U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________
Commission file number 0-22872
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SYMBOLLON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-3463683
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Loring Drive, Framingham, MA 01702
- -------------------------------------------------------------------------------
(Address of principal executive offices)
508-620-7676
- -------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
May 11, 1998
-----------------
Class A Common Stock 3,182,953
Class B Common Stock 15,738
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- March 31, 1998 and December 31, 1997 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the three months
ended March 31, 1998 and March 31, 1997 2
Unaudited Condensed Statements of Cash Flows - For the three
months ended March 31, 1998
and March 31, 1997 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURE 7
INDEX TO EXHIBITS 8
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
(unaudited)
ASSETS
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 2,185,192 $ 2,527,865
Accounts receivable..................................................... 120 24,972
Inventory............................................................... 72,681 73,629
Prepaid expenses........................................................ 49,981 75,156
----------- -----------
Total current assets.............................................. $ 2,307,974 $ 2,701,622
Equipment and leasehold improvements, net of
accumulated depreciation................................................. 142,261 146,868
Other assets:
Patent and trademark cost, net of accumulated amortization............ 178,435 153,157
Deposit............................................................... 2,364 2,364
------------ -----------
TOTAL............................................................. $ 2,631,034 $ 3,004,011
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 51,022 $ 5,879
Other accrued professional fees......................................... 17,466 21,867
Accrued finder's fees................................................... 20,000
Other current liabilities............................................... 9,976 22,857
------------ -----------
Total current liabilities......................................... 78,464 70,603
Redeemable common stock, Class A, par value $.001 per share,
266,667 shares issued at March 31, 1998
(aggregate involuntary liquidation value $500,000) 500,000 500,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share, 5,000,000 shares
authorized, none issued..................................................
Common stock, Class A, par value $.001 per share,
18,750,000 shares authorized, 2,916,286 shares issued at
March 31, 1998 and December 31, 1997, respectively....................... 2,916 2,916
Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 15,738 shares issued at
March 31, 1998 and December 31, 1997, respectively,
each convertible into one share of Class A common stock.................. 16 16
Additional paid-in capital................................................ 7,252,091 7,252,091
Deficit accumulated during the development stage.......................... (5,202,453) (4,821,615)
------------ -----------
Total stockholders' equity........................................... 2,052,570 2,433,408
------------ -----------
TOTAL............................................................. $ 2,631,034 $ 3,004,011
============ ===========
</TABLE>
See notes to condensed financial statements.
1
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Three Months Ended (Inception) to
March 31, March 31,
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales......................................... $ $ $ 617,547
Contract revenue.................................. 40,337 540,680
License fee....................................... 1,790,000
----------- ----------- -----------
Total income.............................. 40,337 2,948,227
Operating Expenses:
Manufacturing costs........................... $ $ $ 352,237
Research and development costs................ 252,387 148,316 4,289,085
General and administrative expenses........... 158,653 124,271 3,664,940
----------- ----------- -----------
Total operating expenses.................. 411,040 272,587 8,306,262
----------- ----------- -----------
Income (Loss) from operations..................... (411,040) (232,250) (5,358,035)
Interest income................................... 30,202 19,549 511,842
Interest expense and debt issuance costs.......... (350) (356,260)
----------- ----------- -----------
Net Income (Loss)................................. (380,838) (213,051) (5,202,453)
Deficit accumulated during the development stage,
beginning of period.............................. (4,821,615) (5,333,079)
----------- ----------- -----------
Deficit accumulated during the development stage,
end of period.................................... $(5,202,453) $(5,546,130) $(5,202,453)
=========== =========== ===========
Net Income (Loss) Per Common Share................ $ (0.15) $ (0.12)
=========== ===========
Weighted average number of common
shares outstanding............................... 2,498,691 1,784,528
=========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Three Months Ended (Inception) to
March 31, March 31,
1998 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ (380,838) $ (213,051) $(5,202,453)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............... 11,308 13,723 390,510
Amortization of debt issuance costs................. 130,000
Accrued rent........................................ (4,667)
Loss on disposition of equipment.................... 7,274
Changes in operating assets and liabilities:
Accounts receivable............................... 24,852 23,974 (120)
Inventory......................................... 948 (28,247) (72,681)
Prepaid expenses.................................. 25,175 22,910 (49,981)
Deferred revenue.................................. (17,596)
Accounts payable and other current liabilities.... 7,861 (22,230) 135,639
----------- ----------- -----------
Net cash provided by (used in)
operating activities.............................. (310,694) (225,184) (4,661,812)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (5,850) (346,503)
Patent and trademark costs............................ (26,129) 7,160 (383,277)
Proceeds from sale of equipment....................... 11,300
Deposit............................................... (2,364)
----------- ----------- -----------
Net cash provided by (used in) investing activities. (31,979) 7,160 (720,844)
----------- ----------- -----------
Cash flows from financing activities:
Notes Payable.........................................
Warrant conversion.................................... 629,204
Borrowings from stockholders.......................... 2,451 253,623
Repayment to stockholders............................. (127,683)
Sale of common stock and units........................ 6,552 7,706,106
Sale of option to purchase units...................... 100
Public offering costs................................. 450,000
Issuance of preferred stock........................... (1,343,502)
----------- ----------- -----------
Net cash provided by financing activities........... 9,003 7,567,848
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........................... (342,673) (209,021) 2,185,192
Cash at beginning of period............................... 2,527,865 2,087,753
----------- ----------- -----------
CASH AT END OF PERIOD..................................... $ 2,185,192 $ 1,878,732 $ 2,185,192
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Description of Business:
Symbollon Corporation (the "Company") was originally incorporated as an
Illinois corporation on July 15, 1986 as Symbollon, Inc. On May 21, 1991,
Symbollon, Inc. was merged into Symbollon Corporation, a newly formed
Massachusetts corporation (which was subsequently reincorporated in Delaware in
August 1993), to carry on the business of Symbollon, Inc. Except where otherwise
indicated, references to the Company in these financial statements and notes
thereto include the activities of Symbollon, Inc.
The Company was formed to develop and commercialize proprietary
iodine-based products for infection control and treatment in biomedical and
bioagricultural industries.
The Company is in the development stage and its efforts since inception
have been principally devoted to research and development, securing patent and
trademark protection and raising capital. In connection with its research and
development efforts, several grants under the Small Business Innovation Research
("SBIR") program concerning the Company's technology have been funded.
Management of the Company anticipates that additional losses will be incurred as
these efforts are pursued. In 1995, the Company signed a marketing and supply
agreement for its first product and commenced shipping.
Note B - Accounting Policies and Disclosure:
The accompanying unaudited financial statements do not contain all of
the disclosures required by generally accepted accounting principles and should
be read in conjunction with the financial statements and related notes included
in the Company's Form 10-KSB for the year ended December 31, 1997 filed with the
Securities and Exchange Commission.
In the opinion of management, the financial statements reflect all
adjustments, all of which are of a normal recurring nature, to fairly present
the Company's financial position, results of operations and cash flows. The
results of operations for the three-month period ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
Note C - Line of Credit:
The Company's $500,000 bank line of credit expired in March 1998, and
the Company has no current plans to replace such line of credit.
4
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is a development stage company. Since inception of the
Company's predecessor in 1986, the Company's efforts have been principally
devoted to research and development, securing patent and trademark protection
and raising capital, most of which efforts commenced after May 1991. Except for
revenue earned since 1995 on sales of IodoZyme, the Company's sole revenue to
date has been from research and development contracts with corporate partners
and interest income.
Forward-Looking Statements
Any statements set forth below or otherwise made in writing or orally
by the Company with regard to its expectations as to financial results and other
aspects of its business may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Company makes such statements based on assumptions which it believes to be
reasonable, the Company's business is subject to significant risks and there can
be no assurance that actual results will not differ materially from the
Company's expectations. Accordingly, the Company hereby identifies the following
important factors, among others, which could cause its results to differ from
any results which might be projected, forecasted or estimated by the Company in
any such forward-looking statements: (i) the timely development and acceptance
of new products, (ii) the achievement of product development milestones by the
Company's corporate partners, (iii) the timely receipt of regulatory clearances
required to market the Company's proposed products, (iv) the continued sale of
IodoZyme, the Company's only product, and (v) the Company's ability to enter
into new arrangements with corporate partners.
Results of Operations
Symbollon's net loss increased by $167,787 or 78.8% from $213,051 in
the three-month period ended March 31, 1997 to $380,838 in the comparable 1998
period. This increase resulted primarily from increased development efforts and
increased general and administrative expenses, and decreased contract revenues.
The Company expects to continue to incur operating losses for the foreseeable
future.
Contract revenues decreased by $40,337 or 100% from $40,337 in the
three-month period ended March 31, 1997 to none in the comparable 1998 period.
This decrease resulted primarily from Symbollon's commitment to undertake
without compensation certain activities in 1998 relating to the dermatology
product development program with Oclassen Pharmaceuticals, Inc. Once those
activities are completed, Symbollon anticipates receiving compensation in the
future for any other activities undertaken at Oclassen's request.
General and administrative expenses increased by $34,382 or 27.7% from
$124,271 in the three-month period ended March 31, 1997 to $158,653 in the
comparable 1998 period. This increase resulted from increased investor and
public relations expenses. Research and development expenses increased by
5
<PAGE>
$104,071 or 70.2% from $148,316 in the three-month period ended March 31, 1997
to $252,387 in the comparable 1998 period. This increase resulted from increased
development expenses, including consultants fees and contract manufacturing
cost, associated with the Company's proposed formulation for the treatment of
fibrocystic breast disease.
During the remainder of 1998, the Company anticipates incurring
significant development expenses associated with its proposed formulation for
the treatment of fibrocystic breast disease, including the cost of preparing and
filing an Investigational New Drug application, manufacturing supplies for
clinical trials and conducting human clinical trials.
Liquidity and Capital Resources
The Company has funded its activities 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 Biomedical Development
Corporation. As of March 31, 1998, the Company had working capital of
$2,229,510. The Company's $500,000 bank line of credit expired in March 1998,
and the Company has no current plans to replace such line of credit.
The Company has had no significant revenue and has incurred a
cumulative loss through March 31, 1998 of $5,202,453. However, the Company
believes that it has the necessary liquidity and capital resources, together
with anticipated future revenues, to sustain planned operations for the twelve
months following March 31, 1998. In the event that the Company's internal
estimates relating to its planned revenues or expenditures prove materially
inaccurate, the Company may be required to reallocate funds among its planned
activities and curtail certain planned expenditures. In any event, the Company
anticipates that it will require additional funds after March 31, 1999, and
therefore, the Company will seek new financing in fiscal 1998.
During the remainder of 1998, the Company anticipates paying
approximately $228,750 as compensation for its current executive officers, and
approximately $20,025 for lease payments on its facilities. At December 31,1997,
the Company had a net operating loss carryforward for Federal income tax
purposes of approximately $4,555,000 expiring through 2011.
6
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on Page E-1.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: May 12, 1998 By: /s/ Paul C. Desjourdy
-------------------------------------
Paul C. Desjourdy, Vice President/CFO
and authorized signatory
7
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
11.1 Statement re: Computation of Earnings per Share...............
27.1 Financial Data Schedule.......................................
8
Exhibit 11.1
<TABLE>
SYMBOLLON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
The Three-Months Ended March 31,
------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net Loss on Per Share Basis....... (380,838) (213,051)
============ ============
Basis loss per share:
Weighted average common shares
outstanding..................... 3,198,691 2,484,528
Shares subject to restriction... (700,000) (700,000)
------------ ------------
2,498,691 1,784,528
============ ============
Net Loss per common share (1):.... $ (0.15) $ (0.12)
============ ============
(1) There is no difference between basis and diluted loss per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED UNAUDITED FINANCIAL STATEMENT OF SYMBOLLON CORPORATION FOR THE THREE
MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENT AS FILED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,185,192
<SECURITIES> 0
<RECEIVABLES> 120
<ALLOWANCES> 0
<INVENTORY> 72,681
<CURRENT-ASSETS> 2,307,974
<PP&E> 269,180
<DEPRECIATION> 126,919
<TOTAL-ASSETS> 2,631,034
<CURRENT-LIABILITIES> 78,464
<BONDS> 0
500,000
0
<COMMON> 2,932
<OTHER-SE> 2,049,638
<TOTAL-LIABILITY-AND-EQUITY> 2,052,570
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 252,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (380,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (380,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (380,838)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
