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 SEPTEMBER 30, 1997
| | 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
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SYMBOLLON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-3463683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Loring Drive, Framingham, MA 01702
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(Address of principal executive offices)
508-620-7676
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(Issuer's telephone number, including area code)
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(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.
November 12, 1997
-----------------
Class A Common Stock 3,181,278
Class B Common Stock 15,738
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
INDEX
-----
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- September 30, 1997 and December 31, 1996 1
Unaudited Condensed Statements of Operations and
Deficit Accumulated During the Development
Stage - For the nine and three months ended
September 30, 1997 and September 30, 1996 2
Unaudited Condensed Statements of Cash Flows - For
the nine months ended September 30, 1997
and September 30, 1996 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 6
PART II. OTHER INFORMATION
Item 2. Changes in Securities 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 9
INDEX TO EXHIBITS 10
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 2,163,629 $ 1,707,099
Accounts receivable..................................................... 98,519 50,406
Inventory............................................................... 107,161 17,818
Prepaid expenses........................................................ 13,945 82,439
----------- -----------
Total current assets.............................................. $ 2,383,254 $ 1,857,762
Equipment and leasehold improvements, net of
accumulated depreciation................................................. 161,189 124,463
Other assets:
Patent and trademark cost, net of accumulated amortization............ 149,372 127,097
Deposit................................................................... 2,364 5,000
------------ -----------
TOTAL............................................................. $ 2,696,179 $ 2,114,322
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 23,840 $ 41,173
Legal fees payable to related party..................................... 9,714 30,676
Other accrued professional fees......................................... 11,704 53,234
Deferred revenue........................................................ 17,596
Other current liabilities............................................... 89,355 14,441
------------ -----------
Total current liabilities......................................... 134,613 157,120
Accrued rent.............................................................. 14,000
------------ -----------
Total liabilities................................................. 134,613 171,120
------------ -----------
Redeemable common stock, Class A, par value $.001 per share,
266,667 shares issued at September 30, 1997
(aggregate involuntary liquidation value $500,000) 500,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share, 5,000,000 shares authorized
Convertible Preferred Stock, Series A, $.001 par value, 444,444 shares
issued at December 31, 1996 (liquidation preference $500,000)............ 444
Common stock, Class A, par value $.001 per share,
18,750,000 shares authorized, 1,288,253 and 2,914,611 shares issued at
December 31, 1996 and September 30, 1997, respectively................... 2,915 1,288
Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 1,196,275 and 15,738 shares issued at December 31,
1996 and September 30, 1997, respectively,
each convertible into one share of Class A common stock.................. 16 1,196
Additional paid-in capital................................................ 7,250,417 7,273,353
Deficit accumulated during the development stage.......................... (5,191,782) (5,333,079)
------------ -----------
Total stockholders' equity........................................... 2,061,566 1,943,202
------------ -----------
TOTAL............................................................. $ 2,696,179 $ 2,114,322
============ ===========
</TABLE>
See notes to condensed financial statements.
1
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Three Months Ended Nine Months Ended (Inception) to
September 30, September 30, September 30,
1997 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 72,000 $ 33,509 $ 234,338 $ 50,241 $ 475,225
Contract revenue.................................. 17,737 51,529 66,324 134,116 536,315
License fee....................................... 750,000 750,000 500,000 1,290,000
----------- ----------- ----------- ----------- -----------
Total income.............................. 839,737 85,038 1,050,662 684,357 2,301,540
Operating Expenses:
Manufacturing costs........................... $ 41,064 $ 22,665 $ 127,085 $ 36,179 $ 300,791
Research and development costs................ 145,632 220,417 428,821 872,752 3,903,159
General and administrative expenses........... 164,253 110,565 403,421 561,256 3,386,130
----------- ----------- ----------- ----------- -----------
Total operating expenses.................. 350,949 353,647 959,327 1,470,187 7,590,080
----------- ----------- ----------- ----------- -----------
Income (Loss) from operations..................... 488,788 (268,609) 91,335 (785,830) (5,288,540)
Interest income................................... 25,199 23,543 66,186 69,715 453,018
Interest expense and debt issuance costs.......... (7,661) (410) (16,224) (2,070) (356,260)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)................................. 506,326 (245,476) 141,297 (718,185) (5,191,782)
Deficit accumulated during the development stage,
beginning of period.............................. (5,698,108) (4,900,373) (5,333,079) (4,427,664)
----------- ----------- ----------- ----------- -----------
Deficit accumulated during the development stage,
end of period.................................... $(5,191,782) $(5,145,849) $(5,191,782) $(5,145,849) $(5,191,782)
=========== =========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE................ $ 0.21 $ (0.12) $ 0.07 $ (0.39)
=========== =========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding.................... 2,442,178 2,015,296 2,106,520 1,859,095
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Nine Months Ended (Inception) to
September 30, September 30,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ 141,297 $ (718,185) $(5,191,782)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............... 46,758 45,006 366,283
Amortization of debt issuance costs................. 130,000
Accrued rent........................................ (14,000) (6,750) 0
Loss on disposition of equipment.................... 240 240
Changes in operating assets and liabilities:
Accounts receivable............................... (48,113) 7,456 (98,519)
Inventory......................................... (89,343) 864 (107,161)
Prepaid expenses.................................. 68,494 50,208 (13,945)
Deferred revenue.................................. (17,596) 0
Accounts payable and other current liabilities.... (4,911) 35,975 191,788
----------- ----------- -----------
Net cash provided by (used in)
operating activities.............................. 82,826 (585,426) (4,723,096)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (83,615) (7,333) (338,935)
Patent and trademark costs............................ (27,683) (45,314) (343,448)
Proceeds from sale of equipment....................... 5,300 5,300
Deposit............................................... 2,636 (2,364)
----------- ----------- -----------
Net cash used in investing activities............... (103,362) (52,647) (679,447)
----------- ----------- -----------
Cash flows from financing activities:
Warrant conversion.................................... 629,204
Borrowings from stockholders.......................... 2,451 253,623
Repayment to stockholders............................. (127,683)
Sale of common stock and units........................ 477,066 6,552 7,704,430
Sale of preferred stock............................... 450,000 450,000
Sale of option to purchase units...................... 100
Public offering costs................................. (1,343,502)
----------- ----------- -----------
Net cash provided by
financing activities................................ 477,066 459,003 7,566,172
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........................... 456,530 (179,070) 2,163,629
Cash at beginning of period............................... 1,707,099 2,087,753
----------- ----------- -----------
CASH AT END OF PERIOD..................................... $ 2,163,629 $ 1,908,683 $ 2,163,629
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
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
iodine-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
("SBIR") program concerning the Company's technology have been funded.
Management of the Company anticipates that additional losses will be incurred as
these efforts are pursued. 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, 1996 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 nine and three-month periods ended September 30,
1997 are not necessarily indicative of the results to be expected for the full
year.
Note C - Line of Credit:
During the first quarter of 1997 the Company established a $500,000
line of credit with Silicon Valley Bank. The line of credit is secured by the
Company's assets and contains various restrictive covenants, including a
restriction on dividends. The line of credit has an interest rate of prime plus
1 1/2% and expires in March 1998.
<PAGE>
Note D - Capitalization:
In May 1997, the holders of the 444,444 outstanding shares of Series A
Preferred Stock converted those shares into an equal number of shares of Class A
Common Stock.
The Company sold 266,667 shares of Class A Common Stock to Bausch &
Lomb Pharmaceuticals, Inc. in a private placement on August 4, 1997 for
$500,000, in conjunction with entering into a collaboration and sale/license
agreement with the Company. The shares are subject to certain voting and
transfer restrictions and may be redeemed at cost at the option of either the
Company or the purchaser.
<PAGE>
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 research and development contracts with corporate partners
and interest income.
Forward-Looking Statements
Any statements set forth below or otherwise made in writing or orally
by the Company with regard to its expectations as to financial results and other
aspects of its business may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Company makes such statements based on assumptions which it believes to be
reasonable, the Company's business is subject to significant risks and there can
be no assurance that actual results will not differ materially from the
Company's expectations. Accordingly, the Company hereby identifies the following
important factors, among others, which could cause its results to differ from
any results which might be projected, forecasted or estimated by the Company in
any such forward-looking statements: (i) the timely development and acceptance
of new products, (ii) the achievement of product development milestones by the
Company's corporate partners, (iii) the timely receipt of regulatory clearances
required to market the Company's proposed products, (iv) the continued sale of
IodoZyme, the Company's only product, and (v) the Company's ability to enter
into new arrangements with corporate partners.
Results of Operations
Symbollon's net income for the three month period ended September 30,
1997 was $506,326, reflecting an increase of $751,802 from a net loss of
$245,476 in the comparable 1996 period. Symbollon's net income for the
nine-month period ended September 30, 1997 was $141,297, reflecting an increase
of $859,482 from a net loss of $718,185 in the comparable 1996 period. The
increased net income for the three-month period resulted primarily from
increased license fees from research and development contracts and increased
product revenues, partially offset by decreased contract revenues. The net
increased income for the nine-month period resulted primarily from decreased
expenses and increased license fees and product revenues, partially offset by
decreased contract revenues. The Company may incur operating losses in future
based on its plan to increase expenditures to fund clinical trials in the area
of fibrocystic breast disease.
Product revenues from sales of IodoZyme for the three and nine-month
periods ended September 30, 1997 were $72,000 and $234,338, respectively,
reflecting an increase of $38,491 and $184,097, respectively, from the product
sales in the comparable 1996 periods. The increased sales reflect in part the
Company's efforts with its marketing partner, West Agro, Inc., to broaden the
<PAGE>
distribution of the product. At September 30, 1997, Symbollon's backlog for
IodoZyme was approximately $142,000 which is expected to be satisfied during the
fourth quarter.
The gross profit margin on product sales for the three and nine-month
periods ended September 30, 1997 were 43% and 46%, compared to 32% and 28%,
respectively, in the comparable 1996 periods. The increase in the gross profit
margin on product sales for the three and nine-month periods ended September 30,
1997 was primarily due to increased sales volume.
Contract revenues for the three and nine-month periods ended September
30, 1997 were $17,737 and $66,324, respectively, reflecting a decrease of
$33,792 and $67,792, respectively, from the contract revenues in the comparable
1996 periods. License fees for the three and nine-month periods ended September
30, 1997 were $750,000, reflecting an increase of $750,000 and $250,000,
respectively, from the license fees in the comparable 1996 periods. In August
1997, the Company entered into a new corporate relationship in the field of
ophthalmics. The increase in license fees in fiscal 1997 was related to the new
corporate relationship. The decrease in contract revenues in fiscal 1997 was
related to a decrease in the services rendered by the Company under its
corporate relationship in the field of dermatology.
Research and development expenses for the three and nine-month periods
ended September 30, 1997 were $145,632 and $428,821, respectively, reflecting a
decrease of $74,785 and $443,931, respectively, from the research and
development expenses in the comparable 1996 periods. The decreases resulted from
decreases in labor costs associated with a reduction in the work force and the
discontinuation of the 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, which has been abandoned. The Company anticipates that
research and development expenses will likely increase above current levels as
it prepares to begin clinical trials in the area of fibrocystic breast disease
in 1998.
General and administrative expenses for the three and nine-month
periods ended September 30, 1997 were $164,253 and $403,421, respectively,
reflecting an increase of $53,688 and a decrease of $157,835, respectively, from
the general and administrative expenses in the comparable 1996 periods. The
increase for the three-month period resulted primarily from increased payments
to third parties related to license fees received. The decrease for the
nine-month period resulted primarily from decreased legal fees, insurance costs
and director fees. The Company anticipates that general and administrative
expenses will remain at current levels for the remainder of 1997.
Liquidity and Capital Resources
The Company has funded its activities through proceeds from Class A
Warrant exercises, its initial public offering and private placements of equity
and debt securities and through loans from principal stockholders and its bank.
Independent research and development activities regarding the Company's
technology has been funded through SBIR grants received and administered by
<PAGE>
Biomedical Development Corporation. As of September 30, 1997, the Company had
working capital of $2,248,641.
The Company has incurred a cumulative loss through September 30, 1997
of $5,191,782. 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 September 30, 1997. 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 September 30, 1998.
During the remainder of 1997, the Company anticipates paying
approximately $70,000 as compensation for its current executive officers, and
approximately $7,088 for lease payments on its facilities. There are no planned
capital expenditures for the remainder of 1997. At December 31, 1996, the
Company had a net operating loss carryforward for Federal income tax purposes of
approximately $5,010,000 expiring through 2011.
Part II - Other Information
Item 2. Changes in Securities
See Note D above regarding the Company's private placement (exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933) on August
4, 1997 of 266,667 shares of Class A Common Stock to Bausch & Lomb
Pharmaceuticals, Inc.
Item 5. Other Information
On August 14, 1997, the Company amended its Collaboration and License
Agreement with Oclassen Pharmaceuticals, Inc. primarily to account for delays
incurred in the development program. The original agreement had anticipated that
an Investigational New Drug Application (IND) covering use of the Company's
chemistry in dermatology would have been filed by August 1997; however, the
development process has not advanced sufficiently to warrant such filing. Along
with certain other changes, in the amendment Symbollon agreed to remove the time
based payment requirement for the next two milestones which were to be paid on
May 1998 and 1999. Such milestone payments will now be payable only with the
occurrence of certain events. Additionally, the amendment deferred a portion
of a milestone payment that was due in August 1997 until November 11, 1997.
Oclassen has failed to pay such deferred milestone payment as required by the
amendment. The parties are discussing the future of the relationship, and
Symbollon is hopeful that the relationship will proceed and that the outstanding
obligations will be satisfied. If the parties are not able to reach agreement
regarding the payment of the outstanding obligations, it is likely that such
relationship will terminate.
<PAGE>
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: November 14, 1997 By: /S/ Paul C. Desjourdy
--------------------------------------
Paul C. Desjourdy, Executive Vice
President/CFO and authorized signatory
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
10.15.2 Amendment to Collaboration and License Agreement, dated
August 14, 1997, between Symbollon Corporation and Oclassen
Pharmaceuticals, Inc.*........................................
11.1 Statement re: Computation of Earnings per Share...............
27.1 Financial Data Schedule.......................................
- --------------------------
* Indicates that material has been omitted and Confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
Commission pursuant to Rule 24b-2.
AMENDMENT TO COLLABORATION AND LICENSE AGREEMENT
This Amendment to the Collaboration and License Agreement by and
between Oclassen Pharmaceuticals, Inc. and Symbollon Corporation dated as of May
14, 1996 (the "Agreement") is made as of this 14th day of August, 1997. All
capitalized terms not defined herein shall have the meaning ascribed to them in
the Agreement.
This Amendment, when signed by the parties to the Agreement, shall
constitute a written amendment in accordance with Section 17.6 of the Agreement.
The parties hereby agree that the Agreement shall be amended as follows:
1. The first sentence of Section 2.1 after the heading "Formation" shall be
deleted and replaced with the following language "The Joint Development
Committee will be comprised of five (5) members with three (3) being appointed
and replaced by Oclassen and two (2) being appointed and replaced by Symbollon."
2. Exhibit C shall be amended to provide that the three (3) members of the Joint
Development Committee appointed by Oclassen are as follows: "1. David Hsia; 2.
Thomas Ho; 3. Mark Taylor"
3. Section 2.3 shall be deleted in its entirety.
4. Section 2.4 shall be deleted and replaced with the following language:
"If at any time during the term of this Agreement, Oclassen
wishes to revise the marketing strategy for any Product
involving a switch to OTC sales, either exclusively or
concurrently with prescription sales, it may so notify the
JDC. If the JDC fails to reach unanimous agreement on such
switch, the top executive officer of each party will confer as
soon as reasonably practicable and each use commercially
reasonable efforts to effect resolution. Should such
conference not resolve the disagreement, the JDC will then
determine, by majority vote, whether to permit the desired
revision to the marketing strategy. If an OTC marketing
strategy is adopted following the process contemplated by this
paragraph, then upon agreement by the parties of Symbollon's
economic return with respect thereto, which return the parties
will negotiate in good faith, Oclassen will have the exclusive
right to make, have made, use, sell and have sold such Product
in the OTC market, and the license granted under Section 4.1
shall be deemed to be amended to reflect such right. Should
the parties not reach agreement with respect to Symbollon's
economic return in connection with OTC sales, such matter will
be decided by arbitration under Section 17.3"
5. In Subsection (b) of Section 3.2 the language "pay Symbollon for its work
under the Project Plan" shall be deleted and replaced with the following
language: "pay Symbollon for its research and development work under the Project
Plan (but not for any non-research work, including JDC
<PAGE>
meetings, travel to or from meetings, discussions regarding the Agreement
itself, presentations and preparations for such presentations)".
6. In Section 4.1 the language "and/or co-promotion pursuant to Section 4.2(b)"
shall be inserted following the words "research and development". The words
"(but not distribution)" shall be deleted.
7. Subsection 4.2(b)(d) shall be deleted and replaced with the following
language:
"(d) that (i) Symbollon shall receive [* INDICATES THAT
MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.] of any
and all amounts received and all other consideration received
(when in a form other than cash or its equivalent, the fair
market value thereof when received) by Oclassen or its
Affiliates directly or indirectly from such co-promoter by
reason of the sale, distribution or use of Product(s), and
(ii) that should Symbollon's economic return with respect to a
co- promotion contemplated by this paragraph not be equivalent
to that which Symbollon would have received in the aggregate
if Symbollon had received a [* INDICATES THAT MATERIAL HAS
BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO RULE 24b-2.] royalty on the
sale of such Product directly by Oclassen to an unrelated
third party (not to include the sale by Oclassen to a
co-promoter), then the parties will negotiate in good faith to
reach an agreement with respect to Symbollon's economic return
in connection with such co-promotion. Should the parties not
reach agreement with respect to Symbollon's economic return in
connection with such co-promotion, such matter will be decided
by arbitration under Section 17.3"
8. The Milestones as set forth in subsections (b), (c), (d) and (e) of Section
6.1 of the Agreement shall be deleted and shall be replaced with the following
language:
"(b) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2.] upon execution of this amendment;
plus
(c) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2.] on November 11, 1997; plus
(d) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2.] upon completion of a Phase I/II,
Phase II or Phase II/III clinical trial of a Product (but not
upon completion of a Phase I clinical Trial of a Product)
("completion" means Oclassen having received actual clinical
reports pertaining to the submitted protocols of such trial);
plus
(e) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2.] upon the first filing of an NDA for
any indication for a Product; plus"
9. In Section 6.2 the language "up to an additional [* INDICATES THAT MATERIAL
HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO
RULE 24b-2.]" shall be deleted and replaced with the following language: "up to
an additional [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL
<PAGE>
TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.]". Additionally, in line
8 of Section 6.2 the words "two (2) consecutive years" shall be deleted and
replaced with the words "four (4) consecutive years".
10. Article 7 shall be deleted and replaced with the following language:
7.1 Symbollon Sale of Products Outside the Territory. If Symbollon sell
Products and/or any other product(s) which incorporate and/or rely on a
Joint Invention and/or Oclassen's Regulatory Filings or Regulatory
Approvals outside the Territory, either directly or in conjunction with
a third party, Symbollon shall pay Oclassen with respect to each
calendar quarter a royalty equal to [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2.] of (1) the amount received by Symbollon from
the Net Sales of such Product(s) or product(s) and, without
duplication, (2) all amounts received and all other consideration
received (when in a form other than cash or its equivalent, the fair
market value thereof when received) by Symbollon by reason of the sale,
license, distribution or use of such Product(s) or product(s), in each
case during such quarter and subject to the following limitations: (a)
for purposes of calculating the preceding royalty amount no royalties
shall be paid on any monies paid to Symbollon by a third party
expressly intended for the additional direct formulation and/or
technical development, nor on any Manufacturing Costs of Product(s) or
product(s) and (b) in no event shall Symbollon's royalty payments owed
under this Article 7 ever exceed [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO RULE 24b-2.] in the aggregate.
7.2 Oclassen's Right of First Negotiation Outside the Territory.
Symbollon shall offer to Oclassen the first opportunity to negotiate
with Symbollon for the exclusive right to develop, manufacture, have
manufactured, use, market, have marketed, sell and/or have sold any
Products and/or any other product(s) which incorporate and/or rely on a
Joint Invention and/or Oclassen's Regulatory Filings or Regulatory
Approvals outside the Territory ("Extra-Territorial Projects").
Symbollon will notify Oclassen as to each Extra-Territorial Project
such that Oclassen shall have at least fifteen (15) days during which
time to consider whether Oclassen wishes to pursue such
Extra-Territorial Project. Within fifteen (15) days after receipt of
notice of an Extra-Territorial Project, Oclassen shall, if it desires
to pursue negotiations with respect to such Extra-Territorial Project,
notify Symbollon of such desire. Symbollon shall then refrain from
negotiating such Extra-Territorial Project with any entity other than
Oclassen for a period of sixty (60) days. During such sixty (60) day
period the parties shall engage in exclusive, good faith negotiations
regarding the Extra-Territorial Project. If such negotiations do not
result in a definitive agreement within the sixty (60) day period, the
exclusive negotiation period shall terminate and Symbollon shall be
entitled to pursue negotiations with respect to such Extra-Territorial
Project with third parties.
11. Section 9.1 shall be deleted and replaced with the following language:
"During the term of this Agreement and unless this Agreement is
terminated by Oclassen due to a material breach by Symbollon, for two
(2) years after termination of this Agreement, Oclassen will not
directly or indirectly research and develop for the topical treatment
and
<PAGE>
prevention of recurrence of human skin diseases except with Symbollon
pursuant to this Agreement a multi-part system which, upon mixing prior
to use, forms a composition containing from 5 to in excess of 300 ppm
of diatomic iodine (I2) or (ii) the use of excipients used in
combination with such compositions that modify the properties of said
compositions including, by way of example, decolorizers, reducing
agents, sequestrants, potentiators or viscosifiers."
12. In Section 11.2(a) the words "pertains to Iodine" shall be deleted and
replaced with the following language:
"pertains to (i) any multi-part system which, upon mixing prior to use,
forms a composition containing from 5 to in excess of 300 ppm of
diatomic iodine (I2), or (ii) the use of excipients used in combination
with such compositions that modify the properties of said compositions
including, by way of example, decolorizers, reducing agents,
sequestrants, potentiators or viscosifiers".
13. In Section 11.3 the words "or acquired" in the line preceding the final line
of Section 11.3 shall be deleted.
14. In Section 12.3(a) the following language shall be inserted in the third
line following the words "Actively Developing": "or shall have plans to
develop".
15. Section 15.3 shall be renumbered as 15.3.1.
16. A new Section 15.3.2 shall be inserted following Section 15.3.1 and shall
read as follows:
15.3.2 Termination by Symbollon. Within thirty (30) days following the
respective milestone dates set forth below, Symbollon may terminate
this Agreement by giving forty-five (45) days written notice to
Oclassen if Oclassen shall fail to meet the corresponding milestone:
(a) by December 31, 1998 Oclassen shall have made a first filing
of an IND for any indication of a Product;
(b) by December 31, 1999 Oclassen shall have completed full patient
enrollment in a Phase I clinical trial of a Product; and
(c) by December 31, 2000 Oclassen shall have completed a Phase I/II,
Phase II or Phase II/III clinical trial of a Product (but not upon
completion of a Phase I clinical Trial of a Product) ("completion"
means Oclassen having received actual clinical reports pertaining to
the submitted protocols of such trial).
Oclassen shall have forty-five (45) days from receipt of Symbollon's
notice to terminate pursuant to this Section 15.3.2 within which to
cure the failure which has provided Symbollon
<PAGE>
a basis to terminate the Agreement in which case such termination by
Symbollon shall be ineffective.
17. In Section 17.1 the addresses for Oclassen and Symbollon shall be changed as
provided below:
Oclassen Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 91720
Telephone: 909-270-1400
Fax: 909-270-1429
Attention: President
Symbollon Corporation
37 Loring Drive
Framingham, MA 01702
Telephone: 508-620-7676
Fax: 508-620-7111
Attention: President
Additionally the following party, rather than "Venture Law Group" shall
receive copies of any Notices to Oclassen:
D'Ancona & Pflaum
30 N. La Salle Street Suite 2900
Chicago, IL 60605
Telephone: (312) 580-2161
Fax: (312) 580-0923
Attention: Michel J. Feldman
Except as herein modified, all other terms and conditions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first written above.
OCLASSEN PHARMACEUTICALS, INC SYMBOLLON CORPORATION
By: /s/ Allen Chao By: /s/ Paul C. Desjourdy
------------------------------- -------------------------------
Its: _______________________________ Its: Executive Vice President
Page - 1
Exhibit 11.1
<TABLE>
SYMBOLLON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
The Three-Months Ended September 30, The Nine-Months Ended September 30,
------------------------------------ -----------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income (Loss)................. $ 506,326 $ (245,476) $ 141,297 $ (718,185)
=========== =========== =========== ===========
Primary income (loss) per share:
Weighted average common and
common equivalent shares outstanding 3,142,178 2,715,296 2,806,520 2,559,095
Shares subject to restriction... (700,000) (700,000) (700,000) (700,000)
----------- ----------- ----------- ----------
2,442,178 2,015,296 2,106,520 1,859,095
=========== =========== =========== ==========
Income (Loss) per share (1):...... $ 0.21 $ (0.12) $ 0.07 $ (0.39)
=========== =========== =========== ==========
(1) There is no difference between primary and fully diluted income (loss) per
share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED UNAUDITED FINANCIAL STATEMENT OF SYMBOLLON CORPORATION FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENT AS FILED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,163,629
<SECURITIES> 0
<RECEIVABLES> 98,519
<ALLOWANCES> 0
<INVENTORY> 107,161
<CURRENT-ASSETS> 2,383,254
<PP&E> 271,282
<DEPRECIATION> 110,093
<TOTAL-ASSETS> 2,696,179
<CURRENT-LIABILITIES> 134,613
<BONDS> 0
500,000
0
<COMMON> 2,931
<OTHER-SE> 2,058,635
<TOTAL-LIABILITY-AND-EQUITY> 2,696,179
<SALES> 234,338
<TOTAL-REVENUES> 1,050,662
<CGS> 127,085
<TOTAL-COSTS> 127,085
<OTHER-EXPENSES> 832,242
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,224
<INCOME-PRETAX> 141,297
<INCOME-TAX> 0
<INCOME-CONTINUING> 141,297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,297
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
