U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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
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(Exact name of small business issuer as specified in its charter)
Delaware 36-3463683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Loring Drive, Framingham, MA 01702
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(Address of principal executive offices)
508-620-7676
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
November 10, 2000
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Class A Common Stock 4,283,521
Transitional Small Business Disclosure Format (check one):
Yes No X
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SYMBOLLON CORPORATION
(a Development Stage Company)
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- September 30, 2000 and December 31, 1999 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the nine and three months ended September
30, 2000 and September 30, 1999 and for the period
from July 15, 1986 (inception) to September 30, 2000 2
Unaudited Condensed Statements of Cash Flows
- For the nine months ended September 30, 2000
and September 30, 1999 and for the period
from July 15, 1986 (inception) to September 30, 2000 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation 5
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 7
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)
September 30, December 31,
2000 1999
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 3,879,971 $ 2,771,821
Restricted cash......................................................... -- 52,615
Accounts receivable..................................................... 34,120 72,015
Inventory............................................................... 62,848 96,354
Prepaid expenses........................................................ 20,038 54,217
----------- -----------
Total current assets.............................................. $ 3,996,977 $ 3,047,022
Equipment and leasehold improvements, net of
accumulated depreciation and amortization................................ 88,464 89,710
Other assets:
Patent and trademark cost, net of accumulated amortization............ 277,888 221,483
Deposit............................................................... 2,364 2,364
------------ -----------
TOTAL ASSETS...................................................... $ 4,365,693 $ 3,360,579
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 21,864 $ 65,903
Accrued clinical studies................................................ 137,754 414,862
Other current liabilities............................................... 98,234 31,158
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Total current liabilities......................................... 257,852 511,923
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Redeemable common stock, Class A, par value $.001 per share,
93,334 shares issued at September 30, 2000 and December 31, 1999
(aggregate involuntary liquidation value $175,000)....................... 175,000 175,000
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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, 4,190,187 and 3,557,339 shares issued at
September 30, 2000 and December 31, 1999, respectively................... 4,191 3,557
Convertible Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, none and 688 shares issued at
September 30, 2000 and December 31, 1999, respectively................... -- 1
Additional paid-in capital................................................ 11,066,833 9,114,867
Deficit accumulated during the development stage.......................... (7,138,183) (6,444,769)
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Total stockholders' equity........................................... 3,932,841 2,673,656
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $ 4,365,693 $ 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 Nine Months Ended (Inception) to
September 30, September 30, September 30,
2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Net product sales............................. $ 99,224 $ 122,100 $ 180,624 $ 294,600 $ 1,646,821
Contract revenue.............................. -- 98,872 -- 287,751 983,713
License fee revenue........................... -- 750,000 -- 750,000 2,940,000
----------- ----------- ----------- ----------- -----------
Total revenue............................. 99,224 970,972 180,624 1,332,351 5,570,534
Operating Expenses:
Cost of goods sold............................ 69,316 64,167 133,083 204,257 1,047,135
Research and development costs................ 116,536 384,885 505,526 1,298,993 7,430,503
General and administrative expenses........... 117,029 99,722 348,752 295,741 4,651,673
----------- ----------- ----------- ----------- -----------
Total operating expenses.................. 302,881 548,774 987,361 1,798,991 13,129,311
----------- ----------- ----------- ----------- -----------
Income (Loss) from operations..................... (203,657) 422,198 (806,737) (466,640) (7,558,777)
Interest income................................... 40,894 18,838 113,323 49,341 776,854
Interest expense and debt issuance costs.......... -- -- -- -- (356,260)
----------- ----------- ----------- ----------- -----------
Net Income (Loss)................................. $ (162,763) $ 441,036 $ (693,414) $ (417,299) $(7,138,183)
=========== =========== =========== =========== ===========
Basic net income (loss) per share of common stock. $ (0.04) $ 0.15 $ (0.18) $ (0.14)
=========== =========== =========== ===========
Diluted net income (loss) per share of common stock. $ (0.04) $ 0.14 $ (0.18) $ (0.14)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - basic.............................. 3,908,129 3,022,127 3,755,431 2,945,511
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - diluted............................ 3,908,129 3,148,439 3,755,431 2,945,511
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
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<TABLE>
SYMBOLLON CORPORATION
(a Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Nine Months Ended (Inception) to
September 30, September 30,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (693,414) $ (417,399) $(7,138,183)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization expense............... 28,656 34,383 504,390
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................................... 52,615 142,991 --
Accounts receivable............................... 37,895 (13,800) (34,120)
Inventory......................................... 33,506 (79,600) (62,848)
Prepaid expenses.................................. 34,179 56,756 (20,038)
Accounts payable and other current liabilities.... (254,070) 471,910 315,028
----------- ----------- -----------
Net cash provided by (used in) operating activities. (760,633) 195,241 (6,442,054)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (20,125) (3,563) (388,513)
Patent and trademark costs............................ (63,693) (17,590) (532,249)
Proceeds from sale of equipment....................... -- -- 11,300
Deposit............................................... -- -- (2,364)
----------- ----------- -----------
Net cash used in investing activities............... (83,818) (21,153) (911,826)
----------- ----------- -----------
Cash flows from financing activities:
Warrant and option exercise........................... 1,949,351 -- 2,578,555
Borrowings from stockholders.......................... -- -- 253,623
Repayment to stockholders............................. -- -- (127,683)
Sale of common stock and units........................ 3,250 736,175 9,422,758
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........... 1,952,601 736,175 11,233,851
----------- ----------- -----------
Net increase in cash and cash equivalents................. 1,108,150 910,263 3,879,971
Cash and cash equivalents at beginning of period.......... 2,771,821 1,514,115 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 3,879,971 $ 2,424,378 $ 3,879,971
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
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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:
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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 nine and three-month periods ended September 30,
2000 are not necessarily indicative of the results to be expected for the full
year.
Note C - Capitalization:
During the third quarter of 2000, the Company raised $1,760,730 from
the exercise of warrants for 586,910 shares of the Company's Class A Common
Stock at $3.00 per share.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
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(R), 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, financial needs, future performance and 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, described or discussed in the section "Risk Factors" in the
Annual Report on Form 10-KSB for the period ended December 31, 1999 and
subsequent filings. 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 September 30,
2000 was $162,763, reflecting an increase of $603,799 from a net income of
$441,036 in the comparable 1999 period. Symbollon's net loss for the nine-month
period ended September 30, 2000 was $693,414, reflecting an increase of $276,115
or 66.2% from a net loss of $417,299 in the comparable 1999 period. The
increased loss for the periods resulted primarily from decreased contract and
license fee revenues from corporate partners and increased general and
administrative expenses, partially offset by decreased development costs related
to the Company's IoGen(TM) clinical trials. The Company expects to continue to
incur operating losses for the foreseeable future.
Product revenues from sales of IodoZyme for the three and nine-month
periods ended September 30, 2000 were $99,224 and $180,624, compared to $122,100
and $294,600 in the comparable 1999 periods. Year-to-date sales of IodoZyme have
decreased 38.7% from the comparable 1999 period. Based on information from the
Company's exclusive marketing partner, the Company anticipates that IodoZyme
sales for the entire year will reflect a similar or larger percentage decrease
compared to 1999 sales.
The gross profit margin on product sales for the three and nine-month
period ended September 30, 2000 were 30% and 26%, compared to 47% and 31% in the
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comparable 1999 periods. The decrease in the gross profit margin on product
sales was primarily due to increased overhead cost per unit associated with the
lower sales volumes experienced in 2000.
There were no contract revenues for the three and nine-month periods
ended September 30, 2000, compared to $98,872 and $287,751 in the comparable
1999 periods. There were no license fee revenues for the three and nine-month
periods ended September 30, 2000, compared to $750,000 in the comparable 1999
periods. The contract and license fee revenues for the three and nine-month
periods ended September 30, 1999 were generated from the corporate relationship
with Bausch & Lomb Pharmaceuticals, Inc., which activities were not preformed in
2000. The Company does not anticipate any further revenues from that
relationship.
Research and development expenses for the three and nine-month periods
ended September 30, 2000 were $116,536 and $505,526, respectively, reflecting
decreases of $268,349 and $793,467, respectively, from the comparable 1999
periods. The decreases resulted from decreased development expenses related to
IoGen, the Company's drug candidate for the treatment of fibrocystic breast
disease, including consulting fees and clinical costs associated with the
Company's completed Phase I and II clinical trials.
General and administrative expenses for the three and nine-month
periods ended September 30, 2000 were $117,029 and $348,752, respectively,
reflecting increases of $17,307 and $53,011, respectively, from the comparable
1999 periods. The increases resulted primarily from increased employee salaries
and related costs and investor and public relations expenses.
The Company's interest income for the three and nine-month periods
ended September 30, 2000 were $40,894 and $113,323, reflecting increases of
$22,056 and $63,982, from the interest income in the comparable 2000 periods.
The increases resulted from increases in available funds for investment.
Liquidity and Capital Resources
The Company has funded its activities through proceeds from private and
public placements of equity and debt securities. As of September 30, 2000, the
Company had working capital of $3,739,125.
The Company continues to incur operating losses and has incurred a
cumulative loss through September 30, 2000 of $7,138,183. The Company believes
that it has the necessary liquidity and capital resources to sustain planned
operations for the twelve months following September 30, 2000. In the event that
the Company's internal estimates relating to its planned revenues or
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 funds after
September 30, 2001, and therefore, the Company will continue to 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 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
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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 $86,000 as compensation for its current executive officers, and
approximately $8,000 for lease payments on its facilities. The Company
anticipates that the continued clinical development of IoGen will cost
approximately $100,000 during the 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 2. Changes in Securities and Use of Proceeds
During the third quarter of 2000, the Company issued 586,910 shares of
the Company's Class A Common Stock upon exercise of outstanding warrants at
$3.00 per share, providing the Company with $1,760,730 in proceeds. The warrants
had been issued in the Company's previously disclosed 1999 private placement,
under Rule 506 of Regulation D under the Securities Act of 1933, of units to
accredited investors, and the shares were similarly issued under Rule 506. The
shares have been registered for resale on Form S-3.
Item 5. Other Information
Pursuant to the Company's Collaboration and Sale/License Agreement with
Bausch & Lomb Pharmaceuticals, Inc., on November 14, 2000 Bausch & Lomb
exercised its right to conclude the agreement. All rights and title to Symbollon
technology sold or licensed to Bausch & Lomb under the agreement reverts back to
the Company. Under the agreement, Bausch & Lomb is required to transfer 482,878
shares of the Company's common stock to Symbollon for no consideration. Bausch &
Lomb purchased those shares for $500,000. Bausch & Lomb has a right to require
Symbollon to redeem it remaining 93,334 shares of the Company's common stock for
$175,000 (Bausch & Lomb's purchase price) if Symbollon has adequate positive
cash flow from operations in any year through 2004.
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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
1. The Company filed report on Form 8-K on August 16, 2000.
The report contained an Item 5 disclosure concerning the
Company's preliminary results of a Phase II clinical trial for
its patented drug, IoGen.
2. The Company filed a report on Form 8-K on September 11,
2000. The report contained an Item 5 disclosure concerning the
exercise of 586,910 warrants at $3.00 per share.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: November 14, 2000 By: /s/ Paul C. Desjourdy
-------------------------------------
Paul C. Desjourdy, President/COO/CFO
and authorized signatory
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SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
27.1 Financial Data Schedule.
9
