SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only
(as premitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SYMBOLLON CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/_/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
/_/ Fee paid previously by written preliminary materials.
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
SYMBOLLON CORPORATION
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 14, 1997
TO THE STOCKHOLDERS OF SYMBOLLON CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Symbollon Corporation, a Delaware corporation (the "Company"), will be held at
the Company's executive offices, located at 122 Boston Post Road, Sudbury,
Massachusetts 01776, on May 14, 1997 at 10:00 a.m., local time, for the
following purposes:
1. To consider and vote upon the election of five directors;
2. To ratify the appointment of Richard A. Eisner & Company, LLP as
the independent auditors of the Company;
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The close of business on April 1, 1997 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the meeting. A complete list of those stockholders will be open to
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours at the executive offices of the Company, 122 Boston Post
Road, Sudbury, Massachusetts 01776, for a period of 10 days prior to the
meeting. The stock transfer books of the Company will not be closed.
All stockholders are cordially invited to attend the meeting. Whether
or not you expect to attend, you are kindly requested by the Board of Directors
to sign, date and return the enclosed proxy promptly. Stockholders who execute
proxies retain the right to revoke them at any time prior to the voting thereof.
A return envelope which requires no postage if mailed in the United States is
enclosed for your convenience.
By the order of the Board of Directors,
PAUL C. DESJOURDY
Assistant Secretary
Dated: April 9, 1997
<PAGE>
SYMBOLLON CORPORATION
122 BOSTON POST ROAD
SUDBURY, MA 01776
(508) 443-0165
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Symbollon Corporation (the "Company")
for the Annual Meeting of Stockholders to be held at the Company's executive
offices, located at 122 Boston Post Road, Sudbury, Massachusetts 01776, on May
14, 1997 at 10:00 a.m., local time, and for any adjournment or adjournments
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. Any stockholder giving such a proxy has the power to revoke it
at any time before it is voted. Written notice of such revocation should be
forwarded directly to the Assistant Secretary of the Company, at the above
stated address. Attendance at the meeting will not have the effect of revoking
the proxy unless such written notice is given.
If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the directions thereon and
otherwise in accordance with the judgment of the persons designated as proxies.
Any proxy on which no direction is specified will be voted in favor of the
following actions described in this Proxy Statement: for the election of the
nominees set forth under the caption "Election of Directors," and for the
ratification of the appointment of Richard A. Eisner & Company, LLP as the
independent auditors of the Company.
The approximate date on which the Company intends to mail or otherwise
deliver this Proxy Statement and the accompanying form of proxy to the Company's
stockholders is April 10, 1997.
Your vote is important. Accordingly, you are urged to sign and return
the accompanying proxy card whether or not you plan to attend the meeting. If
you do attend, you may vote by ballot at the meeting, thereby canceling any
proxy previously given.
VOTING
Only holders of shares of the Company's Class B Common Stock, $.001 par
value per share (the "Class B Common Stock"), Class A Common Stock, $.001 par
value per share (the "Class A Common Stock"), and Series A Preferred Stock,
$.001 par value per share (the "Series A Preferred Stock") (the shares of Series
A Preferred Stock, Class A Common Stock and Class B Common Stock are sometimes
collectively referred to herein as the "Shares"), of record as at the close of
business on April 1, 1997, are entitled to vote at the meeting. On the record
date there were issued and outstanding 15,738 shares of Class B Common,
2,468,790 shares of Class A Common Stock, and 444,444 shares of Series A
Preferred Stock. Each outstanding share of Class B Common Stock is entitled to
five votes, and each outstanding share of Class A Common Stock and Series A
Preferred Stock is entitled to one vote, upon all matters to be acted upon at
the meeting. A majority in interest of the outstanding Shares, represented at
the meeting in person or by proxy, shall constitute a quorum. The affirmative
vote of a plurality of the votes cast is necessary to elect the nominees as
directors. The affirmative vote of a majority of the votes cast is necessary to
ratify the appointment of Richard A. Eisner & Company, LLP as the independent
auditors of the Company. Abstentions and broker non-votes are included in the
determination of the number of Shares present at the meeting for quorum
purposes, and abstentions but not broker non-votes are counted in the tabulation
of the votes cast on proposals presented to stockholders.
<PAGE>
The stockholders vote at the meeting by casting ballots (in person or
by proxy) which are tabulated by a person appointed by the Board of Directors
before the meeting to serve as the inspector of election at the meeting and who
has executed and verified an oath of office. The cost of this solicitation will
be borne by the Company.
BOARD OF DIRECTORS
Election of Directors
At the meeting, five directors will be elected by the stockholders to
serve until the next Annual Meeting of Stockholders or until their successors
are elected and shall qualify. Each of the nominees is currently a director of
the Company. Mr. Irwin Rosenthal, who has served as a director of the Company
since 1992, is not seeking re-election. Management recommends that the persons
named below be elected as directors of the Company and it is intended that the
accompanying proxy will be voted for their election as directors, unless the
proxy contains contrary instructions. The Company has no reason to believe that
any of the nominees will not be a candidate or will be unable to serve. However,
in the event that any of the nominees should become unable or unwilling to serve
as a director, the persons named in the proxy have advised that they will vote
for the election of such person or persons as shall be designated by management.
The following sets forth the names and ages of the five nominees for
election to the Board of Directors, their respective principal occupations or
employments during the past five years and the period during which each has
served as a director of the Company.
Jack H. Kessler, Ph.D., 46
Jack H. Kessler, Ph.D., is the founder of the Company and has served as
Executive Vice-President, Chief Scientific Officer, Secretary, and a director
since the Company's move to Massachusetts in May 1991, and as Chairman of the
Board of Directors since May 1996. Prior to that time, and since the Company was
initially formed in Illinois in 1986, Dr. Kessler was the Company's sole
stockholder and served as its sole officer and director. From January 1990 until
May 1991, he served as principal systems engineer for Kollsman Manufacturing
Company, a diagnostic instrument design and manufacturing company.
Dr. Edward A. Mason, 72
Edward A. Mason, Sc.D., has served as a director of the Company since
September 1992. From 1977 until June 1989, he was employed as Vice-President of
Research at AMOCO Corporation. Dr. Mason has served as a consultant to various
companies since his retirement in July 1989. He is also a director of Unicom
Corporation., a publicly traded company.
Stuart M. Paley, 67
Stuart M. Paley has served as a director of the Company since September
1992, and as Chairman of the Board of Directors of the Company from May 1995 to
May 1996. In 1974 he founded Stuart M. Paley, Incorporated, which is a
registered investment advisor.
James C. Richards, Ph.D., 49
James C. Richards, Ph.D., served as President and Chief Executive
Officer of the Company from May 1991 to September 1995, as Treasurer from May
1991 to May 1994, and as a director since May 1991. Since October 1995, Dr.
Richards has been President, Chief Executive Officer and a director of
IntelliGene Corporation, a privately held company specializing in DNA probe
technologies. From November 1990 to May 1991, he served as Managing Director and
principal stockholder of Carlton Bio Venture Partners, a consulting firm
specializing in
<PAGE>
financing and acquisition of healthcare, medical products and
biotechnology companies. From 1986 to November 1990, Dr. Richards served as
director of business planning and development for Gene-Trak Systems, a joint
venture originally between AMOCO Corporation and Integrated Genetics, Inc.,
engaged in developing diagnostic test devices using DNA probes for the
healthcare and food industries.
Paul C. Desjourdy, 35
Paul C. Desjourdy has served as Executive Vice President and Chief
Financial Officer since July 1, 1996, as Vice-President - Finance and
Administration and Chief Financial Officer of the Company from September 20,
1993 to June 30, 1996, as Treasurer since May 1994, and as a director since
August 1996. From September 1989 to September 1993, Mr. Desjourdy, a certified
public accountant, was an attorney at the law firm of Choate Hall & Stewart.
General Information Concerning the Board of Directors and its Committees
All directors of the Company are elected by the stockholders, or in the
case of a vacancy, by the directors then in office, to hold office until the
next annual meeting of stockholders of the Company and until their successors
are elected and qualified or until their earlier resignation or removal.
The Board of Directors of the Company met seven times and acted by
unanimous written consent two times in the fiscal year ended December 31, 1996.
The Delaware General Corporation Law provides that the Board of Directors, by
resolution adopted by a majority of the entire board, may designate one or more
committees, each of which shall consist of one or more directors. The Board of
Directors annually elects from its members the Executive Committee, Audit
Committee, and Compensation Committee. The Company does not have a Nominating
Committee. During the last fiscal year each of the directors attended at least
75% of the total number of meetings of the Board of Directors and of the
committees on which each director serves.
Executive Committee. The Executive Committee exercises all the powers
and authority of the Board of Directors in the management and affairs of the
Company between meetings of the Board of Directors, to the extent permitted by
law. The Executive Committee is comprised of two directors, Directors Kessler
and Paley. The Executive Committee met once and acted by unanimous written
consent once during fiscal 1996.
Audit Committee. The Audit Committee reviews the engagement of the
independent auditors and their independence. The Audit Committee also reviews
the audit and non-audit fees of the independent auditors, the adequacy of the
Company's internal control procedures and financial reports to be filed with the
Securities and Exchange Commission. The Audit Committee is composed of two
non-employee directors, Directors Paley and Mason. The Audit Committee met four
times during fiscal 1996.
Compensation Committee. The Compensation Committee reviews and
recommends to the Board of Directors remuneration arrangements and compensation
plans for the Company's executives. The Compensation Committee also authorizes
stock option grants, administers the 1993 Stock Option Plan and proposes other
stock option plans. The Committee is composed of two non-employee directors,
Directors Mason and Paley. The Compensation Committee met twice during fiscal
1996.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's voting stock as of March 15, 1997 for (i)
each of the Company's directors, (ii) each of the Named Executive Officers,
(iii) all directors and executive officers of the Company as a group and (iv)
each person known by the Company to own beneficially 5% or more of the
outstanding shares of any class of its voting stock:
<TABLE>
<CAPTION>
Number of Percentage Percentage
Shares of Total of Total
Name and Address of Title Beneficially Percent of Voting Voting
Beneficial Owner (1) of Class (2) Owned (2)(3) Class (3) Securities (3) Power (4)
- --------------------- ------------ ------------ --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Dr. Jack H. Kessler(5)(6) Class A 435,780 17.5%
Preferred 44,444 10.0% 16.3% 15.9%
Anthony J. Cantone(7) Class A 200,000 7.5%
Preferred 400,000 90.0% 19.2% 18.8%
Dr. James C. Richards(5)(8)Class A 359,443 14.6% 12.3% 12.0%
Irwin M. Rosenthal (9)(10) Class A 279,892 11.3% 9.6% 9.4%
Magar, Inc. (9) Class A 277,372 11.2% 9.5% 9.3%
Dr. Herbert Moskowitz (9) Class A 277,372 11.2% 9.5% 9.3%
Martin D. Fife (9) Class A 277,372 11.2% 9.5% 9.3%
Paul C. Desjourdy (11) Class A 96,533 3.8% 3.2% 3.2%
Stuart M. Paley (12) Class A 55,373 2.2% 1.9% 1.8%
Edward A. Mason (5)(13) Class A 33,750 1.4% 1.1% 1.1%
All Executive Officers
and Directors Class A 1,260,771 (14) 48.6%
as a Group (5 persons) Preferred 44,444 10.0% 42.7% 41.8%
- ----------------------------
<FN>
(1) All shares are beneficially owned and sole voting and investment
power is held by the persons named, except as otherwise noted.
(2) "Class A" refers to the Class A Common Stock and "Preferred" refers to
the Series A Preferred Stock. Each share of Series A Preferred Stock
shown in the table is currently convertible into one share of Class A
Common Stock. Does not include information regarding the 15,738 shares
of Class B Common Stock (currently convertible into 15,738 shares of
Class A Common Stock) outstanding which are held by three non-affiliate
owners. Includes 627,199 shares of Class A Common Stock which are
subject to transfer to the Company for no consideration upon the
failure to occur by certain dates of certain conditions. So long as
such shares are subject to such conditions, the holder may vote but not
dispose of such shares. Such shares are treated as outstanding in the
table.
(3) Based upon 2,468,790 of Class A Common Stock, 15,790 of Class B Common
Stock and 444,444 of Series A Preferred Stock outstanding but also
reflecting as outstanding, with respect to the relevant beneficial
owner, the shares which that beneficial owner could acquire upon
exercise of options exercisable within 60 days.
(4) The Class B Common Stock is entitled to five votes per share, whereas
the Class A Common Stock and Series A Preferred Stock are entitled to
one vote per share.
(5) The address of Directors Kessler, Richards, Desjourdy and Mason is
c/o Symbollon Corporation, 122 Boston Post Road, Sudbury, MA 01776.
(6) Includes 1,100 shares owned by his minor child and currently
exercisable options to purchase 22,222 shares of Class A Common Stock.
(7) The address of Mr. Cantone is c/o Cantone Research, Inc., 675 Line
Road, Aberdeen, New Jersey 07747. Class A Common Stock includes
currently exercisable options to purchase 200,000 shares of Class A
Common Stock.
<PAGE>
(8) Includes currently exercisable options to purchase 1,250 shares of
Class A Common Stock.
(9) Dr. Moskowitz and Messrs. Rosenthal and Fife are each officers,
directors and principal stockholders of Magar. These individuals may be
considered to beneficially own, and to have shared investment and
voting power with respect to, all shares of Class A Common Stock owned
by Magar. Information relating to shares owned by each of these
individuals assumes that each beneficially owns all shares of Class A
Common Stock owned of record by Magar. The address of each of these
individuals is c/o Magar, 30 Rockefeller Plaza, New York, NY 10112.
(10) Includes currently exercisable options to purchase 2,500 shares of
Class A Common Stock.
(11) Includes currently exercisable options to purchase 55,333 shares of
Class A Common Stock.
(12) The address of Mr. Stuart M. Paley is c/o Stuart M. Paley,
Incorporated, 101 Central Park West, New York, NY 10023. Includes
currently exercisable options to purchase 12,500 shares of Class A
Common Stock.
(13) Represents currently exercisable options to purchase shares of Class A
Common Stock.
(14) Includes currently exercisable options to purchase 127,555 shares of
Class A Common Stock.
</FN>
</TABLE>
EXECUTIVE COMPENSATION
The following tables set forth certain information relating to
compensation paid by the Company for each of the Company's last three completed
fiscal years to its executive officers whose annual compensation exceeded
$100,000 for the last completed fiscal year (the "Named Executive Officers").
Only those columns which call for information applicable to the Company or the
Named Executive Officers for the periods indicated have been included in such
tables.
<TABLE>
Summary of Compensation Table
<CAPTION>
Annual Long Term
Compensation Compensation
Salary Securities Underlying All Other
Name and Principal Position Year ($) Options/SARs (#) Compensation($)(1)
- --------------------------- ---- --------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Jack H. Kessler 1996 $150,000 96,000 $ 624
Executive Vice President, Chief 1995 $124,800 $1,887
Scientific Officer and Secretary 1994 $121,000 $1,880
Paul C. Desjourdy 1996 $130,000 136,333 $ 264
Executive Vice President, Chief 1995 $112,400 $1,564
Financial Officer and Treasurer 1994 $105,000 $1,531
- --------------------------------
<FN>
(1) For 1996 includes premiums paid on term life insurance on behalf of the
Named Executive Officers in the following amounts: Dr. Kessler: $624
and Mr. Desjourdy: $264. For 1995 includes premiums paid on term life
insurance on behalf of the Named Executive Officers in the following
amounts: Dr. Kessler: $444 and Mr. Desjourdy: $264; and the Company
contributions to the 401(k) accounts of the Named Executive Officers
in the following amounts: Dr. Kessler: $1,443 and Mr. Desjourdy:
$1,300. For 1994 includes premiums paid on term life insurance on
behalf of the Named Executive Officers in the following amounts: Dr.
Kessler: $366 and Mr. Desjourdy: $218; and the Company contributions
to the 401(k accounts of the Named Executive Officers in the following
amounts: Dr. Kessler: $1,514 and Mr. Desjourdy: $1,313.
</FN>
</TABLE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information with respect to options
granted during the last fiscal year to the Named Executive Officers of the
Company.
<PAGE>
<TABLE>
Individual Grants
<CAPTION>
Number of % of Total
Securities Options/SAR
Underlying Granted to Exercise
Options/SAR's Employees in or Base
Name Granted(#) Fiscal Year Price ($/Sh) Expiration Date
---- ------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Jack H. Kessler 36,000 (1) 11.4% $1.125 November 19, 2006
30,000 (1) 9.5% $2.25 November 19, 2006
30,000 (1) 9.5% $3.375 November 19, 2006
Paul C. Desjourdy 100,333 (2) 31.8% $2.3125 July 1, 2006
36,000 (3) 11.4% $1.125 November 19, 2006
- ---------------------------
<FN>
(1) These options vest on November 19, 1997, 1998 and 1999, respectively.
(2) These options vest 45,333 on July 1, 1996; 10,000 on each of September
20, 1996, 1997 and 1998; 8,333 on each of July 1, 1997 and 1998; and
8,334 on July 1, 1999, respectively.
(3) These options vest 16,000 on November 19, 1997; 10,000 on November 19,
1998; and 10,000 on November 19, 1999, respectively.
</FN>
</TABLE>
See "Report on Repricing of Options" relating to repricing of options
granted to Mr. Desjourdy.
Aggregated Fiscal Year-End Option Values
The following table set forth certain information with respect to the
number of unexercised stock options held by each Named Executive Officer on
December 31, 1996, and the value of the unexercised in-the-money options at that
date.
<TABLE>
Aggregated Fiscal Year-End Option Values
<CAPTION>
Value of Unexercised
Number of Securities In-The-Money
Underlying Unexercised Options at Fiscal
Options at Fiscal Year-End Year-End ($) (1)
----------------------------------- --------------------------------
Name (#)Exercisable (#)Unexercisable Exercisable Unexercisable
---- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Jack H. Kessler (2) 0 96,000 $ 0 $9,000
Paul C. Desjourdy 55,333 81,000 $ 0 $9,000
- ------------------
<FN>
(1) The value of unexercised in-the-money options at December 31, 1996, was
determined by multiplying the difference between the fair market value
(the closing sales price) of the Company's Class A Common Stock at the
close of business on December 31, 1996 ($1.375 per share) and the
option exercise price, by the number of options outstanding at that
date. The values have not been realized and may not be realized. The
options have not been exercised and may never be exercised. In the
event the options are exercised, their value will depend upon the fair
market value of the underlying Class A Common Stock on the date of
exercise.
(2) Excludes 22,222 options acquired by Dr. Kessler as part of August 1996
private placement.
</FN>
</TABLE>
<PAGE>
Director Compensation
Each of the Company's non-employee directors will be paid $1,000 for
each board or committee meeting. In addition, each non-employee director is
entitled to receive on January 1st of each year an option (the "Annual Options")
to purchase 2,500 shares of Class A Common Stock at the then fair market value.
The Annual Options may only be exercised with respect to vested shares. One-half
of the shares subject to such options vest on the first anniversary of the date
of grant and the balance vest on the second anniversary of the date of grant.
All directors will be reimbursed for ordinary and necessary travel expenses
incurred in attendance at each board or committee meeting.
During May 1994 the Board of Directors of the Company approved a
consulting agreement between the Company and Dr. Mason. Under the agreement with
Dr. Mason, which will expire on January 31, 1999 (unless terminated prior
thereto), Dr. Mason is to provide reasonable services of an advisory and
consulting nature with respect to technical or managerial aspects of the
business of the Company. Pursuant to that agreement, in May 1996 the Company
issued options having a five year term to purchase 20,000 shares of the
Company's Class A Common Stock at an exercise price of $4.16 per share. The
options vested on the first anniversary of issuance and terminate in May 2001.
Employment Agreements
On December 23, 1995, the Company entered into a new employment
agreement with Dr. Jack H. Kessler, its Executive Vice-President and Chief
Scientific Officer and a director and principal stockholder. On July 1, 1996,
the Company entered into a new employment agreement with Mr. Paul C. Desjourdy,
its Executive Vice-President and Chief Financial Officer and a director. Both
agreements expire in December 2000. In 1997, Dr. Kessler and Mr. Desjourdy will
receive salaries of $150,000 and $130,000, respectively, per annum. The
employment agreements provide for inflationary salary adjustments, and such
compensation may be incrementally increased and bonuses may be given upon the
approval of the Company's Board of Directors. Both Executive Officers have
agreed to devote their full time and best efforts to fulfill their duties and
responsibilities to the Company. They will be entitled to participate in
employee benefit plans.
The Company has the right to terminate the agreements for Cause (as
defined therein) or as a result of the Executive Officers' death or Permanent
Disability (as defined therein). The Executive Officers have the right to
terminate their agreements on account of their Constructive Discharge (as
defined therein). Except in the case of termination for Cause, upon early
termination of their agreements, the Executive Officers shall be entitled to
receive their salaries plus fringe benefits for a period of 18 months from the
date of termination and any bonuses prorated through the date of termination.
Both Executive Officers have agreed not to disclose to anyone
confidential information of the Company during the term of their employment or
thereafter and will not compete with the Company utilizing the Company's
proprietary information, know-how or trade secrets during the term of their
employment or thereafter. All work, research and results thereof, including,
without limitation, inventions, processes or formulae made, conceived or
developed by the Executive Officers during the term of employment which are
related to the business, research, and development work or field of operation of
the Company shall be the property of the Company.
Dr. Kessler is a principal stockholder, officer and director of a
company which has rights to use technology that he developed pertaining to
contact lens disinfection. This technology, which is similar to the Company's
technology, is not expected to be assigned to the Company. As a result, use of
the Company's technology in the area of contact lens disinfection may require
the prior consent of such other company or the then owner of such rights.
<PAGE>
Report on Repricing of Options
In July 1996, the Board of Directors of the Company determined that the
purposes of the 1993 Stock Option Plan were not being adequately achieved with
respect to those employees holding options that were exercisable above current
market value and that it was essential to the best interests of the Company and
the Company's shareholders that the Company retain and motivate such employees.
The Board concluded that such retention was particularly important given the
Company's financial situation and that a cost-effective approach to retention
and motivation was required. The Board further determined that it would be in
the best interests of the Company and the Company's shareholders to provide such
optionees the opportunity to exchange their above market value options for
options exercisable at the current market value. On July 1, 1996, upon approval
of the Board of Directors of the Company, the Company offered all the employees
holding outstanding options under the 1993 Stock Option Plan the opportunity to
exchange such options for new stock options at an exercise price of $2.3125 per
share. The bid price for the Class A Common Stock on Nasdaq on that date was
$2.125. Any holder accepting this offer was required to give up existing
options.
On July 1, 1996, Mr. Desjourdy agreed to the termination of 75,333 of
his existing options to purchase Class A Common Stock at prices ranging from
$5.0625 to $6.00 per share in exchange for 75,333 of new options with an
exercise price of $2.3125 per share. Mr. Desjourdy's new options retained the
vesting schedule of the existing options: 45,333 on or before July 1, 1996;
10,000 on each of September 20, 1996, 1997 and 1998; 8,333 on each of July 1,
1997 and 1998; and 8,334 on July 1, 1999, respectively. At the time of the
repricing, Mr. Desjourdy's existing options had approximately an additional 2 to
9 years remaining before their termination. His new options expire on July 1,
2006.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's directors, officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
initial reports of ownership and changes in ownership of such securities with
the Securities and Exchange Commission. Directors, officers and greater than ten
percent beneficial owners are required by applicable regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of the forms furnished to the
Company and written representations from the Company's directors and officers,
the Company believes that during 1996 all filing requirements applicable to its
directors, officers and greater than ten percent beneficial owners were
satisfied.
CERTAIN TRANSACTIONS
From November 1987 through July 1990, Dr. Kessler loaned the Company an
aggregate of $51,495 at varying rates of interest, of which approximately $4,000
had been repaid. In May 1991, these loans were consolidated and the Company
issued Dr. Kessler a new promissory note in the amount of $47,549, payable on
demand at an annual interest rate of 7%. In August 1996, the Company repaid the
outstanding balance of the note, plus accrued interest in part by issuing 44,444
shares of the Company's Series A Preferred Stock to Dr. Kessler as part of a
private placement of such Series A Preferred Stock at a price of $1.125 per
share and 22,222 immediately exercisable options for shares of Class A Common
Stock at varying exercise prices over time.
During August 1996 the Company issued 400,000 shares of Series A
Preferred Stock, $.001 par value, to Mr. Anthony Cantone at a purchase price of
$1.125 per share as part of a private placement. The Preferred Stock is
convertible at any time into an equal number of shares of Class A Common Stock.
Mr. Cantone was granted certain registration rights with respect to the shares.
<PAGE>
For information concerning employment agreements and option agreements
with the Company's officers, see "Executive Compensation".
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Management of the Company recommends a vote for the ratification of
Richard A. Eisner & Company, LLP as the independent auditors for the Company for
1997.
Richard A. Eisner & Company, LLP has served as the Company's
independent accountants. The Company has requested that a representative of
Richard A. Eisner & Company, LLP attend the meeting. Such representative will
have an opportunity to make a statement, if he or she desires, and will be
available to respond to appropriate questions of stockholders.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth herein
that may come before the meeting. If, however, further business properly comes
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
STOCKHOLDERS PROPOSALS FOR THE 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for
stockholder action at annual meetings in accordance with regulations adopted by
the Securities and Exchange Commission. To be considered for inclusion in the
proxy statement and form of proxy relating to the 1998 annual meeting, such
proposals must be received by the Company no later than December 9, 1997.
Proposals should be directed to the attention of the Assistant Secretary of the
Company.
ANNUAL REPORT ON FORM 10-KSB
The Company is furnishing without charge to each person whose proxy is
being solicited, a copy of the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996, including the financial statements and
schedules thereto, but excluding exhibits. Requests for additional copies of
such report should be directed to the Company, Attention: Investor Relations.
By order of the Board of Directors,
PAUL C. DESJOURDY
Assistant Secretary
Dated: April 9, 1997
PROXY
SYMBOLLON CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jack H. Kessler and Paul C. Desjourdy and each
or either of them (with full power to act without the other), proxies with full
power of substitution, to represent the undersigned and to vote the shares of
stock of the corporation which the undersigned would be entitled to vote, if
personally present, at the Annual Meeting of Stockholders of Symbollon
Corporation to be held on Wednesday, May 14, 1997 at 10:00 a.m. (local time) at
the Company's offices, 122 Boston Post Road, Sudbury, MA 01776, and any
adjournment thereof, upon matters set forth in the Notice of Annual Meeting and
Proxy Statement dated April 9, 1997, a copy of which has been received by the
undersigned.
(Continued, and to be signed on reverse side)
<PAGE>
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Stockholders
SYMBOLLON CORPORATION
May 14, 1997
\ X \ Please mark your votes as in this example.
FOR all nominees WITHHOLD
(except as marked to AUTHORITY
the contrary below) for all nominees
1. ELECTION OF DIRECTORS \ \ \ \
Nominees: James C. Richards
Jack H. Kessler
Paul C. Desjourdy
Edward A. Mason
Stuart M. Paley
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
nominee's name on the line provided below.)
- -----------------------------------------------------
2. TO RATIFY THE APPOINTMENT OF RICHARD A. EISNER & COMPANY, LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY.
FOR AGAINST ABSTAIN
\ \ \ \ \ \
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournments
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THE PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS INDICATED AND FOR APPROVAL OF THE PROPOSALS
PRESENTED.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please make any changes in your address alongside the address as it appears in
the proxy.
SIGNATURE(S)___________________________________ DATE________________
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign as full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
SYMBOLLON CORPORATION
ANNUAL REPORT 1996
[COMPANY LOGO]
<PAGE>
To Our Shareholders:
In our 1995 shareholder letter, we identified two key ingredients to Symbollon's
success: its strong proprietary technology with a broad spectrum of possible
applications and the formulation expertise of its employees. Our business
strategy was to concentrate the Company's internal resources in the development
and commercialization of products in the infection prevention market and to
exploit other applications of the technology through collaborations with
corporate partners.
Our initial efforts to commercialize the first infection prevention application,
a high level disinfectant have been unsuccessful. In August, the Company filed a
510(k) Premarket Notification with the United States Federal Food & Drug
Administration seeking market clearance for the Company's high level
disinfectant for medical equipment. In December, we decided to withdraw the
510(k) filing based on concerns raised by FDA regarding the sporicidal testing
protocol and results submitted.
Although we believe that the test results demonstrated our formulation to be
efficacious and safe, based on the FDA's present position on the sporicidal test
requirements, the Company does not currently plan to resubmit the 510(k) filing.
While we still believe that our technology can produce a number of unique
infection prevention products, our inability to receive regulatory clearance for
the first product has convinced us to continue to exploit infection prevention
through corporate partnerships that will bring additional resources to the
commercialization process.
In our collaborative efforts, we were pleased to be able to enter into an
agreement with Oclassen Pharmaceuticals, Inc. to jointly develop and
commercialize certain treatments for human skin diseases. Initial development
efforts will focus on products for acne, bacterial and fungal skin diseases.
Oclassen is responsible for the development and commercialization efforts, with
Symbollon providing technical assistance. The agreement provides Symbollon with
up to $8.5 million in potential milestone payments, plus a royalty on future
product sales.
This arrangement is a good example of the type of collaborative relationship
that we are seeking. A partner with demonstrated sales and marketing prowess in
the relevant market who offers a financial commitment to the development and
commercialization process that provides significant economic participation for
Symbollon. The primary market opportunities in 1997 which Symbollon is focused
on include dermatology, ophthalmics, topical antimicrobial infection prevention
applications, and certain iodine deficiency diseases.
<PAGE>
Financially, the Company's net loss decreased by 34% from $1,373,711 in fiscal
1995 to $905,415 in fiscal 1996. The reduced net loss, in part, reflects the
Company's continued effort to reduce its expenditures. In August, the Company
was able to raise $500,000 through a private placement of 444,444 shares of
Series A Preferred Stock. With the proceeds from this sale, the Company's 1996
year end cash position remained strong with over $1.7 million on hand. The
annual results are presented in detail in the following pages which serve as a
combined Annual Report and Form 10-KSB. We decided to combine the documents this
year to both save money and present more detailed information to shareholders.
Symbollon's primary objective remains that of increasing shareholder value. Your
continued support of the Company is greatly appreciated.
Sincerely,
by /s/ Jack H. Kessler by /s/ Paul C. Desjourdy
--------------------------- ----------------------------
Jack H. Kessler, Paul C. Desjourdy,
Chairman of the Board, Director,
Executive Vice President Executive Vice President
and Chief Scientific Officer and Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
OR
[ ] 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
(Name of small business issuer in its charter)
Delaware 36-3463683
(State of incorporation) (I.R.S. employer identification no.)
122 Boston Post Road (508) 443-0165
Sudbury, Massachusetts 01776 (Issuer's telephone number)
(Address of principal executive offices)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units, each consisting of one share of Class A Common Stock, $.001 par value
per share, one Redeemable Class A Warrant and one Redeemable Class B Warrant
(Title of class)
Class A Common Stock, $.001 par value per share
(Title of class)
Redeemable Class A Warrants, each Redeemable Class A Warrant entitling the
holder to purchase one share of Class A Common Stock and one Redeemable
Class B Warrant
(Title of class)
Redeemable Class B Warrants, each Redeemable Class B Warrant entitling the
holder to purchase one share of Class A Common Stock
(Title of class)
Check whether the issuer: (1) has 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 contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year (year ended
December 31, 1996) were $762,897.
As of March 21, 1997, the aggregate market value of the voting stock of
the issuer held by non-affiliates of the issuer was approximately $2,831,843
based upon the closing price of such stock on that date.
As of March 21, 1997, 2,468,790 shares of Class A Common Stock and 15,738
shares of Class B Common Stock of the issuer were outstanding.
See "Market for Common Equity and Related Stockholder Matters."
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Proxy Statement for the 1997 Annual Meeting -- Part III
<PAGE>
PART I
Item 1. Description of Business
General Background
Symbollon Corporation (the "Company" or "Symbollon") is engaged in
research, development and commercialization of proprietary iodine-based
pharmaceutical agents, disinfectants, antiseptics and sanitizers (collectively
referred to as "applications"). The Company is a Delaware corporation
incorporated in August 1993 and is the successor by merger to a Massachusetts
corporation of the same name incorporated in May 1991 which was the successor by
merger to an Illinois corporation which was incorporated in July 1986.
The Company's Technology
The Company has developed proprietary iodine technologies that the
Company believes addresses many of the issues associated with the use of iodine.
The technologies control the equilibrium ratio of molecular iodine (I2), which
is lethal to microorganisms, to other inactive species of iodine in solution.
The Company believes that this will enable it to produce iodine-based
applications having advantages over currently available iodine-based products.
By increasing the equilibrium ratio of molecular iodine to other iodine species
in solution, the Company's current and proposed products will have greater
killing power per unit of total iodine. The Company believes that this feature
will enable its current and proposed products to utilize less iodine and
therefore minimize or eliminate some of the negative characteristics associated
with the use of iodine.
In addition, unlike other iodine-based products, which are generally
sold in solution, applications based on the Company's technologies may be sold
in either solid form such as tablets or powders or in combinations of liquids,
powders and gels which are easier and cheaper to ship and store than the
corresponding liquid-based products.
Overall, the Company believes that the major strengths of its patented
technologies are the minimization of staining and color associated with iodine,
broad spectrum of antimicrobial activity, rapidity of cidal activity, safe
residues, no known resistance, and no environmental disposal concerns. The
primary weaknesses of the Company's technologies are the inconvenience of a
multi-part delivery system and the potential for staining and corrosivity.
Initial Product
The Company focused a majority of its initial development efforts
regarding its technologies on a bovine teat sanitizer, marketed as
"IodoZyme(R)". The Company co-developed IodoZyme with West Agro, Inc. of Kansas
City, MO ("West Agro"), a subsidiary of the Tetra Laval Group and a leading
manufacturer and distributor of iodophor-based products for dairy use. In
January 1995, the Company and West Agro signed a marketing and supply agreement
covering IodoZyme, and the Company began shipping IodoZyme to West Agro in early
1995. Pursuant to this agreement, West Agro was granted the exclusive worldwide
right to market, distribute, promote and sell IodoZyme. Under the agreement, the
Company manufactures and supplies West Agro with IodoZyme in finished product
form.
<PAGE>
Total product sales from IodoZyme for 1995 and 1996 were $122,981 and
$117,906, respectively. Substantially all sales were in the United States. West
Agro, through its foreign affiliates, has begun the registration process in
several foreign markets, for which clearances must be received prior to sales in
those foreign markets.
The Company's invoice terms are net 30 days. The Company had no firm
orders for future delivery of products at year end.
Research and Product Development
During 1996 the Company concentrated its product development work on
proposed product applications for a medical and dental instrument disinfectant,
a treatment for stomach ulcers, and the treatment of various dermatological
diseases. Additional development efforts regarding the Company's technology for
use in medical instrument sterilization and hemodialysis membrane disinfection
were conducted during 1996 at various universities and other third party
laboratories through grants from the Small Business Innovation Research ("SBIR")
program. See "Small Business Innovation Research."
The Company spent approximately $980,220 and $1,002,208 on research and
development during the years ended December 31, 1995 and December 31, 1996,
respectively. Since inception, the Company has spent approximately $3,474,338 on
research and development. Under certain collaborative relationships, the Company
has received payments which are reflected in the Company's financial statements
as contract and license fee revenues.
Given the Company's limited financial resources, the uncertainty of the
development effort and the necessity for regulatory approval, there can be no
assurance of ultimate success with respect to any product development program or
that resulting products, if any, will be commercially successful. Additionally,
the Company's limited resources will require substantial support for new
business areas from corporate partners who would ultimately introduce the
products into the marketplace. The Company's current strategic corporate
partners are described below.
Material developments in the Company's ongoing programs during fiscal
1996 are detailed below:
Medical and Dental Instrument Disinfection
During 1995, the Company developed a microbicidal formulation that it
believed addresses issues regarding materials compatibility with respect to
medical and dental instruments to be disinfected and the instrumentation
performing the cleaning process. In August 1996, the Company completed the
necessary testing of its potential product formulation and filed a 510(k)
premarket notification with the Federal Food and Drug Administration ("FDA")
regarding such formulation. In December 1996, the Company withdrew its 510(k)
premarket notification filing due to concerns raised by the FDA regarding the
sporicidal test results contained in the Company's 510(k) submission. The
Company currently does not plan to resubmit the 510(k) application.
Research regarding medical instrument sterilization continued during
1996 under the auspices of Biomedical Development Corporation ("BDC") through a
phase II SBIR grant of $500,000 received in 1994.
<PAGE>
Ulcer Treatment
In June 1995, the Company entered into an Evaluation and Option
Agreement with Astra Merck Inc. ("Astra") to explore the possible use of the
Company's technology against Helicobacter pylori for the treatment of stomach
ulcers. Pursuant to that agreement, during 1996 the Company continued to
evaluate formulations in animal studies paid for by Astra. The Company
anticipates screening additional formulations over the course of 1997. Upon
completion of the studies, Astra has six months to evaluate the Company's
technology and, in Astra's discretion, to negotiate a development and
commercialization agreement covering the technology for use as a treatment
against Helicobacter pylori in the gastrointestinal tract.
Dermatology Applications
In May 1996, the Company signed a collaboration and license agreement
with Oclassen Pharmaceuticals, Inc. ("Oclassen") for dermatological products
based on Symbollon's proprietary iodine technologies. Pursuant to the agreement,
the companies plan to co-develop products for the treatment of certain skin
diseases, with initial development focused on products for acne, bacterial and
fungal skin diseases. Under the terms of the agreement, Oclassen obtained
exclusive marketing rights in the United States and Canada for dermatological
products based on Symbollon's iodine technologies. Subject to continuation of
the agreement, Oclassen will make a series of milestone payments to Symbollon,
plus royalty payments on product sales. Oclassen is primarily responsible for
product development and commercialization. Symbollon consults, for a fee, on the
product development. During 1996, the parties worked together to evaluate
suitable formulation candidates for application in the field. Symbollon
anticipates that work under the arrangement will continue throughout 1997.
Hemodialysis Membrane Disinfection
BDC has been administering a phase II SBIR grant for $600,000 received
in fiscal 1994 to conduct research concerning hemodialysis membrane
disinfection.
Other Potential Applications
The Company believes that its microbicide technologies have potential
applications in the development of a variety of human healthcare and other
products such as topical anti-infectives, oral care and hygiene products, an
antimicrobial ophthalmic application, and iodine deficiency diseases, such as
fibrocystic breast syndrome. Given the Company's limited resources, although
certain preliminary research, development and regulatory activities may be
undertaken by the Company in some of these potential product areas, the
Company's ability to fund the development and commercialization of such
applications will depend in large part on entering into product development and
commercialization agreements with corporate partners.
Small Business Innovation Research
In 1989, the Company entered into an agreement with Biomedical
Development Corporation located in San Antonio, Texas ("BDC") to cooperate in
applying for and performing under Small Business Innovation Research ("SBIR")
grants based on the Company's technology. The Small Business Innovation
Development Act of 1982 requires agencies of the Federal government engaged in
research to set aside a specified percentage of their research budgets for
grants ranging from approximately $50,000 to $75,000 for Phase I and up to
$500,000 to $600,000 for Phase II.
<PAGE>
The Company is required to pay to BDC a royalty of 5% of net sales up
to a maximum of the amount of the SBIR grant related to the product. To date, an
aggregate of $1,475,000 in SBIR funding under eight different grants has been
received by BDC for funding of various projects. The results of research
undertaken by BDC become the property of the Company. In some instances, BDC may
cause research to be conducted by employees of academic institutions. Such
institutions may have rights in the results of such research. Under the
agreement, BDC is required to use its best efforts to obtain licenses to such
information and to transfer all such technical information to the Company. The
United States government retains a royalty-free license in the results of
research funded by SBIR grants, whether patented or not.
Manufacturing and Supplies
The Company currently produces IodoZyme through a combination of
internal manufacturing activities and a network of subcontractors. See
"Management's Discussion and Analysis or Plan of Operation." The Company
currently has limited in-house manufacturing capacity, and if the Company
continues to perform manufacturing activities in-house, additional manufacturing
space and equipment may be necessary if product volumes increase.
See "Description of Property."
The Company believes that there are adequate sources of the raw
materials required to produce its applications for commercial production and
testing purposes. Pursuant to its agreement with West Agro, all sodium iodide
used by the Company in the manufacture of the bovine teat sanitizer is to be
purchased from West Agro at a price not to exceed the price which West Agro
charges its largest customers. The Company has been and expects to continue to
be able to obtain all materials needed for these purposes without any
significant interruption or sudden price increase, although there can be no
assurance thereof.
Marketing and Distribution
In accordance with the marketing and supply agreement signed with West
Agro, West Agro is marketing and distributing IodoZyme, and has agreed to market
and distribute other potential cleaners, sanitizers and disinfectants covered by
the agreement to dairy farms and dairy processing plants on an exclusive basis.
The principal market for IodoZyme is dairy farms.
The Company intends to market and distribute its potential products for
the healthcare industry directly or through others having pre-established
marketing and distribution networks pursuant to contractual arrangements such as
joint venture, licensing, distribution or similar collaborative agreements. The
principal markets for the potential pharmaceutical and healthcare products
include hospitals, medical offices, dental offices, dialysis centers, outpatient
clinics and nursing homes.
Government Regulation
The Company's research and development activities and the production
and marketing of the Company's current products are, and its proposed products
likely will be, subject to regulation by numerous governmental authorities in
the United States including the FDA, the Federal Environment Protection Agency
("EPA"), the United States Department of Agriculture ("USDA") and comparable
state agencies. Foreign governments also regulate the development, production
and marketing of products in their countries. There can be no assurances that
regulatory approvals or clearances will be obtained for any applications of the
Company's technology once developed, that if granted they will not be withdrawn
or
<PAGE>
that other regulatory action might result in an adverse impact on the ability
to market the Company's proposed products.
Federal Environmental Protection Agency
Some uses of the Company's products and proposed products are
considered pesticidal uses. Pesticides are generally required to be registered
with the EPA under the Federal Insecticide, Fungicide and Rodenticide Act
("FIFRA") prior to sale or distribution in the United States. The EPA will not
approve an application for registration unless it determines that the product
will perform its intended function without posing an unreasonable risk to the
environment. In general, applications for EPA registration are required to
include extensive data relating to product chemistry, efficacy and toxicity.
Products that have more than one use will require registration if at
least one of the uses is pesticidal. For such products, the EPA has taken the
position that the Company will be required to submit efficacy data for only the
use(s) that require FIFRA registration. Products that are considered identical
or substantially similar to existing products may be granted conditional
registration subject to the submission of any additional data that the EPA may
require at a later date. Identical or substantially similar product applications
generally include less data and take less time for the EPA to review. States may
impose similar, and in some cases additional and more stringent, standards and
requirements. The Company believes that certain uses of its proposed products,
including disinfectants for medical equipment and hemodialysis membrane
disinfection, will require FIFRA registration.
For several of the Company's products and proposed products, the EPA
and FDA have areas of mutual regulatory responsibility. Pursuant to agreements
between the agencies, the primary and secondary responsibility is allocated
between the two agencies depending upon the proposed use of the product. As a
general rule, the EPA does not consider products that are intended to kill pests
when directly applied to humans or animals as effectively within its FIFRA
jurisdiction. The Company believes that such uses of its products and proposed
products are not likely to require FIFRA registration. These uses include the
bovine teat sanitizer (IodoZyme) and certain medical products (such as treatment
of skin diseases, toothpaste and anti-plaque oral rinses).
The Company has not yet commenced the EPA or state application
processes with respect to any of its proposed products or uses thereof.
Therefore, the Company cannot be certain as to whether the EPA will require
FIFRA registration of uses other than those described herein. Although there are
existing iodine applications on the market, the Company cannot predict whether
the EPA or the states will view its products as substantially similar to such
existing products. Thus, the Company cannot be certain as to either the type and
volume of data it will be required to include in its applications or the length
of time the review processes will take. Based on estimates contained in the
EPA's regulations, the EPA review process may take from several months to over a
few years, and the state application processes may take additional time, but
there can be no assurance that the review processes will not take longer. If the
applications are approved, the Company will be subject to continuing regulation
by the EPA and comparable state agencies pursuant to which the Company may be
required to submit additional data, conduct additional tests, maintain records
and notify such agencies of any required information.
Federal Food and Drug Administration
Pursuant to the Federal Food, Drug and Cosmetic Act, the FDA regulates,
where applicable, development, testing, labeling, manufacturing processes and
facilities, registration, notification, clearance or approval, marketing,
distribution, record keeping and reporting requirements for human and animal
drugs, medical devices, biologics, cosmetics and food additives. The only filing
with the FDA regarding clearance or approval for any of the Company's proposed
products was the 510(k) premarket notification
<PAGE>
filing (subsequently withdrawn) covering the Company's formulation for the
disinfection of medical and dental instruments. See "Research and Product
Development - Medical and Dental Instrument Disinfection."
Bovine Teat Sanitizer
IodoZyme, the bovine teat dip manufactured by the Company, is subject
to regulation by the FDA as an animal drug. Although a lengthy new animal drug
application ("NADA") approval process is generally required prior to marketing
an animal drug, under regulatory discretion afforded by the FDA, the agency does
not currently require manufacturers of bovine teat sanitizers to undergo this
process. The only current FDA requirements applicable to teat treatment
manufacturers are compliance with the FDA's labeling, establishment
registration, drug listing, and manufacturing requirements. The Company believes
that it and its subcontractors are in compliance with the current FDA
requirements applicable to teat treatment manufacturers. However, in February
1993, the FDA issued draft guidelines setting forth the types of data necessary
to demonstrate that a teat treatment is safe for the cow, effective and fulfills
human food safety, manufacturing and environmental requirements. Testing of
IodoZyme was not conducted in accordance with such guidelines. Future required
compliance with these guidelines or other FDA requirements, the probability of
which cannot currently be ascertained by the Company, would have a significant
adverse effect on the marketing of IodoZyme and, consequently, on the Company's
results of operations.
Medical and Dental Instrument Disinfection
The Company's proposed medical and dental instruments disinfectants are
considered under current law chemical germicides regulated as medical devices by
the FDA. The FDA categorizes medical devices into three regulatory
classifications subject to varying degrees of regulatory control. In general,
Class I devices require compliance with premarket clearance, labeling and record
keeping requirements and are subject to other general controls. In addition to
the same controls as Class I devices, Class II devices may be subject to
additional regulatory controls, including performance standards. Class III
devices are typically invasive or life-sustaining products, but also include new
products which are not similar enough to previously marketed products to be
marketed without a higher level of regulation. Class III products require
clinical testing to assure safety and effectiveness and FDA approval prior to
marketing. The FDA also has the authority to require clinical testing of Class I
and Class II devices prior to clearance, and in recent years has imposed such
testing requirements more routinely.
The Company believes its applications will be considered germicides by
the FDA. Liquid chemical germicides have not yet been classified by the FDA into
Class I, II, or III, but the FDA currently allows the marketing of germicides
pursuant to FDA clearance of 510(k) premarket notifications. The 510(k)
premarket notification must be supported by appropriate data establishing the
claim of substantial equivalence to the satisfaction of the FDA. Although the
510(k) clearance is technically a 90-day process, clearance generally takes five
to six months or longer for glutaraldehyde-based products and may require the
submission of additional clinical safety and efficacy data to the FDA. The
Company filed a 510(k) premarket notification filing with the FDA, and
subsequently withdrew such filing, in 1996. See "Research and Product
Development - Medical and Dental Instrument Disinfection."
While it is likely that these products will eventually be classified as
Class I or Class II devices and remain subject to the premarket notification
process, there can be no assurance that 510(k) clearances will be obtained or
that the FDA will not regulate these products as Class III devices subject to
the more rigorous pre-market approval ("PMA") review process, which requires
conducting clinical trials pursuant to an investigational device exemption
(IDE), establishing safety and efficacy, and submitting clinical data,
<PAGE>
manufacturing and quality control data and other information. This process can
take several years and there are no assurances that a PMA will be approved.
Other Medical Products
The Company expects that certain of its potential products such as a
treatment for certain skin diseases and a treatment for certain iodine
deficiency diseases will be regulated by the FDA as pharmaceuticals for use in
humans. The regulatory approval of pharmaceutical products in the United States
intended for therapeutic use in humans involves many steps and generally takes
many years. The initial phase of the FDA approval process involves preclinical
testing which is followed by filing an investigational new drug ("IND")
application with the FDA to obtain permission to test the drug in humans. The
application must contain detailed information about the product including its
composition, manufacturing data, results of preclinical studies and a clinical
design and protocol. The application must also include information on the
investigators, the necessary agreements among parties involved in the testing,
and approval of an institutional review board ("IRB") at the center(s)
conducting the study or studies. If the application has not been denied or if
additional information has not been requested by the FDA within 30 days of
filing, the applicant may generally begin clinical studies.
Clinical testing to demonstrate safety and efficacy of the product
occurs in three phases, each with an expanded patient group. Upon successful
completion of the third phase of testing, a New Drug Application ("NDA") can be
filed. Approval requires a review of detailed data of results of clinical
studies, the composition of the drug, the labeling that will be used,
information on manufacturing methods, and samples of the product. After the FDA
completes its review of the application, the product is typically reviewed by a
panel of medical experts who then advise the FDA as to whether a new drug
approval should be granted. A pre-approval inspection is required prior to the
FDA authorizing the marketing of the product. After the product has been
approved for marketing, postmarketing surveillance studies may be required to
provide additional data to the FDA for longer-term follow-up concerns.
Patents and Proprietary Rights
The Company considers patent protection of its microbicide technology
to be critical to its business prospects. The Company currently holds seven
patents and eight additional patent applications filed in the United States
relating to its technology. In addition, the Company has filed a number of
patent applications relating to its technology in foreign countries.
The first of the Company's patents was issued in 1984 and relates to
bactericidal compositions and methods for applications to oral cavities. The
second patent was issued in 1990 and relates to the use of the Company's
technology as an aqueous sporicidal microbicide. In 1991, two additional patents
were issued one of which covers formulations of the Company's technology to
rapidly sterilize and maintain a sterile environment for an extended period of
time while the other issued patent relates to methods to avoid discoloration of
plant or animal tissue during the sterilization process. The fifth patent, which
was issued in 1993, relates to a method to clean and disinfect pathogens on the
epidermis. The sixth patent, which was issued in October 1994, relates to a
composition to clean and disinfect pathogens on the epidermis. The seventh
patent, which was issued in 1995, relates to a method for forming a sterilant
using an immobilized enzyme. The Company intends to continue to pursue patent
protection for the various applications of its microbicide technology.
The Company also relies upon unpatented proprietary technology, and in
the future may determine in some cases that its interest would be better served
by reliance on trade secrets or confidentiality agreements rather than patents.
To the extent that consultants or other third parties apply technological
<PAGE>
information independently developed by them or by others to Company projects,
disputes may arise as to the proprietary rights to such information which may
not be resolved in favor of the Company. The Company is required to pay
royalties to a co-inventor on certain patents relating to the Company's
technology based on revenues received by the Company from sales of products
falling within the scope of such patents.
Competition
The Company's proposed products and products incorporating the
Company's proposed products would compete with many other applications currently
on the market. In addition, the Company is aware of other companies engaged in
research and development of other novel approaches to applications in some or
all of the markets identified by the Company as potential fields of application
for its products. Many of the Company's present and potential competitors have
substantially greater financial and other resources and larger research and
development staffs than the Company. Many of these companies also have extensive
experience in testing and applying for regulatory approvals. In addition,
colleges, universities, government agencies, and public and private research
organizations conduct research and are becoming more active in seeking patent
protection and licensing arrangements to collect royalties for the use of
technology that they have developed, some of which may be directly competitive
with that of the Company.
The bovine teat sanitizer market is currently dominated by iodophor
products, which generally compete on the basis of price and the ratio of
microbial killing power to total iodine. The Company believes that IodoZyme
competes on the basis of its superior convenience, efficiency, safety and high
ratio of killing power to total iodine. Additionally, IodoZyme, manufactured by
the Company and sold by West Agro, competes directly with products currently
being manufactured and sold by West Agro.
Employees
As of December 31, 1996, the Company had six employees, all of which
are full-time. The Company has relationships with and from time to time engages
the services of university professors and other qualified consultants to assist
it in technological research and development. No employee of the Company is
currently represented by a labor union. Management considers its employee
relations to be good. The Company believes that the future success of the
Company is dependent to a significant degree on its being able to continue to
attract and retain skilled personnel.
Executive Officers
The Company's executive officers are:
Name Age Position with the Company
---- --- -------------------------
Jack H. Kessler, Ph.D. 46 Executive Vice-President, Chief
Scientific Officer, Secretary and
Chairman of the Board of Directors
Paul C. Desjourdy 35 Executive Vice-President,
Chief Financial Officer,
Treasurer and Director
<PAGE>
Certain biographical information regarding each executive officer of
the Company is set forth below:
Jack H. Kessler, Ph.D., is the founder of the Company and has served as
Executive Vice-President, Chief Scientific Officer, Secretary, and a director
since the Company's move to Massachusetts in May 1991, and as Chairman of the
Board of Directors since May 1996. Prior to that time, and since the Company was
initially formed in Illinois in 1986, Dr Kessler was the Company's sole
stockholder and served as its sole officer and director. From January 1990 until
May 1991, he served as principal systems engineer for Kollsman Manufacturing
Company, a diagnostic instrument design and manufacturing company.
Paul C. Desjourdy has served as Executive Vice President and Chief
Financial Officer since July 1996, as Vice-President - Finance and
Administration and Chief Financial Officer of the Company from September 1993 to
June 1996, as Treasurer from May 1994 to present, and as a director since August
1996. From September 1989 to September 1993, Mr. Desjourdy, a certified public
accountant, was an attorney at the law firm of Choate Hall & Stewart.
Officers are elected annually and serve at the discretion of the Board
of Directors.
Item 2. Description of Property
The Company leases approximately 6,000 square feet of office, research
and development and manufacturing space in Sudbury, Massachusetts for a current
base annual rental of approximately $51,000 through September 30, 1997. The
existing lease expires on September 30, 1997 and may be renewed at the Company's
option on the same terms and conditions as the existing lease except that the
rent shall be at the then current fair market value. The Company believes that
this space is suitable and adequate for its current needs; however, because the
existing space has limited in-house manufacturing capacity, additional
manufacturing space may be necessary if product volumes increase. The Company
intends to investigate possibly relocating its operations into a similar size
space with increased manufacturing capability in the greater metropolitan Boston
area if such alternative space can be obtained on reasonable terms.
Item 3. Legal Proceedings
The Company is not a party to any legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1996.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Price Range of Securities
The Company's Class A Common Stock, Class A Warrants and Class B
Warrants trade separately on the Nasdaq SmallCap Market tier of The Nasdaq Stock
Market under the symbols: SYMBA, SYMBW and SYMBZ, respectively. The following
sets forth the high and low sales prices for each of the quarterly periods
during fiscal 1995 and 1996, as reported by Nasdaq.
Fiscal 1995 Fiscal 1996
----------------- -----------------
High Low High Low
---- --- ---- ---
Class A Common Stock
First quarter 9 5 7/8 6 15/16 4 1/8
Second quarter 11 1/2 8 1/2 6 3/8 1 5/8
Third quarter 11 3/8 3 2 1/2 3/4
Fourth quarter 6 1/8 3 1/8 2 5/8 5/8
Class A Warrants
First quarter 6 3/8 3 3/4 4 3/4 2
Second quarter 9 5 1/32 4 3/4 31/32
Third quarter 9 1 3/4 1 1/16 1/4
Fourth quarter 4 3/4 1 7/8 1/2 3/32
Class B Warrants
First quarter 4 5/16 2 1/8 4 1 7/8
Second quarter 8 3/4 3 5/8 2 3/8 1/4
Third quarter 8 1 1/2 15/32 1/8
Fourth quarter 4 7/8 1 3/4 7/32 1/16
There is no established public trading market for the Company's Class B
Common Stock.
<PAGE>
(b) Approximate Number of Equity Security Holders
Based upon information supplied from the Company's transfer agent, the
Company believes that the number of record holders of the Company's equity
securities as of March 21, 1997 are approximately as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Common Stock 32
Class B Common Stock 3
Series A Preferred Stock 2
Class A Warrants 13
Class B Warrants 9
Based upon information supplied from the Company's transfer agent, the
Company believes that the number of beneficial holders of the Company's Class A
Common Stock as of March 21, 1997 is in excess of 800.
(c) Dividends
The Company has never paid a cash dividend on any class of its common
stock and anticipates that for the foreseeable future any earnings will be
retained for use in its business and, accordingly, does not anticipate the
payment of cash dividends.
Item 6. Management's Discussion and Analysis or Plan of Operation
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 in 1995 and 1996 on sales of IodoZyme, the Company's sole revenue
to date has been from licensing/option arrangements and contract research and
development efforts with corporate partners.
Safe Harbor Statements
Any statements contained herein 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, (v) the Company's ability to enter into
new arrangements with corporate partners.
<PAGE>
Results of Operations
Fiscal 1996 versus Fiscal 1995
Symbollon's net loss decreased by $468,296 or 34.1% from $1,373,711 in
fiscal 1995 to $905,415 in fiscal 1996. This decrease resulted primarily from
increased license fee revenues from research and development programs with
corporate partners, and to a lesser extent, decreased general and administration
expenses.
Product revenues from sales of IodoZyme decreased by $5,075 or 4.1%
from $122,981 in fiscal 1995 to $117,906 in fiscal 1996. Based on sales
forecasts provided to Symbollon by West Agro, Symbollon anticipates slightly
increased sales volume for IodoZyme in 1997.
Cost of goods sold for IodoZyme decreased by $33,494 or 32.3% from
$103,600 in fiscal 1995 to $70,106 in fiscal 1996. The resulting increase in the
gross profit margin on product sales in fiscal 1996, from the comparable 1995
period, was primarily due to resolution of prior period manufacturing problems,
and reduced labor costs associated with certain manufacturing activities now
being internally performed. The Company anticipates that the gross profit margin
in 1997 will remain consistent with 1996.
Contract revenues decreased by $105,009 or 42.0% from $250,000 in
fiscal 1995 to $144,991 in fiscal 1996. License fee revenues were $500,000 in
fiscal 1996, as compared to none in fiscal 1995. The contract and license fee
revenues generated in fiscal 1996 relate to one corporate relationship entered
into in May 1996 in the field of dermatology. The contract revenues generated in
fiscal 1995 related to research and development contracts with corporate
partners which were in existence during fiscal 1996 but which generated no
revenue. In 1997, subject to continuation of existing research and development
contracts, the Company anticipates receiving $1,000,000 in license fees. The
level of contract revenues for 1997 is difficult to predict since it depends on
the amount of consulting effort expended by the Company at the request of
corporate partners.
Research and development expenses increased by $21,988 or 2.2% from
$980,220 in fiscal 1995 to $1,002,208 in fiscal 1996. The increase resulted from
increased development expenses, including third party testing and consultant
fees, related to the preparation of the 510(k) filing with the FDA covering the
Company's high level disinfectant formulation (which filing was subsequently
withdrawn).
General and administrative expenses decreased by $112,309 or 14.1% from
$798,335 in fiscal 1995 to $686,026 in fiscal 1996. This decrease resulted
primarily from decreases in salaries and other labor related costs, and
consulting fees, partially offset by an increase in director and officer
insurance premiums. The decrease in consulting fees resulted primarily from the
termination of certain contractual commitments and a general decrease in market
communications.
The Company's interest income decreased by $46,693 or 33.6% from
$138,791 in fiscal 1995 to $92,098 in fiscal 1996. This decrease resulted from
decreased levels in cash reserves during 1996.
During the first half of 1997, the Company expects its research and
development and general and administrative expenses to continue at or slightly
below their present levels. During the later half of 1997, the Company
anticipates incurring additional expenses, including third party testing and
consultant fees, related to preparation of an IND application with the FDA to
obtain permission to test a formulation of its technology in humans for its
effectiveness against certain iodine deficiency diseases.
<PAGE>
Liquidity and Capital Resources
The Company has funded its activities primarily through proceeds from
private and public 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 BDC. See "Small Business
Innovation Research."
During 1996, the Company generated revenues from product sales and
contract and license fees; however, the Company's income remains less than its
operating expenses. The Company has incurred a cumulative loss through December
31, 1996 of $5,333,079. As of December 31, 1996, the Company had working capital
of $1,700,642. The Company believes that it has the necessary liquidity and
capital resources to sustain planned operations for fiscal 1997. In the event
that the Company's internal estimates relating to its planned expenditures prove
inaccurate, the Company may be required to reallocate funds among its planned
activities and curtail certain planned expenditures.
During 1997, the Company is committed to pay approximately $280,000 as
compensation for its current executive officers and approximately $51,000 for
lease payments on its facilities. The Company has no planned capital
expenditures for fiscal 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.
In connection with the Company's initial public offering, certain
stockholders of the Company agreed to transfer an aggregate of 700,000 shares of
Common Stock to the Company if the Company does not attain certain minimum
earnings thresholds. In the event the Company attains any of such earnings
thresholds, the position of the Securities and Exchange Commission is that the
release of these restrictions will be treated, for financial reporting purposes
only, as expense to the Company which is nondeductible for income tax purposes.
Accordingly, the Company will, in the event of the release of the restrictions,
recognize during the period in which the earnings thresholds are met or probable
of being met, what could be a substantial one-time charge which would have the
effect of substantially increasing the Company's loss or reducing or eliminating
earnings, if any, at such time. The amount of expense recognized by the Company
will not affect the Company's total stockholders' equity.
<PAGE>
Item 7. Financial Statements
Report Of Independent Auditors
The Board of Directors and Stockholders
Symbollon Corporation
Sudbury, Massachusetts
We have audited the accompanying balance sheets of Symbollon
Corporation (a development stage company) as at December 31, 1996 and December
31, 1995, and the related statements of operations, stockholders' equity and
cash flows for each of the years in the two-year period ended December 31, 1996
and for the period from July 15, 1986 (inception) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of Symbollon
Corporation at December 31, 1996 and December 31, 1995, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 1996 and for the period from July 15, 1986 (inception) to December
31, 1996 in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
Cambridge, Massachusetts
January 30, 1997
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
BALANCE SHEETS
<CAPTION>
December 31,
ASSETS ------------------
- ------ 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents. . .. . . . . . . . . $ 1,707,099 $ 2,087,753
Accounts receivable. . . . . . . . . . . . . . 50,406 30,870
Inventory. . . . . . . . . . . . . . . . . . . 17,818 31,279
Prepaid expenses . . . . . . . . . . . . . . . 82,439 80,554
----------- -----------
Total current assets. . . .. . . . . . . 1,857,762 2,230,456
Equipment and leasehold improvements, net of
accumulated depreciation and amortization (Note C) 124,463 159,990
Other assets:
Patent and trademark costs, net of accumulated
amortization (Note D). . . . . . . . . . . . 127,097 90,099
Deposit. . . . . . . . . . . . . . . . . . . . 5,000 5,000
----------- -----------
TOTAL . . . . . . . . . . . . . . . . . $ 2,114,322 $ 2,485,545
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . $ 41,173 $ 30,385
Notes payable to stockholder (Note G). . . . . 47,549
Legal fees payable to related party (Note J) . 30,676 4,782
Accrued interest . . . . . . . . . . . . . . . 21,989
Other accrued professional fees. . . . . . . . 53,234 3,822
Other current liabilities. . . . . . . . . . . 14,441 44,963
Deferred revenue . . . . . . . . . . . . . . . 17,596
----------- -----------
Total current liabilities . . . . . . . 157,120 153,490
Accrued rent (Note I) . . . . . . . . . . . . . . 14,000 24,500
----------- -----------
Total liabilities . . . . . . . . . . . 171,120 177,990
----------- -----------
Commitments (Note I)
Stockholders' equity (Notes E and F):
Preferred stock, par value $.001 per share,
5,000,000 shares authorized, 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
1,265,423 shares issued in 1996 and 1995,
respectively . . . . . . . . . . . . . . . . 1,288 1,265
Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 1,196,275 and
1,214,713 shares issued in 1996 and 1995,
respectively. Each share is convertible into
one share of Class A common stock . . . . . . 1,196 1,215
Additional paid-in capital . . . . . . . . . . 7,273,353 6,732,739
Deficit accumulated during the development stage (5,333,079) (4,427,664)
----------- -----------
Total stockholders' equity. . . . . . . . 1,943,202 2,307,555
----------- -----------
TOTAL . . . . . . . . . . . . . . . . . . $ 2,114,322 $ 2,485,545
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
<CAPTION>
July 15, 1986
Year Ended December 31, (Inception) to
------------------------- December 31,
1996 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . $ 117,906 $ 122,981 $ 240,887
Contract revenue . . . . . . . . . . . 144,991 250,000 469,991
License fee revenue. . . . . . . . . . 500,000 540,000
----------- ----------- ----------
Total income . . . . . . . . 762,897 372,981 1,250,878
----------- ----------- ----------
Operating expenses:
Cost of goods sold. . . . . . . . . 70,106 103,600 173,706
Research and development costs . . . 1,002,208 980,220 3,474,338
General and administrative expenses. 686,026 798,335 2,982,709
----------- ----------- ----------
Total operating expenses . . 1,758,340 1,882,155 6,630,753
----------- ----------- ----------
Loss from operations . . . . . . . . . (995,443) (1,509,174) (5,379,875)
Interest income. . . . . . . . . . . . 92,098 138,791 386,832
Interest expense and debt issuance costs. (2,070) (3,328) (340,036)
---------- ----------- ----------
NET LOSS . . . . . . . . . . . . . . . $ (905,415) $(1,373,711) $(5,333,079)
=========== ============ ============
NET LOSS PER SHARE OF COMMON STOCK . . $(.52) $(.79)
====== ======
Weighted average number of
common shares outstanding . . . . . 1,781,796 1,734,019
========== =========
The accompanying notes to financial statements are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock, $.001 Par Value Deficit
Preferred Stock,--------------------------------- Accumulated
$.001 Par Value Class A Class B Additional During the
-------------- ---------------- ---------------- Paid-in Development
Shares Amount Shares Amount Shares Amount Capital Stage Total
------- ------ --------- ------ --------- ------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992. . . . . . . . . . . . . $ (143,451) $(143,451)
Merger and recapitalization, May 1991 (Note A):
Issuance of new shares of Symbollon Corporation 831,316 $ 831 $ 9,169 10,000
Contribution of shares to the Company, September. (41,565) (42) 42 - 0 -
Issuance of shares, September . . . . . . . . . . 425,251 426 299,574 300,000
Net loss for the year . . . . . . . . . . . . . . (207,457) (207,457)
--------- ------ ---------- ------------ ----------
Balance, December 31, 1992. . . . . . . . . . . . 1,215,002 1,215 308,785 (350,908) (40,908)
Issuance of shares, June. . . . . . . . . . . . . 34,998 35 104,965 105,000
Capital contribution as of July . . . . . . . . . 100,000 100,000
Warrants issued with bridge financing . . . . . . 25,000 25,000
Public offering, December:
Issuance of shares . . . . . . . . . . . . . . 1,000,000 $1,000 5,999,000 6,000,000
Costs of offering. . . . . . . . . . . . . . . (1,244,133) (1,244,133)
Sale of unit purchase option . . . . . . . . . 100 100
Net loss for the year . . . . . . . . . . . . . . (1,186,132) (1,186,132)
--------- ------ --------- ------ ---------- ----------- -----------
Balance, December 31, 1993. . . . . . . . . . . . 1,000,000 1,000 1,250,000 1,250 5,293,717 (1,537,040) 3,758,927
Issuance of over-allotment units of public offering 150,000 150 899,850 900,000
Additional public offering costs. . . . . . . . . (99,369) (99,369)
Net loss for the year . . . . . . . . . . . . . . (1,516,913) (1,516,913)
--------- ------ --------- ------ ---------- ----------- -----------
Balance, December 31, 1994. . . . . . . . . . . . 1,150,000 1,150 1,250,000 1,250 6,094,198 (3,053,953) 3,042,645
Warrant conversion, July - August . . . . . . . . 77,920 78 629,126 629,204
Conversion of Class B to Class A. . . . . . . . . 35,287 35 (35,287) (35) - 0 -
Stock purchase plan sales . . . . . . . . . . . . 2,216 2 9,415 9,417
Net loss for the year . . . . . . . . . . . . . . (1,373,711) (1,373,711)
--------- ------ --------- ------ ---------- ----------- -----------
Balance, December 31, 1995. . . . . . . . . . . . 1,265,423 1,265 1,214,713 1,215 6,732,739 (4,427,664) 2,307,555
Issuance of preferred stock, August . . . . . . .444,444 $444 499,555 499,999
Conversion of Class B to Class A. . . . . . . . . 18,438 19 (18,438) (19) - 0 -
Stock purchase plan sales . . . . . . . . . . . . 4,392 4 7,943 7,947
Reduction of warrant conversion costs . . . . . . 33,116 33,116
Net loss for the year . . . . . . . . . . . . . . . (905,415) (905,415)
------- ------ --------- ------ --------- ------ ---------- ----------- -----------
BALANCE, DECEMBER 31, 1996. . . . . . . . . . . .444,444 $444 1,288,253 $1,288 1,196,275 $1,196 $7,273,353 $(5,333,079) $1,943,202
======= ==== ========= ====== ========= ====== ========== ============ ==========
See Note E for additional information.
The accompanying notes to financial statements are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
<CAPTION>
July 15, 1986
Year Ended December 31, (Inception) to
-------------------------- December 31,
1996 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . $(905,415) $(1,373,711) $(5,333,079)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization expense. . . . . . . 57,680 57,493 319,525
Amortization of debt issuance costs. . . . . . . . 130,000
Accrued rent . . . . . . . . . . . . . . . . . . . (10,500) (4,500) 14,000
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . (19,536) 15,330 (50,406)
Inventory. . . . . . . . . . . . . . . . . . . 13,461 (15,763) (17,818)
Prepaid expenses . . . . . . . . . . . . . . . (1,885) 6,402 (82,439)
Deferred revenue . . . . . . . . . . . . . . . 17,596 (62,500) 17,596
Accounts payable and other current liabilities. 90,758 (52,593) 196,699
---------- ------------ -----------
Net cash used in operating activities . . . . (757,841) (1,429,842) (4,805,922)
---------- ------------ -----------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements . . . (5,828) (79,800) (255,320)
Patent and trademark costs . . . . . . . . . . . . . . (53,323) (39,601) (315,765)
Deposit. . . . . . . . . . . . . . . . . . . . . . . . (5,000)
---------- ------------ -----------
Net cash used in investing activities . . . . (59,151) (119,401) (576,085)
---------- ------------ -----------
Cash flows from financing activities:
Warrant conversion . . . . . . . . . . . . . . . . . . 629,204 629,204
Borrowings from stockholders . . . . . . . . . . . . . 253,623
Repayment of borrowings from stockholders. . . . . . . (21,609) (127,683)
Sale of common stock and units . . . . . . . . . . . . 7,947 9,417 7,227,364
Sale of option to purchase units . . . . . . . . . . . 100
Public offering costs. . . . . . . . . . . . . . . . . (1,343,502)
Issuance of preferred stock. . . . . . . . . . . . . . 450,000 450,000
---------- ------------ -----------
Net cash provided by financing activities . . 436,338 638,621 7,089,106
---------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . (380,654) (910,622) 1,707,099
Cash and cash equivalents at beginning of period . . . . . 2,087,753 2,998,375
---------- ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . . . . . $1,707,099 $ 2,087,753 $ 1,707,099
========== =========== ===========
See Note E with respect to noncash transactions.
The accompanying notes to financial statements are an integral part hereof.
</TABLE>
<PAGE>
(NOTE A) - Certain Transactions and 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),
to carry on the business of Symbollon, Inc. At that time, the merged companies
were recapitalized, the sole stockholder of Symbollon, Inc. contributed all of
his stock subscription rights and $5,000 to the Company in exchange for newly
issued shares of the Company and shares of the Company were also issued to a new
investor for $5,000. 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.
Management of the Company anticipates that additional losses will be incurred as
these efforts are pursued. Management will seek additional financing when, and
if, required although there can be no assurance that such financing will be
available or on terms acceptable to the Company.
(NOTE B) - Summary of Significant Accounting Policies:
[1] Cash and cash equivalents:
Cash and cash equivalents are short-term, highly liquid
investments with maturities of less than three months when purchased.
[2] Inventory:
Inventory is stated at the lower of cost or market.
[3] Revenue recognition:
The Company recognizes revenue when the Company fulfills all
of its obligations under its research and licensing agreements or when its
products are shipped. Through December 31, 1996 the Company has generated its
revenue from a small number of customers and agreements.
[4] Depreciation and amortization:
Equipment is depreciated over its estimated useful life using
the straight-line method. Leasehold improvements are being amortized by the
straight-line method over the life of the lease which is less than their
estimated useful lives.
Patent and trademark costs are being amortized over their
estimated useful lives of 17 years by the straight-line method. Such costs are
reviewed for impairment periodically. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of such costs, a loss
will be recognized.
<PAGE>
(NOTE B) - Summary of Significant Accounting Policies: (continued)
[5] Loss per share:
Loss per share is calculated based on the weighted average
number of shares of common stock outstanding during the period. Shares subject
to restriction (Note E) are not considered as outstanding for calculation of
loss per share during any period. Options, warrants and convertible preferred
stock have not been considered as they are antidilutive.
[6] Stock-based compensation:
The Company accounts for its employee stock-based compensation
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees". In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 establishes a fair-value-based
method of accounting for stock-based compensation plans. The Company adopted the
disclosure only alternative in 1996 which requires disclosure of the pro forma
effects on loss and loss per share as if SFAS No. 123 had been adopted, as well
as certain other information.
[7] 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 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.
(NOTE C) - Equipment and Leasehold Improvements:
Equipment and leasehold improvements are stated at cost and consist of
the following:
December 31,
---------------------
1996 1995
--------- ---------
Equipment and fixtures . . . . . . . . $218,528 $212,700
Leasehold improvements . . . . . . . . 36,791 36,791
--------- ---------
255,319 249,491
Less accumulated depreciation
and amortization. . . . . . . . . . 130,856 89,501
--------- ---------
Equipment and leasehold
improvements, net . . . . . . . . . $124,463 $159,990
========= ========
<PAGE>
(NOTE D) - Patent and Trademark Costs:
December 31,
---------------------
1996 1995
--------- --------
Patent costs. . . . . . . . . . . . . . . . . . $298,704 $253,477
Trademark costs . . . . . . . . . . . . . . . . 16,272 8,176
--------- --------
314,976 261,653
Less accumulated amortization . . . . . . . . . 187,879 171,554
--------- --------
Patent and trademark costs, net . . . . . . . . $127,097 $ 90,099
========= ========
(NOTE E) - Capitalization:
The Company has issued both Class A and B common stock. The Class A and
Class B common stock are substantially identical except that holders of Class A
common stock have the right to cast one vote for each share held and the Class B
shareholders have the right to cast five votes for each share held. The Class B
shares are automatically convertible into an equal number of Class A shares upon
the sale or transfer of Class B shares by the original holders thereof, subject
to certain exceptions.
On December 13, 1996 the Company requested its Class B common
stockholders to voluntarily convert their outstanding shares of Class B common
stock into an equal number of shares of Class A common stock which convert on a
one-for-one basis. On January 15, 1997, 1,180,537 of the 1,196,275 shares of
Class B common stock were converted.
On August 14, 1996 the Company completed a private placement of 444,444
shares of a new series of convertible preferred stock at a price of $1.125 per
share. The preferred stock is convertible at any time into an equal number of
shares of Class A common stock. After one year, the conversion rate is subject
to adjustment if the price of the Class A common stock for the twenty days prior
to conversion is below $1.125.
In exchange for the shares issued in the private placement, the Company
received net proceeds of approximately $450,000 and the cancellation of $50,000
of principal and accrued interest on a demand note payable to a stockholder. The
purchasers of the stock also have a right to purchase up to 222,222 shares of
Class A common stock during the first year after the private placement at a
purchase price of $2.00 per share if the preferred stock is converted on or
before March 31, 1997 or $3.00 per share if the conversion is after March 31,
1997.
The liquidation preference of the Series A preferred stock is the
greater of $1.125 per share plus any dividends or an amount payable had each
share of preferred stock been converted to common stock immediately prior to
liquidation.
If declared, the holders of the outstanding shares of Series A
preferred stock are entitled to cumulative dividends at the annual rate of $.09
per share.
The preferred stock will be converted into Class A common stock if
there is a public offering greater than $5,000,000 with a price per share of
$3.00 or more or a majority of the Series A preferred stockholders elect to
convert. The preferred stock will automatically convert on August 14, 2001.
<PAGE>
(NOTE E) - Capitalization: (continued)
In addition to the outstanding options under the Company's stock plans
(Note F), the Company has the following options and warrants outstanding at
December 31, 1996:
Number of Exercise Expiration
Security Units/Warrants Price Date
- --------------------------- -------------- --------- -------------
Redeemable Class A warrants. . . . . . 1,572,080 See below December 1998
Redeemable Class B warrants. . . . . . 1,227,920 See below December 1998
Unit purchase option . . . . . . . . . 100,000 units $9.00 December 1998
Each Class A warrant entitles the holder to purchase, for $8.50, one
share of Class A common stock and one Class B warrant. Each Class B warrant
entitles the holder to purchase, for $11.00, one share of Class A common stock.
The exercise prices of the warrants are subject to adjustment and the warrants
are subject to redemption in certain circumstances. The unit purchase option
entitles the holder to purchase one share of Class A common stock, one Class A
warrant, and one Class B warrant.
In connection with the Company's public offering, certain stockholders
agreed to restrictions on 700,000 shares of the 1,250,000 Class B common shares
outstanding prior to the offering whereby those shares will be transferred to
the Company for no consideration if the future earnings thresholds described
below are not achieved. When, and if, the share restrictions are released, the
Company will incur an expense based on the fair market value of the shares at
the time the restrictions lapse, which is a nondeductible expense for tax
purposes.
The restricted shares are to be released if the Company meets any of
the following earnings levels, (defined as income before income taxes,
extraordinary items or any charge related to the release of shares):
Fiscal Year Ending Earnings
December 31, Level
------------------ -----------
1997. . . . . . . . . . . . . $ 7,000,000
1998. . . . . . . . . . . . . 10,000,000
1999. . . . . . . . . . . . . 15,000,000
(NOTE F) - Stock Plans:
[1] Stock plans:
The Company has adopted three stock plans: a stock option
plan, an employee stock purchase plan and a nonemployee directors' stock option
plan.
The stock option plan provides for the grant of incentive
stock options, nonqualified stock options and stock appreciation rights. At
December 31, 1996 the Company has reserved 800,000 shares for issuance under the
Plan, which is an increase of 400,000 shares from December 31, 1995.
<PAGE>
(NOTE F) - Stock Plans: (continued)
[1] Stock plans: (continued)
The employee stock purchase plan (the "Plan") provides for the
purchase of Class A common stock at 85 percent of the fair market value at
specific dates, to encourage stock ownership by all eligible employees. At
December 31, 1996, the Company has reserved 200,000 shares for purchase under
the Plan, and there were five employees eligible and three employees
participating in the Plan. During the year ended 1996, the Plan purchased 4,392
shares from the Company to satisfy its obligation under the Plan.
The Company's Board of Directors agreed that on January 1 of
each year, each outside director shall be granted an option to purchase 2,500
shares of Class A common stock at fair market value, vesting 50% on each of the
first two anniversaries of the grant. Pursuant to this arrangement, options to
purchase 5,000 shares were granted on January 1, 1995. Subsequent to December
31, 1995 these options will be granted under the nonemployee directors' stock
option plan.
On May 17, 1995 the Company adopted a nonemployee directors'
stock option plan that provides for the grant of nonstatutory stock options
automatically on January 1 of each calendar year commencing on January 1, 1996.
The Company has reserved 100,000 shares for issuance under the plan. Each
outside director shall be granted an option to purchase 2,500 shares of Class A
common stock at fair market value, vesting 50% on each of the first two
anniversaries of the grant. Options to purchase 15,000 shares were granted on
January 2, 1996. At December 31, 1996 five outside directors were included under
this plan.
Under the above plans 636,892 shares are available for future
grant or purchase.
On July 1, 1996 all 128,333 of the then outstanding employee
stock options were repriced to the current market price, using the existing
exercise durations. All vested options that were repriced will not be
exercisable until July 1, 1997. If any employee should leave the Company prior
to July 1, 1997 the vested options held by that employee can be exercised for a
period up to 60 days following July 1, 1997.
<PAGE>
(NOTE F) - Stock Plans: (continued)
[1] Stock plans: (continued)
The Company had the following option activity in 1995 and
1996:
Number Weighted-Average
of Exercise Price
Shares Per Share
------- ----------------
Balance - December 31, 1994. . . . . . . . . . . 163,833 $5.59
Granted. . . . . . . . . . . . . . . . . . . . . 58,000 $5.97
-------
Balance - December 31, 1995. . . . . . . . . . . 221,833 $3.74
Granted. . . . . . . . . . . . . . . . . . . . . 251,500 $2.32
Repriced options:
Original. . . . . . . . . . . . . . . . . . . (128,333) $5.74
Repriced. . . . . . . . . . . . . . . . . . . 128,333 $2.31
Cancelled. . . . . . . . . . . . . . . . . . . . (16,833) $2.98
-------- -----
Balance - December 31, 1996. . . . . . . . . . . 456,500 $2.99
======== =====
Options for 88,333 shares are exercisable as of December 31,
1996 at exercise prices ranging from $4.81 to $10.00 and a weighted-average
exercise price of approximately $5.41 per share, with a weighted-average
remaining contractual life of approximately seven years.
The exercise prices of options outstanding at December 31,
1996 range from $1.13 to $10.00 per share and have a weighted-average exercise
price of approximately $2.99 per share, with a weighted-average remaining
contractual life of approximately seven years.
All options outstanding at December 31, 1996 are categorized
by the following ranges in the table below:
Weighted-Average Number of
Range Exercise Price Shares
--------------- ---------------- ---------
$1.00 to $ 4.00. . . . . . . $1.99 318,500
$4.00 to $10.00. . . . . . . $5.26 138,000
-------
456,500
=======
<PAGE>
(NOTE F) - Stock Plans: (continued)
[2] Stock-based compensation:
The Company has adopted the disclosure-only provisions of SFAS
No. 123, but applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans. There was no compensation expense
recognized in 1996 or 1995. If the Company had elected to recognize compensation
cost for the plans based on the fair value at the grant date for awards granted
as of January 1, 1995 under the plans, consistent with the method prescribed by
SFAS No. 123, net loss per share would have been changed to the pro forma
amounts indicated below:
Year Ended December 31,
--------------------------
1996 1995
----------- ------------
Net loss As reported. . . . . . . . . $ (905,415) $(1,373,711)
Pro forma. . . . . . . . . . (1,019,725) (1,382,724)
Net loss per share As reported. . . . . . . . . (.52) (.79)
Pro forma. . . . . . . . . . (.57) (.80)
The fair value of the Company's stock options used to compute
pro forma net loss and net loss per share disclosures is the estimated present
value at grant date using the Black-Scholes option-pricing model with the
following weighted-average assumptions for 1996 and 1995: dividend yield of
2.5%; expected volatility of 40%; a risk-free interest rate of between 5% and
8%; and an expected holding period of two to five years.
The per share weighted-average grant-date fair value of
options granted during the years ended December 31, 1996 and 1995 was $1.23 and
$2.03, respectively.
(NOTE G) - Notes Payable:
At December 31, 1995, a note payable to a stockholder for $47,549 was
outstanding. On August 14, 1996 the note and accrued interest thereon totaled
$71,608. The stockholder received cash of $21,608 and converted $50,000 into
preferred stock (Note E).
(NOTE H) - Income Taxes:
At December 31, 1996, the Company had no current tax liability or
deferred tax liability. It had deferred tax assets due to net operating loss
carryforwards and research and development tax credits amounting to
approximately $2,004,000 and $100,000, respectively, all of which had been fully
reserved because the likelihood of realization of the benefits cannot be
established. The expected tax benefit derived by applying statutory tax rates to
the loss before income taxes for 1996 and 1995 has been eliminated due to the
increase in the valuation reserve.
At December 31, 1996, the Company had a net operating loss carryforward
amounting to approximately $5,010,000 which expires at various dates through
2011.
The Company is subject to Internal Revenue Code provisions which limit
the loss carryforwards available for use in any given year if significant
changes in ownership occur.
<PAGE>
(NOTE I) - Commitments:
[1] Facilities lease:
The Company leases its facilities under an operating lease
that expires on September 30, 1997 for which the rent for the year then ending
amounts to $51,000. The lease is renewable at the option of the Company for an
additional five years at a rent to be negotiated at the time the option is
exercised.
Rent expense for the years ended December 31, 1996 and
December 31, 1995 was $36,000.
[2] Employment agreements:
The Company has entered into employment agreements with its
principal officers providing for minimum base compensation and severance pay.
For the years ended December 31, 1996 and December 31, 1995, the aggregate
amounts paid under these agreements were $280,000 and $329,000, respectively.
The employment agreements provide for inflationary adjustments and are subject
to other increases based on the Board of Director's approval. Two employment
agreements are in effect which expire December 31, 2000. Amounts to be paid
under these agreements in 1997 total approximately $280,000.
[3] Royalty agreement:
A royalty agreement with one of the inventors who assigned
certain patent rights to the Company provides for royalties based on a
percentage of the licensing revenues received by the Company from products
falling within the scope of the patent rights. The percentage varies from 1.5%
to 5% depending on the gross revenues received, with maximum royalty payments
under the agreement not to exceed $2,884,000. Through December 31, 1996 no
royalties have been earned under this agreement.
[4] Consulting agreements:
The Company has entered into various scientific advisory and
consulting agreements, including agreements with certain directors of the
Company, to support its development activities. These agreements generally
expire over several future years. Amounts charged to operations in connection
with these agreements for the years ended December 31, 1996 and December 31,
1995 amounted to approximately $125,400 and $216,000, respectively. The Company
expects to incur similar or higher expenses in future years.
(NOTE J) - Legal Fees Payable to Related Party:
A partner in the law firm that received fees of $31,200 and $77,245
from the Company in 1996 and 1995, respectively, is also a director of the
Company and a principal stockholder of a corporate stockholder of the Company.
<PAGE>
(NOTE K) - Collaborative Agreement:
On May 14, 1996, the Company entered into a collaboration and license
agreement with a pharmaceutical company. The agreement provides for milestone
and royalty payments in exchange for a license to Symbollon's technology,
proprietary information and patents. The Company is reimbursed for its work
under the agreement on an hourly basis plus materials and third party costs.
Through December 31, 1996, approximately $145,000 of reimbursement costs had
been received and an additional $500,000 was received for the execution of the
agreement. Unless terminated sooner by either party, the agreement will remain
in effect until the last of the licensed patents expire.
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 Company incorporates herein by reference the information appearing
under the caption "Board of Directors" in the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Company's 1997 Annual Meeting of Stockholders.
Information concerning executive officers of the Company is contained
in Part I of this report under the caption "Executive Officers."
Item 10. Executive Compensation
The Company incorporates herein by reference the information appearing
under the caption "Executive Compensation" in the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Company's 1997 Annual Meeting of Stockholders.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The Company incorporates herein by reference the information appearing
under the caption "Principal Stockholders" in the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Company's 1997 Annual Meeting of Stockholders.
Item 12 . Certain Relationships and Related Transactions
The Company incorporates herein by reference the information appearing
under the caption "Certain Transactions" in the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Company's 1997 Annual Meeting of Stockholders.
<PAGE>
Item 13 . Exhibits, List and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on Page E-1. Compensatory plans and arrangements
required to be filed as exhibits are as follows:
1 1993 Stock Option Plan.
2 Form of Stock Option Agreement to be entered into between the Company
and each option holder.
3 1994 Employee Stock Purchase Plan.
4 1995 Non-Employee Directors' Stock Option Plan.
5 Employment Agreement, dated December 23, 1995, between the Company and
Dr. Jack H. Kessler.
6 Employment Agreement, dated July 1, 1996, between the Company and
Paul C. Desjourdy.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year
ended December 31, 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
By: /s/ Paul C. Desjourdy
----------------------
Paul C. Desjourdy
Executive Vice President,
Chief Financial Officer
Date: March 28, 1997
In accordance with the Exchange Act, 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 Title Date
--------- ----- ----
/s/ Jack H. Kessler Executive Vice-President, March 28, 1997
- ------------------------ Chief Scientific Officer,
Jack H. Kessler Secretary and Chairman
of the Board of Directors
(Principal Executive Officer)
/s/ Paul C. Desjourdy Executive Vice President March 28, 1997
- ------------------------- Treasurer, Chief Financial
Paul C. Desjourdy Officer, and Director (Principal
Financial and Accounting Officer)
/s/ Stuart M. Paley Director March 28, 1997
- -------------------------
Stuart M. Paley
/s/ Edward A. Mason Director March 28, 1997
- -------------------------
Edward A. Mason
/s/ James C. Richards Director March 28, 1997
- -------------------------
James C. Richards
/s/ Irwin M. Rosenthal Director March 28, 1997
- --------------------------
Irwin M. Rosenthal
<PAGE>
Symbollon Corporation
Index to Exhibits
3.1 Certificate of Incorporation of the Company; including Certificate of
Designations, Preferences and Rights of Series A Preferred Stock of the
Company. (previously filed as an exhibit to Form 10-QSB for the quarter
ended September 30, 1996 and incorporated by reference.)
3.2 By-Laws of the Company. (1)
3.3 Agreement of Merger, dated as of August 4, 1993, between the Company
and Symbollon Corporation, a Massachusetts corporation, (including
Certificate of Merger and other state filings). (1)
4.1 Form of Warrant Agreement among the Company, D.H. Blair Investment
Banking Corp. (the "Underwriter") and American Stock Transfer and
Trust Company, including forms of Class A and Class B Warrant
Certificates. (1)
4.2 Form of Specimen Class A Common Stock Certificate. (1)
4.3 Form of Stock Restriction Agreement among the Company, the Class B
Stockholders and the Underwriter. (1)
10.1 1993 Stock Option Plan of the Company, as amended. (incorporated by
reference to Exhibit A to the Company's 1994 Annual Stockholders
Meeting Proxy Statement filed under cover of Schedule 14A dated May 4,
1994.)
10.2 Consulting and Separation Agreement, dated September 24, 1995, between
the Company and Dr. James C. Richards. (previously filed as an exhibit
to Form 10-KSB for the year ended December 31, 1995 and incorporated
by reference.)
10.3 Employment Agreement, dated December 23, 1995, between the Company and
Dr. Jack H. Kessler. (previously filed as an exhibit to Form 10-KSB
for the year ended December 31, 1995 and incorporated by reference.)
10.4 Lease dated October 1, 1992 between Stanley W. Snider and the Company.
(1)
10.5 Form of Employment Agreement, effective July 1, 1996, between the
Company and Paul C. Desjourdy. (previously filed as an exhibit to Form
10-QSB for the quarter ended June 30, 1996 and incorporated by
reference.)
10.6 Form of Indemnification Agreement between the Company and each officer
and director of the Company. (1)
10.7 Marketing and Supply Agreement, dated January 11, 1995 between the
Company and West Agro. (previously filed as an exhibit to Form 8-K of
the Registrant dated January 11, 1995 and incorporated by reference).
10.8 Agreement, dated August 31, 1992 among the Company, Dr. Jack H. Kessler
and Dr. Robert Rosenbaum. (1)
10.9 Promissory note dated August 1, 1993 issued by the Company to Dr. Jack
Kessler. (1)
10.10 Form of Stock Option Agreement to be entered into between the Company
and each option holder. (1)
10.11 Consultant Agreement between Mr. Smith and the Company dated
March 23, 1994, as amended on September 1, 1995. (previously filed
as an exhibit to Form 10-KSB for the year ended December 31, 1995 and
incorporated by reference.)
10.12 Consultant Agreement between Dr. Mason and the Company dated June 1,
1994 (previously filed as an exhibit to Form 10-QSB for the quarter
ended June 30, 1994 and incorporated by reference).
10.13 1994 Employee Stock Purchase Plan of the Company. (incorporated by
reference to Exhibit B to the Company's 1994 Annual Stockholders
Meeting Proxy Statement filed under cover of Schedule 14A dated
May 4, 1994.)
10.14 1995 Non-Employee Directors' Stock Option Plan of the Company.
(previously filed as an exhibit to Form 10-QSB for the quarter ended
June 30, 1995 and incorporated by reference.)
10.15 Collaboration and License Agreement, dated May 14, 1996 between the
Company and Oclassen Pharmaceuticals, Inc. (previously filed as an
exhibit to Form 10-QSB for the quarter ended June 30, 1996 and
incorporated by reference.)
10.16 Stock Purchase Agreement, dated August 14, 1996, among the Company,
Anthony J. Cantone and Jack H. Kessler. (previously filed as an exhibit
to Form 10-QSB for the quarter ended September 30, 1996 and
incorporated by reference.)
11.1 Statement re Computation of Earnings per Share.
23.1 Consent of Richard A. Eisner & Company, LLP
27.1 Financial Data Schedule
- --------------------------------
(1) Incorporated by reference to the corresponding exhibit number of the
Registration Statement on Form SB-2 (Registration No. 33-68828) filed on
November 24, 1993 and declared effective on December 7, 1993.
<PAGE>
Officers
Jack H. Kessler, Ph.D.
Executive Vice President,
Chief Scientific Officer,
Secretary and Chairman of the Board
Paul C. Desjourdy
Executive Vice President,
Chief Financial Officer, Treasurer
and Director
Board of Directors
Jack H. Kessler (Chairman)
Executive Vice President,
Chief Scientific Officer, Secretary
Symbollon Corporation
Stuart M. Paley
President
Stuart M. Paley, Incorporated
(a registered investment advisor)
Edward A. Mason, Sc.D.
Consultant
Paul C. Desjourdy
Executive Vice President,
Chief Financial Officer and Treasurer
Symbollon Corporation
James C. Richards, Ph.D.
President, Chief Executive Officer
and Director
IntelliGene Corporation
(a DNA probe diagnostic company)
Irwin M. Rosenthal
Partner
Rubin Baum Levin Constant & Friedman
(a law firm)
Scientific Advisory Board
Waldemar Gottardi, Ph.D.
Associate Professor in Technical Hygiene
Institute of Hygiene
University of Innsbruck, Austria
William Costerton, Ph.D.
Director of Center for Biofilm Engineering
National Science Foundation
Montana State University
Bozeman, Montana
J. Max Goodson, D.D.S., Ph.D.
Head of Pharmacology Department
Forsyth Dental Institute
Boston, Massachusetts
William A. Rutala, Ph.D., M.P.H.
Professor of the School of Medicine
University of North Carolina
Director of Epidemiology, UNC Hospital
Chapel Hill, North Carolina
Corporate Headquarters
122 Boston Post Road
Sudbury, Massachusetts 01776
Tel: (508) 443-0165
Fax: (508) 443-0166
Legal Counsel
Rubin Baum Levin
Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Independent Auditors
Richard A. Eisner & Company, LLP
124 Mt. Auburn Street, Suite 200N
Cambridge, Massachusetts 02138
Transfer Agent and Register
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(212) 936-5100
Annual Meeting
The annual meeting of stockholders will be held Wednesday May 14, 1997 at 10:00
a.m. at the Company's offices at 122 Boston Post Road Sudbury, Massachusetts
SEC Form 10-KSB
A copy of the annual report on Form 10-KSB, as filed by Symbollon Corporation
with the Securities and Exchange Commission, is available without charge upon
written request to:
Corporate and Investor Relations
Symbollon Corporation
122 Boston Post Road
Sudbury, Massachusetts 01776
