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| SYMBA.OB > SEC Filings for SYMBA.OB > Form 10-K on 30-Mar-2009 | All Recent SEC Filings |
30-Mar-2009
Annual Report
The following discussion contains forward-looking statements which involve risks and uncertainties. See "Special Note Regarding Forward Looking Statements" and "Risk Factors" above in this Annual Report on Form 10-K.
Overview
We are a specialty pharmaceutical company. We have a formulation iodine-based proprietary technology that has potential product applications in the areas of infection control and women's healthcare. In 1995, we launched our first commercial product, IodoZyme. It generated approximately $2.8 million in sales. IodoZyme is no longer being sold by our marketing partner.
Since 2000, we have concentrated our product development efforts on the proposed product application for the treatment of fibrocystic breast disease. In March 2008, we discontinued clinical development of the proposed product, IoGen, and decided to commercialize IoGen as a dietary supplement to promote breast health. We launched commercial sale of IoGen in November 2008. We do not have adequate cash reserves to continue base operations in 2009. In order for us to continue our operations, we must raise additional resources or increase sales of IoGen. If we cannot secure additional resources or adequately increase sales of IoGen before existing resources are exhausted, we will have to cease operations.
Going Concern
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of our company as a going concern. We had net losses of $1,784,105 and $3,748,473 and negative cash flows from operations of $1,019,600 and $3,135,632 for the years ended December 31, 2008 and 2007, respectively. At December 31, 2008, we had an accumulated deficit of $21,391,113 and a negative working capital of $58,189. We do not have adequate cash resources to continue our base operations in 2009. These factors raise substantial doubt as to our ability to continue as a going concern.
The application of the going concern concept is dependent upon the Company's ability to receive continued financial support from the Company's creditors, stockholders and external investors and to increase sales of IoGen, our dietary supplement marketing to promote breast health for women. Management is actively seeking equity and debt financing from external investors, and is attempting to increase sales of IoGen. The Company is also pursuing other strategic options, including possible sales or licenses of its technology or a sale or merger of the Company. There can be no assurance that management's efforts will be successful. Failure to either obtain the support of additional external investors to finance the Company's operations, increase sales of IoGen or execute our other strategic options will cause us to cease operations in the near future.
Critical Accounting Policies and Estimates
The following is a discussion of the more significant accounting policies and methods we use.
Estimates - The financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require us to make estimates and assumptions. On an on-going basis, we evaluate our estimates related to the useful lives of fixed and intangible assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Revenue recognition - The Company recognizes revenue from its product sales and corporate partnerships in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition." Under these guidelines, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services rendered, the price is fixed or determinable and payment is reasonably assured.
Valuation of Compensatory Stock Option Grants - On January 1, 2006, we adopted Financial Accounting Standard SFAS 123(R), "Share-Based Payment," for the fiscal year ended December 31, 2006. SFAS 123(R) requires all share-based awards to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Previously, we accounted for stock option grants to our employees and directors in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) using a Black-Scholes formula, and reported in accordance with the disclosure-only alternative described in SFAS 123, "Accounting for Stock-Based Compensation." The valuation provisions of SFAS 123(R) apply to new grants and to grants that were outstanding and unvested as of the effective date. Under SFAS 123(R), the Company uses the Black-Scholes option-pricing model to estimate fair value of stock option grants made on or after January 1, 2006. The Black-Scholes option-pricing model incorporates estimates for expected volatility, expected option life, risk-free interest rates and post-vesting employment termination behavior, and these estimates will affect the calculation of the fair value of the Company's stock option grants. The fair value of stock option grants outstanding as of the effective date is estimated using the Black-Scholes option-pricing model used under SFAS 123. The Company adopted the modified prospective recognition method and implemented the provisions of SFAS 123(R) beginning with the first quarter of 2006.
Long-lived assets - Long-lived assets, such as intangible assets and property and equipment are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets are written down to fair value.
Results of Operations
Fiscal 2008 versus Fiscal 2007
Symbollon's net loss in fiscal 2008 was $1,784,105, reflecting a decrease of $1,964,368 or 52.4% from a net loss of $3,748,473 in fiscal 2007. This decreased loss resulted primarily from decreased clinical development expenses related to IoGen, consulting related expenses and investor relations expenses, partially offset by increased compensation related to equity grants.
Product revenues from sales of IoGen (our dietary supplement for breast health) were $391 in fiscal 2008. IoGen was launched for commercial sale in November 2008, and thus, there were no product revenues from sales of IoGen in fiscal 2007. Cost of goods sold for IoGen were $740 in fiscal 2008.
Research and development expenses decreased by $2,219,635 or 79.1% from $2,805,163 in fiscal 2007 to $585,528 in fiscal 2008. The decrease resulted primarily from decreased clinical trial expenses associated with IoGen. We ceased the clinical development of IoGen in March 2008 after an unsuccessful Phase III trial outcome. We anticipate that our research and development expenses will continue to decrease in 2009 as no further research and development efforts are planned due to financial constraints.
General and administrative expenses increased by $232,547 or 23.8% from $976,805 in fiscal 2007 to $1,209,352 in fiscal 2008. The increase resulted primarily from increased compensation related to equity grants. We anticipate that general and administrative expenses will decrease in 2009 due to financial constraints.
The Company's interest income decreased by $22,371 or 66.8% from $33,495 in fiscal 2007 to $11,124 in fiscal 2008. This decrease resulted from a decrease in cash balances available for investment throughout 2008.
Financial Condition, Liquidity and Capital Resources
We have funded our activities primarily through proceeds from private and public placements of equity securities. During 1999, we sold 836,685 shares of common stock, together with warrants for a like number of shares, in a private placement, realizing net proceeds of approximately $1,356,000. During 2000, we received net proceeds of approximately $1,761,000 from the exercise of 586,910 warrants issued as part of the 1999 private placement. During 2004, we sold 1,261,692 shares of common stock, together with 630,846 warrants, in a private placement, for net proceeds of approximately $634,000 in cash and approximately $186,000 in prepaid services for manufacturing, consulting and clinical trial expenses. During 2005, we sold 1,642,795 shares of Class A Common Stock for gross proceeds of $853,957 (aggregate net proceeds were $800,585) in an offering exclusively to foreign investors pursuant to Regulation S. From December 2005 through March 2006, we issued 615,461 shares of Class A common stock and a like number of warrants for $332,775 in cash and prepaid consulting services upon exercise of privately placed warrants. In June and August 2006, we sold 1,366,500 shares of common stock, together with warrants for a like number of shares, in a private placement, realizing net proceeds of approximately $1,342,340. In December 2006 and January 2007, Symbollon raised net aggregate proceeds of $2,368,038 in a private placement of 3,213,632 shares of its Class A common stock and warrants for 2,410,224 shares. From September through December 2007, Symbollon raised net proceeds of $1,704,350 in a private placement of 2,573,086 shares of its Class A common stock and a like number of warrants.
During 2008, we continued to incur operating losses and have incurred a cumulative loss through December 31, 2008 of $21,391,113. We also continue to have negative cash flow from operations of $1,019,600 for the year ended December 31, 2008. As of December 31, 2008, we had negative working capital of $58,189. We do not have the necessary liquidity and capital resources to sustain planned operations in 2009. We are actively seeking equity and debt financing from external investors, and are attempting to increase sales of IoGen. Any funding we do raise may be dilutive to existing stockholders. We are also pursuing other strategic options, including possible sales or licenses of our technology or a sale or merger. There can be no assurance that our efforts will be successful. Failure to either obtain the support of additional external investors to finance the Company's operations, increase sales of IoGen or execute our other strategic options will cause us to cease operations in the near future.
The report of our independent registered public accountants on our financial statements for the years ended December 31, 2008 and 2007 contains an explanatory paragraph, which indicates that we have incurred recurring losses and negative cash flows from operations that raises substantial doubt about our ability to continue as a going concern. This report is not viewed favorably by analysts or investors and may make it more difficult for us to raise additional debt or equity financing needed to continue our operations.
During 2009, we are committed to pay on a month-by-month basis $18,000 as compensation to our current executive officer and approximately $43,650 for lease payments on our facilities. We have no other material capital expenditures planned during fiscal 2009. At December 31, 2008, we had a net operating loss carryforward for federal income tax purposes of approximately $18,171,000 expiring at various dates through 2028 (from which, however, we may never receive a benefit).
Off Balance Sheet Arrangements
None.
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