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, 2000
| | 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 10, 2000
-----------------
Class A Common Stock 3,694,611
Class B Common Stock --
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, 2000 and December 31, 1999 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development Stage - For
the three months ended March 31, 2000 and March 31, 1999
and for the period from July 15, 1986 to March 31, 2000 2
Unaudited Condensed Statements of Cash Flows
- For the three months ended March 31, 2000 and
March 31, 1999 and for the period from July 15, 1986
to March 31, 2000 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 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURE 8
INDEX TO EXHIBITS 9
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
ASSETS
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 2,684,989 $ 2,771,821
Restricted cash......................................................... 52,438 52,615
Accounts receivable..................................................... 102,132 72,015
Inventory............................................................... 93,790 96,354
Prepaid expenses........................................................ 39,264 54,217
----------- -----------
Total current assets.............................................. $ 2,972,613 $ 3,047,022
Equipment and leasehold improvements, net of
accumulated depreciation and amortization................................ 84,195 89,710
Other assets:
Patent and trademark cost, net of accumulated amortization............ 220,138 221,483
Deposit............................................................... 2,364 2,364
------------ -----------
TOTAL............................................................. $ 3,279,310 $ 3,360,579
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 23,328 $ 65,903
Accrued clinical studies................................................ 409,397 414,862
Other current liabilities............................................... 32,703 31,158
------------ -----------
Total current liabilities......................................... 465,428 511,923
Redeemable common stock, Class A, par value $.001 per share,
93,334 shares issued at March 31, 2000 and December 31, 1999
(aggregate involuntary liquidation value $175,000)....................... 175,000 175,000
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, 3,601,277 and 3,557,339 shares issued at
March 31, 2000 and December 31, 1999, respectively....................... 3,601 3,557
Convertible Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, none and 688 shares issued at
March 31, 2000 and December 31, 1999, respectively....................... - 1
Additional paid-in capital................................................ 9,301,131 9,114,867
Deficit accumulated during the development stage.......................... (6,665,850) (6,444,769)
------------ -----------
Total stockholders' equity........................................... 2,638,882 2,673,656
------------ -----------
TOTAL............................................................. $ 3,279,310 $ 3,360,579
============ ===========
</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,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Net product sales................................. $ 81,400 $ 172,500 $ 1,547,597
Contract revenue.................................. - 82,993 983,713
License fee revenue............................... - - 2,940,000
----------- ----------- -----------
Total revenue............................. 81,400 255,493 5,471,310
Operating Expenses:
Cost of goods sold............................ $ 48,464 $ 113,008 $ 962,516
Research and development costs................ 189,592 440,105 7,114,569
General and administrative expenses........... 100,671 100,294 4,403,592
----------- ----------- -----------
Total operating expenses.................. 338,727 653,407 12,480,677
----------- ----------- -----------
Loss from operations.............................. (257,327) (397,914) (7,009,367)
Interest income................................... 36,246 17,130 699,777
Interest expense and debt issuance costs.......... - - (356,260)
----------- ----------- -----------
Net Loss.......................................... $ (221,081) $ (380,784) $(6,665,850)
=========== =========== ===========
Basic and diluted net loss per share of common stock.$ (0.06) $ (0.13)
=========== ===========
Weighted average number of common shares
outstanding - basic and diluted.................. 3,661,875 2,905,069
=========== ===========
</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,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (221,081) $ (380,784) $(6,665,850)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............... 9,078 11,446 484,812
Amortization of debt issuance costs................. - - 130,000
Loss on disposition of equipment.................... - - 38,717
Reduction of redeemable common stock in lieu of
receipt of license payment........................ - - (175,000)
Changes in:
Restricted cash................................... 177 (2,145) (52,438)
Accounts receivable............................... (30,117) (48,322) (102,132)
Inventory......................................... 2,564 (10,515) (93,790)
Prepaid expenses.................................. 14,953 37,349 (39,264)
Accounts payable and other current liabilities.... (46,495) 193,315 522,603
----------- ----------- -----------
Net cash used in operating activities............. (270,921) (199,656) (5,952,342)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (1,134) (2,965) (369,522)
Patent and trademark costs............................ (1,085) (7,100) (469,641)
Proceeds from sale of equipment....................... - - 11,300
Deposit............................................... - - (2,364)
----------- ----------- -----------
Net cash used in investing activities............... (2,219) (10,065) (830,227)
----------- ----------- -----------
Cash flows from financing activities:
Warrant and option exercise........................... 186,308 - 815,512
Borrowings from stockholders.......................... - - 253,623
Repayment to stockholders............................. - - (127,683)
Sale of common stock and units........................ - - 9,419,508
Sale of option to purchase units...................... - - 100
Public offering costs................................. - - (1,343,502)
Issuance of preferred stock........................... - - 450,000
----------- ----------- -----------
Net cash provided by financing activities........... 186,308 - 9,467,558
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........................... (86,832) (209,721) 2,684,989
Cash at beginning of period............................... 2,771,821 1,514,115
----------- ----------- -----------
CASH AT END OF PERIOD..................................... $ 2,684,989 $ 1,304,394 $ 2,684,989
=========== =========== ===========
</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 ("Symbollon" or 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. 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, 1999 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, 2000 are not
necessarily indicative of the results to be expected for the full year.
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
Symbollon is a development stage company. Since inception, 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
product sales of IodoZyme, the Company's sole revenue to date has been from
research and development collaborations with corporate partners and interest
income.
Forward-Looking Statements
In addition to the historical information contained herein, this Quarterly
Report on Form 10-QSB contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, including, but not
limited to statements concerning plans, objectives, goals, strategies,
prospects, revenues, liquidity and capital resources, financial needs and future
performance, costs and expenditures. Such statements may be identified or
qualified, without limitation, by words such as "likely", "will", "suggests",
"may", "would", "could", "should", "expects", "anticipates", "estimates",
"plans", "projects", "believes", or similar expressions (and variants of such
words or expressions). Investors are cautioned that forward-looking statements
are inherently uncertain. Actual performance, achievements and results may
differ materially from those expressed, projected or suggested in the
forward-looking statements due to certain risks and uncertainties, including,
but not limited to, dependence on collaborative partners, early stage of drug
development, additional financing requirements and availability, history (and
expectation) of losses, uncertainty of patent protection, uncertainty associated
with preclinical and clinical testing, market acceptance, intense competition,
government regulation, dependence on key personnel, lack of marketing and
manufacturing experience, reimbursement and drug pricing uncertainty, potential
product liability, materials incompatibility, ability to maintain its Nasdaq
SmallCap Market listing, hazardous materials, and the other risks and
uncertainties described or discussed in the section "Risk Factors" in the Annual
Report on Form 10-KSB for the period ended December 31, 1999. The
forward-looking statements contained herein represent the Company's judgment as
of the date of the Quarterly Report on Form 10-QSB, and the Company cautions
readers not to place undue reliance on such statements.
Results of Operations
Symbollon's net loss for the three-month period ended March 31, 2000
was $221,081, reflecting a decrease of $159,703 from a net loss of $380,784 in
the comparable 1999 period. The decreased loss for the three-month period
resulted primarily from decreased development costs related to the Company's
ongoing Phase II clinical trial, partially offset by decreased revenues from
product sales and corporate contracts. The Company expects to continue to incur
operating losses for the foreseeable future.
5
<PAGE>
Product revenues from sales of IodoZyme for the three-month period
ended March 31, 2000 was $81,400, reflecting a decrease of $91,100, from the
product sales in the comparable 1999 periods. Because the Company's exclusive
marketing partner orders IodoZyme a limited number of times each year, the
changes between periods reflect mostly timing differences in receipt of those
orders from the marketing partner, and the decreased sales for the three-month
period do not necessarily reflect correspondingly decreased sales for the entire
year.
The gross profit margin on product sales for the three-month period
ended March 31, 2000 were 40%, compared to 34%, in the comparable 1999 periods.
The increase in the gross profit margin on product sales for the three-month
period ended March 31, 2000 was primarily due to decreased labor cost.
There were no contract revenues for the three-month period ended March
31, 2000, compared to $82,993 in the same 1999 period. The contract revenues for
the three-month period ended March 31, 1999 were generated from development
activities related to the corporate relationship with Bausch & Lomb
Pharmaceuticals, Inc. Symbollon does not anticipate generating significant
contract revenues from this corporate relationship in 2000.
Research and development expenses for the three-month period ended
March 31, 2000 were $189,592, reflecting a decrease of $250,513, from the
research and development expenses in the comparable 1999 periods. The decrease
resulted from decreased development expenses related to the Company's drug
candidate for the treatment of fibrocystic breast disease, including consulting
fees and clinical costs associated with the Company's ongoing Phase II clinical
trial and conducting a Phase I clinical trial.
General and administrative expenses for the three-month period ended
March 31, 2000 was $100,671, reflecting an increase of $377, from the general
and administrative expenses in the comparable 1999 period. The Company
anticipates that general and administrative expenses will increase over current
levels for the remainder of 2000 as the Company increases its efforts associated
with investor and public relations.
The Company's interest income for the three-month period ended March
31, 2000 was $36,246, reflecting an increase of $19,116, from the interest
income in the comparable 1999 period. The increase resulted from an increase in
available funds for investment.
6
<PAGE>
Liquidity and Capital Resources
The Company has primarily funded its activities through proceeds from
private and public placements of equity and revenues from research and
development collaborations with corporate partners. As of March 31, 2000, the
Company had working capital of $2,507,185.
The Company continues to incur operating losses and has incurred a
cumulative loss through March 31, 2000 of $6,665,850. The Company believes that
it has the necessary liquidity and capital resources to sustain planned
operations for the twelve months following March 31, 2000. In the event that the
Company's internal estimates relating to its planned revenues and expenditures
prove 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 financing after March 31,
2001, and therefore, the Company will seek new financing during the next twelve
months.
The Company's ability to obtain new financing may, in part, be affected
by the Company's ability to continue to meet the criteria for continued listing
of its securities on the Nasdaq SmallCap Market. Nasdaq's current SmallCap
continued listing criteria require, in part, that the Company maintain net
tangible assets of at least $2,000,000, a minimum bid price of $1.00 per share
of common stock and two market makers for its securities. There can be no
assurance that in the future the Company will be able to continue to meet the
criteria for continued listing of its securities on Nasdaq.
During the remainder of 2000, the Company anticipates paying
approximately $259,000 as compensation for its current executive officers, and
approximately $25,000 for lease payments on its facilities. The Company
anticipates that the continued clinical development of IoGen will cost
approximately $400,000 during remainder of 2000. At December 31, 1999, the
Company had a net operating loss carryforward for federal income tax purposes of
approximately $6,292,000 expiring through 2019.
Part II - Other Information
Item 5. Other Information
Under the Company's Collaboration and Sale/License Agreement with
Bausch & Lomb Pharmaceuticals, Inc., Bausch & Lomb is required to provide
Symbollon with ninety (90) days notice of termination. Unless Bausch & Lomb
provided Symbollon with a notice of termination by May 4, 2000, Bausch & Lomb
would be obligated to pay Symbollon the next milestone payment of $800,000 due
under the agreement on August 4, 2000. Since the development process has not
advanced as originally contemplated by the parties, Symbollon waived the
ninety-day termination notice for the period before the next milestone payment
in order to allow Bausch & Lomb time to gather more information prior to making
its decision on whether to continue the relationship with Symbollon. If Bausch &
Lomb does desire to continue the relationship, Symbollon has also agreed to
enter into good faith negotiations to amend the agreement to reflect a more
realistic and achievable development plan and milestone payment schedule.
7
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on Page E-1.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: May 12, 2000 By: /s/ Paul C. Desjourdy
------------------------------------
Paul C. Desjourdy, President/COO/CFO
and authorized signatory
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
27.1 Financial Data Schedule.......................................
<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, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,684,989
<SECURITIES> 0
<RECEIVABLES> 102,132
<ALLOWANCES> 0
<INVENTORY> 93,790
<CURRENT-ASSETS> 2,972,613
<PP&E> 254,448
<DEPRECIATION> 170,253
<TOTAL-ASSETS> 3,279,310
<CURRENT-LIABILITIES> 465,428
<BONDS> 0
175,000
0
<COMMON> 3,601
<OTHER-SE> 2,638,882
<TOTAL-LIABILITY-AND-EQUITY> 3,279,310
<SALES> 81,400
<TOTAL-REVENUES> 81,400
<CGS> 48,464
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 189,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (221,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (221,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (221,081)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
