<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1996
-------------------------------
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
-----------------------
TO
-------------------------
COMMISSION FILE NUMBER 0-22872
------------
SYMBOLLON CORPORATION
- -------------------------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 36-3463683
- ------------------------------- ----------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
122 Boston Post Road, Sudbury, MA 01776
- -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
508-443-0165
- -------------------------------------------------------------------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
- -------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 / /
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
<TABLE>
<CAPTION>
May 13, 1996
------------
<S> <C>
Class A Common Stock 1,280,423
Class B Common Stock 1,199,713
</TABLE>
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
<PAGE> 2
SYMBOLLON CORPORATION
(a development stage company)
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- March 31, 1996 and December 31, 1995 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the three months
ended March 31, 1996 and March 31, 1995 2
Unaudited Condensed Statements of Cash Flows - For the three
months ended March 31, 1996
and March 31, 1995 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURE 7
INDEX TO EXHIBITS 8
</TABLE>
<PAGE> 3
Part I -- Financial Information
Item 1 -- Financial Statements
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1996 1995
--------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................... $1,680,888 $2,087,753
Accounts receivable......................... 30,870
Inventory................................... 48,365 31,279
Prepaid expenses............................ 96,816 80,554
---------- ----------
Total current assets...................... $1,826,069 $2,230,456
Equipment and leasehold improvements, net of
accumulated depreciation.................... 157,006 159,990
Other assets:
Patent and trademark cost, net of
accumulated amortization.................. 96,923 90,099
Deposit..................................... 5,000 5,000
---------- ----------
TOTAL..................................... $2,084,998 $2,485,545
========== ==========
LIABILITIES
Current liabilities:
Accounts payable............................ $ 45,683 $ 30,385
Notes payable to stockholder................ 47,549 47,549
Legal fees payable to related party......... 1,800 4,782
Accrued interest............................ 22,819 21,989
Other accrued professional fees............. 105,606 3,822
Other current liabilities................... 65,954 44,963
---------- ----------
Total current liabilities................. 289,411 153,490
Accrued rent.................................. 22,250 24,500
---------- ----------
Total liabilities......................... 311,661 177,990
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share,
5,000,000 shares authorized, none issued....
Common stock, Class A, par value $.001 per
share, 18,750,000 shares authorized,
1,265,423 shares issued at December 31,
1995 and March 31, 1996..................... 1,265 1,265
Common stock, Class B, par value $.001 per
share, 1,250,000 shares authorized,
1,214,713 shares issued at December 31, 1995
and March 31, 1996, each share convertible
into one share of Class A common stock...... 1,215 1,215
Additional paid-in capital.................... 6,732,739 6,732,739
Deficit accumulated during the development
stage....................................... (4,961,882) (4,427,664)
---------- ----------
Total stockholders' equity................ 1,773,337 2,307,555
---------- ----------
TOTAL..................................... $2,084,998 $2,485,545
========== ==========
</TABLE>
See notes to condensed financial statements.
1
<PAGE> 4
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
<TABLE>
<CAPTION>
Period From
July 15, 1986
Three Months Ended (Inception) to
March 31, March 31,
1996 1995 1996
-------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net sales ....................................... $ 13,285 $ 15,196 $ 136,266
License fee and contract revenue ................ -- 25,000 $ 365,000
----------- ----------- -----------
Total income ............................ 13,285 40,196 501,266
Operating Expenses:
Manufacturing costs ......................... $ 6,861 $ 57,991 $ 110,461
Research and development costs .............. 345,321 209,937 $ 2,817,451
General and administrative expenses ......... 218,367 247,898 $ 2,515,050
----------- ----------- -----------
Total operating expenses ................ 570,549 515,826 5,442,962
----------- ----------- -----------
Loss from operations ............................ (557,264) (475,630) (4,941,696)
Interest income ................................. 23,876 41,141 $ 318,610
Interest expense and debt issuance costs ........ (830) (820) ($ 338,796)
----------- ----------- -----------
NET LOSS ........................................ (534,218) (435,309) (4,961,882)
Deficit accumulated during the development stage,
beginning of period ............................ (4,427,664) (3,053,953)
----------- ----------- -----------
Deficit accumulated during the development stage,
end of period .................................. ($4,961,882) ($3,489,262) ($4,961,882)
=========== =========== ===========
NET LOSS PER SHARE OF
COMMON STOCK ................................... ($ 0.30) ($ 0.26)
=========== ===========
Weighted average number of common
shares outstanding ............................. 1,780,136 1,700,000
=========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE> 5
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
July 15, 1986
Three Months Ended (Inception) to
March 31, March 31,
1996 1995 1996
----------------------------- ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ......................................... ($ 534,218) ($ 435,309) ($4,961,882)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization expense .......... 15,636 13,603 277,481
Amortization of debt issuance costs ............ 130,000
Accrued rent ................................... (2,250) (750) 22,250
Changes in operating assets and liabilities:
Accounts receivable .......................... 30,870 (6,850) 0
Inventory .................................... (17,086) 34,806 (48,365)
Prepaid expenses ............................. (16,262) 11,599 (96,816)
Deferred revenue ............................. (25,000)
Accounts payable and other current
liabilities ............................... 135,921 (2,864) 241,862
----------- ----------- -----------
Net cash used in
operating activities ...................... (387,389) (410,765) (4,435,470)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements . (8,752) (55,229) (258,244)
Patent and trademark costs ....................... (10,724) (3,440) (273,166)
Deposit .......................................... (5,000)
----------- ----------- -----------
Net cash used in investing activities .......... (19,476) (58,669) (536,410)
----------- ----------- -----------
Cash flows from financing activities:
Warrant conversion ............................... 629,204
Borrowings from stockholders ..................... 253,623
Repayment to stockholders ........................ (106,074)
Sale of common stock and units ................... 7,219,417
Sale of option to purchase units ................. 100
Public offering costs ............................ (1,343,502)
----------- ----------- -----------
Net cash provided by
financing activities ........................ 6,652,768
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH ...................... (406,865) (469,434) 1,680,888
Cash at beginning of period .......................... 2,087,753 2,998,375
----------- ----------- -----------
CASH AT END OF PERIOD ................................ $ 1,680,888 $ 2,528,941 $ 1,680,888
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 6
SYMBOLLON CORPORATION
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Description of Business:
Symbollon Corporation (the "Company") was originally incorporated as an
Illinois corporation on July 15, 1986 as Symbollon, Inc. On May 21, 1991,
Symbollon, Inc. was merged into Symbollon Corporation, a newly formed
Massachusetts corporation (which was subsequently reincorporated in Delaware in
August 1993), to carry on the business of Symbollon Inc. Except where otherwise
indicated, references to the Company in these financial statements and notes
thereto include the activities of Symbollon, Inc.
The Company was formed to develop and commercialize proprietary
enzyme-based products for infection control and treatment in biomedical and
bioagricultural industries.
The Company is in the development stage and its efforts since inception
have been principally devoted to research and development, securing patent and
trademark protection and raising capital. In connection with its research and
development efforts, several grants under the Small Business Innovation Research
program concerning the Company's technology have been funded and additional
grants are being pursued. Management of the Company anticipates that additional
losses will be incurred as these efforts are pursued. In December 1993, the
Company completed an initial public offering of its securities. Management of
the Company expects that existing funds, together with anticipated future
revenues, will enable the Company to fund its operations for the twelve months
following March 31, 1996. Management anticipates that it will require additional
funds thereafter.
In 1995, the Company signed a marketing and supply agreement for its
first product and commenced shipping.
Note B - Accounting Policies and Disclosure:
The accompanying unaudited financial statements do not contain all of
the disclosures required by generally accepted accounting principles and should
be read in conjunction with the financial statements and related notes included
in the Company's Form 10-KSB for the year ended December 31, 1995 filed with the
Securities and Exchange Commission.
In the opinion of management, the financial statements reflect all
adjustments, all of which are of a normal recurring nature, to fairly present
the Company's financial position, results of operations and cash flows. The
results of operations for the three-month period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is a development stage company. Since inception of the
Company's predecessor in 1986, the Company's efforts have been principally
devoted to research and development, securing patent and trademark protection
and raising capital, most of which efforts commenced after May 1991. Except for
revenue earned since 1995 on sales of IodoZyme, the Company's sole revenue to
date has been from licensing/option arrangements with corporate partners and
interest income.
Results of Operations
Symbollon's net loss increased by $98,909 or 22.7% from $435,309 in the
three month period ended March 31, 1995 to $534,218 in the comparable 1996
period. This increase resulted primarily from increased development efforts and
decreased license/option revenues and interest income, partially offset by
decreased manufacturing costs and general and administrative expenses. The
Company expects to continue to incur operating losses for the foreseeable
future.
Product revenues from sales of IodoZyme decreased by $1,911 or 12.6%
from $15,196 in the three month period ended March 31, 1995 to $13,285 in the
comparable 1996 period. However, manufacturing costs decreased by $51,130 or
88.2% from $57,991 in the three month period ended March 31, 1995 to $6,861 in
the comparable 1996 period. Thus, the gross profit margin on product sales
increased from (281.6)% in the three month period ended March 31, 1995 to 48.4%
in the comparable 1996 period. The increase in the gross profit margin on
product sales was primarily due to resolution of prior period manufacturing
problems, and reduced labor costs associated with certain manufacturing
activities now being internally performed.
License/option revenues decreased by $25,000 or 100% from $25,000 in
the three month period ended March 31, 1995 to zero in the comparable 1996
period. This decrease resulted from revenues generated from research and
development contracts with corporate partners not in existence during the three
month period ended March 31, 1996.
General and administrative expenses decreased by $29,531 or 11.9% from
$247,898 in the three month period ended March 31, 1995 to $218,367 in the
comparable 1996 period. This decrease resulted from lower salaries and related
costs. Research and development expenses increased by $135,384 or 64.5% from
$209,937 in the three month period ended March 31, 1995 to $345,321 in the
comparable 1996 period. This increase resulted from increased development
expenses, including third party testing and consultant fees, related to the
preparation of the 510(k) filing with the Federal Food and Drug Administration
covering the Company's high level disinfectant formulation.
5
<PAGE> 8
Liquidity and Capital Resources
The Company has funded its activities through proceeds from Class A
Warrant exercises, its IPO and prior thereto through loans from principal
stockholders and private placements of equity and debt securities. Independent
research and development activities regarding the Company's technology has been
funded through SBIR grants received and administered by Biomedical Development
Corporation. As of March 31, 1996, the Company had working capital of
$1,536,658.
The Company has had no significant revenue and has incurred a
cumulative loss through March 31, 1996 of $4,961,882. However, the Company
believes that it has the necessary liquidity and capital resources, together
with anticipated future revenues, to sustain planned operations for the twelve
months following March 31, 1996. In the event that the Company's internal
estimates relating to its planned revenues or expenditures prove materially
inaccurate, the Company may be required to reallocate funds among its planned
activities and curtail certain planned expenditures. In any event, the Company
anticipates that it will require additional funds after March 31, 1997.
During the remainder of 1996, the Company anticipates paying
approximately $210,000 as compensation for its current executive officers, and
approximately $35,250 for lease payments on its facilities. Planned capital
expenditures for the remainder of fiscal 1996 are expected to be approximately
$38,000, of which approximately $15,000 is for manufacturing equipment, $6,000
is for research and development equipment and the remainder is for general
office needs. The Company is also committed to repay a promissory note which
became due in June, 1995 in the amount of $47,549, plus accrued interest, on
demand by its holder. At December 31,1995, the Company had a net operating loss
carryforward for Federal income tax purposes of approximately $4,125,000
expiring through 2010.
6
<PAGE> 9
Part II - Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits on Page E-1.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: May 14, 1996 By: /S/ Paul C. Desjourdy
---------------------
Paul C. Desjourdy, Vice President/CFO
and authorized signatory
7
<PAGE> 10
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
PAGE #
11.1 Statement re: Computation of Earnings per Share.
<PAGE> 1
Exhibit 11.1
SYMBOLLON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
The Three-Months Ended March 31,
--------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net Loss............................... $ (534,218) $ (435,309)
========== ==========
Primary loss per share (1):
Weighted average common shares
outstanding........................ 2,480,136 2,400,000
Shares subject to restriction........ (700,000) (700,000)
---------- ----------
1,780,136 1,700,000
========== ==========
Loss per share (2):.................... $ (0.30) $ (0.26)
========== ==========
</TABLE>
(1) The shares for the three-month period ended March 31, 1996 and 1995 have
been calculated in accordance with Accounting Principles Board Opinion No. 15.
(2) There is no difference between primary and fully diluted loss per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the condensed unaudited financial statements of Symbollon Corporation
for the three months ended March 31, 1996 and is qualified in its entirety
by reference to such financial statement as filed in the Form 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,680,888
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 48,365
<CURRENT-ASSETS> 1,826,069
<PP&E> 257,454
<DEPRECIATION> 100,448
<TOTAL-ASSETS> 2,084,998
<CURRENT-LIABILITIES> 289,411
<BONDS> 0
<COMMON> 2,480
0
0
<OTHER-SE> 1,770,857
<TOTAL-LIABILITY-AND-EQUITY> 2,084,998
<SALES> 13,258
<TOTAL-REVENUES> 13,258
<CGS> 6,861
<TOTAL-COSTS> 6,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 830
<INCOME-PRETAX> (534,218)
<INCOME-TAX> 0
<INCOME-CONTINUING> (534,218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (534,218)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
