pathogenesis of these conditions has increased. Thus, attention has shifted from
symptomatic therapy and surgical repair, to interest in broad-spectrum
anti-inflammatory and immunosuppressive agents and finally to anti-cytokine and
immunomodulatory interventions based on detailed knowledge of the cellular and
molecular events involved in the induction of autoimmunity.

Rheumatoid Arthritis

Rheumatoid arthritis (RA) is an often painful condition of the joints
which affects approximately one per cent of adults in the United States and
worldwide. This prevalence appears even higher in certain populations and women
have a 2 to 3 fold higher risk of being affected. The causes of this syndrome
are multifactorial and, in many cases, unexplainable. Although often exacerbated
by bacterial infections in affected joints, these infections will also directly
cause RA. With the specific objective of developing immunomodulatory and
anti-cytokine drugs for rheumatoid arthritis, Callisto intends to employ its
expertise in peptide and antibody design in an experimental model of the disease
in rats. This model is already established in the laboratory at Rockefeller
University which will allow a number of approaches to the treatment of
experimental autoimmune arthritis, which may lead to the discovery of several
effective therapeutic agents for the human disease.

o The induction of resistance to arthritis in rats by a
mucopeptide-polysaccharide complex by injection of enzyme digested
complex. The identification of peptide mimitopes of the mucopeptide
fragments which elicit a protective antibody response. Testing the
ability of such a product to prevent or mitigate the progress or
development of rheumatoid arthritis in animals and humans.

o The development of hr Sc Fv or hr Fab antibodies against the
cytokine TNFa.

o The development of an orally ingested antigen that induces
antigen-specific systemic hyporesponsiveness.

o The design and trial of soluble MHII:autoantigenic peptide complexes
to be employed to inhibit the recall antigen proliferative response
of T clones or draining lymph node cells in RA.

o The development of anti-idiotypic antibodies blocking RF(rheumatoid
factor).

o The development of ligand-specific peptide agents that block the
autoimmune antibodies in RA without binding MHC antigens.

o The development of peptide drugs that bind Fc receptors and impede
the formation of immune complexes by rheumatoid factor.

o Suppression of T cell dependent, antibody mediated autoimmune
responses to target proteins, for example Fc, by administration of
high doses of specific peptides. Suppression of the T cell
proliferative response to the dominant peptides of such proteins.

SYNERGY PHARMACEUTICALS, INC.

Overview

Synergy is a privately held biopharmaceutical company engaged in the
development of novel human therapeutics based on two technology platforms: 1)
Atiprimod for treatment of multiple myeloma and autoimmune diseases
("Atiprimod"), and 2) guanylyl cyclase receptor agonists ("GCRA") for treating
colon cancer, ulcerative colitis and asthma. From these two technologies,
Synergy currently has one drug candidate with an active IND application and an
IND amendment for new therapeutic areas, with at least one IND application
expected to be filed within the next year. Notably, Synergy's technologies and
patent estate relating to iminosugars will not be part of the Merger, as these
have been transferred to Unither Pharmaceuticals Inc., a Delaware corporation
("UP") a wholly-owned subsidiary of United Therapeutics Corporation, a Delaware
corporation ("United Therapeutics").

Atiprimod to Treat Multiple Myeloma

On August 28, 2002, Synergy entered into a License Agreement with
AnorMed, Inc., a Canadian corporation to license Atiprimod (SKF 106615).
Atiprimod is one of a class of compounds known as azaspiranes and was originally
developed as a potential treatment for rheumatoid arthritis. The development of
this drug originated with a partnership between AnorMed and SmithKline Beecham
that led to the successful filing of an IND and completion of two Phase I
clinical trials. Atiprimod was originally developed as a treatment for
rheumatoid arthritis based on encouraging data from a number of animal models of
arthritis and autoimmune indications. 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 of Atiprimod
and showed that the drug is well tolerated. In addition, the drug was also found
to be well tolerated in a 6-month daily-dose extension study performed with a
number of patients from the first two studies.

Mechanism of Action

Atiprimod is a macrophage-targeting agent, which affects three areas of
immune response: lysosomal processing, T-cell proliferation and inflammatory
mediators. Atiprimod modifies lysosomal pH, thus decreasing auto-antigen
presentation, but does not lead to a generalized immunosuppressive state.
Moreover, although T-cell proliferation is reduced in Atiprimod-treated animals,
it is not completely suppressed. Notably, Atiprimod has been shown to potently
inhibit the production of the pro-inflammatory mediators IL-6 and TNF. In
addition, in co-cultures of plasma cells and bone marrow stem cells, the drug
has been shown to have a profound effect on VEGF, a well-known anti-angiogenesis
growth factor.

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 (MM) is
the basis for its potential use as a drug to treat this disease. Atiprimod has
been demonstrated using in vitro models of MM autocrine and paracrine growth to
inhibit proliferation of a number of human multiple myeloma cell lines with an
IC50 in the range of 500 - 1500 nM concentrations. 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
myleoma 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, displaying an IC50 of
100 nM. A separate set of experiments also suggest an additional explanation for
the disease modifying activity of Atiprimod originally observed in arthritic-rat
(AA 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. Atiprimod showed complete
inhibition of bone resorption at 500 nM, displaying an IC50 of 200 nM for this
effect. The drug appears to be selectively toxic for activated osteoclasts,
displaying a negligible effect on bone marrow stromal cells. Because osteoclasts
play an important positive role in normal bone metabolism, in addition to their
deleterious effects in non-regulated pathological conditions such as
osteoporosis and a number of other bone diseases, Atiprimod was evaluated to see
whether it adversely affects normal osteoclast function. In a separate series of
experiments, Atiprimod at doses causing 80% or more inhibition of paw
inflammation in the AA rat (20 mg/kg) produced no significant effect on growth
of long bones. In contrast, the immunosuppressive drugs cyclosporin A and
rapamycin demonstrated significant effects on long bone growth and decreased
trabecular area with a concomitant increase in trabecular separation. The study
showed that Atiprimod causes no significant skeletal changes in the growing rat,
whereas cyclosporin A and rapamycin induce significant changes to the skeleton.
These findings have important implications to the treatment of MM and other bone
resorption disorders. Atiprimod has also recently been demonstrated to show
anti-cancer activity in the low micromolar range in human colorectal cancer cell
lines and a number of 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.

Summary of Biological Studies

The results from these in vitro experiments and from earlier studies on
Atiprimod's immunomodulatory and anti-osteoclastic activity taken together form
the basis for evaluating Atiprimod in multiple myeloma and bone destruction due
to cancer. Comparison of the various effects elicited by Atiprimod with those
associated with disease activity and disease stage of multiple myeloma indicate
that this drug has a unique therapeutic potential as a treatment for this
disease, as it simultaneously lowers serum IL-6 and VEGF, the two growth factors
generally recognized to play the major role in the pathophysiology of multiple
myeloma, in addition to lowering TNFa , sIL-2r and IL-1 levels, three other
growth factors associated with the disease. An additional characteristic of
Atiprimod that argues strongly for its potential role in treating multiple
myeloma is the effect it has on inhibiting activated-osteoclast driven bone
resorption, a key debilitating factor associated with the pathology of multiple
myeloma, and which is generally recognized to accelerate disease progression.
This last characteristic may be important to its potential use in treating other
osteolytic bone diseases such as metastatic breast and prostrate cancer.

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
mgkg), 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 effect
of food on bioavailability, as well as the safety and pharmocokinetics 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. Individuals from the 2 Phase I safety studies were also
involved in a long-term, open-label extension trial utilizing 5-mg daily doses
of drug. Forty-three patients entered the study and remained on drug as long as
12 months. Clinical laboratory results for all patients were unremarkable; in
particular liver enzyme levels remained with the normal range in all patients
throughout the study period. Significantly, reductions in tender and swollen
joint counts were noted in a number of subjects during the course of the dosing
period. A Phase II multiple-center trial plan to further evaluate Atiprimod in
RA patients was accepted by the United States Food and Drug Administration (the
"FDA"). The trial was never implemented.

Manufacturing

A practical, efficient and cost effective synthesis for producing
Atiprimod on a large-scale basis has been developed. In the process, a new
dimaleate salt form with superior physical properties (e.g. non-hygroscopic,
improved crystallinity and higher stability) has been developed. Capsule and
table formulations of Atiprimod are feasible.

Intellectual Property

Atiprimod and its analogs have extensive worldwide patents and patent
filings for multiple myeloma, osteolytic bone diseases, autoimmune and
inflammatory diseases. Recent filings have also broadened Atiprimod's coverage
to include use against a variety of cancers. Notably, a composition-of-matter
patent on the dimaleate salt form of Atiprimod allows patent coverage to 2016.

Atiprimod Competitive Advantages

o Novel mechanism for a lethal cancer - multiple myeloma

o Competed Phase I safety trials successfully

o IND for multiple myeloma can be submitted in 2-3 months
(resubmission of Glaxo-SmithKline IND)

o Run two simultaneous clinical trials in same patient-multiple
myeloma/bone resorption

o GMP process and scale-up completed by Glaxo SmithKline

o 7.5 kilos of GMP material available

o Strong National Cancer Institute in-vitro data for solid tumors -
new patent protection for many major markets

o Orally bioavailable small molecule with excellent patent protection

Development Strategy

Synergy intends to amend the SmithKline IND for the new indications of
multiple myeloma and bone resorption and submit the application by July 2003.
Synergy has recruited the world's leader in multiple myeloma, Dr. Ken Anderson,
of the Dana Farber Cancer Institute to design and carry out the clinical
development of this drug for multiple myeloma. Synergy has also recruited Dr.
Moshe Talpaz of the MD Anderson Cancer Center in Houston, Texas, a world
renowned clinical oncologist, to also be involved in the clinical development of
Atiprimod.

The primary indication of this Atiprimod trial with focus on multiple
myeloma but will also look at bone resorption, a critical life threatening
associated problem in those patients. Synergy has preclinical data showing a
potent ability to suppress bone resorption. If successful, this indication would
have broad applicability to metastatic breast and prostate cancer along with
primary bone cancers all of which constitute a very large market opportunity.

Over 7 kilos of GMP drug substance is available from SmithKline and
Synergy believes supply will be sufficient for development into Phase III.
Synergy has also tested Atiprimod in the National Cancer Institute cancer screen
and found the drug to be highly active in most solid tumors. Synergy will
complete mouse model studies in breast, colon, lung and prostate solid tumors.
Successful completion of those models would provide an additional therapeutic
indication which would require only a small amendment to the existing IND to
begin further clinical trials of Atiprimod. New patents have been filed for this
new Synergy discovery. With extended human experience Synergy intends to revisit
the autoimmune therapeutic area by completing preclinical models for Crohn's
disease and ulcerative colitis.

Guanylyl Cyclase Receptor Agonist Technology

Synergy's guanylyl cyclase receptor agonist (GCRA) program is focused
on a field of pharmacology with profound implications for future treatment of
colon cancer, cancers, and for the treatment of inflammation including Crohn's
disease, ulcerative colitis, and general organ inflammation, such as asthma The
basic focus of this work is the control of cyclic GMP (cGMP), an important
second messenger involved in regulation of a variety of physiological dictions
in the body. Recent advances in our understanding of cellular signaling pathways
have elucidated the central role of cGMP, an intracellular signaling molecule
involved in key cellular functions that are tied to inflammation,
anti-tumorigenic responses and/or cellular death (apoptosis). Synthesis of cGMP
in cells of the gastrointestinal tract and other specific organs of the body is
promoted through the action of a guanylyl cyclase receptor (GC-C) activated by
binding of the agonist uroguanylin, a hormone discovered in the early 1990's.
Uroguanylin is produced and secreted by specialized cells in the human
gastrointestinal tract and binds to GC-C receptors of the intestine and colon
where it activates synthesis of cGMP, leading to apoptosis, an important event
in the turnover of cells lining the GI tract mucosa. Disruption and/or
irregularities in the turnover of cells, as is the case with individuals
displaying reduced levels of endogenous uroguanylin, can lead to precancerous
polyps, colon cancer and inflammatory bowel diseases. 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. Since the discovery of guanylin peptides
(agonists of cGMP production) a decade ago, this area of research has grown
considerably as demonstrated by the large number of publications in this new
field. 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 is the basis for the
development of GCRA peptides as drugs to treat colon cancer.

Synergy has established a major program to develop agonists as drugs
that enhance cGMP production for treatment of this cancer condition. In
addition, GCRA compounds are being developed by Synergy to treat other cancers,
gastrointestinal inflammation and asthma and other general organ inflammation.
Synergy expects the guanylate cyclase-signaling pathway to eventually reach
similar standing to that of the cAMP/adenylasc cyclase system in terms of
regulation of a wide range of important cellular functions in the body.

Synergy GCRA Program Superior to Uroguanylin

Synergy decided at the beginning of this program that to have an
acceptable drug candidate it needed to identify a clinical candidate that had
characteristics superior to that of uroguanylin that would enable drug
development. Uroguanylin suffers from several problems noticeably
inter-conversion to biologically inactive conformers, low activity at
physiologic pH and major purification problems associated with the 2 sulfide
bridge folded final products. Synergy believes it has successfully overcome all
of these problems.

Competitive Advantages

o Synergy's GCRA peptide is the only potential drug to up-regulate
cGMP within cells.

o Synergy's GCRA peptide is the only drug that concurrently
down-regulates production of leukotrienes, prostaglandins and
activation of NFCIB, mediators of inflammation and carcinogenesis.

o cGMP is the primary early stage mediator of the anti-inflammatory
cascade with broad anti-inflammatory capability, as opposed to other
strategies that focus on a single mechanism (e.g. Cox-2 inhibitors,
5-lipoxygenase inhibitors, NSAIDs).

o Synergy's GCRA drug will act therapeutically against certain disease
indications that aspirin and Cox-2 inhibitors will not be effective
against (e.g. asthma, colon cancer).

o cGMP has been shown to be the key regulator between proliferation
and apoptosis in the GI tract where disregulation leads to polyps,
colon cancer and GI inflammation (e.g.colon cancer, colitis).

o Synergy's GCRA drug is not orally absorbed and thus will not display
toxicity normally seen with other chemotherapeutic agents.

o Synergy's GCRA drug is a highly unique small peptide with profound
temperature, pH and protease stability (e.g. resistant to gastric
and intestinal juices from human).

o Unique compact 3D structure of the GCRA peptide affords this drug
characteristics like that of other small molecule drugs.

Intellectual Property Rights

Synergy has developed what it believes will be the dominating position
in the use of guanylyl cyclase receptor agonist therapeutics in cancer and
inflammation. The Synergy patent estate consists of 7 patent applications (1
final application, 6 provisionals) filed during 2001-2002 covering:

o Composition-of-matter on novel GCRA peptides (many classes, covering
100's of sequences).

o Use patents on novel peptides covering a broad array of cancers and
organ inflammation diseases.

o Use patents covering uroguanylin, guanylin and ST peptide on a
variety of cancers and organ inflammation.

o Combination therapy with phosphodiesterase inhibitors for treatment
of cancer and organ inflammation.

Development Strategy

Synergy's GCRA program is devoted to the development of peptide
agonists of guanylyl cyclase receptor for treatment of cancer and inflammation.
Novel analog peptides with rigid three-dimensional structures that stabilize the
biologically functional conformation have been designed and synthesized.
Synergy's in-house program is supported by key technical alliances with Dr.
Gregory Nikiforovich (Washington University, St. Louis) an expert in the field
of peptide computational chemistry and Prof. Leonard Forte (University of
Missouri), discoverer of uroguanylin and a worldwide authority in the field of
salt homeostasis. These scientists have worked closely with Synergy scientists
on the development and testing of novel peptides. Based on molecular modeling of
the basic uroguanylin structure, during the past year, Synergy has generated a
library of peptide analogs and analyzed them for biological activity using in
vitro cell assays measuring intracellular production of cGMP. This program has
led to the generation of biologically functional analogs with enhanced
characteristics. One of these analogs, SP304 has been chosen as a clinical
candidate and has demonstrated superior biological activity, enhanced
temperature and protease stability and superior pH characteristics relative to
human uroguanylin. SP304 also exhibits only one biologically active conformation
with no inter-conversion to inactive conformers as is seen with uroguanylin.

Synergy plans to advance its lead clinical candidate (SP304) toward
clinical development in 2003, with the goal of filing an IND on SP304 by 2004.
Synergy's development strategy is focused on evaluating SP304 in animal models
for these three immediate disease targets: 1) colon cancer, 2) asthma, and 3)
ulcerative colitis. Results from these animal studies are expected in 2003, with
the expectation of initiating preclinical studies for an IND in late 2003.
SP304, the lead GCRA agonist peptide for treatment of colon cancer and
ulcerative colitis is expected to exhibit no apparent toxicity, since the drug
will be administered orally and is not absorbed from the intestinal tract.
Additionally, SP304 is easy to produce, heat stable and extremely resistant to
proteolysis, a highly novel characteristic for a peptide drug candidate. Synergy
also has early plans to evaluate SP304 in an animal model of asthma, based on
published work demonstrating the efficacy of uroguanylin against this disease
indication. Assuming this is successful, Synergy will move forward aggressively
with development of SP304 for this indication in the same timeframe.

MANUFACTURING

Even if the merger is completed, neither Callisto nor Synergy intend to
invest in large scale manufacturing facilities until their product candidates
pass significant development hurdles. They believe that all of their existing
products in development can be made using well understood manufacturing methods.
Nevertheless, neither Callisto nor Synergy have manufacturing experience and
they may not be able to develop reproducible and effective manufacturing
processes at a reasonable cost. In such event, we will have to rely on third
party manufacturers whose availability and cost is presently unclear.

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 Callisto or Synergy. The nature and the extent
to which such regulation may apply will vary depending on the nature of any such
products. Virtually all of the potential products of Callisto and Synergy 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 ("Investigational New Drug") application 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
Callisto or Synergy may be marketed impose a similar regulatory process.

COMPETITION

The biopharmaceutical and medical diagnostic industries are
characterized by rapidly evolving technology and intense competition. Callisto's
and Synergy's competitors include major pharmaceutical, biotechnology and
medical diagnostic companies, most of which have financial, technical and
marketing resources significantly greater than those of either of them, singly
or combined. 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 Callisto and Synergy. 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.

TECHNOLOGIES SUBJECT TO LICENSES

As a licensee of certain research technologies, Callisto has a license
agreement with Rockefeller University ("Rockefeller") wherein Callisto has
acquired exclusive rights to develop and commercialize such research
technologies. The agreement generally requires Callisto to pay royalties on
sales of products developed from the licensed technologies and fees on revenues
from sublicensees, where applicable, and Callisto is responsible for the costs
of filing and prosecuting patent applications. In addition, Callisto's agreement
with Rockefeller requires that Callisto commit certain sums annually for
research and development of the licensed products.

CORPORATE EMPLOYEES

As of December 31, 2002, we had no employees. Our sole director and
executive officer, Christoph Bruening, serves without compensation. As of the
same date, Callisto and Synergy had 2 and 4 employees, respectively.

RISK FACTORS

There are many risks and uncertainties that could impact the completion
of the proposed merger and the business operations of Callisto and Synergy,
individually and as proposed to be combined. If any of the factors described
below occur, Callisto and Synergy's business, financial position or results of
operations could be materially adversely affected, the value of our common stock
could decline and such risks could effect the validity of forward looking
statements contained in this statement.

The number of shares of our common stock to be issued in the proposed merger is
fixed and will not be adjusted in the event of any change in stock price

Under the merger agreement, each share of Callisto and Synergy common
stock will be converted into the right to receive shares of our common stock.
The number of shares of our common stock issuable under the Agreement is fixed
and will not be adjusted. The price of our common stock at the closing of the
merger may vary from the price on the date of this document and on the date of
the giving of consents. Webtronics' price may vary because of changes in the
business, operations or prospects of Callisto or Synergy, market assessments of
the likelihood that the merger will be completed, the timing of the completion
of the merger, the prospects of post-merger operations, regulatory
considerations, general market and economic conditions and other factors.

No existing market

Quotations for our common stock can be found on the Over The Counter
Bulletin Board under the symbol "WEBR.OB" and our stock has not traded. Except
for the OTC Bulletin Board, there is no existing trading market for any
securities of Webtronics. Accordingly, there can be no assurance as to the
liquidity of any markets that may develop for the securities, the ability of
holders of the securities to sell their securities, or the prices at which
holders may be able to sell their securities.

The market price of our common stock may be adversely affected by several
factors

The market price of our common stock, if a market develops, could
fluctuate significantly in response to various factors and events, including:

o our ability to integrate operations, technology, products and
services;

o ability of Callisto and Synergy to execute their business plans as a
combined company;

o operating results below expectations;

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

o loss of any strategic relationship;

o industry developments;

o economic and other external factors; and

o period-to-period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of our common stock. Past stock
performance is not an indication of future performance.

The integration of Callisto and Synergy following the proposed merger will
present significant challenges. We may not be able to realize the benefits
anticipated from the proposed merger

The proposed merger involves the partial integration of two companies
that have previously operated independently. Under the terms of the Merger
Agreement, each of Callisto and Synergy are keeping their respective assets and
liabilities separate, and each of their liabilities have been enumerated and
approved by the other party. If the merger is completed, we will face
significant challenges in integrating organizations, operations, technology,
research and development, product lines and services in a timely and efficient
manner and in retaining key personnel and strategic partnerships of both
companies. The combination of both companies will require, among other things,
integration of the companies' management staffs, coordination of the companies'
research and development, sales and marketing efforts, and identification and
elimination of redundant and/or unnecessary overhead. Diversion of management
attention, loss of management-level and other highly qualified employees, and an
inability to integrate management, systems and operations of these two companies
may all result from the merger. The failure to integrate Callisto and Synergy
successfully and to manage the challenges presented by the integration process
may result in our not achieving the anticipated potential benefits of the merger
and could have a material adverse effect on our financial condition. Delays
encountered in the transition process could have a material adverse effect upon
the combined company.

Callisto's and Synergy's product candidates are in an early stage of development
and products are not expected to be marketed for several years

Callisto's and Synergy's product candidates are in an early stage of
development. Neither Callisto nor Synergy has completed the development of any
products and, accordingly, has not received any regulatory approvals, commenced
marketing activities or generated revenues from the sale of products. Each of
Callisto's and Synergy's product candidates will require significant additional
development, pre-clinical and clinical trials, regulatory approval and
additional investment prior to commercialization. Neither Callisto nor Synergy
expects to market any products for several years. In addition, each of
Callisto's and Synergy's product candidates are subject to the risks of failure
inherent in the development of products based on innovative technologies.
Accordingly, there can be no assurance that Callisto's or Synergy's research and
development efforts will be successful, that any of Callisto's or Synergy's
product candidates will prove to be safe, effective and non-toxic in clinical
trials, that any commercially successful products will be developed, that the
proprietary or patent rights of others will not preclude Callisto or Synergy
from marketing its product candidates or that others will not develop
competitive or superior products. As a result of the early stage of development
of product candidates and the extensive testing and regulatory review process
that such product candidates must undergo, neither Callisto nor Synergy can
predict with certainty when it will be able to market any of its products, if at
all. Each of Callisto's and Synergy's product development efforts are based on
novel scientific approaches. There is, therefore, substantial risk that these
approaches may not prove to be successful.

Callisto, Synergy and Webtronics have a history of losses and expect losses in
the future

Each of Callisto, Synergy and Webtronics have incurred operating losses
in every fiscal period they have operated. We expect to incur substantial
additional operating losses over the next several years and expects cumulative
losses to increase as Callisto's and Synergy's research and development and
clinical efforts expand. Revenues, if any, that Callisto or Synergy may receive
in the next few years will be limited to payments under research or product
development relationships that either Callisto or Synergy may establish and
patents under license agreements that Callisto or Synergy may enter into. There
can be no assurance that either Callisto or Synergy will be able to establish
any such relationships, enter into any such license agreements or generate
revenues. To achieve profitable operations, Callisto and Synergy, alone or with
others, must successfully identify and develop products, conduct clinical
trials, obtain regulatory approvals and manufacture and market its products or
enter into license agreements with third parties on acceptable terms. We may
never achieve significant revenues or profitable operations, even if the
proposed merger is completed.

Webtronics will require additional funding to execute its business strategy. If
funding is not available or not available on acceptable terms, Webtronics may be
required to curtail certain product development

If the proposed merger is completed, we will require substantial
additional funds to conduct and sponsor research and development activities, to
conduct pre-clinical and clinical testing, and to market Callisto's and
Synergy's products. Our future capital requirements will depend on many factors,
including continued scientific progress, progress with pre-clinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the ability of Callisto and Synergy to
establish collaborative arrangements, effective commercialization activities and
arrangements and the purchase or development of additional equipment and
facilities. There can be no assurance, however, that changes in Callisto's or
Synergy's research and development plans or other events affecting operating
expenses will not result in the expenditure of such proceeds prior to that time.
Neither we, Callisto nor Synergy have other current sources of funding. As a
result, we will need to raise additional funds before any of its product
candidates achieves regulatory approvals, if at all. We intend to seek such
additional funding through collaborative arrangements and through public or
private financings. There can be no assurance that additional financing will be
available, or, if available, that such additional financing will be available on
terms acceptable to us. If additional funds are raised by issuing debt, we will
incur fixed payment obligations, which could delay the time, if any, when we may
achieve profitability. If adequate funds are not available, we may be required
to delay, scale back or eliminate one or more of its principal product
candidates or obtain funds through arrangements with collaborative partners or
others that may require us to relinquish rights to certain of its technologies,
product candidates or products that Callisto or Synergy would not otherwise
relinquish.

Callisto's and Synergy's operations are subject to stringent laws and
regulations and if they are unable to comply, their business may be
significantly harmed

The production and marketing of the Callisto's and Synergy's principal
product candidates, as well as certain of their respective research and
development activities, are subject to regulation by governmental agencies in
the United States and other countries. Any drug developed by Callisto or Synergy
will be subject to a rigorous approval process pursuant to regulations
administered by the FDA, comparable agencies in other countries and, to a lesser
extent, state regulatory authorities. The approval process for any one of
Callisto's or Synergy's product candidates is likely to take several years or
more and will involve significant expenditures by us for which additional
financing will be required. The cost of conducting clinical trials for any
potential product can vary dramatically based on a number of factors, including
the order and timing of clinical indications pursued and the extent of
development and financial support, if any, from collaborators. Because of the
intense competition in the biopharmaceutical and medical diagnostic markets and
concern over the safety of participating in clinical trials, Callisto and
Synergy may have difficulty obtaining sufficient patient populations or the
support of clinicians to conduct its clinical trials as planned and may have to
expend substantial additional funds to obtain access to such resources, or delay
or modify its plans significantly. There can be no assurance that either
Callisto or Synergy will be able to obtain necessary clearances for clinical
trials or approvals for the manufacturing or marketing of any of their
respective product candidates, that we will have sufficient resources to
complete the required regulatory review process or that we can survive the
inability to obtain, or delays in obtaining, such approvals. Even if regulatory
approvals are obtained, they may provide for significant limitations on the
indicated uses for which a product may be marketed. As with all investigational
products, additional government regulations may be promulgated requiring that
additional research data be submitted that could delay marketing approval of any
of Callisto's or Synergy's product candidates. The subsequent discovery of
previously unknown complications or the failure to comply with applicable
regulatory requirements may result in restrictions on the marketing, or the
withdrawal, of products or possible civil or criminal liabilities. In addition,
we cannot predict whether any adverse government regulation might arise from
future administrative actions.

There are no assurances that any of Callisto's or Synergy's future products will
receive regulatory approval

As part of the regulatory review process, Callisto and Synergy must
sponsor and file, or obtain through others, regulatory applications for each of
its product candidates before they will be able to initiate the clinical trials
necessary to generate safety and efficacy data for inclusion in an application
for FDA marketing approval. Neither Callisto nor Synergy has filed any
regulatory applications to date. We cannot predict with certainty when it might
first submit any application for any product candidates for FDA or other
regulatory review. There can be no assurance that clinical data from studies
performed by either Callisto or Synergy or others will be acceptable to the FDA
or other regulatory agencies in support of any applications that may be
submitted for regulatory approval and the FDA may, among other things, require
the collection of additional data and the conduct of additional clinical studies
prior to acceptance of any such applications.

Each of Callisto and Synergy will be dependent upon relationships with other
companies to conduct clinical trials and manufacture, market or sell their
respective products

Callisto's and Synergy's strategy for the research, development and
commercialization of product candidates will require entering into various
arrangements with corporate and academic collaborators, licensors, licensees and
others, and may therefore be dependent upon the subsequent success of these
outside parties in performing their responsibilities. In addition, there can be
no assurance that they will be able to establish other collaborative
arrangements or license agreements that they deem necessary or acceptable to
develop and commercialize their product candidates or that such collaborative
arrangements or license agreements will be successful. Moreover, certain of the
collaborative arrangements that they may enter into in the future may place
responsibility for pre-clinical testing and clinical trials and for preparing
and submitting applications for regulatory approval for product candidates on
the collaborative partner. Should a collaborative partner fail to develop or
commercialize successfully any product candidate to which Callisto or Synergy
have rights, our business may be adversely affected. In addition there can be no
assurance that collaborators will not be pursuing alternative technologies or
developing products either on their own or in collaboration with others,
including Callisto's or Synergy's competitors, as a means for developing
treatments for the diseases or disorders targeted by these collaborative
programs.

Callisto's and Synergy's ability to compete effectively may decline if they do
not adequately protect their technology and intellectual property, or if they
lose some of their intellectual property rights as a result of, or otherwise
become involved in, expensive lawsuits or administrative proceedings

Callisto's and Synergy's ability to compete effectively depends on
their respective success in protecting proprietary technology in the United
States and abroad. The patent positions of biopharmaceutical and medical
diagnostic companies generally are highly uncertain and involve complex legal
and factual questions. No consistent policy has emerged regarding the breadth of
claims covered in biopharmaceutical and medical diagnostic patents. As its
research projects develop, we intend to file additional patent applications with
the United States Patent and Trademark Office (the "PTO") and with corresponding
foreign patent authorities. There can be no assurance that the PTO or any
foreign jurisdictions will grant patent applications or that Callisto and
Synergy will obtain any patents or other protection for which application for
patent protection has been made. No assurance can be given that patents issued
to or licensed by Callisto or Synergy will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide any competitive
advantage. Callisto and Synergy will also rely on trade secrets, know how and
continuing technological advancement in seeking to achieve a competitive
position. No assurance can be given that we will be able to protect our rights
to unpatented trade secrets or that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets.

In addition to protecting its proprietary technology and trade secrets,
Callisto and Synergy may be required to obtain additional licenses to patents or
other proprietary rights from third parties. No assurance can be given that any
additional licenses required under any patents or proprietary rights would be
made available on acceptable terms, if at all. If Callisto or Synergy do not
obtain required licenses, they could encounter delays in product development
while they attempts to design around blocking patents, or they could find that
the development, manufacture or sale of products requiring such licenses could
be foreclosed.

We could also incur substantial costs in defending any patent
infringement suits or in asserting any patent rights, including those granted by
third parties. The PTO could institute interference proceedings against Callisto
or Synergy in connection with one or more of their patents or patent
applications, and such proceedings could result in an adverse decision as to
priority of invention. The PTO or others could also institute reexamination
proceedings with the PTO against Callisto or Synergy in connection with one or
more of their patents or patent applications and such proceedings could result
in an adverse decision as to the validity or scope of any patents that Callisto
or Synergy may obtain or have the right to use.

Many of Callisto's and Synergy's competitors have substantially greater
financial, technical, research and development and human resources than Callisto
and Synergy, respectively, and we may lose business to competitors

The biopharmaceutical and medical diagnostic industries are
characterized by rapid and significant technological change. Our success, if the
merger is completed, will depend on our ability to develop and apply its
multiple technologies in the design and development of its product candidates
and to establish and maintain a market for its product candidates. There also
are many companies, both public and private, including major pharmaceutical and
chemical companies, medical diagnostic companies, specialized biotechnology
firms, universities and other research institutions engaged in developing
pharmaceutical and biotechnology products and medical diagnostics. Many of these
companies have substantially greater financial, technical, research and
development, and human resources than Callisto and Synergy, either singly or
combined. Competitors may develop products or other technologies that are more
effective than any that are being developed by Callisto or Synergy or may obtain
FDA approval for products more rapidly than either of them. If they commence
commercial sales of products, it still must compete in the manufacture and
marketing of such products, areas in which neither has any experience. Many of
these companies also have manufacturing facilities and established marketing
capabilities that would enable such companies to market competing products
through existing channels of distribution. As a result, there can be no
assurance that Callisto's or Synergy's product candidates will be successfully
developed into products that can be administered to humans or that any such
drugs or therapies will prove to be safe and effective in clinical trials or
cost-effective to manufacture. Further, any product candidates developed by
Callisto or Synergy may prove to have adverse side effects.

There is no assurance that adequate third-party reimbursement will be available
for Callisto's or Synergy's commercialized products

The levels of revenues and profitability of biopharmaceutical and
medical diagnostic companies may be affected by the continuing efforts of
governmental and third party payors to contain or reduce the costs of healthcare
through various means. For example, in certain foreign markets, pricing of
prescription pharmaceuticals is subject to governmental control. In the United
States, there have been, and we expect that there will continue to be, a number
of federal and state proposals to implement similar government control. It is
uncertain what legislative proposals will be adopted or what actions federal,
state or private payors for healthcare goods and services may take in response
to any healthcare reform or legislation.

We cannot predict the effect that healthcare reforms may have on its
business, and there can be no assurance that any such reforms will not have a
material adverse effect on us. Further, to the extent that such proposals or
reforms have a material adverse effect on the business, financial condition and
profitability of other pharmaceutical and medical diagnostic companies that are
prospective collaborators for certain of Callisto's or Synergy's potential
products, their ability to commercialize their respective product candidates may
be adversely affected. In addition, in both the United States and elsewhere,
sales of prescription medical products are dependent in part on the availability
of reimbursement to the consumer from third party payors, such as government and
private insurance plans. Third party payors can indirectly affect the pricing or
the relative attractiveness of product candidates by regulating the maximum
amount of reimbursement that they will provide for product candidates or by
denying reimbursement. There can be no assurance that, if and when marketed,
Callisto's or Synergy's product candidates will be considered cost-effective by
third party payors, that reimbursement will be available or, if available, that
such third party payors' reimbursement policies will not adversely affect their
ability to sell their respective product candidates on a profitable basis.
Limitations on, or failure to obtain, reimbursement for use of Callisto's or
Synergy's product candidates and changes in government and private third party
payors' policies toward reimbursement could have a material adverse effect on
their ability to market their product candidates.

If Callisto or Synergy loses its key employees and consultants or is unable to
attract or retain qualified personnel, our business could suffer

Callisto and Synergy's success, and our success if the merger is
completed, is highly dependent on their ability to attract and retain qualified
scientific and management personnel. Callisto and Synergy are highly dependent
on their respective management, scientific staff, and consultants, including Dr.
Donald H. Picker, Gary S. Jacobs, Kunwar Shailubhai and Dr. John B. Zabriskie.
The loss of the services of Dr. Donald H. Picker, Gary S. Jacobs, Kunwar
Shailubhai or Dr. Zabriskie or other personnel or consultants could have a
material adverse effect on our operations. Although we expect to enter into
employment agreements with each of our key management and scientific employees
and consulting agreements with key outside scientific advisors of each of
Callisto and Synergy, any of such persons may terminate his or her employment or
consulting arrangement with us at any time on short notice. Accordingly, there
can be no assurance that these employees and consultants will remain associated
with either Callisto or Synergy. The loss of the services of the principal
members of such personnel or consultants may impede their ability to
commercialize its product candidates.

Callisto's and Synergy's planned activities may require additional
expertise in areas such as pre-clinical testing, clinical trial management,
regulatory affairs, manufacturing and marketing. Such activities may require the
addition of new personnel and the development of additional expertise by
existing management personnel. They face intense competition for such personnel
from other companies, academic institutions, government entities and other
organizations, and there can be no assurance that Callisto or Synergy will be
successful in hiring or retaining qualified personnel. Their inability to
develop additional expertise or to hire and retain such qualified personnel
could have a material adverse effect on their operations.

ITEM 2. DESCRIPTION OF PROPERTY

Callisto provides us with an office located in its leased offices at
420 Lexington Avenue, Suite 601, New York, New York and does not charge us rent.
Callisto also sponsors research and development activities in laboratories at
The Rockefeller University.

Synergy leases office space at 2 Executive Drive, Suite 450, Somerset,
New Jersey 08873, and in Ireland at 2 Harbourmaster Place, Dublin 1, used for
Synergy's wholly-owned subsidiary, IgX Limited ("IgX"). Synergy is in the
process of selling its leasehold in Ireland as IgX has no operations or
employees.

ITEM 3. LEGAL PROCEEDINGS

We may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of our business. We are
not currently involved in any such litigation that we believe could have a
materially adverse effect on our reported financial condition or results of
operations.

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, 2002.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS

MARKET INFORMATION

Our securities do not currently, and have not in the past, traded on
any public market. Thus, there is currently no market for our securities and
there can be no assurance that a trading market will develop or, if one
develops, that it will continue. The shares of commons tock are quoted in the
NASD's OTC Bulletin Board under the symbol "WEBR.OB"

NUMBER OF SHAREHOLDERS

The number of shareholders of record of our Common Stock as of the
close of business on March 31, 2003 was 3.

DIVIDEND POLICY

To date, we have declared no cash dividends on our Common Stock, and we
do not expect to pay cash dividends in the near term. We intend to retain future
earnings, if any, to provide funds for operation of our business.

RECENT SALES OF UNREGISTERED SECURITIES

From February through June 2001, we issued 1,000,000 shares of our
common stock to our founder, Kevin Monahan, at $.0001 (par value), for an
aggregate amount of $100.00 and we issued 54,500 shares of our common stock at a
price of $.05 per share or aggregate cash proceeds of $2,725 to 25 investors, of
which 8 persons were of accredited status and 17 were of non-accredited status.
Our shares were issued in reliance on the exemptions from registration provided
by Rule 504 of Regulation D and Section 4 (2) of the Securities Act. We are not
and have never been a blank check company. Each investor was provided with a
detailed and specific business plan describing our plan of operations and
products of mortgage and foreclosure information via the Internet.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Critical Accounting Policies

Our accounting policies are described in Note 1 of the consolidated
financial statements included in this Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002. 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.

Since we are in the development stage and have had only limited
expenditures and no estimates we do not consider any accounting policy to be
critical to the understanding of our business.

Results of Operations

Our audited financial statements, which are set forth in Item 7 of this
report, reflect our operating results from February 12, 2001 (inception) to
December 31, 2002 and for the year ended December 31, 2002. During the period
from inception to December 31, 2002, we had no revenue and our expenses totaled
$2,593, of which $440 was incurred in 2001 and $$2,353 in 2002. Substantially
all of these expenses were for office and administrative activities related to
the early stages of developing plans for our foreclosure and mortgage
information business. We entered into an agreement for the hosting of our
website prior to our change in control in March, 2002 and thereafter suspended
that agreement to preserve cash pending our new management's assessment of plans
for financing the cost of indexing with search engines and providing
amortization calculators, mortgage analysis tools and 24 access. Substantially
all of these expenditures were made by management before March 15, 2002.

Callisto, our principal shareholder pays for expenses such as
accounting and legal fees relating to our reporting responsibility under the
Securities Exchange Act of 1934, as well as provides us with an office location
without any expectation of repayment. In the event the proposed merger among
us, Callisto and Synergy is not completed and we do not abandon our plan to
develop the mortgage and foreclosure information business, we will incur
expenses in this endeavor. Each of Callisto and Synergy have plans to expand and
develop their pharmaceutical businesses and if the proposed merger is completed
a full discussion of the results of operations of each company and the plan for
expenditures by the combined company will be included in a Form 8-K report.

Liquidity and Capital Resources

Most of our operating expenses are borne by Callisto, our parent,
without any expectation of reimbursement.

If the proposed merger is not completed the development of the mortgage
and foreclosure information business may require substantial funds for website
design, operation and marketing. No sources of outside funding have been
identified for this purpose.

ITEM 7. FINANCIAL STATEMENTS

Our audited financial statements follow on the next page.

WEBTRONICS, INC
(A Development Stage Company)

Audited Financial Statements

December 31, 2002

TABLE OF CONTENTS

Page
----

Independent Auditors' Report 1

Balance Sheet 2

Statements of Operations 3

Statements of Changes In Stockholders Equity 4

Statements of Cash Flows 5

Notes to Financial Statements 6-8

BAUM & COMPANY, P.A.
Certified Public Accountants
1515 University Drive - Suite 209
Coral Springs, Florida 33071

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Webtronics, Inc.

We have audited the accompanying balance sheet of Webtronics, Inc. ( A
Development Stage Company) as of December 31, 2002 and the related statement of
operations, cash flows and changes in stockholders' equity for the period
commencing February 12, 2001 ( date of inception ) to December 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements present fairly, in all material
respects, the financial position of Webtronics, Inc. ( A Development Stage
Company ) at December 31, 2002 and the statement of operations, cash flows and
changes in stockholders' equity for the period commencing February 12, 2001
(Date of Inception) to December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.

/s/ Brum & Company, P.A.

Coral Springs, Florida
March 27, 2003

WEBTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 2002

ASSETS

Current Assets
Cash $ 232
--------

Total Assets $ 232
========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities $ - 0 -

Stockholders' Equity
Preferred Stock, $.0001 par value, authorized
20,000,000; 0 issued and outstanding - 0 -
Common Stock, $.0001 par value, authorized
50,000,000; 1,054,500 issued and outstanding 105
Additional paid-in capital 2,720
Accumulated Deficit (2,593)
--------

Total Stockholders Equity 232
--------

Total Liabilities and Stockholders' Equity $ 232
========

See accompanying notes to financial statements.
- 2 -

WEBTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
PERIOD COMMENCING FEBRUARY 12, 2001 (DATE OF INCEPTION)
TO DECEMBER 31, 2002

Operations During
Development Stage
Inception
December 31, February 12, 2001
2002 2001 To December 31, 2002
---------- ----------- ---------------------

Revenue $ - 0 - $ - 0 - $ - 0 -

Operating Expenses 2,153 440 2,593
----------- ----------- -------------

Net Income (Loss) before
provision for income taxes (2,153) (440) 2,593

Provision for income taxes - 0 - - 0 - - 0 -
---------- ----------- -------------

Net Income (Loss) $ (2,153) $ (440) $ (2,593)
========== =========== =============

Net Income per common
share (basic) $ (0.00) $ (0.00) $ (0.00)
========== =========== =============

Weighed average of
shares outstanding 1,054,500 1,054,500 1,054,500
========== =========== =============

See accompanying notes to financial statements.
- 3 -

WEBTRONICS, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD COMMENCING FEBRUARY 12, 2001 TO DECEMBER 31, 2002

Additional Deficit Total
Common Stock Paid-In Development Stage Stockholders'
Shares Amount Capital Period Equity
------ ------ ------- ------ ------

Beginning Balance
February 12, 2001 (Inception) - 0 - $ - 0 - $ - 0 - $ - 0 - $ - 0 -

Issuance of common stock 1,054,500 105 2,720 - 0 - 2,825

Net ( loss )
December 31, 2001 - 0 - - 0 - - 0 - (440) (440)
----------- --------- --------- --------- ---------

Balance -December 31, 2001 1,054,500 105 2,720 (440) 2,385

Net (Loss)
December 31, 2002 - 0 - - 0 - - 0 - (2,153) (2,153)
----------- -------- --------- --------- ---------

Balance-December 2002 1,054,500 $ 105 $ 2,720 $ (2,593) 232
=========== ======== ========= ========= =========

See accompanying notes to financial statements.
- 4 -

WEBTRONIC, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD COMMENCING FEBRUARY 12, 2001 (DATE OF INCEPTION)
TO DECEMBER 31, 2002

Operations During
Development Stage
December 31, Inception
2002 2001 To December 31, 2002
---- ---- --------------------

Cash flows from operations:
Net income ( loss ) $ (2,153) 440) $ (2,593)
-------- ------- -------------

Net cash provided for operations (2,153) (440) (2,593)
-------- ------- -------------

Cash flows from financing activities:
Issuance of common stock - 0 - 2,825 2,825
-------- ------- -------------

Net cash flows from financing
activities - 0 - 2,825 2,825
-------- ------- -------------

Net increase (decrease) in cash (2,153) 2,385 232

Cash - beginning 2,385 - 0 - - 0 -
-------- ------- -------------

Cash - ending $ 232 $ 2,385 $ 232
======== ======= =============

See accompanying notes to financial statements.
- 5 -

WEBTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

Organization and Operations

The Company was organized under the laws of the State of
Florida on February 12, 2001. The Company is in the
development stage. The Company plans to develop a website
where individuals can obtain foreclosure of real estate and
related mortgage information. The Company currently has no
operations.

Basis of Accounting

The Company's policy is to prepare its financial statements
using the accrual basis of accounting in accordance with
generally accepted accounting principles. The Company has
retained December 31 as its annual year end.

Use of Estimates

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

Cash and Equivalent

Cash and cash equivalents include cash and cash in banks.
The company maintains cash and cash equivalent balances at a
financial institution that is insured by the federal deposit
Insurance Corporations up to $100,000. At December 31, 2001,
there is no concentration of credit risk from uninsured bank
balances.

Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143, which addresses
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated
asset retirement costs is effective for fiscal years
beginning after June 15, 2002. We do not expect the adoption
of this new standard to have a material impact on our
results of operations or financial position.

In July 2001, the FASB issued SFAS No. 144, "Impairment of
Disposal of Long-Lived Assets," which is effective for
fiscal years beginning after December 15, 2001. The
provisions of this

- 6 -

WEBTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Pronouncements (Continued)

statement provide a single accounting model for impairment
of long-lived assets. We do not expect the adoption of this
new standard to have a material impact on our results of
operations or financial position.

In April 2002, the FASB issued SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections," which is
effective for fiscal years beginning after May 15, 2002.
This statement rescinds the indicated statements and amends
other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their
applicability under changed conditions, SFAS No. 145
encourages early adoption of the provision of this standard
that rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishments of Debt." We do not expect the adoption of
these provisions to have a material impact on our results of
operations or financial position.

In July 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," which is
effective for exit or disposal activities that are initiated
after December 31, 2002. This statement nullifies Emerging
Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a
Restructuring)." This statement requires that liabilities
associated with exit or disposal activities initiated after
adoption be recognized and measured at fair value when
incurred as opposed to at the date an entity commits to the
exit or disposal plans. We expect the adoption of this new
standard to have an impact on the timing of any future
restructuring charges.

NOTE 2 CAPITAL TRANSACTIONS

The Company on February 12, 2001 issued to its founder
1,000,000 restricted shares of common stock at par value
of $ .0001.

The Company in June 2001 issued 54,500 restricted shares of
common stock for $ .05 per share. The offering was made in
reliance upon exemption from registration provided by
Regulation D, Rule 504 of the Securities Exchange
Commission.

NOTE 3 PUBLIC REGISTRATION

The Company's SB-2 registration was accepted by the
Securities and Exchange Commission on September 24, 2001. It
is listed on the OTC bulletin board under the symbol WEBR
Management paid for all expenses of registering the
securities.

-7 -

WEBTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

NOTE 4 INCOME TAX

In February 1992, the Financial Standards Board issued
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Under SFAS No. 109, deferred
assets and liabilities are recognized for the estimated
future tax consequences between the financial statement
carrying amounts of the existing assets and their respective
basis.

Deferred assets and liabilities are measured using enacted
tax rates in effect for the year in which temporary
differences are expected to be recovered or settled. Under
SFAS No. 109 the effect on deferred assets and liabilities
of a change in tax rates is recognized in the period that
includes the enactment date.

The company has a net operating loss carry forward of $2,593
which is offset by a $2,593 valuation allowance due the
uncertainty surrounding the ultimate realization of these
assets. The loss carryforward expires in 15 years.

NOTE 5 SUBSEQUENT EVENTS

On March 10, 2003, the Company entered into a tentative
merger agreement with Callisto Pharmaceuticals, Inc., ( a
majority stockholder ) and Synergy Pharmaceuticals, Inc. (
an unaffiliated company). The merger would be treated as a
stock for stock transaction. This merger would result in
Webtronics, Inc. becoming the parent corporation to both of
the merged companies. As of the date of the financial
statements, this merger has not been executed by the
parties.

- 8 -

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

None.

PART III

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

The following table sets forth the names and ages of our current
directors and executive officers, the principal offices and positions held by
each person and the date such person became a director or executive officer. The
executive officers are elected annually by the Board of Directors. The directors
serve one-year terms until their successors are elected. The executive officers
serve terms of one year or until their death, resignation or removal by the
Board of Directors. There are no family relationships between any of the
directors and executive officers. In addition, there was no arrangement or
understanding between any executive officer and any other person pursuant to
which any person was selected as an executive officer.

Our directors and executive officers as of March 31, 2003, are as
follows:

Name Age Position
---- --- --------

Christoph Bruening 35 President, Secretary and Director

Mr. Bruening was appointed director and President/Secretary of the
Company on January 21, 2003 to fill the vacancy resulting from the resignation
of Yanina Wachtfogel. He is a member of the advisory board of Clarity AG, and
served as a member of the board of Matchnet plc. 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
he served as a funds manger and Director of Asset management for Value
Management & Research AG , a private investment fund and funds manager operating
in Germany. From 1997 to 1998 he was a financial analyst and Head of Research
for Value Research GmbH. Mr. Bruening holds a Bachelor of Science Degree in
Chemistry from Technischen Universitat Darmstadt.

If the proposed merger is completed, four persons nominated by Callisto
will be elected to our board of directors and three persons nominated by Synergy
will be elected to our board of directors. In addition, Donald Picker, Ph.D.
will be appointed our Chief Executive Officer and Gary S. Jacob, Ph.D. will be
appointed as our Chief Scientific Officer. For a period of 18 months after the
closing of the proposed merger, any change in our Chief Executive Officer will
require the majority approval of the directors appointed by Synergy.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 is not applicable
to our officers, directors or persons who own more than ten percent of our
common stock until we register a class of securities under Section 12
thereunder.

ITEM 10. EXECUTIVE COMPENSATION

We have not paid any compensation to executives since our inception.

COMPENSATION OF DIRECTORS

Directors were not separately compensated for their services in the
year ended December 31, 2002.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 31, 2003, certain
information with respect to our equity securities owned of record or
beneficially by (i) each of our officers and directors; (ii) each person who
owns beneficially more than 5% of each class of our outstanding equity
securities; and (iii) all directors and executive officers as a group.

The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares that the selling stockholder has the right to acquire within 60
days. The actual number of shares of Common Stock issuable upon the conversion
of the debentures is subject to adjustment depending on, among other factors,
the number of shares outstanding at the time of conversion and could be
materially less than the number estimated in the table.

Beneficial Ownership
--------------------
Name of Beneficial Owner Shares Percentage
------------------------ ------ ----------

Callisto Pharmaceuticals, Inc. 499,384,600 99.7%

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Callisto, our parent bears substantially all of our operating
expenses,without any expectation that such outlays will be reimbursed.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit No. Exhibit Description
----------- -------------------

2.1 Stock Purchase Agreement between Webtronics, Inc.
and Callisto Pharmaceuticals, Inc. dated March 15, 2002 (1)

2.2 Form of Stock Purchase Agreement between certain shareholders
and Callisto Pharmaceuticals, Inc. dated March 15, 2002 (1)

2.3 Agreement and Plan of Merger by and among Webtronics, Inc.,
Callisto Pharmaceuticals, Inc., Callisto Acquisition Corp., Synergy
Pharmaceuticals, Inc., and Synergy Acquisition Corp. dated March 10,
2003 (2)

3.1 Articles of Incorporation of the Company (3)

3.2 Bylaws of the Company (3)

4.1 Form of Stock Certificate, $.0001 par value (3)

9. None

10 None

11. Statement re: computation of per share earnings.
See Notes to Financial Statements

13. None

16 None

18. None

21. None

22. None

23. None

24. None

99.1 Certification pursuant to 18 U.S.C. Section 1350*

-------------
(1) Incorporated by reference to the exhibits filed with the Company's Current
Report on Form 8-K dated March 15, 2002.

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

(3) Incorporated by reference to the exhibits filed with the Company's Form
SB-2 Registration Statement filed June 20, 2001.

* Filed herewith

(b) Reports on Form 8-K

The following reports on Form 8-K were filed during the quarter ended
December 31, 2003:

Report Dated Items Included Financial Statements
------------ -------------- --------------------

None

Item 14. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing date of this report, our
President (who acts as our principal executive officer and principal financial
officer) carried out an evaluation of the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) of the
Securities Exchange Act of 1934, as amended). Based on that evaluation, the
President concluded that our disclosure controls and procedures are adequate and
effective. There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of that evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

SIGNATURES

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

Dated: March 31, 2003
WEBTRONICS, INC.

By: /s/ Christoph Bruening
--------------------------------
Christoph Bruening, President

Pursuant to 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:

Signature Capacity Date
--------- -------- ----

/s/ Christoph Bruening President, Secretary
--------------------------- and Director March 31, 2003
Christoph Bruening

CERTIFICATION

I, Christoph Brueing, certify that:

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

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

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

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

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

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

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

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

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

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

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

March 31, 2003

/s/ Christoph Bruening
----------------------------
Christoph Bruening
President and Sole Officer