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 JUNE 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
---------
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.
August 10, 2000
-----------------
Class A Common Stock 3,695,611
Transitional Small Business Disclosure Format (check one):
Yes No X
-------- --------
<PAGE>
SYMBOLLON CORPORATION
(a Development Stage Company)
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- June 30, 2000 and December 31, 1999 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the six and three months
ended June 30, 2000 and June 30, 1999 and
for the period from July 15, 1986 (inception)
to June 30, 2000 2
Unaudited Condensed Statements of Cash Flows
- For the six months ended June 30, 2000
and June 30, 1999 and for the period
from July 15, 1986 (inception) to June 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 4. Submission of Matters to a Vote of Security Holders 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)
June 30, December 31,
2000 1999
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 2,455,235 $ 2,771,821
Restricted cash......................................................... 52,300 52,615
Accounts receivable..................................................... 21,870 72,015
Inventory............................................................... 95,926 96,354
Prepaid expenses........................................................ 24,311 54,217
----------- -----------
Total current assets.............................................. $ 2,649,642 $ 3,047,022
Equipment and leasehold improvements, net of
accumulated depreciation and amortization................................ 91,423 89,710
Other assets:
Patent and trademark cost, net of accumulated amortization............ 274,042 221,483
Deposit............................................................... 2,364 2,364
------------ -----------
TOTAL ASSETS...................................................... $ 3,017,471 $ 3,360,579
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 32,544 $ 65,903
Accrued clinical studies................................................ 407,422 414,862
Other current liabilities............................................... 69,943 31,158
------------ -----------
Total current liabilities......................................... 509,909 511,923
------------ -----------
Redeemable common stock, Class A, par value $.001 per share,
93,334 shares issued at June 30, 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, 3,602,277 and 3,557,339 shares issued at
June 30, 2000 and December 31, 1999, respectively........................ 3,602 3,557
Convertible Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, none and 688 shares issued at
June 30, 2000 and December 31, 1999, respectively........................ -- 1
Additional paid-in capital................................................ 9,304,380 9,114,867
Deficit accumulated during the development stage.......................... (6,975,420) (6,444,769)
------------ -----------
Total stockholders' equity........................................... 2,332,562 2,673,656
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $ 3,017,471 $ 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 Six Months Ended (Inception) to
June 30, June 30, June 30,
2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Net product sales............................. $ -- -- $ 81,400 $ 172,500 $ 1,547,597
Contract revenue.............................. -- $ 105,886 -- 188,879 983,713
License fee revenue........................... -- -- -- -- 2,940,000
----------- ----------- ----------- ----------- -----------
Total revenue............................. -- 105,886 81,400 361,379 5,471,310
Operating Expenses:
Cost of goods sold............................ 15,303 27,182 63,767 140,190 977,819
Research and development costs................ 199,398 474,003 388,990 914,108 7,313,967
General and administrative expenses........... 131,052 95,725 231,723 196,019 4,534,644
----------- ----------- ----------- ----------- -----------
Total operating expenses.................. 345,753 596,910 684,480 1,250,317 12,826,430
----------- ----------- ----------- ----------- -----------
Loss from operations.............................. (345,753) (491,024) (603,080) (888,938) (7,355,120)
Interest income................................... 36,183 17,130 72,429 30,503 735,960
Interest expense and debt issuance costs.......... -- -- -- -- (356,260)
----------- ----------- ----------- ----------- -----------
Net Loss.......................................... $ (309,570) $ (473,894) $ (530,651) $ (858,435) $(6,975,420)
=========== =========== =========== =========== ===========
Basic and diluted net loss per share of common stock.$ (0.08) $ (0.16) $ (0.14) $ (0.30)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - basic and diluted.................. 3,694,611 2,905,069 3,678,243 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
Six Months Ended (Inception) to
June 30, June 30,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (530,651) $ (858,435) $(6,975,420)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization expense............... 18,885 22,892 494,619
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................................... 315 (3,996) (52,300)
Accounts receivable............................... 50,145 130,924 (21,870)
Inventory......................................... 428 (11,779) (95,926)
Prepaid expenses.................................. 29,906 55,625 (24,311)
Accounts payable and other current liabilities.... (2,014) 365,481 567,084
----------- ----------- -----------
Net cash used in operating activities............. (432,986) (299,288) (6,114,407)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ (15,741) (2,964) (384,129)
Patent and trademark costs............................ (57,417) (11,575) (525,973)
Proceeds from sale of equipment....................... 11,300
Deposit............................................... (2,364)
----------- ----------- -----------
Net cash used in investing activities............... (73,158) (14,539) (901,166)
----------- ----------- -----------
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........................ 3,250 2,250 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........... 189,558 2,250 9,470,808
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents...... (316,586) (311,577) 2,455,235
Cash and cash equivalents at beginning of period.......... 2,771,821 1,514,115
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 2,455,235 $ 1,202,538 $ 2,455,235
=========== =========== ===========
</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 six and three-month periods ended June 30, 2000
are not necessarily indicative of the results to be expected for the full year.
4
<PAGE>
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, 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, costs and expenditures and Year
2000 matters. 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. 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 June 30, 2000 was
$309,570, reflecting a decrease of $164,324 or 34.7% from a net loss of $473,894
in the comparable 1999 period. Symbollon's net loss for the six-month period
ended June 30, 2000 was $530,651, reflecting a decrease of $327,784 or 38.2%
from a net loss of $858,435 in the comparable 1999 period. The decreased loss
for the periods resulted primarily from decreased development costs related to
the Company's recently completed Phase I and II clinical trials, partially
offset by decreased contract revenues from corporate partners and increased
general and administrative expenses. The Company expects to continue to incur
operating losses for the foreseeable future.
Product revenues from sales of IodoZyme for the three and six-month
periods ended June 30, 2000 were none and $81,400, compared to none and $172,500
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 six-month period do not
necessarily reflect correspondingly decreased sales for the entire year.
The gross profit margin on product sales for the six-month period ended
June 30, 2000 were 22%, compared to 19% in the comparable 1999 period. The
5
<PAGE>
increase in the gross profit margin on product sales was primarily due to
decreased labor cost associated with manufacturing efficiencies.
There were no contract revenues for the three and six-month periods
ended June 30, 2000, compared to none and $188,879 in the comparable 1999
periods. The contract revenues for the six-month period ended June 30, 1999 were
generated from development activities related to 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 during the remainder of 2000.
Research and development expenses for the three and six-month periods
ended June 30, 2000 were $199,398 and $388,990, respectively, reflecting
decreases of $274,605 and $525,118, 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 recently completely Phase I and II clinical trials. The Company
anticipates that if the results of the Phase II trial are favorable research and
development expenses will increase over the remainder of 2000 as the Company
continues the clinical development of IoGen.
General and administrative expenses for the three and six-month periods
ended June 30, 2000 were $131,052 and $231,723, respectively, reflecting
increases of $35,327 and $35,704, 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 six-month periods ended
June 30, 2000 were $36,183 and $72,429, reflecting increases of $19,053 and
$41,926, 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 June 30, 2000, the
Company had working capital of $2,139,733.
The Company continues to incur operating losses and has incurred a
cumulative loss through June 30, 2000 of $6,975,420. The Company believes that
it has the necessary liquidity and capital resources to sustain planned
operations for the twelve months following June 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 June 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
6
<PAGE>
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 $172,500 as compensation for its current executive officers, and
approximately $16,000 for lease payments on its facilities. The Company
anticipates that the continued clinical development of IoGen will cost
approximately $200,000 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 4. Submission of Matters to a Vote of Security Holders
The following items were submitted to a vote of the stockholders at the
Company's Annual Meeting on May 24, 2000:
1. Election of Directors. The following directors were elected:
Votes
--------------------------------------
For Against Withheld
--------- ------- --------
Paul C. Desjourdy 2,948,318 31,085 -0-
Eugene Lieberstein 2,948,318 31,085 -0-
2. Ratification of BDO Seidman, LLP as the independent auditors
of the Company:
Votes
--------------------------------------------------
For Against Withheld
-------- ------- --------
2,960,018 -0- 19,385
Each item identified above was described in the Company's Proxy
Statement for the Annual Meeting of Stockholders. Each item received the
necessary votes for approval. The terms of office of James C. Richards, Ph.D.
and Richard F. Maradie as directors of the Company continue until the 2001
Annual Meeting of Stockholders, and the term of office of Jack H. Kessler, Ph.D.
as a director continues until the 2002 Annual Meeting of Stockholders.
Item 5. Other Information
Under the Company's Collaboration and Sale/License Agreement with
Bausch & Lomb Pharmaceuticals, Inc., Bausch & Lomb was obligated to pay
Symbollon the next milestone payment of $800,000 on August 4, 2000. Development
delays have caused Bausch & Lomb to consider termination of the relationship. In
order to provide Bausch & Lomb with more time to gather information prior to
7
<PAGE>
making its decision, Symbollon has extended by two months to October 4, 2000
Bausch & Lomb's obligation to make the next milestone payment of $800,000. If
Bausch & Lomb does desire to continue the relationship, Symbollon has agreed to
enter into negotiations to amend the collaboration to reflect a more realistic
and achievable development plan and milestone payment schedule. Therefore, it is
uncertain when, or if, Symbollon will receive the next milestone payment from
Bausch & Lomb.
If Bausch & Lomb elects to terminate its sale/license agreement with
Symbollon, then Bausch & Lomb would be required to transfer 482,878 shares of
the Company's common stock to Symbollon for no consideration. Those shares were
purchased by Bausch & Lomb for $500,000. Bausch & Lomb would also then have a
right to require Symbollon to redeem 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.
If Bausch & Lomb terminates its sale/license agreement with Symbollon,
then all rights and title to Symbollon technology sold or licensed to Bausch &
Lomb under the agreement will revert back to the Company.
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: August 10, 2000 By: /s/ Paul C. Desjourdy
-------------------------------------------
Paul C. Desjourdy, President/COO/CFO
and authorized signatory
8
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
27.1 Financial Data Schedule.
9
